Table: Denise’s Consumption of Coffee and Gasoline
(Table: Denise’s Consumption of Coffee and Gasoline) Look at the table Denise’s
Consumption of Coffee and Gasoline. Suppose Denise initially chooses consumption
bundle A. She can increase her total utility by:
A) consuming more gasoline and less coffee.
B) consuming more coffee and less gasoline.
C) not consuming more coffee or gasoline.
D) consuming more coffee and more gasoline.
Figure: Shifts in Demand and Supply IV
(Figure: Shifts in Demand and Supply IV) Look at the figure Shifts in Demand and
Supply IV. The figure shows how supply and demand might shift in response to specific
events. Suppose oil becomes more expensive. Which panel BEST describes how this
will affect the market for gasoline, which is made from oil?
A) panel A
B) panel B
C) panel C
D) panel D
Figure: Shifts in Demand and Supply IV
(Figure: Shifts in Demand and Supply IV) Look at the figure Shifts in Demand and
Supply IV. The figure shows how supply and demand might shift in response to specific
events. Suppose half of the people in San Diego pack up and move to Colorado Springs.
Which panel BEST describes how this will affect the supply of houses in San Diego?
A) panel A
B) panel B
C) panel C
D) panel D
Figure: Market Failure
(Figure: Market Failure) Look at the figure Market Failure. Suppose the supply curve
represents the marginal cost of providing streetlights in a neighborhood that is
composed of two people, Ann and Joe. The demand curve represents the marginal
benefit that Ann receives from the streetlights. Suppose that Joe’s marginal benefit from
the streetlights is a constant amount equal to AC. The marginal social benefit of F
streetlights is:
A) 0.
B) B.
C) less than B.
D) greater than B.
(Table: Johnson’s Income and Expenditures) Look at the table Johnson’s Income and
Expenditures. For Johnson, pizzas are a(n) _____ good.
A) inferior
B) positive
C) neutral
D) normal
Which of the following is an excise tax?
A) a tax of $0.41 per gallon of gas
B) a tax of 12.4% of your wages
C) a tax on the value of your property
D) a one-time local per capita tax of $50
Which of the following U.S. welfare programs is a monetary benefit that is NOT
means-tested?
A) Earned Income Tax Credit
B) Social Security
C) food stamps
D) Medicaid
Figure: Budget Lines for Tea and Scones
(Figure: Budget Lines for Tea and Scones) Look at the figure Budget Lines for Tea and
Scones. For months now, Agnes has had $20 per month to spend on tea and scones. The
price of each cup of tea and each scone has been $1. Which of the charts shows what
will happen to her budget line if her income decreases to $10?
A) A
B) B
C) C
D) D
I know when I shop at the local grocery store, I am helping my community. This
statement best represents this economic concept:
A) People usually exploit opportunities to make themselves better off.
B) There are gains from trade.
C) One person’s spending is another person’s income.
D) Overall spending sometimes gets out of line with the economy’s productive capacity.
The labor demand curve in a perfectly competitive factor market is the horizontal sum
of all firms’ _____ product of labor curves.
A) marginal
B) value of the marginal
C) marginal physical
D) average physical
Until recently Rosemarie worked as an accountant, earning $30,000 annually. Then she
inherited a piece of commercial real estate that had been renting for $12,000 annually.
Rosemarie decided to leave her job and operate a Peruvian restaurant in the space she
inherited. At the end of the first year, her books showed total revenues of $260,000 and
total costs of $230,000 for food, utilities, cooks, and other supplies. Her economic
profit at the end of one year is:
A) $230,000.
B) $30,000.
C) $0.
D) “$12,000.
Figure: The Market for Gas Stations
(Figure: The Market for Gas Stations) The figure The Market for Gas Stations shows
curves facing a typical gas station in a large town. The market is characterized by many
firms, differentiated products, easy entry, and easy exit. If the gas station here is typical,
prices charged by firms in the market are likely to:
A) fall in the long run.
B) rise in the long run.
C) remain unchanged.
D) rise dramatically in the long run.
Economic growth that is not industry-specific is most likely to:
A) have no effect on most businesses.
B) result in many businesses doing well.
C) result in many businesses not doing well.
D) affect only a few select businesses.
