Figure: Collusion
(Figure: Collusion) Look at the figure Collusion. The price charged by the industry with
collusion is shown by:
A) W.
B) X.
C) Y.
D) Z.
Suppose the government imposes a $10 excise tax on the sale of sweaters by charging
suppliers $10 for each sweater sold. If the demand curve is downward-sloping and the
supply curve is upward-sloping:
A) the price of sweaters will increase by $10.
B) consumers of sweaters will bear the entire burden of the tax.
C) the price of sweaters will increase by less than $10.
D) the price of sweaters will decrease by $10.
Figure: Supply of Coconuts
(Figure: Supply of Coconuts) Look at the figure Supply of Coconuts. If the price of
coconuts decreased, it would be represented in the figure as a movement from:
A) A to B.
B) B to A.
C) C to A.
D) E to B.
(Table: Income and Utility for Tyler) The table Income and Utility for Tyler shows the
utility Tyler receives at various income levels, but she does not know what her income
will be next year. There is a 40% chance her income will be $20,000, a 40% chance her
income will be $30,000, and a 20% chance her income will be $40,000. What is her
expected utility in utils?
A) 3,270
B) 3,144
C) 3,420
D) 3,480
Figure: Monopolistic Competitor
(Figure: Monopolistic Competitor) If the firm shown in the figure Monopolistic
Competitor produces at its profit-maximizing level, it will produce:
A) with excess capacity, since its P is greater than MC.
B) without excess capacity, since P is greater than ATC.
C) with excess capacity, since that output level is on the downward-sloping portion of
the ATC curve.
D) without excess capacity, since that output level is on the downward-sloping portion
of the MR curve.
(Table: Production of Cabinets) Look at the table The Production of Cabinets. If each
cabinetmaker could be hired at no cost, how many workers would your firm employ?
A) two
B) six
C) seven
D) eight
Because Casey can type reports faster and more accurately than Ahmet, Casey has a(n)
_____ in typing reports.
A) comparative advantage
B) absolute advantage
C) opportunity cost
D) specialization
There is a trade-off between equity and efficiency in that policies designed to promote
equity often come at the cost of decreased efficiency.
Figure: Demand Curves
(Figure: Demand Curves) Look at the figure Demand Curves. Gala apples have many
close but not perfect substitutes and are not very expensive. Which graph best
represents the demand schedule for Gala apples?
A) A
B) B
C) C
D) D
When goods are rival in consumption and excludable, markets:
A) will not be able to produce the efficient quantity of the good.
B) will produce an efficient quantity of the good.
C) will consistently produce less than the efficient quantity of the good.
D) will find that consumers are unwilling to purchase the good.
State governments levy excise taxes on cigarettes because:
A) they want to subsidize tobacco farming.
B) they want to discourage cigarette smuggling.
C) it is an easy way to raise tax revenue while discouraging smoking.
D) they want to minimize the tax burden on consumers.
The practice of charging different prices to different customers for the same good or
service, even though the cost of supplying those customers is the same, is:
A) privatization.
B) monopolization.
C) output competition.
D) price discrimination.
Scenario: Linear Production Possibility Frontier Largetown has a linear production
possibility frontier, and it produces socks and shirts with 80 hours of labor. The table
shows the number of hours of labor necessary to produce one pair of socks or one shirt.
(Scenario: Linear Production Possibility Frontier) Look at the scenario Linear
Production Possibility Frontier. If Largetown’s labor resource decreases by 40 hours, the
opportunity cost of producing shirts:
A) increases.
B) decreases.
C) does not change.
D) may or may not change depending upon the number of pairs of socks it wishes to
produce.
According to the efficiency wage model, all of the following are correct EXCEPT that
efficiency wages:
A) reduce unemployment.
B) are a type of market failure.
C) are above the equilibrium wage.
D) may reduce worker turnover.
Hugo Chávez was the president of Venezuela. Venezuela is a major producer of oil
products, which remain the keystone of Venezuela’s economy. Suppose President
Chávez wanted to increase his popularity with the citizens of Venezuela and enacted a
government policy to reduce the price of gasoline sold at state-owned gas stations to 50
percent of the previous price. This policy is called a:
A) laissez faire policy.
B) price floor.
C) price ceiling.
D) quota.
When milk prices increased in 2008, one milk consumer stated that the reason he cut
down on milk consumption was so that he could drive his car. This action represents a:
A) movement along the demand curve for milk.
