The process by which resources are transformed into useful forms is
A) capitalization.
B) consumption.
C) production.
D) allocation.
Figure 3.17
Refer to Figure 3.17. The market for sunglasses is in equilibrium at a price of ________
and a quantity of ________ sunglasses.
A) $30; 300
B) $30; 600
C) $60; 450
D) $90; 300
The law of ________ refers to a consumer’s decrease in additional satisfaction as she
consumes more and more units of a good.
A) consumer choice
B) diminishing marginal utility
C) utility maximization
D) infinite demand
Figure 16.6
Refer to Figure 16.6. In the top portion of the figure are the demand curves of two
people in this society for a public good. Which of the panels represents the market
demand curve for the public good?
A) Panel A
B) Panel B
C) Panel C
D) Panel D
If you eat at a Las Vegas casino that charges $12 for its all you can eat buffet, then the
marginal cost of your third trip to the buffet is
A) zero.
B) $4.
C) $12.
D) $36.
It is assumed that the marginal benefit of consumption
A) remains constant as more units of the good are consumed.
B) increases as more units of the good are consumed.
C) decreases as more units of the good are consumed.
D) could either increase or decrease as more units of the good are consumed.
If we assume that labor is the only variable input, the slope of the ________ total
product curve measures the ________ product of labor.
A) short-run; total
B) long-run; total
C) short-run; marginal
D) short-run; average
Which of the following will NOT cause a shift in the demand curve for compact discs?
A) a change in income
B) a change in wealth
C) a change in the price of downloadable online music
D) a change in the price of compact discs
Mustard and mayonnaise are substitutes. Mustard and relish are complements. Mustard
is a normal good. During the summer, about 50% of all mustard was recalled by
manufacturers and removed from store shelves.
Refer to Scenario 3.2. The mustard recall would have caused
A) an increase in the demand for relish.
B) an increase in the quantity demanded of relish.
C) a decrease in the demand for relish.
D) a decrease in the quantity demanded of relish.
Figure 4.4
Refer to Figure 4.4. Assume that initially there is free trade. To reduce U.S. imports
without a tax, the U.S. could
A) increase pollution control regulations.
B) allow drilling for oil in the Alaska National Wildlife Refuge.
C) increase safety regulations for oil refineries.
D) all of the above
Table 8.2
Refer to Table 8.2. If Danica produces five pairs of earrings, her total costs are
A) $160.
B) $180.
C) $185.
D) $200.
Table 3.2
Refer to Table 3.2. If the price per cheeseburger is $9, there is a(n)
A) market equilibrium.
B) excess demand of 500 units.
C) excess demand of 300 units.
D) excess supply of 1,000 units.
Figure 4.5
Refer to Figure 4.5. Assume that initially there is free trade. If the United States then
imposes a $10.00 tax per CD-Rom drive on imported CD-Rom drives,
A) the quantity of CD-Rom drives demanded will be reduced by 6 million.
B) the quantity of CD-Rom drives supplied by U.S. firms will increase by 3 million.
C) the price of CD-Rom drives in the United States will decrease to $5.
D) U.S. imports of CD-Rom drives will increase by 3 million.
Upon graduation, Shawntae had two job offers. The jobs were identical in every way
with two exceptions. One job was located in Ft. Lauderdale, FL and offered an annual
salary of $95,000. The other job was located in Tulsa, OK and offered an annual salary
of $72,000. All else equal, the salary difference is due to ________.
A) compensating differentials
B) discrimination
C) transfer payments
D) the firm in Florida had a lower demand for workers than the firm in Oklahoma
Figure 10.2
Refer to Figure 10.2. This firm’s marginal cost curve has shifted from MC1 to MC0. A
likely explanation for this is that
A) the productivity of a variable input increased.
B) the price of a variable input increased.
C) the demand for the firm’s product increased.
D) the supply of a variable input increased.
Products ________ in the oligopolistic market structure.
A) are always homogeneous
B) are always differentiated
C) are always unique
D) may be homogeneous or differentiated
A family that earns $20,000 a year pays $1,000 a year in payroll taxes. A family that
earns $40,000 a year pays $2,000 a year in payroll taxes. The payroll tax is
A) a progressive tax.
B) a regressive tax.
C) a proportional tax.
D) a benefits-received tax.
Figure 15.3
Refer to Figure 15.3. In the short run, this company is ________, and in the long run, it
should expect to ________.
A) suffering a loss; break even
B) breaking even; break even
C) making a profit; break even
D) suffering a loss; shut down
You are certain that a normal rate of return is 18% for the computer industry. What do
you expect for a normal rate of return in the computer software industry, which is
considered to be much riskier than the computer industry?
A) 18%
B) Less than 18%
C) Above 18%
D) The rate on government bonds
Figure 2.3
Refer to Figure 2.3. Assume that this society’s production possibility frontier is
represented by Panel C. The opportunity cost of sailboats in terms of surfboards is
A) constant.
B) increasing.
C) decreasing.
D) infinite.
An individual earning $60,000 pays $12,000 in taxes. The marginal tax rate on any
income earned above $60,000 is 25%.
