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Figure 4-3 Figure 4-3 shows the market for tiger shrimp. The market is initially in equilibrium at a price of $15 and a quantity of 80. Now suppose producers decide to cut output to 40in order to raise the price […]

Figure 4-4 Refer to Figure 4-4. The figure above represents the market for pecans. Assume that this is a competitive market. Which of the following is true? A) If the price of pecans is $3 the output will be economically […]

Figure 17-3 Refer to Figure 17-3. In Panel A, at low wages (segment i) A) the substitution effect outweighs the income effect. B) the income effect outweighs the substitution effect. C) the substitution effect offsets the income effect. D) labor […]

Figure 15-11 In 2011, Verizon was granted permission to enter the market for cable TV in Upstate New York, ending the virtual monopoly that Time Warner Cable had in most local communities in the region. Figure 15-11 shows the cable […]

What is accounting profit? A) gross revenue minus explicit costs B) gross revenue minus implicit costs C) gross revenue minus explicit and implicit costs D) the same as economic profit Figure 18-1 Refer to Figure 18-1. Area E+H represents A) […]

Table 14-7 The payoff matrix shown above assumes that Perfect Plants and Florabunda Florist must decide whether to offer same-day delivery for their products. The matrix shows how much profit each firm will earn if it does or does not […]

Figure 16-5 Refer to Figure 16-5. Suppose the firm represented in the diagram decides to practice perfect price discrimination. What is the total revenue collected by the firm? A) $6,720 B) $7,680 C) $10,240 D) $13,440 Baxter International, a manufacturer […]

A monopolistically competitive firm that is profitable in the short run will face competition that will eventually eliminate the firm’s profits in the long run. But the firm can stave off competition and continue to earn economic profits if A) […]

Why do most firms in monopolistic competition typically make zero profit in the long run? A) because firms produce differentiated products B) because the lack of entry barriers would compete away profits C) because firms do not produce at their […]

Local or state offices of the Department of Justice usually set prices for natural monopolies in their jurisdictions. If demand is inelastic, the absolute value of the price elasticity coefficient is greater than one. Answer: FALSE The income effect of […]

The sales revenue a seller receives from the sale of an additional unit of goods is called the marginal benefit. A positive technological change will cause the supply of a good to increase. Answer: TRUE The U.S. government would never […]

For which of the following products is social influence likely to have the greatest impact? A) toothpaste B) restaurants C) high-blood pressure medication D) school textbook In 1930, the U.S. government attempted to help domestic firms that were harmed by […]

A corporation is owned by its A) board of directors. B) stockholders. C) employees. D) CEO. Figure 15-4 Figure 15-4 shows the demand and cost curves for a monopolist. Refer to Figure 15-4. What is the profit-maximizing/loss-minimizing output level? A) […]

An agreement among firms to charge the same price or otherwise not to compete is called A) a payoff matrix. B) a subgame-perfect equilibrium. C) a Nash equilibrium. D) collusion. An expansion path shows A) the level of sales necessary […]

Which of the following correctly comments on the following statement? “The only way to increase the revenue from selling a product is to increase the product’s price.” A) It is not true. Revenue will increase as the price of the […]

The government makes all economic decisions in a market economy. The level of output at which all economies of scale have been exhausted is known as A) constant returns to scale. B) minimum efficient scale. C) the economically efficient output […]

A subgame is a simultaneous game embedded in a sequential game. The success of Walt Disney’s animated film The Lion King in 1994 increased production of animated films, increasing the demand for animators much faster than the supply of animators […]

Which of the following would cause an increase in the supply of peanut butter? A) a decrease in the price of grape jelly (assuming that peanut butter and grape jelly are complements) B) an increase in the price of peanut […]

Figure 5-7 Refer to Figure 5-7. The marginal benefit of reducing pollution curve is the same curve as A) the supply of pollution reduction curve. B) the demand for pollution reduction curve. C) the positive externality curve. D) the external […]

