Refer to Figure 9.6. At a market price of $20, this perfectly competitive profit
maximizing firm should produce approximately ________ units.
A) 30
B) 35
C) 40
D) 45
Refer to Figure 18.1. Mutually beneficial terms of trade between the United States and
Canada are:
Figure 18.1
A) 1 bicycle for 8 hang gliders.
B) 1 hang glider for 3 bicycles.
C) 1 hang glider for 1/4 of a bicycle.
D) 1 hang glider for 1/2 of a bicycle.
If the price of output increases, the equilibrium wage of workers who produce that
output will ________ and ________ workers will be hired.
A) increase; more
B) increase; fewer
C) decrease; more
D) decrease; fewer
Figure 4.4 illustrates the demand for guitars. Assume that guitars and guitar strings are
complements. An increase in the price of guitar strings would bring about a movement
from:
Figure 4.4
A) point B to point C.
B) point B to point A.
C) D1 to D0.
D) D1 to D2.
The Motor Carrier Act of 1980 resulted in:
A) lower freight prices.
B) more firms entering the trucking industry.
C) lower value of a trucking license.
D) All of the above are correct.
The price elasticity of demand for color printers is 1.6 and you would like to see the
quantity demanded for color printers to increase by 32%. Then the percentage change in
price should be:
A) 10%.
B) 15%.
C) 20%.
D) 25%.
Figure 12.2 shows demand, marginal revenue, and costs of a duopolist. Suppose that the
two duopolists have the same costs. If the two firms form a cartel and charge the profit
maximizing monopoly price, then compared to perfect competition each firm’s profit
will be ________ and the total output level will be ________.
A) greater; greater
B) greater; smaller
C) smaller; greater
D) smaller; smaller
Consider Figure 12.5. If both players confess, then:
A) both players spend 4 years in jail.
B) both players spend 1 year in jail.
C) player A spends 0 years in jail, and player B spends 8 years in jail.
D) player A spends 8 years in jail, and player B spends 0 years in jail.
Which of the following is NOT a characteristic of a monopolistically competitive
market?
A) There is only one firm selling a product.
B) There are many firms selling products that are similar but not identical.
C) There are many firms that have some control over price.
D) There are no artificial barriers to entry.
Refer to Figure 6.6, which shows a market for taxi medallions. If the number of taxi
licenses is reduced from to , the decrease in total surplus of the market is
represented by:
A) area FGI.
B) area GHI.
C) area FHI.
D) area BDFH – area FHI.
If two firms pollute, and the increase in costs to Firm A from decreasing pollution is
less than the decrease in costs to Firm B from increasing pollution:
A) the firms will not trade the right to pollute.
B) the firms can benefit by trading the right to pollute.
C) while both firms can benefit from trading, there is no way for them to determine an
agreeable price.
D) both firms will stop polluting.
When the price of a car is $25,000, car sales are 10,000 per month. When the price of a
car increases to $29,000, car sales fall to 8,000 per month. Using the initial-value
method, the demand for cars is:
A) elastic.
B) inelastic.
C) unit elastic.
D) It is not possible to say based on the data given.
A company earns $200,000 in profit. The total costs paid by the firm are $800,000.
Production of the goods contaminate the by river and small lakes, which reduces the
profits of the salmon fishermen by $90,000. The external cost to society of the
company’s production is ________.
A) $90,000
B) $200,000
C) $600,000
D) $110,000
If a technological advance makes it possible to produce bananas at a lower cost:
A) the demand for bananas increases.
B) the demand for bananas decreases.
C) the supply of bananas increases.
D) the supply of bananas decreases.
You observe that at your current production of lunch boxes, the average total cost of
producing lunch boxes is $5 and the marginal cost of producing lunch boxes is $2.
What should always happen if you increase lunch box production?
A) Marginal cost will rise.
B) Marginal cost will fall.
C) Average total cost will rise.
D) Average total cost will fall.
In Figure 5.4 supply is perfectly inelastic in graph:
Figure 5.4
A) A.
B) B.
C) C.
D) D.
Recall the Application about how Microsoft responds to the threat of potential
competitors to answer the following question(s).
Recall the Application. In an effort to deter entry into its key markets, Microsoft
engages in:
A) a grim-trigger strategy.
B) a tit-for-tat strategy.
C) price fixing.
D) limit pricing.
