Unlock document.
This document is partially blurred.
Unlock all pages and 1 million more documents.
Get Access
Which of the following correctly comments on the following statement? "The only way
to increase the revenue from selling a product is to increase the product's price."
A) It is not true. Revenue will increase as the price of the product increases only if
demand is elastic.
B) This statement is not true. Revenue will increase as the price of the product increases
only if demand is inelastic.
C) The statement is true.
D) This statement is not true. Revenue will decrease as the price of the product
increases because quantity demanded will fall.
Technological advances have resulted in lower prices for digital cameras. What is the
impact of this on the market for traditional (non-digital) cameras?
A) The demand curve for traditional cameras shifts to the right.
B) The supply curve for traditional cameras shifts to the right.
C) The demand curve for traditional cameras shifts to the left.
D) The supply curve for traditional cameras shifts to the left.
Psychologists Daniel Kahneman and Amos Tversky conducted the following
experiments by asking a sample of people the following questions:
Scenario A: "Imagine that you have decided to see a play and paid the admission price
of $10 per ticket. As you enter the theater you discover that you have lost the ticket. The
seat was not marked and the ticket cannot be recovered. Would you pay $10 for another
ticket?"
Scenario B: "Imagine that you have decided to see a play where admission is $10 per
ticket. As you enter the theater you discover that you have lost a $10 bill. Would you
still pay $10 for a ticket for the play?"
As long as additional tickets are available, there's no meaningful difference between
losing $10 in cash before buying a ticket, and losing the $10 ticket after buying it. In
both cases, you are out $10. Yet, far more subjects (88 percent) in Scenario B say they
would pay $10 for another ticket and see the play while in Scenario A, only 46 percent
of the subjects say they would be willing to spend another $10 to see the play.
Which of the following is the best explanation for the results of the experiment?
A) The endowment effect applies in Scenario A since people already own the ticket and
therefore it is more valuable but this is not so in Scenario B.
B) In Scenario B, people had not anticipated spending an additional $10 so in effect the
price of the ticket is $20 and not $10 whereas in Scenario A, the price of the ticket is
still $10.
C) In Scenario A, people make an immediate connection between the lost ticket and the
play and feel poorer by incorrectly assigning a greater value to the value of the ticket
whereas in Scenario B, they do not make the connection between the lost $10 bill and
the play.
D) The net benefit derived from watching the play is lower in Scenario A where the
effective cost is $20 compared to the net benefit in Scenario B.
The satisfaction a person receives from consuming goods and services is called
A) contentment.
B) psychic income.
C) wealth.
D) utility.
If average total cost is $50 and average fixed cost is $15 when output is 20 units, then
the firm's total variable cost at that level of output is
A) $1,000.
B) $700.
C) $300.
D) impossible to determine without additional information.
In general, the labor supply curve
A) slopes downward because firms will hire fewer workers at higher wages.
B) slopes upward because as the wage rises the opportunity cost of leisure increases.
C) is vertical at the equilibrium wage rate.
D) is perfectly elastic at the equilibrium wage rate.
One goal a firm tries to achieve when it advertises a product is to
A) make the demand curve for the product more elastic.
B) shift the demand curve for the product to the left.
C) make the demand curve for the product unitary elastic.
D) make the demand curve for the product more inelastic.
Figure 2-14
Refer to Figure 2-14. Which two arrows in the diagram depict the following
transaction: Barney earns $250 for selling scissors and razors to Floyd's Barber Shop.
A) J and M
B) K and G
C) K and M
D) J and G
Which of the following would be categorized as an opportunity cost?
a. not being able to spend your $10,000 savings if you sink the money in your business
b. the cost of purchasing supplies for your house-cleaning business
c. the cost of purchasing auto insurance for your dry-cleaning delivery business
A) a only
B) a and c only
C) b and c only
D) all of the above
Figure 16-3
Chantal owns a hairdressing salon which caters to two main groups of customers:
residents of "The Chateau," a retirement community, and other residents in the
neighborhood. Figure 16-3 shows the demand curves for the residents of the retirement
community, labeled Market A, and other residents in the neighborhood, labeled Market
B. The demand curves are not identical.
Refer to Figure 16-3. What prices are charged in the two markets?
