Figure 1
Refer to Figure 18.1. At Point A the distribution of goods is
A) equitable.
B) efficient.
C) equal.
D) just.
Figure 13.3
Refer to Figure 13.3. This firm’s marginal revenue will be positive at
A) prices above $5.
B) prices below $5.
C) all prices.
D) prices between $4 and $8.
Earning a doctorate in environmental economics is an example of
A) a Pareto good.
B) a compensating differential.
C) economic income.
D) an investment in human capital.
Figure 7.4
Refer to Figure 7.4. The marginal product of the fifth worker is
A) 0.
B) 5.
C) 11.
D) 55.
Figure 6.1
Refer to Figure 6.1. AC represents Tom’s budget constraint. Point E then represents a
point that is
A) an available option, as Tom is just spending all of his income.
B) available, but at which he does not spend all his income.
C) not available because it represents a combination of hamburgers and hot dogs that he
cannot purchase with his income.
D) outside his opportunity set but not on his budget constraint.
Figure 8.4
Refer to Figure 8.4. Up to point A, ________ costs are ________.
A) marginal; decreasing
B) marginal; increasing
C) average variable; decreasing
D) average variable; increasing
If a vintner has a comparative advantage in producing wine,
A) he can produce more wine using the same resources than other vintners.
B) wine is the only product he can produce.
C) he can produce wine at a lower opportunity cost than other vintners.
D) he also has an absolute advantage in producing wine.
________ extended the government’s authority to ban vertical and conglomerate
mergers.
A) The Sherman Antitrust Act of 1890
B) The Clayton Act of 1914
C) The Federal Trade Commission Act
D) The Celler-Kefauver Act of 1950
If a firm is producing where MR > MC,
A) the revenue gained by producing one more unit of output exceeds the cost incurred
by doing so.
B) the revenue gained by producing one more unit of output equals the cost incurred by
doing so.
C) the revenue gained by producing one more unit of output is less than the cost
incurred by doing so.
D) the firm is already maximizing profits because revenue is being increased by more
than costs.
You own a clothing store and pay all of your sales people a flat salary. As a result, they
don’t work very hard to generate sales. This is an example of
A) adverse selection.
B) moral hazard.
C) logrolling.
D) an externality.
If a subsidy is granted to perfectly competitive firms that provide external benefits to
society, the firm’s ________ curve will shift down and the industry ________ curve will
shift to the right.
A) marginal cost; demand
B) marginal cost; supply
C) marginal benefit; demand
D) marginal benefit; supply
Which of the following would constitute an act of investment by a household, as
economists use the term?
A) building a new construction vacation home
B) purchasing 100 shares of Microsoft stock
C) buying a corporate bond
D) borrowing money from the bank to pay for a vacation cruise
The shutdown point for a perfectly competitive firm is the
A) lowest point on the ATC curve.
B) point at which a firm’s long-run supply curve ends.
C) lowest point on the AVC curve.
D) lowest point on the marginal cost curve.
TC/q is
A) ATC.
B) MC.
C) AVC.
D) TVC.
Table 20.1
Refer to Table 20.1. Before specialization, Germany produces 45 cases of beer and 30
cases of wine, and Chile produces 18 cases of beer and 24 cases of wine. After
specialization, the increase in wine production is
A) 2 cases of wine.
B) 4 cases of wine.
C) 6 cases of wine.
D) 10 cases of wine.
If the demand for coffee decreases as income decreases, coffee is a(n)
A) normal good.
B) inferior good.
C) substitute good.
D) complementary good.
Figure 17.2
Refer to Figure 17.2. Suppose Fiona’s utility from income is given in the diagram. From
this we would say that Fiona is
A) risk neutral.
B) risk loving.
C) risk averse.
D) a risk taker.
Table 7.2
Inputs Required to Produce a Product Using Alternative Technologies
Refer to Table 7.2. Which technology is the most labor intensive?
A) A
B) B
C) C
D) D
Figure 3.3
Refer to Figure 3.3. As your income decreased, the demand for X shifted fromD1 to D2.
Good X is
A) an inferior good.
B) a normal good.
C) a luxury good.
D) an income-neutral good.
The case against advertising includes the assertion that advertising
A) keeps firms from spending huge sums of money to create artificial differences
among goods.
B) provides consumers with valuable information about product availability, quality,
and price.
C) decreases competition by increasing barriers to entry of new firms into an industry.
D) ensures high quality and efficient production.
Figure 15.5
Refer to Figure 15.5. Assume the Custom Sweater Shop has fixed costs of $275 and is a
monopolistically competitive firm. If this firm is producing the profit-maximizing
output level, the firm’s profit is
A) -$275.
B) -$100.
C) -$75.
D) $0.
Table 16.4 shows the situation facing two firms, both of which are polluting. Assume
that each firm emits 5 units of pollution.
