BHP Billiton is a Canadian company that owns mines in Canada that
A) produce nickel. After World War II, BHP Billiton began to compete with another
Canadian firm, the International Nickel Company. This competition eventually ended
International Nickel’s monopoly in this market.
B) produces bauxite, the mineral needed to produce aluminum. BHP Billiton began to
mine bauxite after World War II. This competition eventually ended the Aluminum
Company of America (ALCOA)’s monopoly in this market.
C) produces coal. Until World War II, BHP Billiton had a monopoly on coal in Canada.
D) produce diamonds.
An advantage of Microsoft windows is its compatibility with the widest range of
hardware and software. The dominance of Windows is self-reinforcing: hardware and
software manufacturers ensure that their products are compatible with Windows in
order to have access to the large number of Windows users. Which principle best
describes this scenario?
A) endowment effects
B) endorsement effects
C) economies of scale
D) network externalities
Table 15-2
The government of a small developing country has granted exclusive rights to Linden
Enterprises for the production of plastic syringes. Table 15-2 shows the cost and
demand data for this government protected monopolist.
Refer to Table 15-2. What is the amount of profit that the firm earns?
A) $34.50
B) $42
C) $47
D) $49
The horizontal-equity principle of taxation is not easy to use in practice because
A) some people engage in rent seeking to reduce their taxes below the level other
people pay.
B) people can use tax loopholes to reduce their incomes below the incomes of other
taxpayers.
C) different people receive different levels of government benefits even if their incomes
are the same.
D) it is difficult to determine whether people are in the same economic situation.
Figure 9-5
Bragabong currently both produces and imports almonds. The government of
Bragabong decides to restrict international trade in almonds by imposing a quota that
allows imports of only 10 million kilos each year. Figure 9-5 shows the estimated
demand and supply curves for almonds in Bragabong and the results of imposing the
quota.
Use Figure 9-5 to answer questions a-j .
a. If there is no quota what is the domestic price of almonds and what is the quantity of
almonds demanded by consumers?
b. If there is no quota how many kilos of almonds would domestic producers supply
and what quantity would be imported?
c. If there is no quota what is the dollar value of consumer surplus?
d. If there is no quota what is the dollar value of producer surplus received by producers
in Bragabong?
e. If there is no quota what is the revenue received by foreign producers who supply
almonds to Bragabong?
f. With a quota in place what is the price that consumers of Bragabong must now pay
and what is the quantity demanded?
g. With a quota in place what is the dollar value of consumer surplus? Are consumers
better off?
h. With a quota in place what is the dollar value of producer surplus received by
producers in Bragabong? Are domestic producers better off?
i. Calculate the revenue to foreign producers who are granted permission to sell in
Bragabong after the imposition of the quota.
j. Calculate the deadweight loss as a result of the quota.
A sequential game can be used to analyze whether a retail firm should build a large
store or a small store in a city, when the correct choice depends on whether a competing
firm will build a new store in the same city. Which of the following is used to analyze
this type of decision?
A) a decision tree
B) a decision matrix
C) a sequential matrix
D) an either-or graph
If the price of refillable butane lighters was to decrease, then
A) the demand for butane would decrease.
B) the demand for butane would increase.
C) the quantity of butane demanded would increase.
D) the quantity of butane demanded would decrease.
Let MP = marginal product, P = output price, and W = wage, then the equation that
represents the condition where a competitive firm would hire another worker is
A) P MP = W.
B) P MP < W.
C) P MP > W.
D) P W > MP.
The federal government and some state governments levy taxes on specific goods such
as gasoline, cigarettes and beer. These are known as
A) sales taxes.
B) sin taxes.
C) specific taxes.
D) excise taxes.
To affect the market outcome, a price ceiling
A) must be set below the black market price.
B) must be set below the legal price.
C) must be set below the price floor.
D) must be set below the equilibrium price.
Uninsured patients receiving treatments at hospital emergency rooms that could have
been provided less expensively at doctor’s offices account for ________ of health care
costs in the United States.
A) between 1 and 4 percent
B) approximately 25 percent
C) almost 40 percent
D) between 15 and 20 percent
What would happen in the market for laser eye surgery if insurance companies started
to cover a portion of the price of voluntary procedures?
A) Demand will increase, but this will not shift the supply curve.
B) Supply will increase, but this will not shift the demand curve.
C) Demand and supply will both increase.
D) Demand will increase and supply will decrease.
Barbara, the consummate hostess, proudly announced as she served dessert, “A port is
often the perfect end to a meal, sipped with a piece of my scrumptious chocolate cake.”
Evidently, Barbara views
A) port and chocolate cake as luxury items.
B) port and chocolate cake as necessities.
C) port and chocolate cake as complementary goods.
D) port and chocolate cake as substitutes to other desserts.
Table 4.7
Refer to Table 4-7. The equations above describe the demand and supply for Bubba’s
Fried Jellybeans. The equilibrium price and quantity for Bubba’s Fried Jellybeans are
$40 and 5 thousand units. What is the value of producer surplus?
