If the market for a product is broadly defined, then
A) the good has many complements.
B) there are few substitutes for the product and the demand for the product is relatively
inelastic.
C) there are many substitutes for the product and the demand for the product is
relatively elastic.
D) the expenditure on the good is likely to make up a large share of one’s budget.
If an airport decides to expand by building an additional passenger terminal, and in
doing so it lowers its average cost per airplane landing, then the expansion would
provide ________ to the airlines.
A) economies of scale
B) diseconomies of scale
C) higher average costs but lower total costs
D) higher marginal costs but lower total costs
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. If the actual terms of trade are 1 hat for 1.8 clocks and 150 hats are
traded, how many clocks will Denmark consume?
A) 270
B) 900
C) 930
D) 1,200
The quantity of tickets demanded to the Super Bowl is always greater than the than the
quantity supplied. Which of the following in the best explanation why the National
Football League does not raise the price of tickets to the level where the quantity
demanded equals the quantity supplied?
A) Raising the price would reduce the demand for tickets; there would then be a surplus
and the game would not sell out.
B) The cost of raising the price and printing new tickets would exceed the revenue the
NFL would receive from higher ticket prices.
C) The demand for Super Bowl tickets is elastic; raising the price would reduce total
revenue.
D) The NFL is concerned that raising ticket prices would be considered unfair.
A firm will break even when
A) P = ATC.
B) P > ATC.
C) P < AVC.
D) P = AVC.
Figure 18-1
Refer to Figure 18-1. Area B+C+F+G represents
A) the portion of sales tax revenue borne by consumers.
B) the portion of sales tax revenue borne by producers.
C) the excess burden of the sales tax.
D) sales tax revenue collected by the government.
Consider an industry that is made up of nine firms each with a market share (percent of
sales) as follows:
a. Firm A: 30%
b. Firm B: 20%
c. Firms C, D, and E: 10% each
d. Firms F, G, H, and J: 5% each
What is the value of the four-firm concentration ratio and how is the industry
categorized?
A) 50%; monopolistic competition
B) 70%; oligopoly
C) 75%; oligopoly
D) 80%; strongly oligopolistic
Red Stone Creamery currently hires 5 workers. When it added a 6th worker, its output
actually fell. Which of the following statements is true?
A) The marginal product of the sixth worker must be negative.
B) The average product of the sixth worker is negative.
C) The sixth worker is not as skilled as the fifth worker.
D) The total product becomes negative.
An isocost line shows
A) all the possible combinations of two inputs that a firm can use to produce its output.
B) all the possible combinations of two inputs a firm can use that have the same total
cost.
C) all the possible combinations of two inputs a firm can use that have the same
marginal cost.
D) all the possible combinations of two inputs with constant returns to scale.
If a consumer receives 20 units of utility from consuming two candy bars, and 25 units
of utility from consuming three candy bars, the marginal utility of the second candy bar
is
A) 25 utility units.
B) 20 utility units.
C) 5 utility units.
D) unknown as more information is needed to determine the answer.
Whenever a buyer and a seller agree to trade,
A) the agreement is made based on absolute advantage.
B) they must have identical opportunity costs in producing their respective products.
C) one party will always be worse off.
D) both must believe they will be made better off.
Figure 5-6
Figure 5-6 shows the market for measles vaccinations, a product whose use generates
positive externalities.
Refer to Figure 5-6. What is the market equilibrium output level?
A) Q1
B) Q2
C) Q1 + Q2
D) Q2 – Q1
If a firm faces a downward-sloping demand curve
A) the demand for its product must be inelastic.
B) it can control both price and quantity sold.
C) it must reduce its price to sell more units.
D) it will always make a profit.
Suppose the per-unit production cost of a book is $4.00 and the retail price is $32. If the
book publisher sells books to a bookstore at a 40 percent discount, what is the amount
of the publisher’s markup per book? Assume that bookstores sell books at the retail
price.
A) $12.80
B) $15.20
C) $19.20
D) $21.60
If the painting firms in a city sign a contract outlining a pricing plan, they are involved
in
A) price competition.
B) a legal form of business contract in the United States.
C) collusion.
D) price regulation.
Figure 3-4
Refer to Figure 3-4. At a price of $15, how many units will be sold?
A) 300
B) 400
C) 600
D) 700
In June, buyers of titanium expect that the price of titanium will fall in July. What
happens in the titanium market in June, holding everything else constant?
A) The demand curve shifts to the right.
B) The quantity demanded increases.
C) The quantity demanded decreases.
D) The demand curve shifts to the left.
The Coffee Nook, a small cafe near campus, sells cappuccinos for $2.50 and Russian
tea cakes for $1.00 each. What is the opportunity cost of buying a Russian tea cake?
A) 2 1/2 cappuccinos
B) 2/5 of a cappuccino
C) $2.50
D) $1.00
Table 2-6
Table 2-6 shows the output per week of two jewelers, Serena and Haley. They can either
devote their time to making bracelets or making necklaces.
Refer to Table 2-6. What is Haley’s opportunity cost of making a bracelet?
