Chile has a comparative advantage over the United States in copper. Which of the
following is a source of this comparative advantage?
A) mild temperatures
B) large deposits of copper ore
C) no opportunity cost associated with copper production
D) high tariffs on copper from other nations
Figure: Production Possibilities and Circular-Flow Diagram
(Figure: Production Possibilities and Circular-Flow Diagram) Look at the figure
Production Possibilities and Circular-Flow Diagram. Assume the two figures represent
the same economy. Suppose that in the circular-flow diagram capital that used to flow
to firms producing coconuts now flows to firms producing fish. This adjustment in the
economy would be best represented in the production possibilities figure by a move
from point A toward:
A) point A (no movement).
B) point B (a decrease in coconut production and an increase in fish production).
C) point C (a decrease in coconut production).
D) point D (an outward shift of the entire curve).
Because people usually exploit opportunities to make themselves better off, which of
the following methods of reducing pollution is likely to be most effective?
A) appealing to the polluter to be a good citizen
B) publicizing the harmful effects of pollution
C) imposing a tax per unit of pollution generated
D) All three methods are equally effective.
The willingness to sacrifice some economic payoff to avoid a potential loss is:
A) irrational behavior.
B) bounded rationality.
C) the result of a concern about fairness.
D) risk aversion.
(Table: Variable Costs for Lots) Look at the table Variable Costs for Lots. During the
winter, Alexa runs a snow-clearing service in a perfectly competitive industry, which is
made up of 50 identical firms. Assume that costs are constant in each interval; that is,
the variable cost of clearing anywhere from 1 through 10 lots is $200. Her only fixed
cost is $1,000 for a snowplow. Her variable costs include fuel, her time, and hot coffee.
Which of the following is a point on the industry short-run supply curve?
A) P = $40; Q = 60
B) P = $10; Q = 10,000
C) P = $35; Q = 2,500
D) P = $25; Q = 40
Policies that limit imports, usually to insulate domestic producers from foreign
competition, are known as:
A) import-competing clauses.
B) import reduction acts.
C) trade protection.
D) competition protection.
(Table: The Market for Chocolate-Covered Peanuts) Look at the table The Market for
Chocolate-Covered Peanuts. A surplus of 210 bags of chocolate-covered peanuts exists
if the price is _____ per bag.
A) $0.90
B) $0.80
C) $0.60
D) $0.40
Figure: The Demand for Bricklayers
(Figure: The Demand for Bricklayers) Look at the figure The Demand for Bricklayers.
The equilibrium market wage for bricklayers is $100. For a profit-maximizing firm at
the equilibrium level of output, the VMPLbricklayers:
A) is $200.
B) is equal to the market wage rate.
C) is irrelevant, since the firm is a price taker.
D) cannot be determined from the information provided.
The study of a single firm and how it determines prices falls under the study of:
A) macroeconomics.
B) microeconomics.
C) economic growth.
D) fiscal policy.
(Table: Production Possibilities Schedule II) Look at the table Production Possibilities
Schedule II. If the economy is producing at Y, the opportunity cost of producing at Z is
_____ units of consumer goods per period.
A) 1
B) 6
C) 8
D) 14
If the opportunity costs of production are constant, then the production possibility
frontier is:
A) bowed out from the origin.
B) bowed in toward the origin.
C) a straight line.
D) circular.
Figure: Marginal Benefits and Marginal Costs
(Figure: Marginal Benefits and Marginal Costs) Look at the figure Marginal Benefits
and Marginal Costs. More time spent studying economics adds points to economics
scores (MB) but subtracts points from accounting scores (MC). The marginal benefit of
studying economics for four hours is _____ points, and the marginal cost is _____
points.
A) 30; 30
B) 20; 10
C) 20; 20
D) 30; 10
You decide to join the economics club, but this means you can’t join the accounting club
because it meets at the same time. This statement best represents this economic concept:
A) The real cost of something is what you must give up to get it.
B) “How much” is a decision at the margin.
C) People usually exploit opportunities to make themselves better off.
D) There are gains from trade.
The price elasticity of supply for a good is 3 if a _____ in price leads to a 3% decrease
in the quantity supplied.
A) 1% increase
B) 1% decrease
C) 9% decrease
D) 9% increase
Figure: The Demand Curve for Oil
(Figure: The Demand Curve for Oil) Look at the figure The Demand Curve for Oil. The
price elasticity of demand between $20 and $21 is _____, since the price elasticity is
_____.
A) price-elastic; less than 1.
