7. In the above figure, when the wage rate increases from $5.00 to $7.50 an hour, Bob chooses less leisure because of
(A) the substitution effect.
(B) the income effect.
(C) both of the above
(D) neither of the above

1. Suppose the government has declared beer to be an illegal substance and has imposed equal penalties on any person caught buying a beer and on any person caught selling a beer. Using the above figure, in which CBL is the cost of breaking the law, by how much is beer consumption decreased by the penalties? (A) Beer consumption is decreased by 200 quarts. (B) Beer consumption is decreased by 400 quarts. (C) Beer consumption is decreased by 300 quarts. (D) Beer consumption is decreased by 500 quarts.

2. Which of the following is a correct statement about markets for prohibited goods? (A) Taxing a good at a sufficiently high rate can achieve the same consumption level as prohibition. (B) Penalizing sellers of an illegal good decreases supply and penalizing buyers decreases demand. (C) Penalizing either buyers or sellers of an illegal good decreases the quantity bought. (D) All of the above are correct statements.

3. In the above figure, the government has imposed a tax on sellers of pizza. The amount of the tax(A) is $40. (B) is $10. (C) is $30. (D) cannot be determined without more information.

4. In the above figure, the government has imposed a tax on sellers of pizza. The tax increases (A) the amount received by sellers by $30. (B) the price paid by buyers by $30. (C) the quantity of pizza sold from 40 million per year to 60 million per year. (D) the after-tax price by $40.

5. In the above figure, the government has imposed a tax on sellers of pizza. After the tax has been imposed, the after-tax price of a pizza is _______ and the equilibrium quantity is _______ per year. (A) $20； 40 million (B) $10； 60 million (C) $20； 20 million (D) $30； 20 million

6. In the above figure, when his wage rate increases from $5.00 to $7.50 per hour, which of the following does Bob experience? (A) a change in his preferences (B) an increase in the opportunity cost of leisure (C) an increase in the opportunity cost of working (D) all of the above

8. Market power is the _______. (A) political power of monopolies. (B) size of the market. (C) forces of supply and demand. (D) ability of a firm to set its price.

9. The figure above shows the demand and cost curves for a single-price monopolist. What level of output maximizes the firm's economic profit? (A) 0 units (B) 30 units (C) 20 units (D) 50 units

10. The figure above shows the demand and cost curves for a single-price monopolist. What price will the firm charge? (A) $50 per unit (B) $30 per unit (C) $10 per unit (D) $20 per unit

11. The figure above shows the demand and cost curves for a single-price monopolist. What economic profit does this firm earn? (A) $400 (B) $200 (C) zero (D) $600

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