The Consumer Product Safety Commission (CPSC) was established in:
a. 1887. c. 1934.
b. 1931. d. 1972.
Exhibit 1A-3 Straight line
In Exhibit 1A-3, the slope for straight line AB is:
a. 3. c. 1.
b. 1. d. 5.
Consider a consumer who spends all income on only two goods: pizza and soda. An
extra slice of pizza would give the consumer 60 extra utils, while an extra can of soda
would give the consumer 20 extra utils. Pizza costs $3 per slice, and soda costs $1 per
can. In this situation, the consumer:
a. is buying too much pizza and not enough soda.
b. should purchase more pizza and less soda.
c. has maximized his or her total utility.
d. needs to equate the marginal utilities for pizza and soda.
Exhibit 3-3 Demand curves
Which of the graphs in Exhibit 3-3 depicts the effect of an increase in income on the
demand for DVDs (a normal good)?
a. Graph A. c. Graph C.
b. Graph B. d. Graph D.
How will an increase in lumber prices influence the home construction market?
a. The demand for newly constructed homes will increase.
b. The demand for newly constructed homes will decrease.
c. The supply of newly constructed homes will increase.
d. The supply of newly constructed homes will decrease.
A merger between an auto manufacturer and a steel mill would result in which of the
following?
a. A conglomerate merger. c. A horizontal merger.
b. A vertical merger. d. A monopoly merger.
The cross elasticity between two goods is 2.5. These goods are:
a. perfect complements.
b. imperfect complements.
c. unrelated.
d. substitutes.
e. inferior.
“As consumption of a good increases, the extra satisfaction received from consuming an
additional unit of the good decreases.” This statement is known as the law of:
a. demand.
b. increasing costs.
c. diminishing marginal utility.
d. diminishing marginal returns.
e. total utility.
In an efficient market, deadweight loss is ____.
a. maximum. c. constant.
b. minimum. d. zero.
Which of the following statements is true?
a. To maximize profits, a firm must maximize total revenue.
b. In long-run equilibrium, a competitive firm produces at the point of minimum
average total cost.
c. In the short-run, a perfectly competitive firm produces where total cost is minimum.
d. In the short-run, a perfectly competitive firm will close down whenever price is less
than average total cost.
A public transit company finds that when it reduces the price of a bus ticket, total
revenues remain the same. One can conclude from this that:
a. the demand curve is horizontal, reflecting infinite price elasticity.
b. the company sells the same number of bus tickets both before and after the price
change.
c. the demand curve for bus tickets must have shifted to the right.
d. the firm is operating in a range of the demand curve that is unit elastic.
e. the price should be lowered further so that a larger quantity can be sold.
Exhibit 2-7 Production possibilities curve
For the economy shown in Exhibit 2-7, which of the following is true when the
economy is at point A?
a. More cars are being produced than are needed.
b. There must be resources that are not being used fully.
c. Some car production must be forgone in order to produce more grain in the same
period.
d. Increased grain production would be impossible.
Exhibit 11-11 Labor wage and cost data
In Exhibit 11-11, the total wage cost of hiring 12 employees is equal to:
a. $17.80.
b. $63.80.
c. $102.70.
d. $81.60.
e. $6.80.
Exhibit 14-1 Private and social cost
The perfectly competitive profit-maximizing firm in Exhibit 14-1 creates water and air
pollution as a consequence of producing its output of pigs. If pollution costs are borne
by third parties, the firm will maximize economic profit by choosing to:
a. voluntarily incur costs to reduce its pollution.
b. produce at output rate Q3.
c. produce at output rate Q2.
d. produce at output rate Q4.
When total utility is at a maximum, marginal utility is:
a. zero.
b. positive.
c. negative.
d. one.
e. infinite.
IBM and Sara Lee are two of the biggest firms in the United States, but they produce
different products. Could they legally merge, or would their merger be struck down by
the courts?
A monopsonist will hire more workers than will be hired in a competitive labor market.
What are the different types of trade barriers? What are the arguments for trade
barriers? What are the consequences of trade barriers?
If a firm increases output and its average total cost rises, then the firm is experiencing
economies of scale.
Other things being equal, a fall in the price of orange juice will decrease the quantity
supplied.
Under the original Sherman Antitrust Act, violators were guilty of a misdemeanor.
Financial capital by itself is not a factor of production; instead it is only a paper claim
on economic capital.