Price leadership occurs if:
A) smaller firms in an industry silently agree to charge the same price as the largest
firm.
B) two or more firms in an industry agree to fix the price at a given level.
C) competition among a large number of small firms generates a stable market price.
D) competition among a large number of small firms generates similar but slightly
different prices.
Suppose that the market for candy canes operates under conditions of perfect
competition, that it is initially in long-run equilibrium, that the price of each candy cane
is $0.10, and that the market demand curve is downward-sloping. The price of sugar
rises, increasing the marginal and average total costs of producing candy canes by
$0.05. In the short run a typical producer of candy canes will be making:
A) an economic profit.
B) zero economic profit.
C) negative economic profit.
D) The answer is impossible to determine from the information given.
José, a corn farmer operating in a perfectly competitive market, pays his workers $8 an
hour. At his current level of labor use, the marginal product of an additional hour of
labor is three bushels of corn. The market price of corn is $2.75. To maximize his
profits, Jose should:
A) hire more labor.
B) hire less labor.
C) not change the amount of labor.
D) This question cannot be answered without knowing the average product of labor.
The ability of a monopolist to raise the price of a product above the competitive level
by reducing the output is known as:
A) product differentiation.
B) barrier to entry.
C) market power.
D) patents and copyrights.
Figure: The Marginal Benefit Curve
(Figure: The Marginal Benefit Curve) Look at the figure The Marginal Benefit Curve.
The total benefit of mowing seven lawns is approximately:
A) $172.
B) $140.
C) $60.
D) $18.
(Table: Lilly’s Apple Orchard) Look at the table Lilly’s Apple Orchard. Lilly is the
price-taking owner of an apple orchard. Her orchard has fixed costs of $30. If the price
of a bushel of apples is $35, her economic profit will be:
A) “$30
B) “$5
C) $0
D) $5
If the price is greater than the average variable cost and less than the average total cost
at the profit-maximizing quantity of output in the short run, a perfectly competitive firm
will:
A) continue to produce at an economic loss.
B) earn an economic profit.
C) encourage other firms to enter the industry.
D) produce more than the profit-maximizing quantity.
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 a monopoly, how much is
deadweight loss when the monopolist maximizes profit?
A) $0
B) $20
C) $80
D) $160
An excise tax is levied on:
A) each unit of a good or service that is sold.
B) earnings.
C) the ownership of real estate.
D) the inheritance of assets.
As a result of frequent flooding, the insurance market has noted a positive correlation
between flooding and the amount of insurance monies paid out for such floods. Holding
demand for insurance constant, if flooding is expected to continue to be a problem,
flood insurance premiums will most likely:
A) rise.
B) fall.
C) stay the same.
D) rise, fall, or stay the same.
Suppose the wealth of buyers in the insurance market falls. We would expect insurance
premiums to _____ as the _____ curve shifts _____.
A) rise; supply; left
B) fall; supply; right
C) fall; demand; left
D) rise; demand; right
Faruq spends all of his income on tacos and milkshakes. His income is $100, the price
of tacos is $10, and the price of milkshakes is $2. Put tacos on the horizontal axis and
milkshakes on the vertical axis. If Faruq spends all of his income, the opportunity cost
of one taco equals _____ milkshakes.
A) 2
B) 10
C) 5
D) 1/5
An economy is efficient if it is:
A) possible to produce more of all goods and services.
B) possible to produce more of one good without producing less of another.
C) not possible to produce more of one good without producing less of another good.
D) producing a combination of goods.
Figure: City with Two Polluters
(Figure: City with Two Polluters) Look at the figure City with Two Polluters. If the
government does not intervene in the pollution market, equilibrium will occur where
firm A produces _____ tons and firm B produces _____ tons of pollution, for a total of
_____ tons.
A) 2,000; 2,000; 4,000
B) 0; 1,000; 1,000
C) 1,000; 0; 1,000
D) 800; 1,400; 2,200
The typical supply curve illustrates that:
A) other things equal, the quantity supplied for a good is inversely related to the price
of a good.
B) other things equal, the supply of the good creates its own demand for the good.
C) other things equal, the quantity supplied for a good is positively related to the price
of a good.
D) price and quantity supplied are unrelated.