A) price in market A = price in market B = $15
B) price in market A = $10; price in market B = $15
C) price in market A = price in market B = $5
D) price in market A = price in market B = $10
Figure 11-6
Figure 11-6 contains information about the short run cost structure of a firm.
Refer to Figure 11-6. In the figure above which letter represents the marginal cost
curve?
A) A
B) B
C) C
D) D
Which of the following statements about the economically efficient level of air
pollution is correct?
A) The economically efficient level of pollution is zero.
B) The economically efficient level of pollution occurs where all social costs equal all
social benefits.
C) The economically efficient level of pollution occurs where the marginal cost of
pollution reduction equals the marginal social benefit of reduction.
D) The economically efficient level of pollution occurs where total benefits of pollution
reduction are maximized.
Which of the following is used to explain why a consumer's willingness to buy a cell
phone increases as the number of other people who own and use cell phones increases?
A) network externalities
B) market failure
C) diminishing marginal utility
D) the income effect of a price change
Table 1-1
Lydia runs a small nail salon in the town of New Hope. She is debating whether she
should extend her hours of operation. Lydia figures that her sales revenue will depend
on the number of extra hours the nail salon is open as shown in the table above. She
would have to hire a worker for those extra hours at a wage rate of $10 per hour.
Refer to Table 1-1. What is Lydia's marginal cost if she decides to stay open for an
extra two hours instead of one hour?
A) $10
B) $20
C) $25
D) $40
What is the difference between an "increase in supply" and an "increase in quantity
supplied"?
A) There is no difference between the two terms; they both refer to a shift of the supply
curve.
B) There is no difference between the two terms; they both refer to a movement along a
given supply curve.
C) An "increase in supply" means the supply curve has shifted to the right while an
"increase in quantity supplied" means at any given price supply has increased.
D) An "increase in supply" means the supply curve has shifted to the right while an
"increase in quantity supplied" refers to a movement along a given supply curve in
response to an increase in price.
What does the phrase "internalizing an external cost" mean?
A) limiting the extent to which domestic firms can outsource production
B) prohibiting economic activities that create externalities
C) forcing producers to factor into their production costs the cost of the externalities
created in the production of their output
D) finding a way to address cross-border pollution
The distribution of income primarily determines which of the fundamental economic
questions?
A) What goods and services are to be produced?
B) How the goods and services are to be produced?
C) Who will receive the goods and services produced?
D) How to plan the economy?
A regressive tax is a tax for which people with lower incomes
A) pay a lower percentage of their incomes in tax than do people with higher incomes.
B) pay a higher percentage of their incomes in tax than do people with higher incomes.
C) pay the same percentage of their incomes in tax as do people with higher incomes.
D) do not have to pay unless their incomes exceeds a certain amount.
Article Summary
Brandeis University economist Benjamin Shiller has written a paper which explains
how Netflix could combine demographic data with customers' Web browsing habits to
more accurately predict how much a customer would be willing to pay for a Netflix
subscription, and how using this method of first-degree price discrimination would
generate higher profits. Shiller explains that the more information a company has about
its customers, the better it is at being able to set prices to increase profits. As he stated
in his paper, "Using all variables to tailor prices, one can yield variable profits 1.39
percent higher than variable profits obtained using non-tailored 2nd degree
price-discrimination. Using demographics alone to tailor prices raises profits by much
less, yielding variable profits only 0.14% higher than variable profits attainable under
2nd degree [price discrimination]."
Source: Brian Fung, "How Netflix could use Big Data to make twice as much money
off you," Washington Post, September 4, 2013.
Refer to the Article Summary above. If Netflix chose to use Shiller's pricing method
A) consumer surplus would be zero.
B) producer surplus would be zero.
C) deadweight loss would be maximized.
D) consumer surplus, producer surplus, and deadweight loss would all be equal.
In reaction to passage of the Smoot-Hawley Tariff, Canada as well as many other U.S.
trading partners
A) enacted large increases in tariffs on U.S. imports.
B) eliminated tariffs on U.S. imports.
C) refused to export any products to the United States.
D) refused to import any products from the United States.
The basic cause of deadweight losses from the existence of common resources and
externalities is
A) a lack of clearly defined and enforceable property rights.
B) the self-interested rationality of human beings.