Farah has $100 to spend each month on bread and chicken. Suppose the price of bread is $4 a loaf and the price of chicken is $5 per pound. a. Draw her budget constraint and label it BC0. Put bread […]

Consumer surplus in a market for a product would be equal to ________ if the market price was zero. A) zero B) the area between the supply curve and the demand curve C) the area above the supply curve D) […]

Sequential games are often used to analyze which two types of business strategies? A) whether to invest in research and development and whether to offer employees an early retirement package B) deciding to merge with another firm and deciding how […]

A curve that shows all the combinations of two inputs, such as labor and capital, that will produce the same level of output is called A) an isoquant. B) an isocost line C) a budget line. D) an optimal input […]

If firms in a monopolistically competitive industry are making profits in the short run A) barriers to entry will be erected to keep out rivals. B) some firms will ultimately exit the industry. C) they will resort to advertising wars […]

Because the monopolistically competitive firm faces a ________ demand curve for its product, it ________ the price of its output. A) downward-sloping; cannot influence B) horizontal; can influence C) horizontal; cannot influence D) downward-sloping; can influence The marginal rate of […]

If the market for a product is broadly defined, then A) the good has many complements. B) there are few substitutes for the product and the demand for the product is relatively inelastic. C) there are many substitutes for the […]

In which market structure is it not possible to practice price discrimination? A) perfect competition B) monopolistic competition C) oligopoly D) monopoly Consider an industry that is made up of nine firms each with a market share (percent of sales) […]

Figure 5-9 Companies producing toilet paper bleach the paper to make it white. The bleach is discharged into rivers and lakes and causes substantial environmental damage. Figure 5-9 illustrates the situation in the toilet paper market. Refer to Figure 5-9. […]

Figure 18-7 Figure 18-7 shows the Lorenz curve for a hypothetical country. Refer to Figure 18-7. The second highest 20 percent of households A) earn 24 percent of the society’s total income. B) earn 28 percent of the society’s total […]

Which of the following statements is true? A) Opportunity cost = explicit cost – implicit cost. B) Total cost = fixed cost + implicit cost. C) Total cost = fixed cost + variable cost. D) Variable cost = wages + […]

An individual’s labor supply curve shows A) the maximum wage rates offered to that individual by various potential employers. B) the relationship between wages and the quantity of labor that she is willing to supply. C) the relationship between wages […]

If, for a given percentage decrease in price, quantity supplied decreases by a proportionately smaller percentage, then supply is A) unit elastic. B) perfectly elastic. C) relatively inelastic. D) elastic. A monopolistically competitive firm will A) charge the same price […]

Figure 9-2 Suppose the U.S. government imposes a $0.40 per pound tariff on rice imports. Figure 9-2 shows the impact of this tariff. Refer to Figure 9-2. The increase in domestic producer surplus as a result of the tariff is […]

Arnie Ziffel has $20 per week to spend on any combination of pineapples and green tea. The price of a pineapple is $4 and the price of a bottle of green tea is $2. The table below shows Arnie’s utility […]

Figure 13-11 Refer to Figure 13-11. The diagram depicts a firm A) in a constant-cost industry. B) in an increasing-cost industry. C) in long-run equilibrium. D) that is making short-run losses. When someone takes out a mortgage loan to buy […]

The key characteristics of a monopolistically competitive market structure include A) few sellers. B) sellers selling similar but differentiated products. C) high barriers to entry. D) sellers acting to maximize revenue. Table 4-4 Table 4-4 shows the demand and supply […]

When demand is elastic, a fall in price causes total revenue to rise because A) when price falls, quantity sold increases so total revenue automatically rises. B) the increase in quantity sold is large enough to offset the lower price. […]

The popularity of digital cameras has enticed large discount stores like Wal-Mart and Costco to offer digital photo printing services. How does this affect the digital photo printing market? A) The demand curve for digital photo printing services shifts to […]

