Figure 6.2
Refer to Figure 6.2. Assume Mr. Lingle’s budget constraint is AC. He will have leftover
income if he purchases the bundle represented by point
A) A.
B) B.
C) E.
D) D.
You and two friends are going to the movies and are going to one of three movies: A, B,
or C. You prefer movie A to movie B and movie B to movie C. One of your friends
prefers movie B to movie C and movie C to movie A. You other friend prefers movie C
to movie A and movie A to movie B. The three of you decide to use majority rule voting
to decide which movie you will see. If you first have a vote between movies A and B
and then between the winner of that vote and movie C, then movie ________ will win.
However, if you first vote between movies A and C and then between the winner of that
vote and movie B, then movie ________ will win. This is an example of the ________.
A) C; B; voting paradox
B) B; C; impossibility theorem
C) A; C; voting paradox
D) A; B; majority rule voting
All Pittsburgh police officers must go through the same training program, but police
officers assigned to the narcotics squad earn 10% more than police officers assigned to
guard the city courthouse. This 10% difference in pay is an example of a
A) human capital differential.
B) compensating differential.
C) transfer payment.
D) utility differential.
Which of the following will definitely occur when there is an increase in the supply of
and decrease in demand for MP3 players?
A) an increase in equilibrium price
B) a decrease in equilibrium price
C) an increase in equilibrium quantity
D) a decrease in equilibrium quantity
The production possibility frontier is used to illustrate the concept of
A) the laissez-faire economy.
B) opportunity costs.
C) equilibrium.
D) aggregate demand.
In the ________, the tax receipts from today’s workers are used to pay benefits to
retired and disabled workers and their dependents today.
A) Medicare and Medicaid programs
B) public assistance (welfare) program
C) Social Security system
D) Supplemental Security Income program
A monopolistically competitive firm
A) can sell an infinite amount of output at the market-determined price.
B) must lower price to sell more output.
C) must raise price to sell more output.
D) sells a fixed amount of output regardless of price.
Which of the following statements of the expected flow of future benefits is false?
A) Firms must rely on forecasts of expected future benefits to make sensible investment
decisions.
B) Households, business firms, and governments all evaluate the expected flow of
benefits when making investment decisions.
C) If future benefits are overestimated by the firm, the firm will under invest in capital.
D) If future benefits are underestimated by the firm, the firm will under invest in
capital.
Resources are exchanged in ________ markets.
A) product
B) factor
C) exchange rate
D) stock
Investors put up $52,000 to construct a building and purchase all equipment for a new
restaurant. The investors expect to earn a minimum return of 10 percent 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 $3 on average per meal.
In the short run, if the restaurant shuts down, its losses will equal its ________ costs of
________.
A) variable; $1,600
B) total; $3,600
C) fixed; $1,000
D) fixed; $2,000
Figure 15.2
Refer to Figure 15.2. If We Do Hair is maximizing profit as a monopolistically
competitive firm, its total costs are
A) $1,200.
B) $960.
C) $800.
D) $660.
The World Bank lends money to countries to
A) finance their international transactions.
B) stabilize their exchange rates.
C) promote their economic development.
D) fund wars against dictatorial regimes.
In the presence of negative externalities, ________ is produced and in the presence of
positive externalities, ________ is produced.
A) too little of the good; too much of the good
B) too much of the good; too little of the good
C) too much of the good; the right amount of the good
D) the right amount of the good; too little of the good
The optimal method of production is the one that
A) maximizes output regardless of cost.
B) maximizes inputs.
C) minimizes cost.
D) minimizes the normal rate of return.
Related to theEconomics in Practice on page 55: The Amazon Kindle and the electronic
textbooks available for the Kindle are complementary goods. Electronic textbooks and
traditional, hard copy textbooks are substitute products. If the price of electronic
textbooks for the Kindle decreases,
A) demand for the Kindle increases, demand for electronic textbooks increases, and
demand for traditional, hard copy textbooks decreases.
B) the quantity of Kindles demanded increases, demand for electronic textbooks
increases, and the quantity of traditional, hard copy textbooks demanded decreases.
C) demand for the Kindle decreases, the quantity of electronic textbooks demanded
increases, and demand for traditional, hard copy textbooks decreases.
D) demand for the Kindle increases, the quantity of electronic textbooks demanded
increases, and demand for traditional, hard copy textbooks decreases.
Relating to the Economics in Practice on page 363: The smart phone app which allows
skiers at a slope to report weather conditions to others would lessen the problem of
A) moral hazard.
B) market signaling.
C) asymmetric information.
D) risk-loving.
The idea that the demand for steel workers stems from the demand for steel is
A) the value of the marginal product of auto workers.
B) derived demand.
C) indirect demand.
D) output demand.
Figure 8.5
Refer to Figure 8.5. The marginal cost of the ________ oven is $66.67.
