Monopolistic competition is similar to perfect competition because firms in both market
structures:
A) are price takers.
B) produce goods that are perfect substitutes.
C) find it beneficial to advertise.
D) do not face any barriers to entry to the industry in the long run.
The addition to the total revenue from selling one more unit of the good is:
A) less than the market price.
B) average profit.
C) marginal cost.
D) marginal revenue.
Your health club is offering a free one-year membership for the person who attends the
most yoga classes in March. This results in more people attending yoga. This statement
best represents this economic concept:
A) The real cost of something is what you must give up to get it.
B) People usually exploit opportunities to make themselves better off.
C) There are gains from trade.
D) Markets move toward equilibrium.
(Table: Expected Exam Scores from Studying Economics and Accounting) Look at the
table Expected Exam Scores from Studying Economics and Accounting. If you studied
for a total of three hours, your combined scores would be maximized by spending
_____ hours studying accounting.
A) zero
B) one
C) two
D) three
For Domingo, the optimum consumption bundle is the one that _____ his _____, given
his budget constraint.
A) minimizes; utility
B) maximizes; utility
C) maximizes; opportunity cost
D) minimizes; opportunity cost
If personal income up to and including $25,000 is not taxed, income of $25,001 to
$50,000 is taxed at 10%, and income over $50,000 is taxed at 20%, then a family
earning an income of $75,000 will pay _____ in personal taxes.
A) $6,000
B) $7,500
C) $11,250
D) $15,000
(Table: Cakes) Look at the table Cakes. Pat is opening a bakery to make and sell special
birthday cakes. She is trying to decide how many mixers to purchase. Her estimated
fixed and average variable costs if she purchases one, two, or three mixers are shown in
the table. Assume that average variable costs do not vary with the quantity of output. If
Pat purchases three mixers, her average fixed cost _____ in the range of output between
100 and 400 cakes.
A) increases
B) decreases
C) remains the same
D) can’t be calculated
(Table: Cakes) Look at the table Cakes. Pat is opening a bakery to make and sell special
birthday cakes. She is trying to decide how many mixers to purchase. Her estimated
fixed and average variable costs if she purchases one, two, or three mixers are shown in
the table. Assume that average variable costs do not vary with the quantity of output. If
Pat purchases one mixer, her average fixed cost _____ in the range of output between
100 and 400 cakes.
A) increases
B) decreases
C) remains the same
D) can’t be calculated
Table: Pumpkin Market
(Table: Pumpkin Market) There are two consumers, Andy and Ben, in the market for
pumpkins. Their willingness to pay for each pumpkin is shown in the table Pumpkin
Market. There are two producers of pumpkins, Cindy and Diane, and their costs are also
shown. The equilibrium price for pumpkins is $8 and the equilibrium quantity is 5. If
Andy buys one more pumpkin and Diane sells one fewer pumpkin than in equilibrium,
total surplus will _____ by _____.
A) increase; $16
B) increase; $14
C) decrease; $4
D) decrease; $3
Jessica’s income increased by 10% this year. In the same year, Jessica’s quantity
demanded of milk increased by 10% and her quantity demanded for bread increased by
5%. This means that for Jessica:
A) both milk and bread are inferior goods.
B) both milk and bread are normal goods.
C) milk is an inferior good, but bread is a normal good.
D) milk is a normal good, but bread is an inferior good.
National defense and clean air are similar in that both are _____, but they differ in that
national defense is _____, while clean air is not.
A) rival in consumption; excludable
B) nonrival in consumption; excludable
C) excludable; rival in consumption
D) nonexcludable; nonrival in consumption
Scenario: Tom’s Budget Constraint
Tom is trying to decide how to allocate his $50 budget for music downloads and online
movie streaming when the price of a music download is $1 and the price of a movie is
$5.
(Scenario: Tom’s Budget Constraint) Read the scenario Tom’s Budget Constraint. The
combination _____ music downloads and _____ movies lies INSIDE Tom’s budget line.
(Tom can afford this combination, but he will not be spending the entire $50.)
A) 50; 10
B) 50; no
C) no; 5
D) 100; 5
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 $20. If the cable company is in a perfectly competitive
industry, how much is deadweight loss?
A) $0
B) $320
C) $160
D) $500
The fact that a society’s production possibility frontier is bowed out, or concave to the
origin of a graph, demonstrates the law of _____ opportunity cost.
A) increasing
B) decreasing
C) constant
D) concave
(Table: Producer Surplus) Look at the table Producer Surplus. If the price of a ticket to
see The Nutty Nutcracker is $50, then Dudley’s producer surplus is:
A) $0.
B) $25.
C) $60.
D) $240.