A) $5 thousand
B) $12.5 thousand
C) $25 thousand
D) $37.5 thousand
Figure 9-1
Figure 9-1 shows the U.S. demand and supply for leather footwear.
Refer to Figure 9-1. Suppose the government allows imports of leather footwear into
the United States. The market price falls to $18. What is the value of consumer surplus?
A) $0
B) $270
C) $305
D) $320.
Which of the following is a normative economic statement?
A) The price of gasoline is too high.
B) The current high price of gasoline is the result of strong worldwide demand.
C) When the price of gasoline rises, the quantity of gasoline purchased falls.
D) When the price of gasoline rises, transportation costs rise.
Figure 2-3
Refer to Figure 2-3. Sergio Vignetto raises cattle and llamas on his land. His land is
equally suitable for raising either animal. Which of the graphs in Figure 2-3 represent
his production possibilities frontier?
A) Graph A
B) Graph B
C) Graph C
D) either Graph A or Graph C
E) either Graph B or Graph C
Lou buys an Iron Man 2 poster at a garage sale for $30 and resells it on eBay to Kyle
for $60. Which of the following statements is true?
A) The transaction has made Lou better off and Kyle worse off.
B) The transaction is economically inefficient.
C) The transaction has made Lou and Kyle better off.
D) It is not possible for Kyle to enjoy any consumer surplus from this transaction.
Table 9-6
Production and
Consumption Production
Without Trade With Trade
Denmark and Belize can produce both clocks and hats. Table 9-6 shows the production
and consumption quantities without trade, and the production numbers with trade.
Refer to Table 9-6. With trade, what is the total gain in hat production?
A) 150
B) 300
C) 400
D) 650
If the production possibilities frontier is ________, then opportunity costs are constant
as more of one good is produced.
A) bowed out
B) bowed in
C) non-linear
D) linear
A restaurant sells a large soft drink at a fixed price of $1.79. A term used by economists
to describe the money received from the sale of an additional large soft drink is
A) marginal revenue.
B) gross earnings.
C) pure profit.
D) net benefit.
The financial statement that sums up a firm’s revenues, costs, and profit over a period of
time is its
A) income statement.
B) balance sheet.
C) dividend yield statement.
D) price-earnings statement.
Figure 14-1
Assume that Lexus (L) is the first automobile company to produce a luxury class hybrid
automobile and is the only such company for the past four years. BMW is now
considering producing its own luxury hybrid automobile and Lexus must decide
whether or not to lower the price of its luxury hybrid to counter BMW’s entry into the
luxury hybrid niche.
Refer to Figure 14-1. Should Lexus lower its price in order to deter BMW’s entry into
the luxury hybrid automobile market?
A) In terms of profit earned, it makes no difference whether Lexus lowers its price or
not; in either case it will make $280 million profit if BMW enters.
B) No, it should keep the same price and work to capitalize on its brand loyalty.
C) Yes, it will drive BMW out of the market.
D) No, because BMW will enter the market regardless of Lexus’ decision about its
price.
Raising funds through financial intermediaries is called
A) direct finance.
B) corporate finance.
C) indirect finance.
D) dividend reinvestment.
Which of the following would cause an increase in the supply of peanut butter?
A) a decrease in the price of grape jelly (assuming that peanut butter and grape jelly are
complements)
B) an increase in the price of peanut butter
C) an increase the price of a product that producers sell instead of peanut butter
D) an increase in the number of firms that produce peanut butter
A tax that imposes a small excess burden relative to the tax revenue that it raises is
A) a payroll tax.
B) a sin tax.
C) an efficient tax.
D) a FICA tax.
A perfectly competitive firm produces 3,000 units of a good at a total cost of $36,000.
The price of each good is $10. Calculate the firm’s short-run profit or loss.
A) loss of $6,000
B) profit of $6,000
C) profit of $30,000
D) There is insufficient information to answer the question.
The size of a deadweight loss in a market is reduced by
A) government legislating a ceiling price.
B) government legislating a price floor.
C) market price being close to marginal cost.
D) creative destruction.
A budget constraint
A) represents the bundles of consumption that make a consumer equally happy.
B) refers to the limited amount of income available to consumers to spend on good and
services.
C) reflects the desire by consumers to increase their income.
D) shows the prices that a consumer chooses to pay for products he consumes.
Which of the following are primarily macroeconomic topics and which are primarily
microeconomic topics?
a. gasoline prices
b. unemployment
c. inflation
d. health care costs
e. air pollution
f. economic growth
Suppose that the price of a money clip increases from $0.75 to $0.90 and quantity
supplied rises from 8,000 units to 10,000 units. Use the midpoint formula to calculate
the price elasticity of supply.
A) 1.22
B) 1.0
C) 0.82
D) 0.07
An externality is
A) a benefit realized by the purchaser of a good or service.
B) a cost paid for by the producer of a good or service.
C) a benefit or cost experienced by someone who is not a producer or consumer of a
good or service.
D) anything that is external or not relevant to the production of a good or service.
Figure 6-7
Refer to Figure 6-7. Between points a and b on the demand curve, demand is
A) perfectly inelastic.
B) unit-elastic.
C) perfectly elastic.
D) elastic.