A strategy that is the same regardless of the action of the other player in a game is a
_____ strategy.
A) competitive
B) trigger
C) dominant
D) tit-for-tat
Figure: Computing Monopoly Profit
(Figure: Computing Monopoly Profit) Look at the figure Computing Monopoly Profit.
The profit-maximizing price is _____ and will generate total economic profit of _____.
A) P2; EF
B) P3; the rectangle P1P2FG
C) P3; the rectangle P2P3EF
D) P3; EF
Countries that trade based on the Heckscher”Ohlin model will find that:
A) their import goods tend to utilize their relatively scarce factors of production most
intensively.
B) the goods they export tend to use their relatively scarce factors of production most
intensively.
C) countries with a relative abundance of capital will export goods that use labor
intensively.
D) the concept of absolute advantage determines which goods they should export and
import.
Employers can sometimes organize to pay lower wages when:
A) efficiency wages are used to drive down morale and break up a labor union.
B) health maintenance organizations (HMOs) organize to get groups of doctors to work
together at lower wages than they would earn on their own.
C) labor unions are not allowed to engage in collective bargaining.
D) corporations force the minimum wage down.
Whenever a species is threatened with extinction, it is likely that:
A) clearly defined property rights exist.
B) no one has exclusive property rights to it.
C) greedy folks are winning again.
D) it is the result of too much government regulation.
Sam always tries to maximize his utility in his consumption of popcorn and soft drinks.
Both of these goods are subject to diminishing marginal utility. Suppose the prices of
these goods, along with Sam’s income, stay the same, but Sam decides to decrease his
consumption of popcorn. Holding everything else constant, this means that Sam must
_____ his consumption of soft drinks, and his marginal utility per dollar spent on
popcorn will be _____ than it used to be.
A) increase; greater
B) decrease; greater.
C) increase; less
D) decrease; less
The municipal swimming pool charges lower entrance fees to local residents than to
nonresidents. Assuming that this pricing strategy increases the profits of the pool, we
can conclude that nonresidents must have a _____ demand for swimming at the pool
than residents.
A) greater
B) lower
C) more elastic
D) less elastic
(Table: Production Function for Soybeans) Look at the table Production Function for
Soybeans. Assume that the fixed input, capital, is 10 acres of land and a tractor, which
have a combined cost of $150 per day. The cost of labor is $100 per worker per day.
The total cost of producing 45 bushels of soybeans is:
A) $100.
B) $200.
C) $350.
D) $4,500.
(Table: Variable Costs for Lawns) Look at the table Variable Costs for Lawns. During
the summer, Alex runs a lawn-mowing service, and lawn-mowing is a perfectly
competitive industry. Assume that costs are constant in each interval; that is, the
variable cost of mowing 1 through 10 lawns is $100. His only fixed cost is $1,000 for
the mower. His variable costs include fuel, his time, and mower parts. If the price for
mowing a lawn is $40, how much is Alex’s total cost at the profit-maximizing output?
A) $1,000
B) $1,200
C) $500
D) $1,500
The free-rider problem is a direct result of:
A) the inability to exclude nonpayers.
B) marginal-cost pricing.
C) full-cost pricing.
D) horizontally summed supply curves.
If there is a 50% probability that Joseph will earn $10 per hour at his job today and a
50% probability that he will earn $20 per hour today, his expected pay per hour is:
A) $10.00.
B) $12.50.
C) $15.00.
D) $20.00.
(Table: Employment and Output) In the table Employment and Output, if the price of a
bushel of wheat is $10, then the value of the marginal product of the third worker is:
A) $15.
B) $150.
C) $170.
D) $510.
Which is NOT a source of comparative advantage?
A) In general, France has absolute advantage over Italy in production of goods and
services.
B) The United States’ technology for computer chip design is more advanced than
India’s.
C) Hawaii has a more favorable climate to grow pineapple than Italy.
D) In the market for lumber, Canada has many more trees than England.
Mexico is relatively labor-abundant when compared with the United States. Therefore,
Mexico has a comparative advantage in _____ compared with the United States.