The price of popcorn is $0.50 per box and the price of peanuts is $0.25 per bag. You
have $5 to spend. You decide to purchase 8 boxes of popcorn. The maximum number of
bags of peanuts that you can purchase is:
A) 4.
B) 8.
C) 10.
D) 12.
(Table: Cakes) Look at the table Cakes. Pat is opening a bakery to make and sell special
birthday cakes. She is trying to decide how many mixers to purchase. Her estimated
fixed and average variable costs if she purchases one, two, or three mixers are shown in
the table. Assume that average variable costs do not vary with the quantity of output. If
Pat purchases three mixers and bakes 200 cakes per day, what is her average fixed cost?
A) $0.05
B) $2.50
C) $5.00
D) $12.50
Figure: Kristin’s Budget Line
(Figure: Kristin’s Budget Line) Look at the figure Kristin’s Budget Line. The price of a
cup of cappuccino is $3, and the price of an apple is $1. Kristin’s income is:
A) $50.
B) $120.
C) $60.
D) $20.
Airlines that engage in price discrimination charge lower prices to vacation travelers
because their _____ is more _____ than that of other travelers.
A) demand; elastic
B) demand; inelastic
C) supply; elastic
D) supply; inelastic
If an increase in the price of a good leads to an increase in total revenue, the _____
curve is price _____.
A) supply; inelastic
B) demand; inelastic
C) supply; elastic
D) demand; elastic
The government agency in the United States that reviews proposed mergers of firms in
the same industry and prohibits mergers that it believes will reduce competition is the:
A) Commerce Department.
B) Federal Reserve.
C) Labor Department
D) Department of Justice.
The effect of a natural disaster can be shown by _____ the production possibility
frontier.
A) a point inside of
B) an outward shift of
C) a movement from one point to another along
D) an inward shift of
In the United States, the mobility between income groups is:
A) relatively high.
B) not important because less than 1% of the population lives below the poverty line.
C) difficult because of public assistance programs.
D) very rare.
Figure: Revenues, Costs, and Profits for Tomato Producers III
(Figure: Revenues, Costs, and Profits for Tomato Producers III) Look at the figure
Revenues, Costs, and Profits for Tomato Producers III. The market for tomatoes is
perfectly competitive. If the market price of a bushel of tomatoes is $12, in the short run
this farm will:
A) minimize its losses by shutting down.
B) minimize its losses by continuing to produce.
C) break even.
D) earn an economic profit.
Figure: The Perfectly Competitive Firm II
(Figure: The Perfectly Competitive Firm II) Look at the figure The Perfectly
Competitive Firm II. If this firm’s MR curve is MR1, the firm will maximize profit by
producing _____ units of output, and its economic profit will be _____.
A) Q1; positive
B) Q2; negative
C) Q3; positive
D) Q4; negative
If demand is downward-sloping and supply is upward-sloping, which of the following
statements about the effects of an excise tax is INCORRECT?
A) The lower the elasticity of supply relative to the elasticity of demand, the lower the
burden of the tax borne by suppliers.
B) An excise tax causes a deadweight loss because consumer and producer surpluses
are reduced by more than the revenue the government collects.
C) An excise tax drives a wedge between the price paid by consumers and the price
received by producers.
D) An excise tax is inefficient because it distorts incentives at the margin for both
consumers and producers.
Which of the following is (are) barrier(s) to entry?
A) control of scarce resources
B) economies of scale
C) patents and copyrights
D) control of scarce resources, economies of scale, and patents and copyrights
(Table: Production of Good Z and Good X in Urbanville) Look at the table Production
of Good Z and Good X in Urbanville. Suppose this table shows the production
possibility frontier. Urbanville is producing at combination C and moves to
combination D. What is the opportunity cost of this move?
A) 15 of X
B) 5 of Z
C) 15 of Z
D) 45 of X
The city bus system charges lower fares to senior citizens than to other passengers.
Assuming that this pricing strategy increases the profits of the bus system, we can
conclude that senior citizens must have a _____ demand for bus service than other
passengers.
A) greater
B) lower
C) more elastic
D) less elastic
(Table: Consumer Surplus) Look at the table Consumer Surplus. Assume that each
student wants to buy one ticket. If the price of a ticket to see The Nutty Nutcracker is
$50 and there is no other market for tickets, total consumer surplus for the five students
is:
A) $105.
B) $130.
C) $270.
D) $320.
Table: Lindsay’s Farm
(Table: Lindsay’s Farm) Look at the table Lindsay’s Farm. Lindsay’s variable costs of
production:
A) stay constant.
B) are equal to 10.
C) are zero when she produces no crops.
D) fall as soon as she starts producing.