A) 3/4 of a bracelet
B) 3 bracelets
C) 1 1/3 necklaces
D) 2 necklaces
Max Shreck, an accountant, quit his $80,000-a-year job and bought an existing tattoo
parlor from its previous owner, Sylvia Sidney. The lease has five years remaining and
requires a monthly payment of $4,000. The lease
A) is a fixed cost of operating the tattoo parlor.
B) is a variable cost of operating the tattoo parlor.
C) is an implicit cost of operating the tattoo parlor.
D) is part of the marginal cost of operating the tattoo parlor.
Allison’s Auto Art is a company that applies pinstripes to vehicles. Allison’s cost for a
basic 1-color pinstriping job is $35, and she charges $95 for this service. For a total
price of $175, Allison will apply a fancier 3-color pinstripe application to an
automobile, a service that adds an additional $40 to the total cost of the package. What
is Allison’s marginal benefit if she sells a basic 1-color job?
A) $35
B) $60
C) $95
D) The marginal benefit cannot be determined.
Figure 13-3
Refer to Figure 13-3. The marginal revenue from one additional unit sold is the sum of
the gain in revenue from selling the additional unit and the loss in revenue from having
to charge a lower price to sell the additional unit. Based on the diagram in the figure,
A) X represents the gain (price effect) and Y the loss (output effect).
B) X + Z represents the loss (output effect) and Y the gain (price effect).
C) Y represents the gain (output effect) and X the loss (price effect).
D) X represents the loss (price effect) and Y + Z the gain (output effect).
Figure 2-4
Figure 2-4 shows various points on three different production possibilities frontiers for
a nation.
Refer to Figure 2-4. Consider the following events:
a. a reduction in the patent protection period to no more than 2 years
b. a war that destroys a substantial portion of a nation’s capital stock
c. the lack of a secure and enforceable property rights system
Which of the events listed above could cause a movement from W to V?
A) a only
B) a and b only
C) a and c only
D) b and c only
E) a, b, and c
If total revenue exceeds fixed cost, a firm
A) should produce in the short run.
B) has covered its variable cost.
C) is making short-run profits.
D) may or may not produce in the short run, depending on whether total revenue covers
variable cost.
The “Buy American” provision in the 2009 stimulus package required that stimulus
money be spent only on U.S.-made goods, effectively acting as a quota of zero imports
when stimulus money was being spent. In the U.S. steel market, the “Buy American”
provision in the 2009 stimulus package would
A) convert some consumer surplus to deadweight loss.
B) transfer some deadweight loss to producer surplus.
C) transfer some producer surplus to consumer surplus.
D) reduce the producer surplus received by foreign manufacturers.
Once a country has lost its comparative advantage in producing a good, its income will
be ________ and its economy will be ________ if it switches from producing the good
to importing it.
A) higher; less efficient
B) higher; more efficient
C) lower; less efficient
D) lower; more efficient
Figure 12-9
Figure 12-9 shows cost and demand curves facing a profit-maximizing, perfectly
competitive firm.
Refer to Figure 12-9. At price P2, the firm would
A) lose an amount equal to its fixed cost.
B) lose an amount more than fixed cost.
C) lose an amount less than fixed cost.
D) break even.
Which of the following generates productive efficiency?
A) competition among sellers
B) competition among buyers
C) government inspectors
D) government production rules and regulations
Consider the following pairs of items:
a. shampoo and conditioner
b. iPhones and earbuds
c. a laptop computer and a desktop computer
d. beef and pork
e. air-travel and weed killer
Which of the pairs listed will have cross-price elasticity of zero?
A) a and b only
B) c only since most people cannot do without computers
C) e only
D) none of the pairs listed
Table 15-1
A monopoly producer of foreign language translation software faces a demand and cost
structure as given in Table 15-1.
Refer to Table 15-1. What is the marginal revenue from the sale of the 12th unit?
A) $75
B) $50
C) $20
D) -$5
What is the incentive for a firm to join a cartel?
A) to be able to earn profits in the long run but not in the short run
B) to be able to earn larger profits than if it was not part of the cartel
C) to completely insulate itself from competition
D) to produce a larger amount of output than if it was not part of the cartel
Larry and Mike are equally skilled construction workers employed by the Brown and
Root Company. Larry’s job is riskier because he typically works on a scaffold 1,000 feet
above ground. Larry’s higher wage rate is the result of
A) economic discrimination.
B) a compensating differential.
C) a negative feedback loop.
D) a higher marginal revenue product.
If, for the last bushel of apples produced and sold by an apple farm marginal revenue
exceeds marginal cost, then in producing that bushel the farm
A) added more to total cost than it added to total revenue.
B) added an equal amount to both total revenue and total cost.
C) added more to total revenue than it added to total cost.
D) maximized its profits or minimized its losses.
Consumers have to make tradeoffs in deciding what to consume because
A) not all goods give them the same amount of satisfaction.
B) the prices of goods vary.
C) they are limited by a budget constraint.
D) there are not enough of all goods produced.