Consider a market in which some high-quality goods are sold, but not as many as if
there was perfect information about the quality of the good. This type of market is
known as a:
A) beneficial selection.
B) thin market.
C) symmetric market.
D) efficient market.
Joe runs a business and needs to decide how many hours to stay open. Figure 2.2
illustrates his marginal benefit of staying open for each additional hour.
Suppose that we observe Joe staying open 6 hours per day. If he is following the
marginal principle, what must his marginal cost per hour be?
A) $16
B) $24
C) $32
D) $48
Which one of the following statements is NOT true?
A) A firm that chooses to cheat on a price-fixing scheme should consider the short-term
gain in profits from cheating versus the long-term loss in profits from being punished.
B) The duopoly-pricing strategy leads to negative economic profits.
C) Cartels may break down because of the incentive to cheat.
D) Price leadership arrangements are an implicit price-fixing scheme.
The effect of income on the demand for normal goods is such that:
A) as the price of a normal good falls, people are likely to buy less of the good.
B) as the price of a good falls, people are likely to buy more of all normal goods.
C) as the price of a good falls, people are likely to buy less of all normal goods.
D) both A and C
Recall Application 1, “Don’t Forget the Costs of Time and Invested Funds,” to
answer the following questions.
According to the Application, if the interest rate rises, then the opportunity costs of
running a business:
A) rises.
B) falls.
C) is unchanged.
D) cannot be determined with the information given.
Refer to Figure 18.2. After trade and specialization begin, the maximum amount of
spears that Macadamia can consume is:
Figure 18.2
A) 40.
B) 100.
C) 120.
D) 160.
Joe runs a business and needs to decide how many hours to stay open. Figure 2.2
illustrates his marginal benefit of staying open for each additional hour.
Suppose that we observe Joe staying open 5 hours per day. If he is following the
marginal principle, what must his marginal cost per hour be?
A) $16
B) $24
C) $32
D) $40
Buyers and sellers acting in their own best interest generate outcomes that are in
society’s best interest when:
A) there are informed buyers and sellers.
B) there is perfect competition.
C) there are no external costs.
D) all of the above.
If Coca Cola Company uses heat sensors and microchips to automatically change prices
of its products. Which of the following economically describes Coca Cola’s goal to
charge higher prices for a can of Coke on a hot day?
A) price discrimination
B) rent-seeking
C) deadweight loss
D) internalizing an externality
An individual or country that has a comparative advantage in the production of one
good:
A) must have an absolute advantage in the good’s production.
B) must not have an absolute advantage in the good’s production.
C) may or may not have an absolute advantage in the good’s production.
D) must not have an absolute advantage in the production of the other good.
Figure 4.2 illustrates the supply and demand for t-shirts. If the actual price of t-shirts is
$15, there is an:
A) excess demand of 8 t-shirts.
B) excess supply of 8 t-shirts.
C) excess demand of 10 t-shirts.
D) excess supply of 10 t-shirts.
Which of the following is an example of a market failure caused by the existence of a
public good?
A) A levee is not built because no one wants to pay for it, even though everyone agrees
that it is important.
B) We send a chimpanzee to space. You think it would be better if we send a lemur.
C) We spend $300 billion for national defense. You think it is too much.
D) McDonald’s is your favorite restaurant. Other people think the food they serve is
unappealing.
Suppose that in a month the price of movie rentals decreases from $3.25 to $3. At the
same time, the quantity of movie rentals demanded increases from 100 to 120. The
price elasticity of demand for movie rentals (calculated using the midpoint formula) is:
A) zero.
B) inelastic.
C) unitary elastic.
D) elastic.
Recall the Application about the decrease in taxes on cigarettes in several
Canadian provinces in 1994 to answer the following question(s).
According to this Application, after the government deceased cigarette taxes in several
Canadian provinces, demand for cigarettes ________ in these provinces, shifting the
demand curve to the ________.
A) increased; right
B) increased; left
C) decreased; right
D) decreased; left
Buyers in the market for used guitars are getting more pessimistic about the possibility
of getting a good guitar. This will cause the price of used guitars to ________ and the
percentage of good used guitars to ________.
A) increase; increase
B) increase; decrease
C) decrease; increase
D) decrease; decrease
Recall the Application about the production of coffee in China to answer the
following question(s).According to the Application, farmers in the city of Pu’er, China
currently earn more growing ________ than they do growing ________.
