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The market demand curve for a popular teen magazine is given by Q = 80 – 10P where P is the magazine price in dollars per issue and Q is the weekly magazine circulation in units of 10,000. If the […]

Who does NOT earn economic rent in a competitive factor market? A) No one B) Everyone C) The last factor of production hired D) The inframarginal workers E) Only owners of physical properties earn economic rents The food processing industry […]

The expected value of a project is always the A) median value of the project. B) modal value of the project. C) standard deviation of the project. D) weighted average of the outcomes, with probabilities of the outcomes used as […]

Which of the following is NOT a public good? A) Public fireworks display B) National defense C) Books in a public library D) Clean air Scenario 5.4: Suppose an individual is considering an investment in which there are exactly three […]

1) In the situation involving a bilateral monopoly, a A) single firm acts as both the monopsonist and the monopoly. B) single seller sells to a single buyer. C) monopsonist sells to a monopsonist. D) monopolist sells to a monopolist. […]

Suppose the market price for wheat changes, and we move from point A to point B on the wheat demand curve. If the price elasticity of wheat demand was -0.3 at point A and -0.4 at point B, what is […]

If an Engel curve has a positive slope A) both goods are normal. B) the good on the horizontal axis is normal C) as the price of the good on the horizontal axis increases, more of both goods in consumed. […]

Figure 9.5 Refer to Figure 9.5. If the government establishes a price floor of $2.50 and farmers grow only the amount of berries that will be sold, producer surplus will A) fall by $50. B) fall by $100. C) remain […]

Scenario 5.2: Randy and Samantha are shopping for new cars (one each). Randy expects to pay $15,000 with 1/5 probability and $20,000 with 4/5 probability. Samantha expects to pay $12,000 with 1/4 probability and $20,000 with 3/4 probability. Refer to […]

Scenario 10.2: A monopolist faces the following demand curve, marginal revenue curve, total cost curve and marginal cost curve for its product: Q = 200 – 2P MR = 100 – Q TC = 5Q MC = 5 Refer to […]

The utilities commission in a city is currently examining pay telephone service in the city. The commission has been asked to evaluate a proposal by a city council member to place a $0.10 price ceiling on local pay phone service. […]

Which of the following statements about the diagram below is true? A) Demand is infinitely elastic. B) Demand is completely inelastic. C) Demand becomes more inelastic the lower the price. D) Demand becomes more elastic the lower the price. Actual […]

When an industry’s raw material costs increase, other things remaining the same, A) the supply curve shifts to the left. B) the supply curve shifts to the right. C) output increases regardless of the market price and the supply curve […]

If the inflation rate falls and nominal interest rates are unchanged, A) inflation will fall. B) inflation will continue at the same rate. C) real interest rates rise. D) real interest rates are unaffected. E) real interest rates fall. A […]

Even if we were able to completely eliminate greenhouse gas (GHG) emissions today, the problems associated with the accumulated stock of GHGs in the atmosphere will persist for a long time because: A) their dissipation rate is very low. B) […]

The key reason that the Laspeyres price index tends to overstate the impact of price changes on consumers is that it: A) only accounts for price increases and ignore price decreases. B) measures prices two periods after the actual price […]

Scenario 4.1: Daniel derives utility from only two goods, cake (Qc) and donuts (Qd). The marginal utility that Daniel receives from cake (MUc) and donuts (MUd) are given as follows: MUc = Qd MUd = Qc Daniel has an income […]

At a given level of labor employment, knowing the difference between the average product of labor and the marginal product of labor tells you A) whether increasing labor use raises output. B) whether increasing labor use changes the marginal product […]

Suppose your neighbor likes to repair motorcycles in his front yard during evenings and on weekends, and he earns $400 per week from this work. However, the sight of piles of greasy motorcycle parts and the additional noise and traffic […]

An allocation in which one person can be made better off only by making someone else worse off is A) inefficient. B) efficient. C) a partial equilibrium. D) a general equilibrium. How much profit will the monopolist whose cost and […]

A minimum wage policy induces an: A) excess demand for labor. B) excess supply of labor. C) efficient market outcome. D) elastic labor supply response. Scenario 12.3: Suppose a stream is discovered whose water has remarkable healing powers. You decide […]

The PDV of a perpetuity with a yearly payment of $500 at an interest rate of 5% is A) $100. B) $5,000. C) $25,000. D) $10,000. E) $100,000. If we plot the quantity of aluminum ore mined per year on […]

Use the following two statements to answer this question: I. In order to answer normative questions, it is necessary to make value judgments. II. In order to conduct positive economic analysis, it is always necessary to use empirical evidence in […]

Suppose Orange Inc. sells MP3 players and initially has monopoly power because there are only a few close substitutes available to consumers. As more types of MP3 players are introduced into the market, the demand facing Orange becomes ________ elastic […]

Which of the following statements is NOT compatible with explanations for why peak-load pricing is more profitable than charging a single price? A) Consumer willingness to pay for the product varies a lot across different time periods. B) Marginal cost […]