A cigarette tax imposes a relatively ________ tax burden on low-income households,
and the authors of the study suggest that the cigarette tax would be ________ for
low-income households.
A) large; beneficial
B) large; detrimental
C) small; beneficial
D) small; detrimental
Normative economics:
A) is the focus of most modern economic reasoning.
B) answers the question “What ought to be?”
C) predicts the consequences of alternative actions.
D) answers the question “What is?”
Suppose air bags are installed on all cars sold. Which of the following is likely to
occur?
A) There are fewer accidents because cars are safer.
B) People drive more carefully.
C) People drive more recklessly and there are more accidents.
D) People drive more recklessly and there are fewer accidents.
The marginal principle ________ to private goods with external benefits because
________.
A) does apply; the efficient quantity is that quantity for which the marginal social
benefit equals the marginal cost
B) does apply; the efficient quantity is that quantity for which the marginal private
benefit equals the marginal cost
C) does not apply; the efficient quantity is a quantity greater than the quantity for which
the marginal private benefit equals the marginal cost
D) does not apply; it is a principle that governs private markets with no externalities
Under which conditions might diseconomies of scale result?
A) improved coordination brought about by bureaucracy
B) decreasing costs of inputs
C) increasing output prices
D) increased bureaucracy
If incomes increase and Honda Civics are considered inferior goods, then:
A) the demand for Honda Civics will increase.
B) the quantity demanded for Honda Civics will increase.
C) the demand for Honda Civics will decrease.
D) the quantity demanded for Honda Civics will decrease.
A voluntary export restraint is a trade policy by which a nation agrees to limit its:
A) exports of a good in order to avoid more restrictive trade policies.
B) imports of a good, but only under the threat of more restrictive trade policies.
C) exports of a good in order to increase employment.
D) imports of a good.
Figure 18.5
For the good in Figure 18.5, with the tariff, the people in the country will buy:
A) Q2.
B) Q1.
C) Q4.
D) Q5.
Refer to Figure 7.1. Which of the following statements is INCORRECT?
A) Bundle F costs less than bundle D.
B) Bundle C costs as much as bundle E.
C) Bundle G costs more than bundle C.
D) Bundle B costs less than bundle C.
In which of the following ways is a monopolistically competitive firm like a perfectly
competitive firm?
A) Short-run economic profits are always positive.
B) Long-run economic profits are negative.
C) Long-run economic profits are positive.
D) Long-run economic profits are equal to zero.
Refer to Figure 12.6. If the firm represented was to decrease its price from $12 to $9:
A) other firms would match the price decrease.
B) other firms would not lower their prices.
C) the total revenue of the firm in Figure 12.9 would increase.
D) other firms would not match the price decrease.
Figure 9.3 shows the cost structure of a firm in a perfectly competitive market. If the
market price is $3 and the firm is currently producing 100 units. If the firm produces
zero unit in the short run, it will reduce its economic loss by:
Figure 9.3
A) $300.
B) $600.
C) $900.
D) $1,200.
Assume that tortilla chips and salsa are complements. When the price of tortilla chips
decreases:
A) the demand for salsa increases.
B) the demand for salsa decreases.
C) the supply of salsa decreases.
D) the demand for tortilla chips decreases.
Figure 15.2 depicts a one-mile stretch of beach with 100 swimmers distributed evenly
along the beach. There are two ice cream vendors – 1 and 2 – on the beach selling an
identical product. Assume that each swimmer buys only one ice cream cone and that
they prefer to buy ice cream from the nearer vendor. If neither vendor has an incentive
to adjust their locations:
A) vendor 1 is at B while vendor 2 is at D.
B) vendor 1 is at A while vendor 2 is at C.
C) vendor 1 is at A while vendor 2 is at D.
D) both vendors are at C.
Because pollution taxes raise production costs, the ________ curve ________.
A) supply; shifts to the right
B) supply; shifts to the left
C) supply; does not change
D) demand; shifts to the right
Recall the application about Penzoil and Quaker State, what happened to the prices of
their product when the merger occurred
A) Penzoil raised its product prices.
B) Quaker State raised its product prices.
C) Penzoil decreased its product prices.
D) Quaker decreased its product prices.
In order to practice price discrimination a firm must:
A) avoid detection by the government.
B) have some degree of market power.
C) have a homogeneous product.
D) advertise their product.