A) all goods
B) goods that are labor-intensive in production
C) goods that are capital-intensive in production
D) goods that are land-intensive in production
If an emissions tax is too low:
A) there will be too little pollution.
B) there will be too much pollution.
C) the marginal social cost of pollution will be less than the marginal social benefit of
pollution.
D) there could be either too much or too little pollution.
(Table: Soybean Cost) Look at the table Soybean Cost. What is the shut-down price for
this farmer?
A) $10
B) $11
C) $12
D) $13
A fixed cost:
A) will exist only in the long run.
B) depends on the level of output.
C) can be positive, even if the firm doesn’t produce any output in the short run.
D) decreases until the point of diminishing returns is reached.
Figure: Production Possibility Frontier
(Figure: Production Possibility
Frontier) Look at the figure Production Possibilities Frontier. Which of the following is
NOT an efficient rate of production per period?
A) 18 cars and no computers
B) no cars and 20 computers
C) 16 cars and 12 computers
D) no cars and 18 computers
(Table: Costs of Producing Bagels) Look at the table Cost of Producing Bagels. The
marginal cost of producing the second bagel is:
A) $0.05.
B) $0.10.
C) $0.30.
D) $0.40.
A high-income household is taxed a certain amount of money. A low-income household
receives financial assistance in the same amount from government. The value of the
marginal dollar of the financial assistance to the family and the taxes paid by the
high-income family are:
A) the same, since it is the same amount of money.
B) different, since the marginal dollar is worth more to the low-income family.
C) different, since the high-income family’s lost income will keep them from buying
necessities.
D) unimportant in determining the impact of this plan on the welfare state.
(Table: Demand Schedule for Gadgets) Look at the table The Market for Gadgets. Two
producers, Margaret and Ray, dominate the market. Each firm can produce gadgets at
marginal costs of approximately zero and has no fixed cost. A) If these firms form a
cartel to maximize joint profits, what output level will be produced and at what price? If
the output is shared evenly, how much profit will each firm earn? B) Suppose that
Margaret decides to increase production by 100 gadgets and Ray leaves output constant.
What will be the new market price and output? How much profit will each firm earn?
Which of the following is NOT an activity that generates an externality?
A) Bob’s Service Station dumps used oil in the river.
B) Bob renovates a run-down house in the neighborhood.
C) Bob occasionally drives while drunk.
D) Bob’s Service Station donates a car to charity.
Figure: The Marginal Benefit Curve
(Figure: The Marginal Benefit Curve) Look at the figure The Marginal Benefit Curve.
The total benefit of mowing six lawns is approximately:
A) $19.
B) $35.
C) $154.
D) $200.
The long-run average total cost of producing 100 units of output is $4, while the
long-run average cost of producing 110 units of output is $4. These numbers suggest
that the firm producing this output has:
A) economies of scale.
B) diseconomies of scale.
C) constant returns to scale.
D) diminishing returns.
The marginal product of labor is:
A) the change in labor divided by the change in total product.
B) the slope of the total product of labor curve.
C) the change in average product divided by the change in the quantity of labor.
D) the change in output that occurs when capital increases by one unit.
An externality is said to exist when:
A) individuals impose costs or benefits on others but have no incentive to take these
costs and benefits into account.
B) individuals impose costs or benefits on others, and the market provides incentives to
take these costs and benefits into account.
C) individual actions are affected by external forces like the loss of U.S. jobs because of
competition from abroad.
D) individual actions are affected by government policies (such as taxes) that are
externally imposed on the market.
Figure: Model of a Competitive Market
(Figure: Model of a Competitive Market) Given the figure Model of a Competitive
Market, if a tax is imposed on sellers, the equilibrium price will _____ and the
equilibrium quantity will _____.
A) increase; decrease
B) remain the same; increase
C) remain the same; decrease
D) increase; increase
The burden of a tax on a good is said to fall completely on the producers if the:
A) price paid by consumers for the good declines by the amount of the tax.
B) price paid by consumers for the good increases by the amount of the tax.
C) price paid by consumers does not change.
D) wages received by workers who produce the good increase by the amount of the tax.