Consumer surplus in a market for a product would be equal to ________ if the market
price was zero.
A) zero
B) the area between the supply curve and the demand curve
C) the area above the supply curve
D) the area under the demand curve
If a corporate bond with face value of $5,000 has an interest rate of 4 percent paid once
a year for a term of 30 years, what is the size of the coupon payment?
A) $4
B) $200
C) $1,250
D) $5,000
Average total cost is
A) total cost divided by the quantity of output produced.
B) total explicit costs divided by the quantity of output produced.
C) variable cost divided by the quantity of output produced.
D) the change in fixed plus variable cost divided by the quantity of output produced.
The benefit to the firm from hiring one additional worker is called the
A) marginal revenue product of labor.
B) marginal revenue.
C) marginal profit.
D) total revenue.
Which of the following would cause an increase in the equilibrium price and an
increase in the equilibrium quantity of watermelons?
A) an increase in demand and an increase in supply
B) an increase in supply
C) an increase in supply and an increase in demand greater than the increase in supply
D) a decrease in demand and an increase in supply
In a typical year, ________ of new jobs are created by small firms.
A) less than 5 percent
B) 10 percent
C) 40 percent
D) 75 percent
The efficient level of paper production will occur where the
A) marginal private benefit from consuming paper is equal to the marginal social cost
of production.
B) marginal social benefit from consuming paper is equal to the marginal social cost of
production.
C) economically efficient level of the output of paper is equal to the economically
efficient level of inputs.
D) production of paper no longer produces negative externalities.
If Canada has a comparative advantage relative to Mexico in the production of timber,
then
A) the explicit cost of production for timber is lower in Canada than in Mexico.
B) the opportunity cost of production for timber is lower in Canada than in Mexico.
C) the implicit costs of production for timber are higher in Canada than in Mexico.
D) the average cost of production for timber is lower in Canada than in Mexico.
At low wages, the labor supply curve for most people slopes upward because
A) the supply of labor is perfectly inelastic at low wages.
B) as wages increase the opportunity cost of leisure increases.
C) as wages increase income also increases unless hours worked decrease.
D) the demand for labor is perfectly elastic at low wages.
Whenever a firm can charge a price greater than marginal cost
A) the firm must be a monopolist.
B) there is some loss of economic efficiency.
C) consumers have the ability to choose a close substitute.
D) the firm will earn economic profits.
Figure 5-2
Figure 5-2 shows a market with a negative externality.
Refer to Figure 5-2. The size of marginal external costs can be determined by
A) S2+ S1 at each output level.
B) S2– S1at each output level.
C) the supply curve S2.
D) the supply curve S1.
The price elasticity of demand for beef is estimated to be 0.60 (in absolute value). This
means that a 20 percent increase in the price of beef, holding every thing else constant,
will cause the quantity of beef demanded to
A) decrease by 12 percent.
B) decrease by 26 percent.
C) decrease by 32 percent.
D) decrease by 60 percent.
Figure 11-11
Figure 11-11 illustrates the long-run average cost curve for a firm that produces picture
frames. The graph also includes short-run average cost curves for three firm sizes:
ATCa, ATCb and ATCc.
Refer to Figure 11-11. If the firm chooses to produce and sell 25,000 frames per month
by operating in the short run with a scale operation represented by ATCc
A) the firm will not be operating efficiently.
B) the firm will be operating efficiently.
C) the firm would lower its average costs by reducing its scale of operation.
D) the firm will not be able to earn a profit.
Figure 12-13
Refer to Figure 12-13. Suppose the prevailing price is P1 and the firm is currently
producing its loss-minimizing quantity. If the firm represented in the diagram continues
to stay in business, in the long-run equilibrium
A) it will reduce its output to Q0 and face a price of P0.
B) it will continue to produce Q1 but faces the higher price of P2.
C) it will expand its output to Q2 and face a price of P2.
D) it will expand its output to Q3 and face a price of P1.
Figure 3-3
Refer to Figure 3-3. The figure above shows the supply and demand curves for two
markets: the market for an original Picasso painting and the market for designer jeans.
Which graph most likely represents which market?
A) Graph B represents the market for an original Picasso painting and Graph A
represents the market for designer jeans.
B) Graph A represents the market for an original Picasso painting and Graph B
represents the market for designer jeans.
C) Graph A represents both the market for an original Picasso painting and designer
jeans.
D) Graph B represents both the market for an original Picasso painting and designer
jeans.
Table 2-8
Table 2-8 shows the number of labor hours required to produce a digital camera and a
pound of wheat in China and South Korea.
Refer to Table 2-8. Does either China or South Korea have an absolute advantage and if
so, in what product?
A) South Korea only has an absolute advantage in wheat.
B) China only has an absolute advantage in wheat.
C) South Korea has an absolute advantage in both products.
D) China only has an absolute advantage in digital cameras.
Assume that the demand curve for MP3 players shifts to the right and the supply curve
for MP3 players shift to the left, but the supply curve shifts more than the demand
curve. As a result
A) both the equilibrium price and quantity of MP3 players will decrease.
B) the equilibrium price of MP3 players will decrease; the equilibrium quantity will
increase.
C) the equilibrium price of MP3 players may increase or decrease; the equilibrium
quantity will decrease.
D) the equilibrium price of MP3 players will increase; the equilibrium quantity will
decrease.
