Which is NOT an example of a resource?
A) land
B) labor
C) capital
D) production
The quantity demanded of labor will decrease if:
A) the price of the product that the labor produces increases.
B) the productivity of labor increases.
C) the price of labor rises.
D) there is an increase in the supply of a factor labor uses.
Figure: A Tariff on Oranges in South Africa
(Figure: A Tariff on Oranges in South Africa) Look at the figure A Tariff on Oranges in
South Africa. When the government imposes a tariff on imported oranges, the price of
oranges in South Africa rises from PW to PT and domestic producer surplus _____ to
_____.
A) falls; G + I
B) falls; G + I + J + K
C) rises; G + + J + K
D) rises; G + H
When individuals take external costs and benefits into account:
A) there are no external costs.
B) they internalize the externality.
C) the government should intervene in the market.
D) the market will not reach an efficient solution.
Suppose that a profit-maximizing monopoly firm undergoes a substantial technological
change that reduces its marginal and average total costs by $40. If in response to its
reduction in cost the firm changes its price in a profit-maximizing way, then we can
predict that its total economic profit will:
A) fall.
B) remain unchanged.
C) rise.
D) It is not possible to make a determination from the information given.
“Unemployment of 5% is too high” is:
A) a normative statement.
B) a positive statement.
C) the circular-flow model.
D) an example of comparative advantage.
If your purchases of shoes decrease from 11 pairs per year to 9 pairs per year when the
price of shirts increases from $8 to $12, for you, shoes and shirts are considered:
A) inferior goods.
B) luxury goods.
C) substitute goods.
D) complementary goods.
Figure: The Market for Sandwiches
(Figure: The Market for Sandwiches) Look again at the figure The Market for
Sandwiches. How much total surplus would be lost if there were a quota of eight
sandwiches that could be legally exchanged at a price of $5?
A) $3
B) $72
C) $27
D) $32
Figure: Harold’s Indifference Curves The figure shows three of Harold’s indifference
curves for bread and cheese.
(Figure: Harold’s Indifference Curves) Look at the figure Harold’s Indifference Curves.
If the price of cheese is $2 per pound and Harold has $10 to spend on bread and cheese,
Harold _____ his consumption of cheese as the price of bread rises from $1 per loaf to
$2 per loaf, indicating that bread and cheese are _____.
A) increases; substitutes
B) increases; complements
C) decreases; substitutes
D) decreases; complements
If the price elasticity of supply is:
A) less than 1, then the supply is price-elastic.
B) less than 1, then the supply is price-inelastic.
C) zero, then price is unit-elastic.
D) less than 1, then the supply is very responsive to price changes.
Bluefin tuna travel in schools throughout the world’s oceans. Fishing boats from many
nations harvest bluefin tuna as the schools migrate through their national waters. The
schools of bluefin tuna are best described as:
A) a private good.
B) a public good.
C) an artificially scarce resource.
D) a common resource.
Figure: The Market for Hamburgers
(Figure: The Market for Hamburgers) Look at the figure The Market for Hamburgers. If
the market is originally in equilibrium and the government imposes an excise tax of
$0.80 per unit of the good sold, consumer surplus will be reduced by:
A) $175.
B) $240.
C) $105.
D) $90.
Which of the following goods is most likely an artificially scarce good?
A) tickets to a boxing match
B) pay-per-view of a boxing match
C) health care
D) the police department
When a firm cannot affect the market price of the good that it sells, it is said to be a:
A) price taker.
B) natural monopoly.
C) dominant firm.
D) cartel.
(Table: TC’s Pizza Parlor) Look at the table TC’s Pizza Parlor. Assume that the marginal
benefit is constant in intervals of production. Suppose five slices of pizza are being
produced. What is the marginal benefit of producing one more slice of pizza?
A) $3
B) $2
C) $15
D) $55
An industry with a large number of relatively small firms producing _____ in a market
with easy entry and exit is a(n) _____.
A) similar products; monopoly
B) identical products; monopolistic competition
C) differentiated products; oligopoly
D) differentiated products; monopolistic competition
Which of the following is TRUE?
A) If price falls below average variable cost, the firm will shut down in the short run.
B) Total revenue and marginal revenue are the same in perfect competition.
C) Economic profit per unit is found by subtracting MC from price.
D) Economic profit is always positive in the long run.
Figure: Producer Surplus III
(Figure: Producer Surplus III) Look at the figure Producer Surplus III. If the price of the
good is $2, producer surplus will equal:
A) $20.
B) $40.
C) $60.
D) $80.
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. If Faruq purchases 10 milkshakes, he
can purchase _____ tacos.
A) 10
B) 50
C) 8
D) 18
The additional cost imposed on society as a whole by an additional unit of pollution is:
A) the marginal social benefit of pollution.
B) the marginal social cost of pollution.
C) the optimal Pigouvian tax.
D) a technology spillover.
(Table: Marginal Benefit of Sweatshirts) Look at the table Marginal Benefit of
Sweatshirts. The marginal benefit of producing the third sweatshirt is:
A) $31.
B) $16.
C) $15.
D) $14.
In the short run, if P < AVC at the quantity where MR = MC, a perfectly competitive
firm produces _____ and takes an economic _____.
A) output; profit
B) output; loss
C) no output; profit
D) no output; loss
All perfectly competitive fast-food firms are hiring the profit-maximizing quantity of
labor and are paying their workers $7 per hour. If the government raises the minimum
wage to $8 per hour:
A) the value of the marginal product will exceed the wage, and firms will hire more
workers.
B) the value of the marginal product will be less than the wage, and firms will lay off
some workers.
C) firms will increase their prices to keep the value of the marginal product equal to the
wage.
D) firms will have to exit the industry, since the value of the marginal product is always
less than the wage.
Which book illustrates the advantages of specialization using an eighteenth-century pin
factory?
A) Free to Choose, by Milton Friedman
B) The Wealth of Nations, by Adam Smith
C) Das Kapital, by Karl Marx
D) The General Theory, by John Maynard Keynes