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The model suggesting that countries will specialize in producing the good that uses its
relatively abundant factor of production most intensively is referred to as the _____
model.
A) Heckscher"Ohlin
B) absolute advantage
C) sweatshop labor
D) pauper labor fallacy
Figure: MSB and MSC of Pollution
(Figure: MSB and MSC of Pollution) Look at the figure MSB and MSC of Pollution. If
the current level of pollution is at Q1, _____ pollution is being emitted, as _____.
A) not enough; MSB > MSC
B) not enough; MSB < MSC
C) too much; MSB > MSC
D) the socially optimal amount of; MSB = MSC
A perfectly competitive firm is a:
A) price taker.
B) price searcher.
C) cost maximizer.
D) quantity taker.
Figure: Slope
(Figure: Slope) Look at the figure Slope. The
slope of the line in the graph can be calculated by:
A) dividing the horizontal change by the vertical change.
B) dividing the vertical change by the horizontal change.
C) subtracting the sum of the Y values from the sum of the X values.
D) adding the sum of the X values to the sum of the Y values.
Which of the following is TRUE?
A) A monopoly firm is a price taker.
B) MR > P if the demand curve is downward-sloping.
C) MR = MC is a profit-maximizing rule for any firm.
D) In monopoly P = MC when profits are maximized.
Tariffs and import quotas tend to:
A) increase the quantity of imports as compared to free trade.
B) generate government revenue.
C) increase consumer surplus as compared to free trade.
D) reduce total surplus as compared to free trade.
If the price of a good increases by 20% and the quantity demanded changes by 15%,
then the price elasticity of demand is equal to:
A) 0.75.
B) approximately 0.33.
C) approximately 1.33.
D) 1.
Figure: PPV
(Figure: PPV) Look at the figure PPV, which shows the demand and marginal revenue
for a pay-per-view football game on cable TV. Assume that the marginal cost and
average cost are a constant $40. If the cable company is a single-price monopoly and
maximizes profit, consumer surplus will be:
A) $0.
B) $45.
C) $70.
D) $90.
Figure: Producer Surplus III
(Figure: Producer Surplus III) Look at the figure Producer Surplus III. If the price of the
good is $4, producer surplus will equal:
A) $20.
B) $40.
C) $60.
D) $80.
Table: Utility from Oranges and Star Fruit Pounds of Oranges Total Utility from
Oranges Pounds of Star Fruit Total Utility 0 0 0 0 1 24 1 70 2 44 2 130 3 60 3 180 4
72 4 220 5 80 5 250 6 84 6 270 7 84 7 280
(Table: Utility from Oranges and Star Fruit) Look at the table Utility from Oranges and
Star Fruit. Oranges cost $2 per pound and star fruit costs $5 per pound. Calvin has $26
to spend. If Calvin buys 4 pounds of star fruit and 3 pounds of oranges, how much is his
total utility?
Pounds of Oranges Total Utility from Oranges Pounds of Star Fruit Total Utility
0 0 0 0
1 24 1 70
2 44 2 130
3 60 3 180
4 72 4 220
5 80 5 250
6 84 6 270
7 84 7 280
A) 72
B) 180
C) 280
D) 364
Figure and Table: The Changing Slope of an Indifference Curve
(Figure and Table: The Changing Slope of an Indifference Curve) Look at the figure
and table The Changing Slope of an Indifference Curve. Which of the following
statements is TRUE?
A) Combination V is preferred to combination X.
B) Combination W is preferred to combination Z.
C) Combination X is preferred to combination W.
D) The consumer is indifferent between V and W.
Figure: Seasonally Adjusted Unemployment Rate
/ (Figure:
Seasonally Adjusted Unemployment Rate) Look at the figure Seasonally Adjusted
Unemployment Rate. The distance between each labeled point on the horizontal axis is
one year. Using this graph, the unemployment rate was at a minimum in ______ and a
maximum in ______.
A) 2003; 2000
B) 2007; 2001
C) 2003; 1999
D) 2000; 2003
Oligopoly is a market structure that is characterized by a _____ number of _____ firms
that produce _____ products.
A) large; relatively small and independent; identical
B) small; independent; identical or differentiated
C) large; relatively small and independent; differentiated
D) small; interdependent; identical or differentiated
A firm in monopolistic competition maximizes its profit by producing so that:
A) MC = ATC.