For a monopsony buyer of an input, the marginal expenditure curve A) lies above the average expenditure curve. B) lies below the average expenditure curve. C) is identical to the average expenditure curve. D) lies below the input demand curve. […]

Producer surplus is measured as the A) area under the demand curve above market price. B) entire area under the supply curve. C) area under the demand curve above the supply curve. D) area above the supply curve up to […]

Which of the following job market signals are less costly for high-quality workers to send than low-quality workers? A) Spending long hours at the office B) Sending emails to coworkers and supervisors at night and on weekends C) Leaving voice-mail […]

Suppose the equilibrium price of milk is $3 per gallon but the federal government sets the market price at $4 per gallon. The market mechanism will force the milk price back down to $3 per gallon unless the government: A) […]

The area below the demand curve and above the price line measures A) consumer surplus. B) economic profit. C) elasticity of demand. D) the total value obtained from consuming the good or service. Use the following statements to answer this […]

Scenario 13.8 Consider the following game: In game in Scenario 13.8, what will occur if IVY Corp. plays a maximin strategy? A) $1, $10 B) $1, -$5000 C) $2, $0 D) $2, $2 E) There is a .25 chance of […]

The marginal product of labor for Acme, Inc. is 15. The average product of labor is 25, and the price of labor is $10. Assuming that Acme, Inc. is a competitor in its output and input markets, the marginal revenue […]

Which of the following is NOT an example of a way in which microeconomic analysis can help in designing environmental policy? A) Determining the optimal level of vehicle fuel efficiency standards B) Designing laws to provide incentives for firms to […]

Which of the following statements is NOT true? A) The trade-offs facing consumers and producers are based on prices. B) All prices are determined by market interactions between buyers and sellers. C) Prices serve an important role in microeconomics. D) […]

Consider the following information: StowUrStuff Storage is located slightly below sea level in a coastal town. It could build and maintain a flood control system around its property at an annual cost of $1000, and if it did so, the […]

Suppose the market demand curve for cable internet service is completely elastic. At the market equilibrium price under perfect competition, the consumer surplus in this market equals: A) total consumer expenditures. B) total sales revenue. C) zero. D) an amount […]

Zoe is an executive at Dell Computer Company who is in charge of designing the next version of laptop computers. She will consider such features as screen size, weight, processor speed, and CD and DVD drives. Given the fact that […]

Corn flakes are A) a rival good because many firms produce them. B) a rival good because if another person wants some corn flakes society has to use additional resources to produce corn flakes for that person. C) a non-rival […]

Two firms operating in the same market must choose between a collude price and a cheat price. Firm A’s profit is listed before the comma, B’s outcome after the comma. If each firm tries to choose a price that is […]

Bill uses his entire budget to purchase Pepsi and hamburgers, and he currently purchases no Pepsi and 6 hamburgers per week. The price of Pepsi is $1 per can, the price of a hamburger is $2, Bill’s marginal utility from […]

For the monopolist shown below, the profit maximizing level of output is: A) Q1. B) Q2. C) Q3. D) Q4. E) Q5. You have been hired by an attorney to perform an economic analysis of lost wages in a wrongful […]

Consider the following three market baskets: If baskets B and C are on the same indifference curve, and if preferences satisfy all four of the basic assumptions, then: A) A is preferred to C. B) A is preferred to B. […]

The marginal benefit and marginal private cost curves for aphrodisiacs are given as follows: MB = 200 – Q MPC = Q In addition to private costs, there is a marginal external cost of $10 per unit of output. What […]

The government provides public education because A) public education is a public good. B) public education is non-rival and nonexclusive. C) private education is rival and exclusive. D) public education combats the negative externalities of private education. E) public education […]

Which price index measures the change in housing prices from repeated sales information? A) S&P / Case-Shiller index B) GDP deflator C) Chain-weighted consumer price index D) Dow-Jones index Which of the following statements is true? A) If marginal costs […]

For an inferior good, the income and substitution effects A) work together. B) work against each other. C) can work together or in opposition to each other depending upon their relative magnitudes. D) always exactly cancel each other. Monica consumes […]

When Joe maximizes utility, he finds that his MRS of X for Y is greater than Px/Py. It is most likely that: A) Joe’s preferences are incomplete. B) Joe’s preferences are irrational. C) Joe is not consuming good X. D) […]

The price elasticity of demand for nursery products is -10. The advertising elasticity of demand is 0.4. Using the “Rule of Thumb for Advertising,” the profit maximizing level of advertising will be set at ________ of sales. A) 0.25 percent […]

The key assumption underlying the theory of the firm is that: A) firms are assumed to maximize sales revenue. B) managers are assumed to maximize the number of employees in their department. C) firms are assumed to maximize profits. D) […]

A consumer spends his income on food and rent. The government places a $1 tax on food. To restore the pre-tax consumption level of food the rebate paid to consumers will be smallest when A) the own price elasticity of […]

Table 5.4 Refer to Table 5.4. If outcomes 1 and 2 are equally likely at Job A, and if at Job B the $20 outcome occurs with probability .1, and the $50 outcome occurs with probability . 9, then A) […]