At a price of $11, quantity demanded is 90; and at a price of $9, quantity demanded is
110. Since total revenue ________ by the price decrease, demand must be ________.
A) is increased; elastic
B) is decreased; inelastic
C) is unchanged; unit elastic
D) is unchanged; elastic
The purpose of the Corn Laws was to
A) encourage imports and discourage exports, and thus keep the price of food low.
B) encourage both exports and imports in order to integrate the British economy with
the rest of Europe.
C) discourage both imports and exports in order to promote economic self-sufficiency
in Britain.
D) discourage imports and encourage exports, and thus keep the price of food high.
If the marginal product of a worker for a hearing aid manufacturer is 6 hearing aids, and
the price of a hearing aid is $300, the firm’s marginal revenue product is
A) $50.
B) $300.
C) $1,800.
D) $18,000.
Figure 15.4
Refer to Figure 15.4. Assume the No-Sweat Sweatshirt Manufacturing Company has
fixed costs of $90 and is a monopolistically competitive firm. If the firm is attempting
to maximize profits, its profit is
A) -$175.
B) -$100.
C) -$75.
D) $0.
Taxes on a producing firm’s ________ are meant to force decision makers to consider
the full costs of their actions.
A) positive externalities
B) marginal production
C) spillovers
D) total production
Table 11.1
Refer to Table 11.1. If the interest rate is 10%, Nashbar Bicycle’s total investment
would be
A) $0.
B) $50,000.
C) $250,000.
D) $350,000.
The utility possibilities frontier graphically represents a two-person world that shows
________ at which A’s utility can be increased only if B’s utility is decreased.
A) all incomes
B) only the most efficient point
C) all points
D) all production levels
Table 16.3 shows the situation facing two firms, both of which are polluting. Assume
that each firm emits 5 units of pollution.
Table 16.3
Refer to Table 16.3. Suppose the government wants to reduce the total amount of
pollution from the current level of 10 to 4. To do this, the government caps each firm’s
emissions at 2 units and issues 2 permits to each firm. If firms are not allowed to trade
permits, what is the total cost of the pollution reduction?
A) $60
B) $110
C) $116
D) $260
The ________ broadly we define a market, the less difficult it becomes to find
________.
A) more; substitutes
B) more; complements
C) less; substitutes
D) more; goods independent of each other
When a small amount of output is produced per unit of the input, the input is said to
exhibit
A) high productivity.
B) low productivity.
C) marginal productivity.
D) derived productivity.
Table 10.2
Refer to Table 10.2. Diminishing returns to labor start with the ________ worker.
A) second
B) third
C) fourth
D) fifth
Table 19.1
Relating to the Economics in Practice on page 392: Refer to Table 19.1. If income
increases from $20,000 to $40,000, the marginal tax rate is
A) 2%.
B) 12%.
C) 14%.
D) indeterminate from this information.
Figure 1.4
Refer to Figure 1.4. Which of the following curves or lines has a zero slope throughout?
A) A
B) B
C) C
D) D
Figure 13
The market is initially in equilibrium at Point A. If supply shifts from S1 to S2, the new
equilibrium price will be ________ and the new equilibrium quantity will be ________.
A) $5.00; 4
B) $5.00; 10
C) $7.00; 6
D) $7.00; 7
Table 19.1
Relating to the Economics in Practice on page 392: Refer to Table 19.1. If income
increases from $60,000 to $80,000, the marginal tax rate is
A) 5%.
B) 20%.
C) 35%.
D) indeterminate from this information.
A theory of ________ that concludes that the social contract emerging from the original
position would call for an income distribution that would maximize the well-being of
the worst-off member of society is known as Rawlsian justice.
A) utilitarian justice
B) distributional justice
C) labor value
D) legal equity
Figure 20.1
Refer to Figure 20.1. The opportunity cost of producing a bushel of soybeans in the
United States is
A) 1/2 as much as that in Canada.
B) twice as much as that in Canada.
C) 4 times as much as that in Canada.
D) the same as that in Canada.
Table 3.2
Refer to Table 3.2. If the price per cheeseburger is $5, the price will
A) remain constant because the market is in equilibrium.
B) decrease because there is an excess demand in the market.
C) increase because there is an excess demand in the market.
D) decrease because there is an excess supply in the market.
When the price of fresh fish increases 10%, quantity demanded is unchanged. The price
elasticity of demand for fresh fish is
A) perfectly inelastic.
B) elastic.
C) inelastic.
D) unitary elastic.
The government should extend the duration of unemployment benefits to those workers
who lost their jobs due to outsourcing. This statement is best described as
A) an example of marginalism.
B) an example of the fallacy of composition.
C) a normative statement.
D) a positive statement.
Which of the following is a normative question?
A) Why do gasoline prices increase between Memorial Day and Labor Day?
B) What will happen to gasoline consumption if the federal tax on gasoline is
eliminated?
C) To reduce the regressive nature of the gasoline excise tax, should the portion of the
gasoline excise tax paid by high-income individuals be increased?
D) How will oil exploration be affected if the government subsidizes oil producers?
A local campaign is asking for contributions of $5.00 per citizen to fund the renovation
of the boardwalk in Atlantic City following Hurricane Sandy. The total cost of the
renovation is estimated to be $125 million. You decide not to contribute, because your
contribution would be small relative to the total that it won’t make any difference
whether you contribute or not. This is an example of the
A) nonexcludable problem.
B) nonrival in consumption problem.
C) free-rider problem.