C) the use of a market system to deal with scarcity.
D) the absence of government intervention.
If a consumer always buys goods rationally, then
A) the total utilities of the different goods consumed will be equal.
B) the average utilities of the different goods consumed will be equal.
C) the marginal utility per dollar spent on all goods will be equal.
D) the marginal utility of the different goods consumed will be equal.
Writing in the New York Times on the technology boom of the late 1990s, Michael
Lewis argues, "The sad truth, for investors, seems to be that most of the benefits of new
technologies are passed right through to consumers free of charge." What does Lewis
means by the benefits of new technology being "passed right through to consumers free
of charge"?
A) Firms in perfect competition are price takers. Since they cannot influence price, they
cannot dictate who benefits from new technologies, even if the benefits of new
technology are being "passed right through to consumers free of charge."
B) In perfect competition, price equals marginal cost of production. In this sense,
consumers receive the new technology "free of charge."
C) In the long run, price equals the lowest possible average cost of production. In this
sense, consumers receive the new technology "free of charge."
D) In perfect competition, consumers place a value on the good equal to its marginal
cost of production and since they are willing to pay the marginal valuation of the good,
they are essentially receiving the new technology "free of charge."
Let D = demand, S = supply, P = equilibrium price, and Q = equilibrium quantity. What
happens in the market for tropical hardwood trees if the governments restrict the
amount of forest lands that can be logged?
A) D decreases, S no change, P and Q decrease
B) S decreases, D no change, P increases, Q decreases
C) D and S decrease, P and Q increase
D) D no change, S decreases, P increases, Q increases
At a price of $100, Beachside Canoe Rentals rented 11 canoes. When it increased its
rental price to $125, 9 canoes were rented. Calculate the absolute value of the price
elasticity of demand for canoe rentals using the midpoint formula.
A) 2
B) 25
C) 9
D) 75
Figure 13-11
Refer to Figure 13-11. What is the amount of excess capacity?
A) Q4 - Q3 units
B) Q4 - Q2 units
C) Q3 - Q2 units
D) Q3 - Q1 units
According to the marginal productivity theory of income
A) the greater the quantity of resources owned by an individual, the greater his
incentive to increase productivity and his income.
B) the average income received by an individual who supplies resources is influenced
by the resources owner's marginal productivity.
C) the income received by an individual who supplies labor services equals the
incremental benefit generated to the firm by that individual's labor.
D) the income received by an individual who supplies labor services equals the profit
generated to the firm by that individual's labor.
Table 9-2
Sarita and Gabriel own S&G Bakery. Table 9-2 lists the number of pies and cakes Sarita
and Gabriel can each bake in one day.
Refer to Table 9-2. Select the statement that accurately interprets the data in the table.
A) Sarita has a greater opportunity cost than Gabriel for baking cakes.
B) Sarita's opportunity cost for baking cakes is less than Gabriel's.
C) Gabriel has a greater opportunity cost than Sarita for baking pies.
D) Gabriel's opportunity cost for baking cakes and baking pies are both greater than
Sarita's.
What is the endowment effect?
A) the tendency of people to be unwilling to sell something they already own even if
they are offered a price that is greater than what they would be willing to pay to buy the
good if they did not already own it
B) the tendency of people to be unwilling to sell something they already own because
of its sentimental value
C) the tendency of people to overstate the value of a good they already own even
though similar items can be purchased at a lower price
D) the sum total of assets that a person has acquired over the years
Consider the market for blackjack dealers in Las Vegas. In each of the following cases,
explain what happens to the equilibrium wage rate and the quantity of blackjack dealers
hired.
a. Three new large resort casinos open in Las Vegas.
b. Fewer students are attending classes to learn to become blackjack dealers.
c. Traditionally, blackjack dealing is a field that attracts foreign workers. However,
changes in immigration laws have made it more difficult for foreign workers to come to
Las Vegas to obtain jobs. The demand for blackjack dealers, however, does not change.
d. Advances in technology have increased the popularity of electronic blackjack
machines and decreased the popularity of live table games which require the use of a
dealer.
Suppose an industry is made up of 25 firms, all with equal market share. The four-firm
concentration ratio of this industry is
A) 16%.
B) 20%.
C) 25%.
D) It cannot be determined from the information given.