B) MC = AR.
C) MC = MR.
D) MC = P.
Which of the following formulas is CORRECT?
A) VMPL = MC × P.
B) VMPL = MPL × P.
C) MPL = VMPL × P.
D) VMPL / MC = TR.
Figure: A Market with a Tax
(Figure: A Market with a Tax) Look at the figure A Market with a Tax. The deadweight
loss arising from the imposition of this tax is equal to the areas:
A) B + D
B) D + E.
C) B + C.
D) C + F.
(Table: Demand for Solar Water Heaters) Look at the table Demand for Solar Water
Heaters. The marginal cost of producing solar water heaters is zero, and only two firms,
Rheem and Calefi, produce them. If Rheem and Calefi get into a price war, the
equilibrium price in the market will be:
A) $0.
B) $700.
C) $800.
D) $1,000.
Scenario: Music Downloads and Streamed Movies
Phillip has an income of $300 per month, which he uses to purchase music downloads
(MD) and streamed movies (SM). Each music download costs $1 and each streamed
movie costs $5.
(Scenario: Music Downloads and Streamed Movies) Read the scenario Music
Downloads and Streamed Movies. Suppose Phillip's income falls by half, and the prices
for both music downloads and streamed movies also fall by half. As a result of this,
Phillip:
A) can buy fewer music downloads if he spends all of his income on music downloads.
B) can buy fewer streamed movies if he spends all of his income on streamed movies.
C) will not notice any change in his budget line.
D) will undergo a parallel shift out of his budget line.
A perfectly competitive firm's marginal cost curve above the average variable cost
curve is its _____ curve.
A) input demand
B) short-run supply
C) marginal revenue
D) total revenue
Figure: A Tariff on Oranges in South Africa
(Figure: A Tariff on Oranges in South Africa) Look at the figure A Tariff on Oranges in
South Africa. When the government imposes a tariff on imported oranges, the price of
oranges in South Africa rises from PW to PT and the volume of imports falls to:
A) Q2 " Q1.
B) C1 " C2.
C) C1 " Q1.
D) C2 " Q2.
Kurt earns a wage of $100 per hour; Jim earns a wage of $10 per hour. To maximize
utility, Kurt works 45 hours per week and Jim works 50 hours per week. The value of
an additional hour of leisure is:
A) higher for Jim than for Kurt.
B) higher for Kurt than for Jim.
C) less than $100 for Kurt.
D) greater than $10 for Jim.
Which of the following statements about the differences between monopoly and perfect
competition is INCORRECT?
A) A monopolist has market power, while a perfect competitor does not.
B) Unlike a perfectly competitive firm, a monopoly can make positive economic profits
in the long run.
C) A monopoly will charge a higher price and produce a smaller quantity than a
competitive market with the same demand and cost structure.
D) Monopoly profits can continue in the long run because the monopoly produces more
and charges a higher price than a comparable perfectly competitive industry.
A tax of $20 on an income of $200, $40 on an income of $300, and $80 on an income
of $400 is:
A) progressive.
B) proportional.
C) regressive.
D) constant-rate.
Figure: The Market for Tea in Sri Lanka
(Figure: The Market for Tea in Sri Lanka) Look at the figure The Market for Tea in Sri
Lanka. In autarky, the price is P1. When the economy is opened to trade, the price rises
to PW. Sri Lanka will _____ tea and the volume of trade will equal _____.
A) import; QT " CT
B) export; QT" CT
C) import; QT" Q1
D) export; Q1" CT
An announcement that smoking will harm your ability to think clearly will most likely
result in:
A) an increase in the quantity of cigarettes demanded.
B) a decrease in the demand for cigarettes.
C) no change in smoking habits.
D) an increase in the price of cigarettes.
The price of popcorn is $0.50 per box and the price of peanuts is $0.25 per bag. You
have $5 to spend on both goods. The maximum number of bags of peanuts that you can
purchase is:
A) 5.
B) 10.
C) 20.
D) 40.
If the price elasticity of demand between two points on a demand curve is 0.75, then the
demand between those two points is:
A) price unit-elastic.
B) price-inelastic.
C) price-elastic.
D) unknown.
(Table: Total Product and Marginal Product) Look at the table Total Product and
Marginal Product. The marginal product of the second worker is:
A) 10.
B) 15.
C) 20.
D) 30.