D) drop-in-the-bucket problem.
Figure 13.1
Refer to Figure 13.1. The demand curve facing an electric company is most likely
represented by
A) Panel A.
B) Panel B.
C) Panel C.
D) Panel D.
Figure 8.5
Refer to Figure 8.5. The marginal cost of the third oven is
A) $50.
B) $100.
C) $150.
D) indeterminate from this information.
If a firm’s total costs are $80 when 10 units of output are produced and $90 when 11
units of output are produced, the marginal cost of the 11th unit is
A) $1.
B) $5.
C) $8.09.
D) $10.
Figure 9.1
Refer to Figure 9.1. If this farmer maximizes profits, his average total cost will be
A) $7.
B) $9.
C) $11.
D) $15.
The production possibility frontier is a graph that shows
A) all the combinations of goods and services that are consumed over time if all of
society’s resources are used efficiently.
B) the amount of goods and services consumed at various average price levels.
C) the rate at which an economy’s output will grow over time if all resources are used
efficiently.
D) all the combinations of goods and services that can be produced if all of society’s
resources are used efficiently.
Related to the Economics in Practice on page 82: If a hurricane results in the supply of
hotel rooms decreasing and the equilibrium price for hotel rooms increases, the demand
for hotel rooms ________ and total revenue from the sale of hotel rooms ________.
A) has decreased; will decrease
B) has decreased; may increase, decrease, or stay the same
C) may have increased, decreased, or stayed the same; will decrease
D) may have increased, decreased, or stayed the same; may increase, decrease, or stay
the same
Related to the Economics in Practice on page 108: Which of the following, if true,
would support the argument for raising cigarette taxes even if the price of cigarettes has
relatively little impact on adults’ cigarette consumption?
A) The health risks of cigarette smoking are affected by the amount of nicotine in
cigarettes as well as the number of cigarettes smoked.
B) When cigarette taxes vary between neighboring states, people have an incentive to
buy cigarettes in the state with lower taxes.
C) Illness due to smoking is a significant cause of lost economic productivity.
D) The demand for cigarettes is more elastic for underage smokers as compared to that
of adult smokers.
A society can produce two goods: donuts and beer. The society’s production possibility
frontier is negatively sloped and “bowed outward” from the origin. As this society
moves down its production possibility frontier, producing more and more units of
donuts, the opportunity cost of producing beer
A) decreases.
B) remains constant.
C) increases.
D) could decrease or increase depending on the technology.
Explain with the use of a graph the economic consequences of imposing a minimum
wage that is above the market-clearing wage.
Give an example of a negative externality and explain why the outcome is inefficient.
What is a cartel?
Evaluate the following statement. “I used my own money, my own land and my own
equipment to start my business. Therefore I don”t have any costs associated with
running my business”.
Graph the budget constraint for a worker who earns 5 dollars an hour and can,
theoretically, work 24 hours a day. Measure units of leisure along the horizontal axis.
Now graph the budget constraint for a worker who makes 6 dollars an hour and can,
theoretically, work 24 hours a day. Compare the two graphs.
Automobile insurance companies insure both safe and unsafe drivers. Ideally they
would like to be able to charge different premiums to each to reflect the cost differences
in insuring both types of drivers. What type of economic problem is this and how might
insurance companies deal with it?
Kathy and Amy paint pictures and do caricatures to sell to tourists. In one day, Kathy
can either paint two pictures or do four caricatures. In one day, Amy can either paint
three pictures or do three caricatures. For both Kathy and Amy, what is the opportunity
cost of painting one picture? Who has the comparative advantage in painting pictures
and who has the comparative advantage in doing caricatures? How might they be able
to increase their total output?
Create a time series graph with the data in the table below:
To the casual observer it is often difficult to understand how a company would spend
several million dollars building a plant or other structure and then simply stop and
abandon the project midway. How can this be justified on economic grounds?
There is a practice in the stock market known as ‘short selling” whereby an
individual will borrow stock from someone, turn around and sell it and then buy it back
when it’s price has fallen in order to return the stock back to the lender. What
expectation does this short seller have about the price of this company’s stock? How can
he expect to make money at this practice? What could go wrong that might cost him
money?
Social Security benefits are determined by a complex formula that is rarely discussed
publicly but the information is available on the Social Security Administration’s
website. A recipient’s lifetime earnings is indexed and averaged over the highest 35
years of earnings to obtain an Average Monthly Indexed Earnings amount (AIME). If
Social Security benefits begin at age 65 to 67, the monthly benefit in 2007 is 90% of the
first $680 of AIME, 32% of AIME above $680 and less than $4100, and only 15% of
AIME in excess of $4100. For example, an individual whose indexed earnings were at
the poverty level of $10,200/year would receive 78.4% of that in benefits, while an
average earner of $37,000/year would receive only 44.8% of that in benefits, and
individual’s with above average earnings receive an even lower proportion in benefits.
Using this information how could one argue that the payroll tax is not regressive?
What are barriers to entry?
List the characteristics of a perfectly competitive market.
Stu’s Shoe Company faces the following cost schedule:
Fill in the blanks.
Explain the difference between a change in supply and a change in quantity supplied.
Susie receives an allowance from her parents of $10 per week. She spends her entire
allowance on two goods: cans of hairspray and bubble gum. The price of a can of
hairspray is $2 and the price of a pack of bubble gum is $1. What is the opportunity cost
of a can of hairspray? What is the opportunity cost of a pack of bubble gum?
What is meant by the expected rate of return?