Jayanthi moves her yoga studio from her home to a space she rents in Oakland,
California. Holding everything else constant, as a result of this move
A) her explicit cost falls and her implicit cost rises.
B) her implicit cost falls and her explicit cost rises.
C) her economic cost rises.
D) her opportunity cost rises.
An increase in the demand for lobster due to changes in consumer tastes, accompanied
by a decrease in the supply of lobster as a result bad weather reducing the number of
fishermen trapping lobster, will result in
A) a decrease in the equilibrium quantity of lobster and no change in the equilibrium
price.
B) an increase in the equilibrium price of lobster and no change in the equilibrium
quantity.
C) an increase in the equilibrium price of lobster; the equilibrium quantity may increase
or decrease.
D) a decrease in the equilibrium quantity of lobster; the equilibrium price may increase
or decrease.
A patent is a government-imposed entry barrier because
A) it allows a firm to achieve economies of scale.
B) it is a key input owned by the firm that is granted the patent.
C) it limits the quantity of a good that can be imported into a country.
D) it gives a firm the exclusive right to a new product for a period of 20 years from the
date the product is invented.
Figure 18-9
Refer to Figure 18-9 to answer the following questions.
a. Did the distribution of income become more equal in 2016 that it was in 2015, or did
it become less equal? Explain.
b. If area A = 1,600, area B = 200, and area C = 3,200, calculate the Gini coefficient for
2015 and the Gini coefficient for 2016.
Figure 10-7
Manuri has $300 to spend on Pilates classes and Yoga classes. The price of a group
Pilates class is $20 and the price of a group Yoga class is $10. Manuri’s optimal bundle
is given by “A” in Figure 10-7.
Refer to Figure 10-7. Suppose the price of Pilates sessions rises to $30 while income
and the price of Yoga sessions remain unchanged. What is her new optimal bundle?
A) still remains at bundle A.
B) bundle B.
C) bundle C.
D) bundle D.
Without an increase in the supplies of factors of production, how can a nation achieve
economic growth?
A) by producing more high-value goods and fewer low-value goods
B) through technological advancement which enables more output with the same
quantity of resources
C) by lowering the prices of factors of production
D) by increasing the prices of factors of production
Insurance companies typically charge women lower prices than men for automobile
insurance. Is this an example of price discrimination?
A) No, because, on average, women have better driving records than men and the costs
of insuring men are greater than the costs of insuring women.
B) Yes, because the costs of selling insurance to men and women are the same.
C) Yes, because insurance companies can prevent arbitrage; that is, women cannot
transfer their insurance coverage to men.
D) No, because there are too many insurance companies for any one company to have
market power. A firm must possess market power in order to practice price
discrimination.
Which of the following firms is not able to practice price discrimination?
A) movie theaters
B) commercial airlines
C) land-line telephone companies
D) the largest wheat farmer in Nebraska
Figure 2-1
Refer to Figure 2-1. Point A is
A) technically efficient.
B) unattainable with current resources.
C) inefficient in that not all resources are being used.
D) the equilibrium output combination.
A horizontal merger
A) is a merger between firms in the same industry.
B) results in a trust (for example, the Standard Oil Company).
C) is a merger between firms at different stages of production of a good.
D) was illegal in the United States until the Federal Trade Commission Act was passed
by Congress in 1914.
The poverty rate is defined as the percentage of the
A) labor force that is poor according to the federal government’s definition of poverty.
B) population that is exempt from paying federal income taxes.
C) population who qualify to receive welfare payments and food stamps.
D) population that is poor according to the federal government’s definition of poverty.
A price-discriminating firm charges the highest price to
A) the group with the largest demand.
B) the group with the most elastic demand.
C) the group with the least elastic demand.
D) the group with demand that is unit elastic.
The World Trade Organization (WTO) promotes foreign trade and investment, or
globalization. In recent years opposition to globalization has led to violent protests at
meetings of the WTO. One reason for these anti-globalization protests is
A) foreign trade and investment are examples of zero-sum games.
B) protesters believe that globalization will result in a return to communism in
developing countries.
C) protesters believe that free trade destroys the distinctive cultures of many countries.
D) protesters object to the loss of intellectual property (such as software programs and
movies) that results from foreign trade and investment.
Which of the following is not an advantage of starting a new business as a
proprietorship?
A) The owner has complete control over the business.
B) A proprietorship has few government rules and regulations to comply with.
C) Business profits are only taxed once, not twice.
D) A proprietorship can easily attain additional funding.
An article in the Wall Street Journal in early 2001 noted two developments in the
market for laser eye surgery. The first development concerned side effects from the
surgery, including blurred vision. The second development was that the companies
renting eye-surgery machinery to doctors had reduced their charges. In the market for
laser eye surgeries, these two developments
A) decreased demand and decreased supply, resulting in a decrease in the equilibrium
quantity and an increase in the equilibrium price of laser eye surgeries.
B) decreased demand and increased supply resulting in an increase in both the
equilibrium quantity and the equilibrium price of laser eye surgeries.
C) decreased demand and increased supply, resulting in a decrease in the equilibrium
price and an uncertain effect on the equilibrium quantity of laser eye surgeries.
D) decreased demand and increased supply, resulting in a decrease in both the
equilibrium price and the equilibrium quantity of laser eye surgeries.