A) first
B) second
C) third
D) sixth
The income elasticity of demand
A) measures the change in income necessary for a given change in quantity demanded.
B) measures the responsiveness of income to changes in quantity demanded.
C) measures the responsiveness of quantity demanded to changes in income.
D) is the ratio of the percentage change in income to the percentage change in quantity
demanded.
Figure 4.3
Refer to Figure 4.3. At an effective price ceiling for pencils,
A) quantity demanded is greater than quantity supplied.
B) quantity demanded is less than quantity supplied.
C) quantity demanded is equal to quantity supplied.
D) price is above equilibrium.
If a profit-maximizing competitive firm ________ compensate society for a negative
externality, the firm will choose to produce where price equals marginal cost.
A) does not have to
B) is pressured to
C) voluntarily chooses to
D) is legally bound to
ABC Corp. is considering an investment project that costs $500 today. It expects the
project will yield income of $200 at the end of years 1, 2, and 3. The interest rate must
be ________ for the firm to undertake the project.
A) at least 11%
B) no more than 9%
C) exactly equal to 10%
D) It is indeterminate from the given information.
Figure 8.2
Refer to Figure 8.2 above. The total fixed costs for The Barber Shop are $3,000. If The
Barber Shop produces 300 haircuts, the average fixed costs are
A) $0.20.
B) $5.
C) $10.
D) $100.
Related to the Economics in Practice on page 134: Suppose Store ABC runs an ad
claiming to have “low prices every day.” They even demonstrate that the total
expenditure for a basket of groceries is less at their store than at any of their
competitors. Which of the following statements is NOT true?
A) You would clearly be better off shopping at Store ABC.
B) Your preferences may not be consistent with the basket used by Store ABC (in their
example), thus it is not clear whether or not you would be better off shopping at Store
ABC or not.
C) Even if your preferences are generally consistent with the basket used by Store ABC,
it may still be possible for you to substitute other similar goods for those in the basket
used by Store ABC (in their example) and thus spend less at another store.
D) All of the above statements are true.
The determinants of elasticity include
A) availability of substitutes.
B) price relative to income.
C) time.
D) all of the above
Figure 7.11
Refer to Figure 7.11. The slope of the isocost line (in absolute value) is
A) greater than 1.
B) less than one.
C) equal to 1.
D) equal to 0.
In the Cournot model, each firm’s reaction function shows the firm’s ________ as it
depends on its rival’s output.
A) break-even output
B) optimal, profit-maximizing output
C) minimum cost
D) marginal revenue
Figure 1.3
Refer to Figure 1.3. If a 45 degree line were also graphed, it would ________ the line
shown on the graph.
A) lie above
B) lie below
C) cross
D) indeterminate from this information
The table shows the relationship between income and utility for Jane.
Table 17.1
Refer to Table 17.1. Suppose Jane has a 1/3 chance of becoming disabled in any given
year. If she does become disabled, she will earn $0. If Jane does not become disabled,
she will earn her usual salary of $60,000. Jane has the opportunity to purchase disability
insurance which will pay her her full salary in the event she becomes disabled. How
much would such an insurance policy be worth to Jane?
A) $0
B) $20,000 or less
C) more than $20,000 but less than $40,000
D) $40,000 or more
When there is a surplus of a product in an unregulated market, there is a tendency for
A) price to rise.
B) price to fall.
C) quantity demanded to increase.
D) quantity supplied to decrease.
What is the Doha Development Agenda?
What is capital flight?
Without drawing a graph explain what probably happened to the production possibility
frontier during the Black Plague.
The demand for tobacco is price inelastic. Suppose there is a drought that destroys a
large portion of the tobacco crop. What will happen in the market for tobacco? Will the
equilibrium price and quantity change? If so, how? What will happen to the total
revenue earned by tobacco farmers?
Explain what money income is and why it is less inclusive than “economic income”.
Music.com is earning a total revenue of $100,000 per year. Its annual total fixed costs
are $50,000 and its annual total variable costs are $175,000. What is the operating profit
for Music.com? What is economic profit? Is this firm doing the right thing by
continuing to produce in the short run? If conditions don”t change what should this firm
do in the long run?
Explain what would happen if the equilibrium wage in the labor market was below the
legislated minimum wage.
Why are public goods a source of market failure?
Give an example of a positive economic statement and a normative economic
statement.
What is the relationship between average total cost, average variable cost, and average
fixed cost? If average total cost is $5.76 and average fixed cost is $1.35, what is the
level of average variable cost?
How would you measure the price of an hour of leisure? Explain.
What is a command economy?
Explain what the poverty line is and its purpose.
XYZ Corporation sells boxes in a competitive market. The price of the boxes is $2
each. Hourly output varies with the amount of labor hired as follows:
Fill in the columns for marginal product of labor and marginal revenue product.
Describe the supply curve in a monopoly market.
What is a maximin strategy?