Wenqin is a farmer, and in the short run she produces 100 bushels of wheat. Her
average total cost per bushel is $1.75, total revenue is $450, and total fixed costs are
$100. Wenqin’s:
A) average fixed cost is $1.50.
B) profit per bushel is $2.75.
C) average variable cost is $1.25.
D) economic profit is $250.
(Table: Consumer Equilibrium) Look at the table Consumer Equilibrium. Assume that
goods X and Y both cost $1 per unit and you have $4 to spend on both goods. To
maximize utility, you would consume _____ unit(s) of X and _____ unit(s) of Y.
A) no; 4
B) 1; 3
C) 2; 2
D) 3; 1
Feng is thinking of mowing lawns over the summer. His friend Jason mows lawns, and
he says the marginal cost of mowing the fourth lawn in a day is $40. Feng thinks about
it and realizes that the total cost of mowing four lawns is:
A) $160.
B) $40.
C) $80.
D) not possible to determine from the information provided.
Which of the following ALWAYS results in an increase in price and quantity?
A) an increase in supply and a decrease in demand
B) an increase in demand with no change in supply
C) an increase in supply with no change in demand
D) a decrease in demand and supply
A market economy will produce _____ without any government regulation.
A) too little pollution
B) too much pollution
C) the socially optimal amount of pollution
D) the amount of pollution that maximizes total surplus
Economists who are asked to choose between two government policies may disagree
because:
A) they make the same value judgments about the desirability of the policies.
B) they base their conclusions on models that make different assumptions.
C) as a matter of course, economists often take opposing points of view so that all sides
of a question may be discussed.
D) economists are trained ignore facts and focus on theory.
An artificially scarce good is similar to a public good in that it is _____, but it is also
similar to a private good in that it is _____.
A) nonrival in consumption; nonexcludable
B) nonrival in consumption; excludable
C) excludable; nonrival in consumption
D) nonexcludable; rival in consumption
Which of the following generates a positive externality?
A) You buy a new car and find $5,000 in the door panel.
B) Your next-door neighbor mows the lawn at 6 A.M.
C) Your next-door neighbor installs a bat house and the bats eat mosquitoes.
D) Joe buys health insurance but decides not to take the time to get a flu shot.
George has a weekly income (I) of $50, which he uses to purchase doughnuts (D) and
coffee (C). If the price of a doughnut is $1 and the price of coffee is $2.50, his budget
constraint can be expressed as:
A) D = 50 + 2.50C.
B) D = 50 ” 25C.
C) D = 50 ” 0.25C.
D) D = 50 ” 2.50C.
A fixed input is one:
A) that exists in nature, and there is only so much of it.
B) that can be used for one thing only.
C) that can never produce more or less in any period.
D) whose quantity cannot be changed in the short run.
Supply curves tend to be more _____ the more time producers have to adjust to price
changes.
A) price-inelastic
B) price-elastic
C) steeply sloped
D) inflexible
(Table: Coal Mine Pollution) The table Coal Mine Pollution shows the marginal social
benefit and cost of various amounts of pollution from a coal mine. If 5 tons of pollution
is produced:
A) too much pollution is produced.
B) the efficient amount of pollution is produced.
C) not enough pollution is produced.
D) the socially optimum amount of pollution is produced.
The importance of an economic model is that it allows us to:
A) build a complex and accurate model of the economy.
B) build an accurate mathematical model of the economy.
C) focus on the effects of only one change at a time.
D) avoid opportunity costs.
Suppose the cross-price elasticity of demand for butter and margarine is equal to 0.96
but the cross-price elasticity for water and lemons is “0.13. This means that butter and
margarine are _____, while water and lemons are _____.
