1) A company has two locations where it employs workers doing the same job and
working the same hours. Other things the same most workers would prefer to live in
location A, but location A has a higher cost of living than location B.
a.The company likely needs to pay workers in location A more.
b.The company likely needs to pay workers in location B more.
c.It’s not clear if the company would need to pay more to workers in location A or
location B.
d.The company must pay workers the same amount.
2) Figure 18-1
On the graph, L represents the quantity of labor and Q represents the quantity of output
per week.
Refer to Figure 18-1. Based on the shape of the curve, the
(i)total product is increasing.
(ii)total product is decreasing.
(iii)marginal product is increasing.
(iv)marginal product is decreasing.
a.(i) only
b.(i) and (iii) only
c.(i) and (iv) only
d.(ii) and (iv) only
3) According to the superstar phenomenon, the most talented person in the following
occupations is likely to earn extremely high wages except
a.an author.
b.an auto mechanic.
c.a singer.
d.an advice columnist.
4) On hot summer days, electricity-generating capacity is sometimes stretched to the
limit. At these times, electric companies may ask people to voluntarily cut back on their
use of electricity. An economist would suggest that
a.every electric customer has an incentive to prevent the system from overloading, so
this voluntary approach is the most efficient.
b.it would be more efficient if the electric company raised its rates for electricity at peak
times.
c.it would be more efficient to have a lottery to decide who had to cut back their use of
electricity at peak times.
d.it would be more efficient to force everyone to cut their usage of electricity by the
same amount.
5) A market structure with barriers to entry is
a.a monopoly.
b.oligopolistically competitive.
c.monopolistically competitive.
d.perfectly competitive.
6) The slope of a line passing through the points (15, 3) and (10, 6) is
a.-3/5.
b.3/5.
c.-5/3.
d.5/3.
7) Stock dividends and interest payments are examples of factors of production.
a.True
b.False
8) Diseconomies of scale occur when
a.average fixed costs are falling.
b.average fixed costs are constant.
c.long-run average total costs rise as output increases.
d.long-run average total costs fall as output increases.
9) When a monopolistically competitive firm is in long-run equilibrium,
a.price is equal to average total cost.
b.price is equal to marginal cost.
c.price is equal to marginal revenue.
d.the firm operates at its efficient scale.
10) When the loss from a business-stealing externality exceeds the gain from a
product-variety externality,
a.firms are more likely to operate at efficient scale.
b.there are likely to be too many firms in a monopolistically competitive market.
c.market efficiency is likely to be enhanced by the entry of new firms.
d.all firms are earning zero economic profit.
11) If the consumer’s income and all prices simultaneously double, then the optimum
consumption bundle will
a.shift outward relative to the original optimum.
b.move leftward along the original budget constraint.
c.not change.
d.shift inward relative to the original optimum.