If consumers believe the price of iPads will decrease in the future, this will cause the demand for iPads to decrease now. A consumer maximizes her total utility from a bundle of goods when her marginal utility from each good […]

The Trans-Pacific Partnership (TPP) would ________ tariffs on most goods and services shipped between partnership countries and also ________ so-called non-tariff barriers to trade, such the licenses governments require to import some goods. A) eliminate; reduce B) raise; raise C) […]

A numerical limit imposed by a government on the quantity of a good that can be imported into the country is called a A) tariff. B) quota. C) quantity floor. D) barricade. Congressman Murphy made the following proposal: “We should […]

A perfectly competitive firm will maximize its profit at the rate of output where the vertical distance between its total revenue curve and total cost curve is the largest. This is the same rate of output where A) average total […]

In a two-good, two country world, if one country has an absolute advantage in the production of both goods, it cannot benefit by trading with the other country. A market failure arises when an entire sector of the economy (for […]

Indirect finance includes the sale by a corporation of stocks or bonds, as well as borrowing money from a bank. As output increases, the distance between average total cost and average variable cost increases. Answer: FALSE Horizontal equity is achieved […]

If the price of peaches, a substitute for plums, decreases the demand for plums will increase. Trade only occurs if there are only winners, and no losers, as a result of the trade. Answer: FALSE Economic profit is the difference […]

Table 14-4 Alistair Luggage and Baine Baggage are the only firms selling luggage in the upscale town of Montecito. Each firm must decide on whether to increase its advertising budget to compete for customers. If one firm increases its advertising […]

Table 2-12 Refer to Table 2-12. This table shows the number of labor hours required to produce a digital camera and a bushel of wheat in China and South Korea. a. Assume each country has a total of 9,000 labor […]

Which of the following exemplifies the tragedy of the commons? A) Residents on the northern coast of California receive only one public broadcasting signal which may be eliminated altogether if government funding is cut. B) The Pleasant Hill community is […]

When BMW, an German company, purchases a welding machine that was made in Toronto, the purchase is A) both a German and a Canadian import. B) a German import and a Canadian export. C) a German export and a Canadian […]

The wage rate is the opportunity cost of A) working. B) working overtime. C) leisure. D) consumption. Jake sells Star Wars memorabilia on eBay. His annual revenue is $42,000 per year, the explicit costs of his business are $10,000, and […]

A personal exemption refers to A) the tax rate that applies to a particular tax bracket. B) the tax bracket that represents basic living expenses. C) an amount representing basic living expenses that can be subtracted from income. D) a […]

In discussions of barriers to entry, what is meant by the term “virtuous cycle”? A) A virtuous cycle refers to successful research and development that leads to information that is used to develop other new products. B) A virtuous cycle […]

According to a study of the U.S. demand for alcoholic beverages, the price elasticity of demand for beer is -0.30. Which of the following could explain why the price elasticity of demand for beer is low? A) Beer is an […]

The following appeared in a Florida newspaper a week after a hurricane hit the state. “Floridians are relieved that the storm produced no fatalities but homeowners face weeks, if not months, of rebuilding. Matters are made worse by the soaring […]

Suppose the consumer’s income increases while the prices of the goods remain constant. Then the A) budget constraint shifts inward parallel to the original budget constraint. B) budget constraint shifts outward parallel to the original budget constraint. C) indifference curves […]

Barbara, the consummate hostess, proudly announced as she served dessert, “A port is often the perfect end to a meal, sipped with a piece of my scrumptious chocolate cake.” Evidently, Barbara views port and chocolate cake as A) luxury items. […]

In economics, the term “free rider” refers to A) a person who evades taxes. B) a supervisor who delegates menial time-consuming activities to others. C) one who volunteers her services. D) one who waits for others to produce a good […]

Figure 5-2 Figure 5-2 shows a market with a negative externality. Refer to Figure 5-2. The deadweight loss due to the externality is represented by the area A) abc. B) abf. C) abd. D) ade. Which of the following is […]

