Figure: The Market for Thumb Drives
(Figure: The Market for Thumb Drives) Look at the figure The Market for Thumb
Drives. Assume that PA is the autarky price, PW is the world price, and D and S
represent domestic demand and supply, respectively. Consumer surplus in free trade
equals the area:
A) A.
B) A + B + C.
C) A + B + C + D.
D) A + B.
Figure: Consumer Equilibrium III
(Figure: Consumer Equilibrium III) Look at the figure Consumer Equilibrium III. Kurt
consumes at point C. If income remains unchanged, Kurt could gain more utility by
choosing point:
A) B.
B) A.
C) F.
D) E.
Which of the following groups has the LOWEST median earnings in the U.S. labor
market?
A) White men
B) women, regardless of ethnicity
C) African Americans
D) Hispanics
In terms of indifference curves, a demand curve is generated by changes in:
A) the income effect.
B) the substitution effect.
C) the price of one good.
D) the price of both goods simultaneously.
LaToya sees honey and sugar as perfect substitutes. She is always willing to substitute 1
teaspoon of honey for 2 teaspoons of sugar. If honey is twice as expensive as sugar,
LaToya will:
A) use only honey.
B) use only sugar.
C) use a lot of honey and a little sugar.
D) be willing to purchase either sugar or honey.
France and England both produce wine and cloth with constant opportunity costs.
France can produce 150 barrels of wine if it produces no cloth or 100 bolts of cloth if it
produces no wine. England can produce 50 barrels of wine if it produces no cloth or
150 bolts of cloth if it produces no wine. When international trade takes place, each
country specializes completely in the production of the good in which it has a
comparative advantage1 barrel of wine exchanges for 1 bolt of clothand France exports
50 units of wine. We can conclude that France produces _____ units of wine and _____
units of cloth and that France consumes _____ units of wine and _____ units of cloth.
A) 150; 100; 100; 100
B) 150; 0; 100; 50
C) 150; 0; 50; 50
D) 0; 100; 50; 50
Scenario: The Production of Wheat and Toys
The table describes the production of two goods,
wheat and toys, in country A and country B. Each country has a linear production
possibility frontier with respect to its production of the two goods. The numbers in each
column represent the total number of units each country could produce if it used all of
its resources to produce the good.
(Scenario: The Production of Wheat and Toys) Look at the scenario Production of
Wheat and Toys. If each country specializes in the good for which it has the
comparative advantage:
A) country A will produce wheat, and country B will produce toys.
B) country A will produce both wheat and toys.
C) country A will produce toys, and country B will produce wheat.
D) country B will produce both wheat and toys.
Figure: The Total Product
(Figure: The Total Product) Look at the figure The Total Product. After hiring L2 labor
and producing at point B on the total product curve, hiring more labor beyond L2 would
cause the:
A) marginal product of labor to rise.
B) marginal product of labor to be negative.
C) total product to be negative.
D) total product to be zero.
Lisa works 46 hours a week at $10 an hour. If her wage increases to $16.50:
A) the substitution effect implies that she will work less.
B) if leisure is a normal good, the income effect implies that she will work less.
C) if leisure is a normal good, the income effect will reinforce the substitution effect
and she will work less.
D) Lisa’s marginal product of labor has decreased.
_____ are a good that is rival in consumption and nonexcludable.
A) Public parks
B) Public policy, such as national economic policy,
C) Private beaches
D) National defense
Austin’s total fixed cost at the bakery is $3,600 a month. Austin employs 20 workers
and pays each worker $8 an hour. The marginal product of the twentieth worker is 12
iced cupcakes an hour. What is the marginal cost of the last cupcake produced by the
last worker Austin hired?
A) $0.26
B) $0.66
C) $3.81
D) $8.00
(Table: Value of the Marginal Product of Labor and Demand) In the figure Value of the
Marginal Product of Labor and Demand, the total product of labor is shown for the
hourly production of power cords. Assume that the market for power cords is perfectly
competitive. The price of a power cord is $2, the market wage rate is $40 per hour, and
eight workers are hired. Profit can be maximized by hiring _____ worker(s).
A) one more
B) two more
C) one fewer
D) three fewer
Figure: The Market for Tortillas
(Figure: The Market for Tortillas) Look at the figure The Market for Tortillas. With a
nonbinding price floor, the price could be equal to _____, consumers would demand
_____, and producers would supply _____.
A) P1; Q1; Q3
B) P2; Q2; Q2
C) P1; Q3; Q1
D) P3; Q2; Q1
In the long run, monopolistically competitive firms:
A) produce at the level that minimizes average total cost.
