Table 6.2
Refer to Table 6.2. Diminishing marginal utility sets in after the ________ donut per
day.
A) first
B) second
C) third
D) fourth
You are hired as an economic consultant to The Pampered Pet Shop. The Pampered Pet
Shop operates in a perfectly competitive industry. This firm is currently producing at a
point where market price equals its marginal cost. The market price is less than its
average variable cost. You should advise the firm to
A) cease production immediately because it is not covering its variable costs of
production.
B) lower its price so that it can sell more units of output.
C) produce in the short run to minimize its loss, but exit the industry in the long run.
D) raise its price until it breaks even.
Economic profit is
A) (PATC)q.
B) (P+ATC)q.
C) P(q–ATC).
D) Pq/ATC.
Related to the Economics in Practice on page 28: Which one of the following occurs
when an individual enters the paid work force?
A) The opportunity cost of time for housework increases, because time spent on
housework could be spent on money-earning activities.
B) The opportunity cost of time for housework increases, because money earned at a
job can allow individuals to pay someone to do household chores that the individuals
used to do themselves.
C) The opportunity cost of time for housework decreases, because increased earning
power makes individuals less likely to do their own housework.
D) The opportunity cost of time for housework decreases, because as more people enter
the work force, businesses have greater incentives to develop innovations that make
housework more efficient.
The measure of a firm’s ________ is the current market value of its plant, equipment,
inventories, and intangible assets.
A) investment
B) depreciation
C) capital stock
D) capital flow
Figure 7.9
Refer to Figure 7.9. The slope of isocost AB is
A) greater than the slope of isocost CD.
B) less than the slope of isocost CD.
C) equal to the slope of isocost CD.
D) indeterminate from this information, as the prices of capital and labor are not given.
If the price floor is set below the equilibrium price,
A) quantity demanded will be less than quantity supplied.
B) there will be a surplus.
C) there will be a shortage.
D) the floor will be ineffective.
The marginal cost of producing 40 units of a public good is $200. There are two
individuals in the society. Person A is willing to pay $80 for 40 units of the public good.
If 40 units of the public good are provided, how much must Person B be willing to pay?
A) $0
B) $80
C) $120
D) $150
If the price of the product produced by labor decreases, the marginal revenue product of
labor curve will
A) be unaffected because productivity of labor has not changed.
B) shift to the left.
C) shift to the right.
D) become more inelastic.
In the year 2012, the population of the world
A) was approximately 2 billion people.
B) was approximately 4.2 billion people.
C) was over 6.9 billion people.
D) exceeded 12 billion people.
If the average variable cost curve is above the marginal cost curve, then
A) marginal costs must be decreasing.
B) marginal costs must be increasing.
C) marginal costs can be either increasing or decreasing.
D) average variable costs must be increasing.
Efficiency occurs when
A) the economy is producing what people want at least possible cost.
B) the economy has a fair and just distribution of income.
C) all markets are in equilibrium.
D) unemployment is low and prices are stable.
Which of the following statements is true?
A) Planned economies have fared very well in recent years, with many of these
economies thriving.
B) Command economies operate the most efficiently because the government makes all
the production decisions.
C) In command economies, consumers still exercise choice.
D) In a command economy, consumers answer the questions of what to produce, how to
produce it, and how to distribute it.
The reason that opportunity costs arise is that
A) an economy relies on money to facilitate exchange of goods and services.
B) resources are scarce.
C) there are no alternative decisions that could be made.
D) people have limited wants.
Figure 3.14
Refer to Figure 3.14. An increase in quantity supplied is represented by a movement
from
A) S2 to S3.
B) S2 to S1.
C) Point B to Point A along supply curveS2.
D) Point B to Point C along supply curve S2.
A perfectly price elastic demand curve will be a ________ line.
A) horizontal
B) vertical
C) positively sloped
D) negatively sloped
Upon graduating with an accounting degree, you open your own accounting firm of
which you are the sole employee. To start the firm you passed on a job offer with a
large accounting firm that offered you a salary of $60,000 annually. Last year you
earned a total revenue of $100,000. Rent and supplies last year were $50,000.
Your annual operating profit is
A) -$10,000.
B) $40,000.
