Werner & Sons is a manufacturer of three-ring binders operating in a perfectly
competitive industry. Table 12-5 shows the firm’s cost schedule. Table 12-5
Use the table to answer the following questions.
a. Complete Table 12-5 by filling in the blank cells.
b. Werner is selling in a perfectly competitive market at a price of $40. What is the
profit maximizing or loss-minimizing output?
c. Calculate the firm’s profit or loss.
d. Should the firm continue to produce in the short run? Explain.
e. If the firm’s fixed costs were $30 higher what would be the profit-maximizing output
level in the short run? Indicate whether the output level will increase, decrease or
remain unchanged compared to your answer in b.
f. Suppose fixed cost remains at $76. If the price of three-ring binders falls to $20 what
is the profit-maximizing or loss-minimizing output?
g. Calculate the profit or loss. Should the firm continue to produce in the short run?
Explain your answer.
h. Suppose the fixed cost remains at $76. What price corresponds to the shut-down
point?
i. Suppose the fixed cost remains at $76. What price corresponds to the break-even
point?
The ________ the reserve ratio, the ________ the money multiplier.
A) smaller; smaller
B) smaller; larger
C) larger; larger
D) None of the above are correct.
If the Fed decided to reverse its policy actions implemented during the heart of the
recession, the Fed would be acting to try to prevent
A) a decrease in unemployment.
B) an increase in unemployment.
C) an increase in deflation.
D) an increase in inflation.
If the marginal tax rate is less than the average tax rate as taxable income increases, the
tax structure is
A) regressive.
B) proportional.
C) progressive.
D) unfair.
Figure 11-18
A curve that connects points a, d and e is called
A) an input-output curve.
B) a total cost line.
C) an expansion path.
D) an indifference line.
An ________ is represented by a rightward shift of the demand curve while an
________ is represented by a movement along a given demand curve.
A) increase in demand; decrease in demand
B) increase in demand; increase in quantity demanded
C) decrease in demand; decrease in quantity demanded
D) increase in quantity demanded; increase in demand
A ________ demand curve for shampoo would be caused by a change in the price of
shampoo.
A) rightward shift of the
B) leftward shift of the
C) movement along the
D) positively sloped
Table 9-1
Linda and Sandy own The Preppy Puppy, a dog grooming business. Table 9-1 lists the
number of dogs Linda and Sandy can each bathe and groom in one week. Select the
statement that accurately interprets the data in the table.
A) Sandy has a greater opportunity cost than Linda for dog grooming.
B) Sandy’s opportunity cost for dog grooming is less than Linda’s.
C) Linda has a greater opportunity cost than Sandy for dog bathing.
D) Sandy’s opportunity cost for dog grooming and dog bathing are both greater than
Linda’s.
What factors are not important in determining exchange rate fluctuations in the long
run?
A) relative price levels across countries
B) relative rates of productivity growth across countries
C) preferences for domestic and foreign goods across countries
D) speculating in currency markets
On average, jobs at small firms pay ________ wages than jobs at large firms and are
________ likely to offer fringe benefits such as health insurance and retirement
accounts.
A) higher; more
B) lower; more
C) higher; less
D) lower; less
Figure 26-2
In the figure above, the movement from point A to point B in the money market would
be caused by
A) an increase in the price level.
B) a decrease in real GDP.
C) an open market sale of Treasury securities by the Federal Reserve.
D) a decrease in the required reserve ratio by the Federal Reserve.
Many colleges and universities practice yield management. As a result, they offer
different financial aid packages to different students. One result of yield management is
that colleges often
A) offer a less generous financial aid package to students who apply for an early
admission decision.
B) offer a more generous financial aid package to students who apply for an early
admission decision.
C) offer a less generous financial aid package to students with relatively high family
incomes.
D) offer a less generous financial aid package to students who don’t participate in many
extracurricular activities when they are in high school.
If you spend more of your income on consumption goods, which of the following will
occur?
A) The production of investment goods will fall.
B) Economic growth will be stimulated.
C) Investments in education will rise.
D) For every dollar you spend on consumption, real GDP will fall by a dollar.
An increase in taxes will ________ consumption spending, and a decrease in transfer
payments will ________ consumption spending.
A) increase; increase
B) decrease; increase
C) increase; decrease
D) decrease; decrease
In the United States, doctors and hospitals that provide most health care are
A) primarily private firms.
B) primarily employed by the government.
C) split evenly between private firms and employed by the government.
D) 100 percent employed by the government.
When there is an externality in a market
A) the externality will move the market to an economically efficient equilibrium.
B) the externality will cause the market price to be less than or greater than the
equilibrium price.
C) the government should use price controls to enable the market to reach equilibrium.
D) government intervention may increase economic efficiency.
Which of the following criteria should be used to evaluate if government intervention in
a market for the purpose of environmental protection is justified?
A) Does the intervention program reduce pollution to zero using the least costly
method?
B) Is the intervention program economically efficient?
C) Does the intervention program make the amount of economic surplus as large as
possible?
D) Is the damage to the environment from government intervention as small as
possible?
The resource income earned by those who supply labor services is called
A) wages and salaries.
B) stock options.
C) profit.
D) bonus.