Refer to the table shown. The average variable cost of producing five bicycles per week
is:
A. less than or equal to $116.
B. $116.
C. $140.
D. greater than or equal to $140.
Answer:
The price mechanism that guides people’s actions is called the:
A. invisible market force.
B. invisible hand.
C. invisible handshake.
D. invisible foot.
Answer:
Suppose the supply and demand tables shown reflect the supply and demand for milk
per week. What is the equilibrium price and quantity of milk?
A. $1 per gallon and 2,000 gallons per week.
B. $2 per gallon and 1,500 gallons per week.
C. $3 per gallon and 2,000 gallons per week.
D. $4 per gallon and 2,000 gallons per week.
Answer:
Refer to the graph shown. If labor costs $10 per unit and machines cost $15 per unit, the
economically efficient cost of producing 500 units of output is:
A. $100.
B. $150.
C. $300.
D. impossible to determine using the information given.
Answer:
An increase in the marginal income tax rate is likely to:
A. increase the quantity of labor supplied.
B. decrease the quantity of labor supplied.
C. decrease the quantity of labor demanded.
D. increase the quantity of labor demanded.
Answer:
An isoquant is a curve that represents combinations of:
A. factors of production that produce equal amounts of output.
B. factors of production that cost the same amount.
C. output that can be produced from the same quantity of inputs.
D. output that can be produced at the same cost.
Answer:
To prevent price wars and enhance profits, firms in a cartel may:
A. encourage foreign competition.
B. accept the price in the marketplace.
C. establish a contestable market.
D. collude.
Answer:
Refer to the graph shown. Between points B and D, marginal utility is:
A. increasing, and so total utility is falling.
B. positive, and so total utility is increasing.
C. positive, and so total utility is falling.
D. increasing, and so total utility is at its maximum.
Answer:
Suppose the above supply and demand tables reflect the supply and demand for milk
per week. At a price of $1, there is a:
A. surplus of 500 gallons per week.
B. surplus of 1,000 gallons per week.
C. shortage of 2,500 gallons per week.
D. shortage of 1,000 gallons per week.
Answer:
Society as a whole benefits from a decrease in poverty because:
A. few people derive pleasure from knowing that others are not in poverty.
B. increased assistance to those in poverty raises their incentives to work.
C. if there are fewer families in poverty, there will be less demand for child care.
D. if there are fewer people in poverty, the incentive to commit crimes falls.
Answer:
Up through the early decades of the 20th century, many countries remained closed to
trade, charging high tariffs or imposing strict quotas on imported goods. In 1948, 23
countries joined the General Agreement on Tariffs and Trade (GATT), which sought to
set out rules for trade and enhance future negotiations. The reduction in tariffs as a
result of GATT probably brought about:
A. a decrease in consumption.
B. an increase in consumption.
C. no change in consumption.
D. a reduction in domestic production.
Answer:
When society achieves economic efficiency, it is:
A. maximizing producer surplus but not consumer surplus.
B. maximizing consumer surplus but not producer surplus.
C. producing a specified amount of output at the highest possible cost.
D. producing a specified amount of output at the lowest possible cost.
Answer:
Given a set amount of money, goods A and B both give the same marginal utility but
good A costs twice as much as good B. You should:
A. consume more of good A and less of good B.
B. consume more of good B and less of good A.
C. keep consuming the current amounts of both good A and good B.
D. realize that you don’t have enough information to answer the question.
Answer:
The following graph shows average fixed costs, average variable costs, average total
costs, and marginal costs of production.
Refer to the graph shown. Average variable cost is minimized when output equals:
A. 12 units.
B. 6 units.
C. 21 units.
D. 25 units.
Answer:
Refer to the graphs shown. The effect of an increase in the price of CDs on consumers
is best shown by arrow:
A. A.
B. B.
C. C.
D. D.
Answer:
The cost/benefit approach that economists agree on requires an economist to determine
a quantitative cost and benefit for:
A. only tangible items.
B. everything but life.
C. everything, including life.
D. everything, including life but not potential lives.
Answer:
Refer to the graph shown. If the price of the product is $1 and the firm is a natural
monopoly:
A. there will be a surplus of the product.
B. the firm will earn economic profit by satisfying the market quantity demanded at that
price.
C. the firm can earn profit by producing more than Qc.
D. the firm will incur losses by producing the quantity demanded at that price.
Answer:
Which of the following statements is true?