C) $50,000.
D) $100,000.
Figure 16.2
Refer to Figure 16.2. The ________ imposed as a result of producing automobiles is
$10.00 per car.
A) marginal social cost
B) marginal damage cost
C) total cost
D) marginal private cost
Assuming that labor is the only variable input, if society values a good ________ it
costs firms to hire the workers to produce that good, the good ________ be produced.
A) equal to what; will not
B) less than; will
C) more than; will not
D) less than; will not
________ is (are) paid regardless of a person’s income from other sources and
regardless of assets.
A) Unemployment benefits
B) The earned income tax credit
C) Medicaid
D) Supplemental Security Income
Figure 15.2
Refer to Figure 15.2. From society’s viewpoint, the ________ level of output is 50
perms.
A) minimum level
B) efficient level
C) monopoly level
D) shut down
An economist wants to understand the relationship between minimum wages and the
level of teenage unemployment. The economist collects data on the values of the
minimum wage and the levels of teenage unemployment over time. The economist
concludes that a 1% increase in minimum wage causes a 0.2% increase in teenage
unemployment. From this information he concludes that the minimum wage is harmful
to teenagers and should be reduced or eliminated to increase employment among
teenagers.
The collection and use of the data on minimum wage and teenage unemployment over
time is an example of
A) law and economics.
B) economic history.
C) econometrics.
D) empirical economics.
At the ________ level of provision for a ________ good, the government must know
everyone’s preferences.
A) optimal; private
B) unregulated; private
C) optimal; public
D) unregulated; public
Within a fully employed, centrally planned economy that provides basic housing, food,
and clothing at very affordable levels for all,
A) there is no need for unemployment insurance, welfare, or other social programs.
B) there is a real need for government social welfare programs.
C) there is a need for government to permit market-determined prices.
D) there is a need for government to permit market-determined wages.
Loretta sells Timmy a baseball with a forged autograph of Babe Ruth. Loretta knew that
the autograph was forged but told Timmy it was authentic, and even presented him with
fake documentation verifying its authenticity. Economists would call this an
A) efficient exchange, as any type of voluntary exchange promotes efficiency.
B) inefficient exchange, as at least one party used false market information.
C) efficient exchange, assuming Loretta was not intentionally trying to trick Timmy.
D) inefficient exchange because there were externalities involved.
An act of production, as economists use the term, is demonstrated by which of the
following?
A) A worker places money in a pension fund.
B) A local nonprofessional theater company performs a play.
C) An individual buys municipal bonds to avoid taxes.
D) A firm buys a pre-existing building in order to expand its operations.
Remittances sent from developed countries are estimated at approximately ________
per year.
A) $2 million
B) $50 million
C) $100 billion
D) $5 trillion
Which of the following in NOT a decision that must be made by perfectly competitive
firms?
A) how much output to supply
B) which production technology to use
C) how much of each input to demand
D) what price to charge for its output
Critics of minimum wage laws argue that such laws will end up hurting people with
lower skills because
A) lower skilled workers will be forced into taking jobs that they would not freely
choose.
B) compensating differentials will not be applied.
C) property income is a better way to measure hourly rates.
D) these laws interfere with the smooth functioning of the labor market and create
unemployment.
Public goods represent ________ because by their very nature they are nonexcludable
and nonrival, which makes it difficult for the private sector to supply them profitably.
A) a positive externality
B) a negative externality
C) a market failure
D) efficient production
The top 1% of families in the income distribution receive most of their income from
________ income.
A) labor
B) property
C) transfer
D) profit
The ________ is the share of industry output in sales or employment accounted for by
the top firms in an industry.
A) concentration ratio
B) contestability ratio
C) competitive index
D) collusive level
Figure 1.4
Refer to Figure 1.4. At Point E in panel A, the slope is
A) zero.
B) infinite.
C) negative.
D) indeterminate from this information.
Figure 7.3
Refer to Figure 7.3. The average product of the first worker is ________ yards raked.
A) 4
B) 10
C) 14
D) 27
Developing nations account for about ________ of the world’s people, and are
estimated to receive one-fourth of the world’s income.
A) one-fourth
B) one-third
C) one-half
D) three-fourths