A) tea; coffee
B) rice; coffee
C) coffee; tea
D) rice; tea
If incomes increase and Honda Civics are considered normal goods, then:
A) the demand for Honda Civics will increase.
B) the quantity demanded for Honda Civics will increase.
C) the demand for Honda Civics will decrease.
D) the quantity demanded for Honda Civics will decrease.
No barriers to entry in a market implies that, in the long run, economic profit will be:
A) above average.
B) zero.
C) equal to accounting profit.
D) none of the above.
Other things being equal, if the average fixed cost curve shifts upward at all output
levels:
A) the marginal cost curve shifts upward at all output levels.
B) the average variable cost curve shifts upward at all output levels.
C) the average total cost curve remains unchanged at all output levels.
D) the vertical distance between the average total cost curve and the average variable
cost curve increases at all output levels.
Specialization and exchange result from differences in productivity that lead to:
A) opportunity cost.
B) comparative advantage.
C) absolute advantage.
D) self-sufficiency.
Which of the following are most likely to be considered substitutes to pizzas?
A) hamburgers
B) cheese
C) pepperoni
D) soda
When the government converted the highway from 4 lanes into 6 lanes, they claimed
the capacity had increased by 50 percent. When the government switched the highway
back from 6 lanes to 4 lanes, they claimed the capacity had been decreased by 33
percent. Had the government used the midpoint method, the percentage increase would
have been ________ percent and the percentage decrease would have been ________
percent.
A) 33; 50
B) 33; 33
C) 40; 40
D) 50; 50
Refer to Figure 7.1. The ________ movie rental has a marginal utility of zero.
A) first
B) second
C) third
D) fourth
Figure 18.4
Refer to Figure 18.4. With an import ban, how many artichokes are produced
domestically in Duckland?
A) 85
B) 75
C) 65
D) 30
Figure 10.6 shows prices, demands, and cost data for the only restaurant in a small
town. Which group’s demand for meals is more price-elastic?
A) the senior customers
B) the non-senior customers
C) the two groups are equally sensitive to a change in price
D) There is not sufficient information.
Marginal revenue is:
A) the ratio of total revenue to quantity.
B) the difference between total revenue and total costs.
C) the added revenue that a firm takes in from selling an additional unit of output.
D) the additional profit the firm earns when it sells an additional unit of output.
A graphical tool that provides a visual representation of the consequences of alternative
strategies is a:
A) game tree.
B) network.
C) strategy set.
D) decision node.
Consider two individuals, Jesse and April, who hand paint kites and snowboards. Table
3.2 shows how much of each good Jesse and April can paint in one hour.
Table 3.2
Which of the following is true?
A) April has a comparative advantage in painting kites but not snowboards.
B) April has a comparative advantage in painting snowboards but not kites.
C) April has a comparative advantage in painting both goods.
D) April does not have a comparative advantage in painting either good.
Which of the following is NOT a viewpoint of the self-interest theory of government?
A) Politicians and bureaucrats pursue their own interests rather than public interests.
B) Politicians may have an incentive to gain renown by pursuing a public program the
cost of which exceeds its benefits.
C) Limitations on taxes and spending are considered as safeguards against the selfish
behavior of government officials.
D) Government officials are assumed to align their interests with public interests.
Figure 18.1
Refer to Figure 18.1. After trade and specialization begin, the maximum amount of
umbrellas that Duckland can consume is:
A) 90.
B) 100.
C) 150.
D) 120.
Suppose that the price of fertilizer, an input in the production of corn, falls. We would
predict that the equilibrium quantity of corn will ________ and the equilibrium price of
corn will ________.
A) rise; rise
B) rise; fall
C) fall; rise
D) fall; fall
If average variable cost decreases as output increases, then:
A) marginal cost is negative.
B) marginal cost is decreasing.
C) marginal cost is less than average variable cost.
D) marginal cost is greater than average variable cost.
One of the most obvious clues to the relative scarcity of a product in a market economy
is:
A) the variations in available sizes.
B) its current market price.
C) the limited selection of colors.
D) none of the above.
Average variable costs are minimized when:
A) marginal costs begin to increase.
B) marginal costs begin to decrease.
C) marginal cost is greater than average total cost.
D) marginal cost equals average variable cost.