A) complements; substitutes
B) substitutes; complements
C) inelastic goods; elastic goods
D) elastic goods; complements
There are two plants in an industry. To reduce pollution, the government has imposed
environmental standards forcing each plant to cut emissions by 60%. At the emissions
standard, the marginal social benefit of pollution for plant A is $500, and the marginal
social benefit of pollution for plant B is $125. The same level of pollution can be
achieved at a lower cost by:
A) forcing plant A to reduce emissions and allowing plant B to increase emissions.
B) allowing plant A to pollute more and requiring plant B to pollute less.
C) forcing both plants to reduce emissions.
D) allowing both plants to pollute more.
The _____ analyzes trade under the assumption that opportunity costs are constant and
therefore production possibility frontiers are straight lines.
A) pauper labor fallacy model
B) Ricardian model
C) Heckscher”Ohlin model
D) oligopoly model
Scenario: Countries A and B Two countries, A and B, produce two goods, wheat (W)
and steel (S). Each has a linear production possibility frontier in both goods. If country
A spends all of its available resources to produce wheat, it can produce 500 tons of
wheat and no steel. If it uses all of its resources to produce steel, it can produce 250
tons of steel and no wheat. If country B spends all of its available resources producing
wheat, it can produce 400 tons of wheat, and if it spends all of its resources on the
production of steel, it can produce 400 tons of steel.
(Scenario: Countries A and B) Look at the scenario Countries A and B. If countries A
and B both specialize and trade:
A) only country A will gain.
B) only country B will gain.
C) country A and country B will gain if they both specialize in the good in which they
have a comparative advantage.
D) neither country will gain.
Suppose Professor Jones receives a promotion and an increase in her annual salary. Her
labor supply curve will be _____ if the substitution effect is _____ than the income
effect.
A) upward-sloping; greater than
B) upward-sloping; smaller than
C) downward-sloping; greater than
D) vertical; greater than
Greta starts using a new baking technique, and she can now do twice as much of
everything. In a single day Greta can now make 10 cakes or 8 pies, rather than the 5
cakes and 4 pies she could previously bake. Greta’s production possibility frontier has
_____, but her opportunity costs of making pies _____.
A) shifted right; are unchanged
B) shifted right; have decreased
C) not changed; have increased
D) not changed; have decreased
In perfectly competitive markets, if the price is _____, the firm will _____.
A) greater than ATC; make an economic profit
B) greater than the minimum ATC; break even
C) less than ATC; make an economic profit
D) less than ATC; break even
Figure: Unemployment Rate over Time
(Figure: Unemployment Rate over Time) Look
at the figure Unemployment Rate over Time. In the time-series graph, as we move from
1991 to 1993, we see that the unemployment rate has _____ from approximately _____
to approximately _____.
A) decreased; 5%; 4%
B) increased; 5.5%; 7%
C) decreased; 7.8%; 5%
D) increased; 4%; 6.3%
Time allocation refers to:
A) how many hours an employer should hire a worker for.
B) how many hours people choose to spend on different activities.
C) how many hours unions will choose for their members to work.
D) how different types of talents determine the wages people will earn.
Figure: The Socially Optimal Quantity of Pollution
(Figure: The Socially Optimal Quantity of Pollution) In the figure The Socially Optimal
Quantity of Pollution, without government intervention:
A) firms will continue to pollute until the marginal social benefit is zero.
B) firms will continue to pollute until the marginal social benefit is $200.
C) the optimal quantity of pollution will occur.
D) The outcome cannot be determined without more information.
Figure: The Linear Demand Curve
(Figure: The Linear Demand Curve) Look at the figure The Linear Demand Curve. As a
producer, you are interested in maximizing your total revenues in this market. At what
price should you sell your good? What is the corresponding total revenue?
A) $10; $100
B) $20; $200
C) $0; $100
D) $5; $100
A planning period during which all of a firm’s resources are variable is the _____ run.
A) long
B) fixed
C) short
D) nominal
The long run refers to the period for which:
A) a fixed input exists.
B) all inputs are variable.
C) marginal costs are decreasing.
D) diminishing returns raise marginal cost.