The study of behavior in situations of interdependence is called:
A) cost”benefit analysis.
B) econometric theory.
C) game theory.
D) strategic theory.
Wendy sells ice-making machines. She can sell six per week at a price of $2,000 per
machine. If she charges $2,100 per machine, she will sell only five per week. The
marginal benefit of selling the sixth ice-making machine is:
A) $2,000.
B) $2,100.
C) $12,000.
D) $1,500.
Alison is a traveling salesperson who drives many miles each day to visit her clients.
She gets utility from the purchase of gasoline, but she doesn’t care which brand of
gasoline she consumes. Suppose she has a daily budget of $100 for gasoline and can
purchase from two companies, PB and Noxxe. Today she notices that the price of a
gallon of gas at PB is $2.50 and the price of a gallon of gas at Noxxe is $3.33. What is
her optimal purchase of gas?
A) 40 gallons at PB and 30 gallons at Noxxe
B) none at PB and 30 gallons at Noxxe
C) 20 gallons at PB and 15 gallons at Noxxe
D) 40 gallons at PB and none at Noxxe
Countries that engage in trade will tend to specialize in goods in which they have _____
and will _____ those goods.
A) a comparative advantage; import
B) an absolute advantage; export
C) a comparative advantage; export
D) an economic profit; import
Holding all other things constant, if ramen noodles are an inferior good to Vanessa, then
as her income increases, her demand curve for ramen noodles:
A) will shift left.
B) will shift right.
C) will not shift at all.
D) may shift left or right, but we’re not sure by how much.
(Table: TC’s Pizza Parlor) Look at the table TC’s Pizza Parlor and assume that marginal
cost is constant in the intervals of production. The marginal cost for pizza production:
A) remains constant.
B) increases, then decreases.
C) increases.
D) decreases.
Figure: The Total Product
(Figure: The Total Product) Look at the figure The Total Product. Labor added from L1
and up to L2 is:
A) subject to diminishing marginal returns.
B) adding increasing amounts to total product.
C) adding negative amounts to total product.
D) adding negative amounts to total product and subject to diminishing marginal
returns.
If the marginal tax rate equals the average tax rate, the tax system is:
A) proportional.
B) progressive.
C) degressive.
D) regressive.
In an oligopoly:
A) there are many sellers.
B) there are no barriers to entry.
C) firms recognize their interdependence.
D) total surplus is maximized.
In a perfectly competitive market:
A) the price will change to reflect any change in production cost.
B) the existence of profits leads firms to exit the industry, while losses lead firms to
enter the industry.
C) in the long run, economic profits are positive.
D) perfect competition generates prices greater than marginal costs.
Alex’s wage rate falls. Holding everything else constant, Alex’s new time allocation
budget line will:
A) shift in toward the origin, parallel to the old one.
B) shift away from the origin, parallel to the old one.
C) rotate to the left on the x-axis.
D) rotate down on the y-axis.
Scenario: Two Identical Firms
Two identical firms make up an industry in which the market demand curve is
represented by Q = 5,000 ” 4P, where Q is the quantity demanded and P is price per
unit. The marginal cost of producing the good in this industry is constant and equal to
$650. Fixed cost is zero.
(Scenario: Two Identical Firms) If one firm in the scenario Two Identical Firms decides
to cheat, the cheating firm will:
A) be able to increase its profits initially.
B) find that cheating leads to a decrease in its profits alone.
C) find that cheating initially leads to an increase in both firms’ profits.
D) find that the other firm has an increase in its profits alone.
Which of the following statements is TRUE?
A) It is possible to observe how much people benefit from consuming an additional unit
of a public good.
B) It is difficult to get an accurate estimate of the marginal social benefits of public
goods because individuals have an incentive to distort the truth about their willingness
to pay.
C) Individuals tend to underestimate the amount of a public good that they desire.
D) It is straightforward to estimate the marginal social benefits of public goods.
A natural monopoly exists whenever a single firm:
A) is owned and operated by the government.
B) is investor owned but has been granted the exclusive right by the government to
operate in a market.
C) has economies of scale over the entire range of production that is relevant to its
market.
D) has gained control over a strategic input of an important production process.
Unions represent approximately _____% of employees of private businesses.
A) less than 1
B) 7
C) 19
D) 29
If property rights are restricted by government regulation, many more mutually
beneficial transactions will occur.
(Table: Street Cleanings) Look at the table Street Cleanings. Suppose that the marginal
cost of each street cleaning is $18. Which statement is TRUE?
A) If the city decided to clean the streets only once per month, Peter would be willing
to pay the entire cost of the cleaning.
B) If the city decided to clean the streets only once per month, Wendy would be willing
to pay the entire cost of the cleaning.
C) If Wendy and Peter were the only people in society, the efficient number of street
cleanings would be one per month.
D) If Wendy and Peter were the only people in society, the efficient number of street
cleanings would be at least two per month.
Since 1967 the percentage of the population living below the poverty line has:
A) not fluctuated.
B) steadily increased.
C) steadily decreased.
D) fluctuated, but not in any consistent direction.
If combination A lies on a higher indifference curve than combination B and
combination B lies on a higher indifference curve than combination C, it must be that
the total utility associated with combination A is _____ the total utility associated with
combination C.
A) less than
B) more than
C) equal to
D) more than or equal to
(Table: The Market for Chocolate-Covered Peanuts) Look at the table The Market for
Chocolate-Covered Peanuts. If the price of chocolate-covered peanuts is $0.50, there is:
A) a surplus of 35 bags per month.
B) a shortage of 35 bags per month.
C) a surplus of 70 bags per month.
D) a shortage of 70 bags per month.
If the marginal social benefit received from pollution is greater than its marginal social
cost in a market:
A) society’s well-being can be improved if the quantity of pollution decreases.
B) firms in the market produce the socially optimal level of pollution.
C) firms in the market produce too much pollution.
D) firms in the market produce too little pollution.
Figure: Consumer Surplus I
(Figure: Consumer Surplus I) Look at the figure Consumer Surplus I. If the good is
free, consumer surplus equals the area:
A) ABP2.
B) AFP1.
C) BGF.
D) AQ30.
Sasha buys a warm soda and a slice of cold pizza. The marginal utility from a soda is
40, and the price of the soda is $1. The marginal utility from a slice of pizza is 80. Since
Sasha always chooses the utility-maximizing choice, we know the price of a slice of
pizza must be:
A) $20.
B) $2.
C) $1.
D) $0.50.
John Rawls believed that:
A) government has a small role in achieving an economically fair society.
B) we should do unto others as we would like them to do unto us if we were in the same
place.
C) Robert Nozick’s views of economic fairness are similar to his own view.
D) government has no right to force people with high incomes to support others with
lower incomes.
(Table: Total Utility of Income After College Expenses) Look at the table Total Utility
of Income After College Expenses. The premium for a fair insurance policy to pay their
daughter’s tuition and eliminate the uncertainty in the Smith family’s income after
tuition would equal:
A) $12,000.
B) $10,000.
C) $8,000.
D) $5,000.
The largest _____ program in the United States is _____.
A) social insurance; Medicaid
B) social insurance; Social Security payments to retired persons
C) means-tested; farmers’ aid
D) means-tested; Social Security payments to retired persons
The United States places a tariff on imported Brazilian ethanol. The impact of this tariff
on the domestic ethanol market is a _____ domestic price, _____ consumer surplus, and
_____ producer surplus.
A) higher; less; more
B) lower; less; more
C) higher; more; less
D) higher; less; less