B) movement along the supply curve for milk.
C) shift of the demand curve for milk.
D) shift of the supply curve for milk.
The market for soybeans is initially in equilibrium. Because of mad cow disease,
producers decide to replace bone meal with soybeans in cattle feed. The likely effect is
that:
A) the equilibrium price and quantity of soybeans will rise.
B) the equilibrium price and quantity of soybeans will fall.
C) the equilibrium quantity of soybeans will rise, but we can’t determine what will
happen to the equilibrium price.
D) the equilibrium price of soybeans will rise, but we can’t determine what will happen
to the equilibrium quantity.
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.
If the price of bread is $1 per loaf, the price of cheese is $2 per pound, and Harold has
$14 to spend on bread and cheese, Harold’s optimal consumption bundle is _____
loaves of bread and _____ pounds of cheese.
A) 6; 4
B) 4; 3
C) 3; 2
D) 2; 8
It is certain that the equilibrium quantity will rise when:
A) the supply curve and the demand curve both shift to the right.
B) the supply curve shifts to the right and the demand curve shifts to the left.
C) supply and demand both shift to the left.
D) supply shifts to the left and demand stays the same.
If the economy booms and peoples’ incomes rise, then the demand curve for a normal
good like new houses will _____ and the equilibrium quantity of new houses produced
will _____.
A) shift to the right; increase
B) not shift; not change
C) not shift; increase
D) shift to the left; decrease
Figure: The Demand for Notebook Computers
(Figure: Demand for Notebook Computers) Look at the figure The Demand for
Notebook Computers. The change in total revenue resulting from a change in price
from P to T suggests that demand is:
A) inelastic.
B) price-elastic.
C) price-inelastic.
D) price unit-elastic.
The purpose of antitrust policy is to:
A) limit pollution.
B) provide access to affordable health care for uninsured Americans.
C) prevent the exercise of monopoly power.
D) control inflation and interest rates.
The marginal social benefit received from pollution is less than its marginal social cost
in the market for highly polished glass. In this situation:
A) firms in the market produce the socially optimal level of pollution.
B) society’s well-being cannot be improved by changing the quantity of pollution.
C) firms in the market produce too much pollution.
D) firms in the market produce too little pollution.
If drivers decide to make phone calls without considering the costs imposed on others,
the:
A) number of phone calls made while driving will be more than the socially optimal
quantity.
B) number of phone calls made while driving will be fewer than the socially optimal
quantity.
C) marginal social cost curve will lie below the marginal cost of production curve.
D) marginal social benefit curve will lie below the marginal social cost curve.
Many furniture stores run “going out of business” sales but never go out of business.
For the shut-down decision to be the appropriate one, the price of furniture must be
_____ than the _____ average variable cost.
A) higher; maximum
B) lower; minimum
C) higher; minimum
D) lower; maximum
(Table: Total Cost and Total Individual Benefit) Look at the table Total Cost and Total
Individual Benefit. If there are 1,000 residents and they all have the same total
individual benefit, as shown in the table, what is the total social benefit of three animal
control officers?
A) $10
B) $9,000
C) $10,000
D) $90,000
Insurance companies deal with the problems of moral hazard by:
A) always insuring buildings for their full replacement value.
B) refusing to insure commercial properties against losses caused by fire.
C) requiring a deductible to provide an incentive for insured individuals to take
reasonable precautions to avoid losses.
D) charging extra in cases of adverse selection.
(Figure: Strawberries and Submarines II) Look at the figure Strawberries and
Submarines II. The downward slope of the production possibility frontier implies that
resources:
A) must be used efficiently.
B) are scarce.
C) should not be wasted.
D) should be allocated so that approximately equal amounts of both goods are
produced.
Scenario: E-Books and Sports Tickets
Phillip has an income of $300 per month, which he uses to purchase two goods, e-books
and sports tickets. Each e-book costs $10, and each ticket costs $15.
(Scenario: E-Books and Sports Tickets) Read the scenario E-Books and Sports Tickets.
Suppose Phillip discovers that if he spends all of his money on sports tickets, he can
buy more sports tickets than he could previously because something changed. This is a
result of a(n) _____ in the price of _____.
A) increase; tickets
B) decrease; tickets
C) increase; e-books
D) decrease; e-books