B) set marginal revenue equal to price.
C) cannot earn an economic profit.
D) produce so that marginal cost equals price.
(Table: Producer Surplus) Look at the table Producer Surplus. If the price of a ticket to
see The Nutty Nutcracker is $75 and there is no other market for tickets, the total
producer surplus for the five students is:
A) $190.
B) $139.
C) $75.
D) $40.
A production possibility frontier illustrates the _____ facing an economy that _____
only two goods.
A) prices; sells
B) trade-offs; produces
C) trade-offs; sells
D) shortages; produces
A good is most likely to be artificially scarce if:
A) it is nonexcludable and nonrival.
B) the seller is a monopolist.
C) it is nonexcludable but rival.
D) it is excludable but nonrival.
An increase in _____ will have an ambiguous (uncertain) effect on price.
A) tastes and preferences
B) the price of a substitute
C) the price of a complement
D) income
Roommates Sarah and Zoe are hosting a Halloween party and have to make food for
their guests and costumes for themselves. To finish both tasks as quickly as possible,
Sarah and Zoe know that each of them should focus on just one task, but they don’t
know who should do what. Sarah and Zoe should determine which roommate:
A) has the absolute advantage in cooking.
B) has the comparative advantage in cooking.
C) can cook the most in a given amount of time.
D) can complete the cooking in the least amount of time.
The utility of a good is determined by how much _____ a particular consumer obtains
from it.
A) satisfaction
B) usefulness
C) cost
D) need fulfillment
An assumption of the model of perfect competition is:
A) identical goods.
B) difficult entry and exit.
C) few buyers and sellers.
D) cooperation and interdependence between sellers.
In 2000, financial experts announced that they:
A) would no longer be willing to buy or sell mortgage-backed securities.
B) were unable to predict expected income from mortgage-backed securities.
C) had overestimated the risk of loss from mortgage-backed securities.
D) had developed a model that could predict the risk of losing money on
mortgage-backed securities.
_____ taxes are paid on wages.
A) Income
B) Profits
C) Property
D) Sales
(Table: Spring Water) The table Spring Water shows the demand and cost data for a
firm in a monopolistically competitive industry producing drinking water from
underground springs. If the industry were in perfect competition, the profit-maximizing
price would be:
A) $10.00.
B) $6.50.
C) $8.38
D) $8.29
Figure and Table: The Budget Line
(Figure and Table: The Budget Line) Look at the figure and table The Budget Line. An
increase in income would:
A) rotate the budget line along the horizontal axis.
B) shift the budget line to the left.
C) rotate the budget line along the vertical axis.
D) shift the budget line to the right.
In the classic prisoners’ dilemma with two accomplices in crime, the dominant strategy
for each individual is to:
A) not confess.
B) confess.
C) confess only if the other confesses.
D) This game does not have a dominant strategy.
Figure: The Total Product
(Figure: The Total Product) Look at the figure The Total Product. As labor is hired
between L1 and L2, the total product is _____ and the marginal product is _____.
A) rising; positive
B) falling; zero
C) rising; negative
D) rising; zero
If a tax system is poorly designed, it may be possible to increase:
A) efficiency without sacrificing equity.
B) equity while causing inefficiency.
C) efficiency by sacrificing equity.
D) equity without causing inefficiency or increase efficiency without sacrificing equity.
The poverty line is adjusted each year to reflect:
A) changes in the cost of living.
B) changes in the size of the average family.
C) the long-term rise in the average standard of living.
D) changes in the cost of living and changes in the size of the average family.
The market for lemonade is in equilibrium and the price of lemons rises. In the
lemonade market _____ will _____, _____ the price and _____ the quantity.
A) demand; decrease; decreasing; decreasing
B) demand; decrease; increasing; decreasing
C) supply; increase; decreasing; increasing
D) supply; decrease; increasing; decreasing
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. M is the _____ curve.
A) ATC
B) MR
C) MC
D) AVC
For a firm in a perfectly competitive market _____ revenue equals _____.
A) marginal; total revenue
B) marginal; market price
C) net; price
D) net; marginal revenue
If relevant events are _____, diversification will NOT reduce risk.
A) positively correlated
B) negatively correlated
C) dependent
D) independent