Which of the following would cause an increase in the supply of peanut butter?
A) a decrease in the price of grape jelly (assuming that peanut butter and grape jelly are
complements)
B) an increase in the price of peanut butter
C) an increase the price of a product that producers sell instead of peanut butter
D) an increase in the number of firms that produce peanut butter
“The price of compact fluorescent light bulbs fell because of improvements in
production technology. As a result, the demand for incandescent light bulbs decreased.
This caused the price of incandescent light bulbs to fall; as the price of incandescent
light bulbs fell the demand for incandescent light bulbs decreased even further.”
Evaluate this statement.
A) The statement is false. A decrease in the price of compact fluorescent light bulbs
would decrease the demand for incandescent light bulbs, but a decrease in the price of
incandescent light bulbs would not cause the demand for incandescent light bulbs to
decrease.
B) The statement is false because the demand for incandescent light bulbs would
increase as the price of compact fluorescent light bulbs fell.
C) The statement is false because compact fluorescent light bulbs producers would not
reduce their prices as a result of improvements in technology; doing so would reduce
their profits.
D) The statement is false because it confuses the law of demand with the law of supply.
What does a Lorenz curve illustrate?
A) a comparison of the distribution of income in two different countries
B) the distribution of income within a country in a given time period
C) the share of taxes paid by different groups of households
D) the change over time in the percentage of households with incomes that place them
below the poverty line
Which of the following statements about the importance of trade to the U.S. economy is
true?
A) Since 1950, both exports and imports have steadily decreased as a fraction of U.S.
gross domestic product.
B) Overall, about 80 percent of U.S. manufacturing jobs depend directly or indirectly
on exports.
C) The United States is the second largest exporter in the world.
D) The U.S. economy is highly dependent on international trade for growth in its gross
domestic product.
The distribution of income typically refers to how income is distributed across the
population ________. Income mobility looks at how a person or family’s income
changes ________.
A) in a particular year; over time
B) over a lifetime; each year
C) by age group; by education level
D) by race and gender; based on the state of the economy
Last year, Anthony Millanti earned exactly $30,000 of taxable income. Assume that the
income tax system used to determine Anthony’s tax liability is progressive. The table
below lists the tax brackets and the marginal tax rates that apply to each bracket.
a. Draw a new table that lists the amounts of income tax that Anthony is obligated to
pay for each tax bracket, and the total tax he owes the government. (Assume that there
are no allowable tax deductions, tax credits, personal exemptions, or any other
deductions that Anthony can use to reduce his tax liability).
b. Determine Anthony’s average tax rate.
Figure 15-17
Your college decides to offer a psychology course as a MOOC that can be taken by
students anywhere in the world, whether they are actually enrolled in your college or
not. The demand and cost situation for the MOOC is shown in the figure.
Refer to Figure 15-17. The faculty member who designed the course argues: “I think
the course should be priced so that the maximum number of students enroll.” How
much profit (or loss) will the college make on the course if it charges this price?
A) -$2,592,000
B) -$1,080,000
C) $0
D) $450,000
In monopolistic competition there is/are
A) many sellers who each face a downward-sloping demand curve.
B) a few sellers who each face a downward-sloping demand curve.
C) only one seller who faces a downward-sloping demand curve.
D) many sellers who each face a perfectly elastic demand curve.
Figure 16-5
Refer to Figure 16-5. Suppose the firm represented in the diagram decides to practice
perfect price discrimination. What is the profit-maximizing quantity?
A) 320 units
B) 480 units
C) 560 units
D) 640 units
Which of the following is not a barrier to entry?
A) an inelastic demand curve
B) economies of scale
C) ownership of a key input
D) a patent
A firm’s accounting profit is also its
A) economic profit.
B) income statement.
C) net income.
D) statement of liabilities.
Figure 13-13
Refer to Figure 13-13. What is the profit maximizing output level?
A) Q1 units
B) Q2 units
C) Q3 units
D) Q4 units
Ben’s Peanut Shoppe suffers a short-run loss. Ben will not choose to shut down if
A) his Shoppe’s total revenue exceeds his fixed cost.
B) his Shoppe’s total revenue exceeds his variable cost.
C) his Shoppe’s total revenue exceeds his implicit costs.
D) his Shoppe’s total revenue exceeds his capital costs.
Marginal revenue for an oligopolist is
A) identical to the demand for the firm’s product.
B) difficult to determine because the firm’s demand curve is typically unknown.
C) downward sloping beneath the firm’s demand curve.
D) horizontal on a price-quantity diagram.
If Japanese workers are more productive than French workers then trade between Japan
and France
A) can take place only if France has an absolute advantage in producing a good or
service Japanese buyers want.
B) cannot take place because Japanese goods and services will be less expensive than
French goods and services.
C) cannot take place until French workers become more productive.
