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To maximize her grade in economics, Stacey should study until:
A) her marginal cost of studying begins to increase.
B) her marginal benefit of studying begins to decrease.
C) her marginal benefit of studying equals her marginal cost of studying.
D) her marginal cost of studying reaches zero.
Prices are important economic signals because they convey information about how
much consumers are willing to pay for a good and how much it costs sellers to produce
a good.
The negative income tax:
A) describes a badly designed tax system.
B) is a system in which low incomes are taxed at a higher rate than high incomes.
C) is a program in which low-income working families receive income supplements
rather than having to pay taxes.
D) is the minimum tax that must be paid by a business even if it has a negative income
(or a loss).
If an individual is risk-averse, then his or her total utility function must display _____
marginal utility.
A) constant
B) diminishing
C) increasing
D) either constant or diminishing, but not increasing,
Joseph chooses a combination of apples and oranges along his budget line. The
marginal rate of substitution of apples for oranges is 2, the price of an apple is $0.50,
and the price of an orange is $1.50. Joseph:
A) is maximizing total utility.
B) should consume more apples and fewer oranges to maximize total utility.
C) should consume fewer apples and more oranges to maximize total utility.
D) may or may not be maximizing total utility.
Figure: Hot Drinks Sold and Temperature
(Figure: Hot Drinks Sold and Temperature) Look
at the figure Hot Drinks Sold and Temperature. If we move from point J to point L in
the figure, the outside temperature has ______ degrees and the number of hot drinks
sold has ______.
A) decreased by 30; increased by 30
B) increased by 20; decreased by 20
C) increased by 30; decreased by 30
D) increased by 40; decreased by 40
Figure: Computing Monopoly Profit
(Figure: Computing Monopoly Profit) Look at the figure Computing Monopoly Profit.
Producing at point N would:
A) result in MR = MC.
B) result in positive economic profits.
C) never be profit-maximizing, since at this output MR < 0 and MC > 0.
D) result in the firm breaking even.
If a change in price causes total revenue to change in the same direction, we can
conclude that the demand is:
A) price inelastic.
B) price elastic.
C) price unit-elastic.
D) zero elastic.
(Table: Cherry Farm) Look at the table Cherry Farm. If the price is $6 per pound:
A) firms will enter the industry.
B) firms will exit the industry.
C) the industry is in long-run equilibrium.
D) the industry has minimized average total cost.
The evidence suggests that taken collectively, taxes in the U.S. economy are:
A) extremely regressive.
B) extremely progressive.
C) somewhat progressive.
D) proportional.
Figure: Collusion
(Figure: Collusion) Look at the figure Collusion. The quantity of output produced by
firm 1 when there is collusion in the industry is shown by:
A) F.
B) G.
C) H.
D) K.
(Table: Lunch) Look at the figure Lunch. Joe makes and sells picnic lunches to people
taking all-day rafting trips on the river. The marginal cost and average cost of each
lunch are a constant $4. If Joe is one of many firms in a competitive industry, what is
consumer surplus in the long run?
A) $4
B) $10
C) $180
D) $360
If an excise tax is imposed on wine and collected from the consumers, the _____ curve
will shift _____ by the amount of the tax.
A) demand; upward
B) demand; downward
C) supply; upward
D) supply; downward
Taken collectively, people in nations that engage in international trade are not likely to:
A) consume more than they were able to consume in the absence of trade.
B) raise their standards of living.
C) gain from lower opportunity costs of production.
D) be made worse off.
Which of the following will raise the price of milk?
A) a shift to the right of the supply curve for milk
B) a shift to the right of the demand curve for milk
C) an increase in the number of milk suppliers
D) a decrease in the number of milk buyers
Alex is willing to buy the last ticket to the Billy Bragg concert for $15, while Jake is
willing to pay $25. Alex is first in line and buys a ticket for $15. He then resells his
ticket to Jake for $20. By reselling the ticket instead of going to the concert himself,
Alex caused:
A) the sum of the consumer and producer surplus to increase.
B) the sum of the consumer and producer surplus to decrease.
C) a deadweight loss of $5.
D) consumer surplus to decrease and producer surplus to increase.
The insurance industry operates on the principles of:
A) risk trading and diversification.
B) exploitation and capital accumulation.
C) moral hazard and irrationality.
D) adverse selection and diminishing marginal utility.
(Table: Comparative Advantage I) Look at the table Comparative Advantage I. Sweden
has a comparative advantage in producing:
A) cell phones only.
B) herring only.
C) both cell phones and herring.
D) neither cell phones nor herring.
Manny is attending college and majoring in economics. By doing so, Manny is
improving his:
A) land.
B) labor.
C) capital.
D) human capital.
(Table: Cost Data) Look at the table Cost Data. The average total cost of producing 2
purses is:
A) $60.
B) $120.
C) $190.
D) $220.
In London, any motorist entering a particular area in the city center during certain
specified times must pay a congestion fee equal to £8, with fines for noncompliance
rising to as high as £120. The congestion fee is:
A) a Pigouvian tax aimed at regulating the use of city streets, a common resource.
B) an attempt to internalize the costs of traffic delays and congestion.
C) the wrong policy tool for solving the problem of congestion; instead, motorists
should be allowed to make deals to determine when and where they are permitted to
drive.
D) a Pigouvian tax aimed at regulating the use of city streets, a common resource, and
an attempt to internalize the costs of traffic delays and congestion.
(Table: Production Function for Soybeans) Look at the table Production Function for
Soybeans. Assume that the fixed input, capital, is 10 acres of land and a tractor, which
have a combined cost of $150 per day. The cost of labor is $100 per worker per day.
The total cost of producing 25 bushels of soybeans is:
A) $50.
B) $100.
C) $150.
D) $250.
Rice and potatoes are substitutes in consumption. If the price of rice rises and there is a
bumper crop of potatoes, in the market for potatoes one would expect the equilibrium
price to _____ and the equilibrium quantity to _____.
A) rise, fall, or stay the same; rise
B) rise; fall
C) fall; fall
D) rise; fall, rise, or stay the same
Figure: The Profit-Maximizing Firm in the Short Run
(Figure: The Profit-Maximizing Firm in the Short Run) Look at the figure The
Profit-Maximizing Firm in the Short Run. Which of the following statements is TRUE?
A) AFC is represented by the vertical distance between curve M and curve N at any
level of output.
B) AFC is represented by the vertical distance between curve N and curve O at any
level of output.
C) This figure illustrates the long run because all costs are variable.
D) Quantity q2 is to the left of the shut-down point.
Which of the following is an example of wage disparity due to compensating
differentials?
A) The median earnings of White men are more than the median earnings of African
Americans.
B) People with graduate degrees usually have higher earnings than people who did not
graduate from high school.
C) Nick Saban, the football coach at the University of Alabama, earns more than an
economics professor.
D) Crab fishermen on the Bering Sea earn more than clerks who sell goldfish at a pet
store.
A new startup airline is offering free round-trip tickets to anywhere to the first 600
people who enter the office on the airline's first day of business. You arrive 24 hours
before it is scheduled to open to be sure to get the free tickets, and you buy food from
vendors while waiting in line. The cost of the tickets to you is:
A) zero.
B) the cost of food while you wait in line.
C) the cost of food while you wait in line and the opportunity cost of your time spent in
line.
D) the actual value of the ticket.