When this person earns $70,000, her average tax rate is
A) 7%.
B) 5%.
C) 25%.
D) indeterminate from this information.
When the demand curve is a downward sloping straight line, the quantity at which the
demand curve intersects the horizontal (quantity) axis is ________ the quantity at
which the marginal revenue curve intersects the horizontal (quantity) axis.
A) equal to
B) less than
C) twice
D) four times
An oligopolistic model in which firms produce exactly the same results as would exist
if the industry were ________ is called the collusion model.
A) perfectly competitive
B) monopolistically competitive
C) government regulated
D) a monopoly
An individual wheat farmer produces wheat in a perfectly competitive market. A
decrease in the market demand for wheat will cause the farmer’s marginal revenue to
________ and his profit maximizing level of output to ________.
A) increase; increase
B) increase; decrease
C) decrease; increase
D) decrease; decrease
The value of the slope of a society’s production possibility frontier is called its
A) marginal rate of substitution.
B) inflation rate.
C) unemployment rate.
D) marginal rate of transformation.
Figure 8.5
Refer to Figure 8.5. If two ovens are produced, average variable costs are
A) $100.
B) $200.
C) $225.
D) indeterminate from this information.
Figure 10.4
Refer to Figure 10.4. Firms will
A) hire 175 units of labor at a market wage of $15.
B) hire 100 units of labor at a market wage of $15 and have a surplus of $5 per unit of
labor.
C) hire 100 workers at a wage of $25.
D) indeterminate from the given information.
Imperfect competition
A) means there is no competition in the market.
B) results in less efficient market outcomes.
C) should always be regulated by the government
D) is a major cause of externalities in the market.
Figure 8.4
Refer to Figure 8.4. If six microwave ovens are produced, Micro Oven’s average total
costs are
A) $33.33.
B) $83.33.
C) $116.67.
D) $200.00.
You use $45,000 of your own money to start an espresso stand. During the first year
you earn a 10% return on that investment. If the current interest rate is 8%, you earn an
economic profit of
A) -$900.
B) $100.
C) $500.
D) $900.
Investors put up $520,000 to construct a building and purchase all equipment for a new
restaurant. The investors expect to earn a minimum return of 10 per cent on their
investment. The restaurant is open 52 weeks per year and serves 900 meals per week.
The fixed costs are spread over the 52 weeks (i.e. prorated weekly). Included in the
fixed costs is the 10% return to the investors and $1,000 per week in other fixed costs.
Variable costs include $1,000 in weekly wages and $600 per week for materials,
electricity, etc. The restaurant charges $5 on average per meal.
The restaurant is making ________ economic profits per week.
A) positive
B) zero
C) negative
D) break-even
Under perfect competition, the person that ends up with the marginal unit is the person
that values it
A) at an amount above its price.
B) at an amount lower than its price.
C) exactly at its price.
D) above its marginal cost.
Is it theoretically possible for general equilibrium to be attained? Is it likely that general
equilibrium will be attained? Explain.
What is social choice?
Why are losses acceptable in the short run but not the long run?
Assume the government reduces your welfare check by $1 for every $2 that you earn on
the job while on welfare. How will this tax affect your labor supply decisions? What is
the implicit tax rate of such a policy?
Customers often complain about the high price of accessories for their cell phone
including batteries, chargers and head sets. Often these items can cost even more than
the price of the phone. Explain using price elasticity why this might be the case.
The following table shows output per hour for Mexico and Canada, two countries that
produce beer and T-shirts:
What is the opportunity cost of a bottle of beer for Mexico? What is the opportunity
cost of a T-shirt for Mexico? Who has a comparative advantage in producing beer? How
can you tell?
The following table shows output per hour for Fred and Barney who mow lawns and
trim hedges:
What is the opportunity cost of mowing a lawn for Fred? What is the opportunity cost of
trimming a hedge for Fred? Who has a comparative advantage in mowing lawns? How can
you tell?
What has been the reaction of many governments to the failure of central planning?
Why is it not a contradiction to say that a firm is simultaneously earning an accounting
profit but suffering an economic loss?
If you travel to Mexico you will often see currency exchange businesses along the way
as you approach the border. Even though each of these businesses is essentially ‘selling”
the same product (i.e. Mexican pesos) how is it that some of them are able to charge
more for the peso than others?
Using Scenario 2 what would be the number of points that the testing company would
have to award to make students indifferent between guessing and not guessing even
when the student has eliminated three of the answers if it still wishes to impose a five
point penalty for guessing incorrectly. Would this be any different than awarding one
point for correct answers and zero points for wrong answers?
A doctor sets up a private practice in small town where he faces no other competitors.
In spite of his monopoly position why is he not guaranteed to make a profit?
Comment on the following statement: “Diminishing returns occur when total output
falls as additional units of labor are combined with fixed inputs in the production
process.”
List the four criteria that are generally used to evaluate economic outcomes.
Use the graph below to calculate the marginal cost of the first, second and third unit of
output.
What is the relationship between average total cost and marginal cost?
What is the relationship between marginal cost and fixed cost?