D) will take place so long as each country has a comparative advantage in a good or
service that buyers in the other country want.
In an oligopoly, firms can increase their market power by
A) selling to buyers who have market power.
B) pursuing dominant strategies.
C) colluding to set prices.
D) undertaking heavy advertising expenditure.
According to Porter’s Five Competitive Forces Model, which kinds of products are most
likely to limit the ability of firms in an industry to raise prices?
A) differentiated products that target a small subsegment of the industry
B) substitutable products produced by firms in different industries
C) similar products produced by similar industries in low-cost countries
D) complementary products produced by different firms in the same industry
Both presidents Kennedy and Reagan proposed significant cuts in income taxes because
A) at the time of their proposals the federal government was experiencing budget
surpluses; that is, tax revenue exceeded government expenditures.
B) they wanted to offset their proposals to increase other taxes.
C) state governments had increased their taxes and they believed the tax cuts they
proposed would result in most citizens paying about the same total state and federal
taxes.
D) they believed that the tax cuts would enhance economic efficiency.
Which of the following statements correctly describes the distinction between
technology and technological change?
A) Technology refers to the processes used by a firm to transform inputs into output of
goods and services while technological change is a change in a firm’s ability to produce
a given level of output with a given quantity of inputs.
B) Technology refers to the ability of a firm to increase its maximum output from a
given quantity of inputs and technological change is the process by which the firm
achieves this productivity gain.
C) Technology is product-centered; its refers to developing new products with limited
resources while technological change is process-centered in that it focuses on
developing new production techniques.
D) Technology involves research and development while technological change involves
the use of more efficient machinery.
Which of the following equations is correct?
A) AVC – ATC = AFC
B) AVC + ATC = AFC
C) AFC + AVC = ATC
D) ATC + AVC = AFC
Table 2-9
Table 2-9 shows the number of labor hours required to produce a canoe and a sailboat in
Guatemala and Honduras.
Refer to Table 2-9. Guatemala has a comparative advantage in the production of
A) canoes.
B) sailboats.
C) both products.
D) neither product.
The slope of a typical isoquant is negative because to produce a given output, a
producer
A) will use more of one input only if it uses more of another.
B) can use less of one input only if the productivity of that input increases
C) can use less of one input only if it uses more of another.
D) will use more of one input only if the price of that input falls.
Goods and services bought domestically but produced in other countries are referred to
as
A) exports.
B) imports.
C) transfer payments.
D) foreign consumption.
A perfectly competitive apple farm produces 1,000 bushels of apples at a total cost of
$36,000. The price of each bushel is $50. Calculate the firm’s short-run profit or loss.
A) loss of $14,000
B) profit of $14,000
C) profit of $50,000
D) There is insufficient information to answer the question.
Figure 12-5
Figure 12-5 shows cost and demand curves facing a typical firm in a constant-cost,
perfectly competitive industry.
Refer to Figure 12-5. If the market price is $20, what is the average profit at the
profit-maximizing quantity?
A) $5
B) $6
C) $9
D) $20
Figure 9-2
Suppose the U.S. government imposes a $0.40 per pound tariff on rice imports. Figure
9-2 shows the impact of this tariff.
Refer to Figure 9-2. Without the tariff in place, the United States produces
A) 9 million pounds of rice.
B) 15 million pounds of rice.
C) 31 million pounds of rice.
D) 42 million pounds of rice.
If there is a market outcome in which the marginal benefit to consumers of the last unit
produced is equal to its marginal cost of production and consumer surplus plus producer
surplus is maximized, then
A) maximum deadweight loss occurs.
B) economic efficiency is achieved.
C) profits are maximized.
D) costs are minimized.
Figure 18-6
Figure 18-6 shows the Lorenz curves for Islandia and Syldavia.
Refer to Figure 18-6. If area X = 2,060, area Y = 240, and area Z= 2,700, calculate the
Gini coefficient for Syldavia.
A) 05
B) 12
C) 46
D) 85
Figure 4-1
Figure 4-1 shows Arnold’s demand curve for burritos.
Refer to Figure 4-1. If the market price is $1.50, what is the consumer surplus on the
first burrito?
A) $0.50
B) $1.00
C) $1.50
D) $7.50
If smartwatches are considered substitutes for smartphones, the decline in the price of
smartwatches would, all else equal,
A) increase the demand for smartphones.
B) decrease the demand for smartphones.
C) increase the quantity of smartphones demanded.
D) decrease the quantity of smartphones demanded.
Which of the following is an example of market “production,” as used by economists?
A) Garvey takes out a low-cost government loan to start his pet-sitting business.
B) Heidi makes a pizza for her family’s dinner.
C) Katrina works as a cashier at the local produce stand.
D) The theatre and film studies department in Fine Art’s College stages a play at the
local theatre.