If the number of employees who quit, are fired, or retire increases while the hiring of new employees declines, this indicates that the A) labor demand curve is shifting to the right. B) labor supply curve is shifting to the […]

If, for a given output level, a perfectly competitive firm’s price is less than its average variable cost, the firm A) is earning a profit. B) should shut down. C) should increase output. D) should increase price. The government of […]

Table 12-1 Table 12-1 shows the short-run cost data of a perfectly competitive firm that produces plastic camera cases. Assume that output can only be increased in batches of 100 units. Refer to Table 12-1. Suppose the fixed cost of […]

Table 17-1 Refer to Table 17-1. Suppose the output price is $3. If the wage rate is $90, what is the profit-maximizing quantity of labor that the firm should hire? A) 7 units B) 5 units C) 4 units D) […]

Figure 11-11 Figure 11-11 illustrates the long-run average cost curve for a firm that produces picture frames. The graph also includes short-run average cost curves for three firm sizes: ATCa, ATCb and ATCc. Refer to Figure 11-11. In the short […]

Table 11-7 Table 11-7 shows cost data for Lotus Lanterns, a producer of whimsical night lights. Refer to Table 11-7. What is the average total cost of production when the firm produces 120 lanterns? A) $1,680 B) $72 C) $14 […]

If a 6 percent increase in income leads to a 4 percent increase in quantity demanded for audio books, the income elasticity of demand is A) -0.67. B) 67. C) 5. D) An income tax system is ________ if marginal […]

Table 12-3 Arnie sells basketballs in a perfectly competitive market. Table 12-3 summarizes Arnie’s output per day (Q), total cost (TC), average total cost (ATC) and marginal cost (MC). Refer to Table 12-3. What will Arnie’s output be and how […]

Table 9-1 Linda and Sandy own The Preppy Puppy, a dog grooming business. Table 9-1 lists the number of dogs Linda and Sandy can each bathe and groom in one week. Refer to Table 9-1. Select the statement that accurately […]

The public choice model raises questions about the government’s ability to regulate economic activity efficiently. Which of the following statements represents the views of most economists with regard to the role of government? A) Congress should abolish the Food and […]

Table 11-3 Refer to Table 11-3. The table above refers to the relationship between the quantity of workers employed and the number of cardboard boxes produced per day by Manny’s House of Boxes. The capital used to produce the boxes […]

Figure 18-2 Figure 18-2 shows a demand curve and two sets of supply curves, one set more elastic than the other. Refer to Figure 18-2. If the government imposes an excise tax of $1.00 on every unit sold, what is […]

When a firm’s long-run average cost curve is horizontal for a range of output, then that range of production displays A) increasing returns to scale. B) constant returns to scale. C) decreasing returns to scale. D) constant average fixed costs. […]

Tanesha sells homemade candles over the Internet. Her annual revenue is $64,000 per year, the explicit costs of her business are $17,000, and the opportunity costs of her business are $22,000. What is her economic profit? A) $17,000 B) $25,000 […]

The marginal product of labor is calculated using the formula A) L/Q. B) ΔL/ΔQ. C) ΔQ/ΔL. D) Q/L. To maximize profit a monopolist will produce where A) marginal revenue is equal to marginal cost. B) demand for its product is […]

Figure 1-3 Refer to Figure 1-3. Calculate the area of the trapezoid X. A) $270 B) $720 C) $810 D) $2,520 “A competitive market achieves economic efficiency by maximizing the sum of consumer surplus and producer surplus.” This statement A) […]

The Organization of Petroleum Exporting Countries (OPEC) controls about 75 percent of the world’s proven oil reserves. Economists refer to OPEC as a cartel because A) OPEC is a monopoly, but it is located outside of the boundaries of any […]

