The price elasticity of a good will tend to be larger:
A) the longer the relevant time.
B) the fewer number of substitute goods available.
C) if it is a staple.
D) if it is relatively inexpensive.
The price of popcorn is $0.50 per box and the price of peanuts is $0.25 per bag. You
have $10 to spend on both goods. The maximum number of boxes of popcorn that you
can purchase is:
A) 5.
B) 10.
C) 20.
D) 40.
Figure: The Demand for Shirts
(Figure: The Demand for Shirts) Look at the figure The Demand for Shirts. The price
elasticity of demand for the segment AB, by the midpoint method, is:
A) 13.
B) 11.
C) 0.91.
D) 0.1.
The World Trade Organization:
A) assists importers and exporters in conducting their trade.
B) works together with United Nations forces to enforce international decisions.
C) organizes the negotiations involved in trade agreements and resolves disputes among
members.
D) promotes trade by organizing educational conferences.
In the market for canned pinto beans, _____ will increase if income increases and if
pinto beans are a(n) _____ good.
A) demand; inferior
B) demand; normal
C) supply; inferior
D) supply; normal
Figure: Producer Surplus
(Figure: Producer Surplus) Look at the figure Producer Surplus. Total producer surplus
is _____ when the price is $40.
A) $40
B) $60
C) $80
D) $85
Table: Price Elasticity
(Table: Price Elasticity) Look at the table Price Elasticity. What is the price elasticity of
demand between $0.75 and $0.50?
A) 0.25
B) 0.33
C) 0.43
D) 0.52
Figure: Profits in Monopolistic Competition
(Figure: Profits in Monopolistic Competition) In panel (B) of the figure Profits in
Monopolistic Competition, the profit-maximizing quantity of output is determined by
the intersection at point:
A) J.
B) K.
C) L.
D) M.
Figure: The Market for Computers
(Figure: The Market for Computers) Look at the figure The Market for Computers.
Assume that PA is the autarky price and PW is the world price. Producer surplus without
international trade would be area:
A) X + Y + Z.
B) W + X + Y.
C) X + Y.
D) Y.
In the circular-flow diagram, the product market is where:
A) firms buy goods and services.
B) firms buy resources used to produce goods and services.
C) households buy goods and services.
D) households buy resources used to produce goods and services.
(Table: The Utility of Macaroni and Cheese) Look at the table The Utility of Macaroni
and Cheese. Carmen loves macaroni and cheese for Thanksgiving. The marginal utility
she derives from the sixth serving she eats is:
A) “25.
B) 0.
C) 25.
D) “15.
(Table: Costs of Birthday Cakes) Look at the table Costs of Birthday Cakes. Assume
that fixed costs are $10. What is the marginal cost of the fifth cake?
A) $2
B) $10
C) $12
D) $20
The price elasticity of demand for fresh zucchini has been estimated to be 2.25. A new
irrigation system yields a 25% increase in the nation’s crop of fresh zucchini. Which of
the following best describes how this will affect total expenditures on zucchini, all other
things equal?
A) Total expenditures will remain unchanged.
B) Total expenditures will fall.
C) Total expenditures will rise.
D) The information is insufficient to answer the question.
Figure: Harold’s Indifference Curves The figure shows three of Harold’s indifference
curves for bread and cheese.
(Figure: Harold’s Indifference Curves) Look at the figure Harold’s Indifference Curves.
The price of cheese is $2 per pound and Harold has $10 to spend on bread and cheese.
As the price of bread rises from $1 to $2 per loaf, his consumption of bread:
A) increases from 2 to 3 loaves.
B) decreases from 3 to 2 loaves.
C) increases from 3 to 4 loaves.
D) decreases from 4 to 3 loaves.
Figure and Table: The Market for Taxi Rides
(Figure and Table: The Market for Taxi Rides) Look at the figure and table The Market
for Taxi Rides. The figure represents a competitive market for taxi rides. If the
government imposes an excise tax of $2 per ride (causing the supply curve to shift
upward by that amount), then the government will collect tax revenues of _____, BUT
the tax will cause a _____ deadweight loss to society.
A) $8 million; $1 million
B) $16 million; $2 million
C) $24 million; $4.5 million
D) $48 million; $6 million
Which of the following is NOT true about the factor distribution of income?
A) It is the division of total income among labor, land, and capital.
B) Labor receives the bulk of the income in the modern U.S. economy.
C) The returns to human capital are easily measured.
D) A part of the proprietor’s income should be considered wages that the business
owners pay themselves.
_____ of insurance are often risk-averse, and _____ of insurance are interested in
reducing their exposure to risk.
A) Demanders; suppliers
B) Demanders; demanders
C) Suppliers; demanders
D) Suppliers; suppliers
Moral hazard occurs when individuals:
A) do not do what is in their own best interest.
B) know more about acceptable business behavior than other people do.
C) have an incentive to violate their morals.
D) know more about their actions than other people do.
Figure: Joanna’s Time Allocation Budget Line
(Figure: Joanna’s Time Allocation Budget Line) The figure Joanna’s Time Allocation
Budget Line depicts what happens when she can choose how to spend 40 hours. What is
Joanna’s wage rate?
A) $10.00
B) $12.50
C) $40.00
D) $15.00
Temporary Assistance for Needy Families is a means-tested program that:
A) offers assistance to anyone who is defined as below the poverty threshold.
B) provides limited assistance to poor households with children.
C) is essentially an in-kind benefit.
D) is the same thing as Medicaid.
Figure: Water Works
(Figure: Water Works) Look at the figure Water Works, which describes a small town’s
water works, a natural monopoly. If the water works is unregulated and maximizes
profit, how many customers will it serve?
A) 200
B) 300
C) 375
D) 400
Wendy has a monopoly in the retailing of motor homes. She can sell five per week at
$21,000 each. If she wants to sell six, she can only charge $20,000 each. The price
effect of selling the sixth motor home is:
A) $20,000.
B) “$15,000.
C) “$5,000.
D) $25,000.
If an economy produces the desired mix of goods from its available resources, then this
mix of goods is:
A) allocatively efficient.
B) both productively and allocatively efficient.
C) productively efficient.
D) neither productively nor allocatively efficient.
If marginal cost is equal to average total cost:
A) average total cost is increasing.
B) average total cost is at its maximum.
C) average total cost is at its minimum.
D) marginal cost is decreasing.
When the government imposes an excise tax in a market with a downward-sloping
demand curve and an upward-sloping supply curve:
A) consumer surplus falls.
B) producer surplus falls.
C) a deadweight loss occurs.
D) consumer surplus falls, producer surplus falls, and a deadweight loss occurs.
Figure: Consumer Surplus II
(Figure: Consumer Surplus II) Look at the figure Consumer Surplus II. If the price of
the good increases from $3 to $4, consumer surplus will decrease by:
A) $5.
B) $10.
C) $15.
D) $20.
The problem of determining what goods and services society should produce:
A) exists because we can produce more than we need or want.
B) exists because there are not enough resources to provide all of the goods and
services that people want.
C) would not exist if all goods and services were scarce.
D) would not exist if government owned all of the resources.
(Table: Willingness to Pay for Basketball Sneakers) The table Willingness to Pay for
Basketball Sneakers shows each player’s willingness to pay for basketball sneakers.
Assume that each player wants to buy at most, one pair of sneakers. If the price of
basketball sneakers is $100, how many pairs will be purchased?
A) one
B) two
C) three
D) four