B) price unit-elastic; equal to 1.
C) price-elastic; a negative number.
D) price-inelastic; less than 1.
An industry characterized by many firms producing similar but differentiated products
in a market with easy entry and exit is called:
A) perfectly competitive.
B) monopolistic.
C) monopolistically competitive.
D) oligopolistic.
(Table: Utility from Burgers and Milkshakes) Look at the table Utility from Burgers and
Milkshakes. David’s marginal utilities for milkshakes and burgers are given in the table.
The price of milkshakes is $2, and the price of burgers is $5. If David’s income is $22,
to maximize his utility, he buys _____ shake(s) and _____ burger(s).
A) 1; 1
B) 6; no
C) 5; 1
D) 6; 2
Figure: The Market for Lattes
(Figure: The Market for Lattes) If an excise tax of $1.50 is assessed on each latte,
government revenue will be:
A) $400.
B) $600.
C) $800.
D) $1,200.
When a perfectly competitive firm is in long-run equilibrium, the firm is producing at
_____ cost.
A) maximum average total
B) maximum average variable
C) minimum marginal
D) minimum long-run average total
If the extent to which common resources (such as fish in the sea) should be used is left
to the private market:
A) resource use will be efficient and will maximize social welfare.
B) each individual will use the resource until his or her marginal benefit is equal to the
marginal social cost.
C) the marginal social cost and each individual’s marginal private cost will be the same.
D) the marginal social cost will be greater than the marginal private cost, and the
resource will be overused.
Figure: Monopolistic Competition V
(Figure: Monopolistic Competition V) The figure Monopolistic Competition V
illustrates a firm in the _____; in the _____, the demand and marginal revenue curves
will shift to the _____.
A) short run; long run; right
B) long run; short run; left
C) short run; long run; left
D) long run; short run; right
If a firm operating in monopolistic competition is producing a quantity that generates
MC > MR, then the marginal decision rule tells us that profit:
A) can be increased by increasing production.
B) can be increased by decreasing production.
C) can be increased by decreasing the price.
D) is maximized only if MC = P.
An increase in the supply of a good is caused by:
A) input prices rising.
B) a fall in the price of the good.
C) an increase in the number of sellers.
D) expectations of future price increases.
The equilibrium value of the marginal product of a factor is the additional value
produced by the _____ unit of that factor employed in the factor market as a whole.
A) first
B) last
C) most productive
D) least productive
Joseph chooses a combination of apples and oranges along his budget line. The
marginal rate of substitution of apples for oranges is 2, the price of an apple is $0.50,
and the price of an orange is $0.10. Joseph:
A) is maximizing total utility.
B) should consume more apples and fewer oranges to maximize total utility.
C) should consume fewer apples and more oranges to maximize total utility.
D) may or may not be maximizing total utility.
The price of popcorn is $0.50 per box and the price of peanuts is $0.25 per bag. You
have $10 to spend. You decide to purchase 8 bags of peanuts. The maximum number of
boxes of popcorn that you can purchase is:
A) 4.
B) 8.
C) 10.
D) 16.
Suppose that a profit-maximizing monopoly firm undergoes a substantial technological
change that reduces its marginal and average total costs by $40. If in response to its
reduction in cost the firm changes its price in a profit-maximizing way, then we can
predict that its total output will:
A) rise.
B) fall.
C) remain unchanged.
D) It is not possible to make a determination from the information given.
Figure: The Market for Oranges in South Africa
(Figure: The Market for Oranges in South Africa) Look at the figure The Market for
Oranges in South Africa. In autarky, the price of oranges in South Africa is P1. When
the economy is opened to trade, the price falls to PW. South Africa will _____ oranges
and the volume of trade will equal _____.
A) import; CT” QT
B) export; CT” QT
C) import; Q1” QT
D) export; CT” Q1
The problem of wasteful duplication in monopolistic competition is due to:
A) excess capacity.
B) a lack of physical and human capital.
C) barriers to entry.
D) the lack of close substitutes for products produced by monopolistically competitive
firms.
(Figure: Strawberries and Submarines II) Look at the figure Strawberries and
Submarines II. Suppose the economy is operating at point B. Achieving production at
point F would require that the economy:
A) achieve full employment and an efficient allocation of resources.
B) reduce its production of strawberries.
C) reduce its production of submarines.
D) improve its technology or increase its resources.