Most people would prefer to drive a luxury car that has all the options, but more people buy less expensive cars even though they could afford the luxury car because A) car buyers are irrational. B) the total utility of […]

Table 16-3 Julie plans to start a pet-sitting service. She surveyed her neighborhood to determine the demand for this service. Assume that each person surveyed demands only one hour of pet sitting services per period. Table 16-3 above shows a […]

Table 17-2 Refer to Table 17-2. The marginal profit from hiring the second unit of labor is A) $4,200. B) $1,960. C) $1,800. D) $1,450. The value you give today to money you will receive in the future is called […]

If, when you consume another piece of candy, your marginal utility is zero, then A) you want more candy. B) you have maximized your total utility from consuming candy. C) you have not yet reached the point of diminishing marginal […]

An agreement negotiated by two countries that places a numerical limit on the quantity of a good that can be imported by one country from another country is called A) a non-tariff trade barrier. B) an export quota. C) an […]

Article Summary Recent studies about wealth inequality and income inequality indicate that the American public’s estimates of the distribution of wealth and income are quite different than actual data suggests. With respect to wealth, the top 20 percent of households […]

If equilibrium is achieved in a competitive market A) there is no deadweight loss. B) the deadweight loss will be maximized. C) the deadweight loss will equal the sum of consumer surplus and producer surplus. D) the deadweight loss will […]

Pierre can produce either a combination of 20 bow ties and 30 neckties or a combination of 35 bow ties and 15 neckties. If he now produces 35 bow ties and 15 neckties, what is the opportunity cost of producing […]

Rent control is an example of a price ceiling. In the United States, imports and exports make up more than half of GDP. Answer: FALSE If some monopolistically competitive firms exit their market after suffering short-run losses, the demand curves […]

Airlines often engage in last-minute price cutting to fill remaining empty seats on a flight because this practice will generally A) prevent rival airlines from competing in that market. B) increase marginal revenue more than marginal cost. C) maximize marginal […]

Table 6-7 Refer to Table 6-7. a. Using the information in the table, calculate the income elasticity of demand for good X and characterize the good. Use the midpoint formula. b. Can you calculate the income elasticity of demand for […]

Table 2-9 Table 2-9 shows the number of labor hours required to produce a canoe and a sailboat in Guatemala and Honduras. Refer to Table 2-9. Does either Guatemala or Honduras have an absolute advantage and if so, in what […]

Which of the following is likely to occur as the result of the law of diminishing marginal utility? A) Petra’s utility from her second apple was less than her satisfaction from her first orange. B) Hudson enjoyed his second slice […]

Consider the market for pilots. What is likely to happen to the equilibrium wage and quantity of pilots if the government enforces a lower mandatory retirement age, say from age 65 to age 62? A) The equilibrium wage and the […]

Consider a public good such as fire protection services. Rich people may benefit more than the poor from such a service because rich people stand to lose more from a fire that destroys property. In this case A) the ability-to-pay […]

Table 12-1 Table 12-1 shows the short-run cost data of a perfectly competitive firm that produces plastic camera cases. Assume that output can only be increased in batches of 100 units. Refer to Table 12-1. If the market price of […]

Joss is a marketing consultant. Iris and Daphne are potential customers interested in commissioning Joss to undertake a market survey and compile the findings in a report. Iris is willing to pay $500 for the service while Daphne is willing […]

Harvey Miller owns a baseball that was hit for a home run by Ted Williams. Harvey, a long-time Boston Red Sox fan, recently refused to sell his baseball for $75,000 even though he would not have paid someone more than […]

The United States is a leading exporter of wheat. What explains the comparative advantage of the United States in wheat production? A) positive externalities B) investment by multinational firms such as Archer-Daniels-Midland and Tyson Foods Inc. C) climate and soil […]

Compare two situations. (A) A firm is not legally responsible for damages that result from air pollution caused by its production of steel. (B) A firm is legally responsible for damages that result from its production of steel. Ronald Coase […]