Table 16.4
Refer to Table 16.4. Suppose the government wants to reduce the total amount of
pollution from the current level of 10 to 4. To do this, the government caps each firm’s
emissions at 2 units and issues 2 permits to each firm. If firms are allowed to trade
permits and all possible trades are made, Firm B will reduce its pollution by a total of
________ unit(s).
A) 0
B) 1
C) 2
D) 3
The Russian transition to a ________ economy required market-supporting institutions
such as a developed banking system, functional financial markets, a code of
commercial law, and developed processes for insurability of business activities.
A) command
B) market
C) dictatorial
D) fascist
If ________, a firm would shut down in the short run and exit the industry in the long
run.
A) TR > TVC but TR < TC
B) TR = TC
C) TR > TFC
D) TR < TVC
Figure 13.1
Refer to Figure 13.1. Of the following choices, Panel A best represents the demand
curve for
A) an individual producer of soybeans.
B) a utility company.
C) insulin.
D) none of the above
Figure 4
Refer to Figure 8.4. The marginal cost of the third microwave oven is
A) $50.
B) $150.
C) $850.
D) $1,000.
Figure 7.6
Refer to Figure 7.6. If this shoe manufacturer increases labor from 20 to 25 (moving
along the given isoquant with Q = 50), the marginal product of the 25th worker
A) is zero, as the total number of shoes produced remains at 50.
B) is 7.5, as capital can be reduced by 7.5 units when the 25th worker is hired.
C) cannot be determined because output remains constant.
D) cannot be determined because both capital and labor have been increased.
Figure 8.8
Refer to Figure 8.8. If this farmer is producing the profit-maximizing level of output,
her profit is
A) $0.
B) $2,800.
C) $3,000.
D) $12,000.
Figure 1.1
Refer to Figure 1.1. The relationship between the daily temperature and the number of
gallons of ice cream purchased demonstrates
A) an infinite slope.
B) a negative slope.
C) a positive slope.
D) a zero slope.
The ABC Computer Company wants to increase the quantity of computers it sells by
5%. If the price elasticity of demand is -2.5, the company must
A) increase price by 2.0%.
B) decrease price by 2.0%.
C) increase price by 0.5%.
D) decrease price by 0.5%.
Which model of oligopoly results in the greatest efficiency?
A) contestable markets model
B) Cournot model
C) price leadership model
D) collusion model
Ockham’s razor is the principle that states
A) supply creates its own demand.
B) we must forego something when making a decision.
C) costs which have been incurred cannot be avoided.
D) irrelevant detail should not be included in a model.
Are all externalities negative? Explain.
What are the three basic decisions that any household must make.
The graph below shows a firm’s demand, marginal revenue, and marginal cost curves.
Find the profit-maximizing level of output and mark it q*. Find the price the firm
should charge and mark it P*.
If an adult plays tic-tac-toe with another adult typically the result is that neither player
wins. However, when adults play small children they are usually successful in beating
them. How is it that there could be Nash equilibrium in the first case and not the
second?
A bank manager advises all of his loan officers that the average cost of funds for the
bank over the past year has been 6%. The bank has borrowed $1 million at 5%, another
$1 million at 6% and another $1 million at 7%. Future borrowing costs are expected to
continue at 7%. The manager however, instructs his loan officers that they are
authorized to make loans at interest rates that are equal to or greater than the bank’s
average cost of borrowing. How would you evaluate the bank manager’s decision?
Suppose there is news that indicates that gasoline supplies might suddenly become
disrupted by a truckers’ union strike. What would you expect would happen to the
demand for gasoline in the present? How might consumers change their behavior and
why? What impact would this news have on the price of gasoline immediately? Would
it matter whether the news story was accurate?
List the three programs that are part of the Social Security system.
List some types of non-price rationing systems.
What happens to a firm’s profit-maximizing level of output if the price of the product
falls? Use a graph to explain your answer.
Table 8.4
Refer to Table 8.4. Assume that Scott Board Shorts is producing in a perfectly
competitive output market. The price of a pair of shorts is $40. To maximize profits,
how many shorts should Scott produce?
In 1999, both the equilibrium price and equilibrium quantity of widgets increased. Use
supply and demand analysis to explain how these changes could have occurred.
Why do economists regard who is legally responsible for paying the tax to be
irrelevant?
What is depreciation?
Assume that you have heard news that a local radio station is hosting a luncheon at your
school by offering hot dogs, chips and cola at no expense to the student body. Why
would economists say that this lunch is not truly free?
Events prior to the 1995 baseball season, including a threatened “lockout” by owners if
the players decided to end their strike, likely had a great effect on attendance at baseball
games. Consider in this scenario market attendance as a measure of quantity and ticket
prices as the measure of price.
Graphically illustrate the effect of dissatisfaction with the team by fans. What effect
does this have on the price and quantity of tickets sold?
Explain the concept of marginalism as it is used in economics.
Mike’s Pretzels employs labor at a wage rate of $8 per hour and rents capital for $20 per
hour. At its current level of labor and capital, the marginal product of labor is 24 and the
marginal product of capital is 55. Is the firm currently maximizing profit? Explain.
List three reasons why one type of labor may be paid more than another.
What is market failure?
Give an example of a positive externality and explain why the outcome is inefficient.