A. Any technically efficient production process is always economically efficient.
B. Any economically efficient production process is always technically efficient.
C. A production process is either economically efficient or technically efficient but
never both.
D. A production process must always be both economically efficient and technically
efficient.
Answer:
Which of the following market structures is characterized by interdependent pricing and
output decisions?
A. Monopoly.
B. Oligopoly.
C. Monopolistic competition.
D. Perfect competition.
Answer:
Refer to the graph shown. If the market price is P4, the maximum profit the firm can
earn is:
A. Q4 multiplied by P4.
B. Q3 multiplied by P3.
C. Q4 multiplied by the difference between P4 and P3.
D. Q3 multiplied by the difference between P3 and P2.
Answer:
Two economists are walking down a street. One sees $100 on the ground. The other
responds, “It must be an illusion. You’d never find $100 on the ground.” What kind of
economist is the one who saw the $100?
A. A traditional economist
B. A modern economist
C. A mathematical economist
D. A heuristic economist
Answer:
Refer to the table shown. A comparative advantage in the production of gold is held by:
A. Zimbabwe.
B. Botswana.
C. neither country.
D. both countries.
Answer:
Compute the approximate elasticity of supply from the following data:
A. .2.
B. .5.
C. 2.1.
D. 5.0.
Answer:
If a firm is able to lower total costs by specializing in marketing and distribution while
outsourcing production, it is taking advantage of:
A. less developed nations.
B. economies of scope.
C. economies of scale.
D. technical efficiency.
Answer:
In a long-run equilibrium, monopolistically competitive firms produce where:
A. marginal cost is equal to price.
B. marginal revenue is equal to price.
C. average total cost is equal to price.
D. marginal revenue is greater than marginal cost.
Answer:
Refer to the graphs shown. The arrow that best captures the impact of a decline in price
on quantity supplied is:
A. W
B. X
C. Y
D. Z
Answer:
A firm’s demand curve for labor services:
A. is independent of the demand for the firm’s output.
B. will not change if technology changes.
C. depends on the amount of other inputs used by the firm.
D. is not related to the price of the firm’s output.
Answer:
The slope of a line is the:
A. value on the vertical axis divided by the value on the horizontal axis.
B. value on the horizontal axis divided by the value on the vertical axis.
C. change in the value on the vertical axis divided by the change in the value on the
horizontal axis.
D. change in the value on the horizontal axis divided by the change in the value on the
vertical axis.
Answer:
Refer to the graph below.
Which of the shifts explains what would happen to the production possibility curve if
restrictions were imposed on tuna fishing?
A. I
B. II
C. III
D. IV
Answer:
Jason is faced with two choices: A BMW costing $40,000 gives him an additional 800
units of utility, and a laser printer costing $1,000 gives him an additional 25 units of
utility. Rational choice theory would predict that he would choose:
A. to purchase the BMW.
B. to purchase the laser printer.
C. It is impossible to choose because the goods have different prices.
D. It is impossible to choose because BMWs and laser printers are fundamentally
different goods with different purposes.
Answer:
Public television periodically runs pledge drives to raise money. Only a small
percentage of the people who benefit from public television are willing to pay. Why
does public television have a problem in collecting money from its viewers?
A. Broadcast television has public good aspects.
B. Public television has problems of adverse selection.
C. Public television is an example of government failure.
D. Broadcast television has problems of informational problems.
Answer:
Which of the following generalizations is derived from the economist’s framework?
A. Politicians always take too long to enact regulations because they must wait for
economic advisors to perform a cost/benefit analysis.
B. Policies that relieve immediate suffering often have the best long-run consequences.
C. Sound policies often are prevented by individuals’ self-interest-seeking activities.
D. Government regulations have the same impact whether they are designed on the
basis of cost/benefit analysis or were developed as a reaction to real-world events.
Answer:
Firms continue to produce (illegally) counterfeit computer software and documentation.
Many of the illegal copies are Microsoft products, though Microsoft still has a large
share of the market for its products. The presence of enforced copyright protection laws
indicates that the market for Microsoft software cannot be considered a competitive
market because:
A. the products of pirates are not identical to those of Microsoft.
B. pirate producers are not profit-maximizing entrepreneurial firms.
C. buyers are not price takers.
D. there are significant barriers to entry.
Answer: