The number of seats available in a stadium is fixed at 80,000. The equilibrium price for
a ticket to a football game at the stadium is $30. The equilibrium price for a ticket to a
soccer match at the stadium is $10. Which of the following is true?
A) Football games must be more expensive to produce than a soccer match.
B) The demand for each football game must be more than the demand for each soccer
match.
C) The supply of soccer matches must be less elastic than the supply of football games.
D) The demand for each soccer game must be greater than the demand for each football
game.
You paid $140 for a biology textbook at the beginning of the semester. At the end of the
semester you sell the textbook for $85. The textbook has depreciated
A) $140.00.
B) $85.00.
C) $55.00.
D) an indeterminate amount based on this information.
A person will continue to pursue an activity until his or her marginal ________ equals
his or her marginal ________ cost.
A) benefit; damage
B) benefit; social
C) social cost; external
D) benefit; private cost
A tax whose burden is the same proportion of income for all households is
A) a regressive tax.
B) a progressive tax.
C) a proportional tax.
D) an equal tax.
If Mexico has a comparative advantage in the production of oil compared to France,
then
A) Mexico also has an absolute advantage in the production of oil.
B) France has an absolute advantage in the production of oil.
C) Mexico can produce oil at a lower opportunity cost than France.
D) France cannot produce oil.
According to the theory of comparative advantage, specialization and free trade will
benefit
A) only that trading party that has both an absolute advantage and a comparative
advantage in the production of all goods.
B) all trading parties, even when some are absolutely more efficient producers than
others.
C) only that trading party that has an absolute advantage in the production of all goods.
D) only that trading party that has a comparative advantage in the production of all
goods.
The Social Security system is financed through ________.
A) private insurance contributions
B) general revenues
C) the income tax
D) a payroll tax
The ________ Act extended the government’s authority to ban vertical and
conglomerate mergers.
A) Sherman
B) Clayton
C) Celler-Kefauver
D) Federal Trade Commission
Tyrell is consuming X and Y so that he is spending his entire income and MUx/Px = 7
and MUy/Py = 7. To maximize utility, he should consume
A) the same amount of X and Y since he is already maximizing utility.
B) less of both X and Y.
C) more X and less Y.
D) less X and more Y.
If the demand for sardines increases as income decreases, sardines are a(n)
A) normal good.
B) inferior good.
C) substitute good.
D) complementary good.
Which of the following is an example of mechanism design?
A) an employer pays all sales people a fixed salary
B) welfare reform that limits the amount of time a person can collect benefits
C) health insurance with zero co-pays
D) reduced prices on bulk purchases
The Eyes on the World Company monopolizes the production of a specialized contact
lens. The Eyes on the World Company will find it profitable to increase the production
of the contact lenses as long as marginal revenue is
A) less than marginal cost.
B) equal to marginal cost.
C) greater than marginal cost.
D) positive.
________ argued for a tax on consumption instead of on income because the standard
of living depends not on income, but on how much is consumed.
A) Thomas Hobbes
B) John Rawls
C) Irving Fisher
D) Ben Bernanke
The Farley Farm, a dairy company, has total costs of $15,000 and total variable costs of
$2,000. The Farley Farm’s total fixed costs are
A) $0.
B) $13,000.
C) $17,000.
D) indeterminate because the firm’s output level is not known.
Figure 16.2
Refer to Figure 16.2. The ________ amount of cars is 25.
A) efficient
B) unregulated
C) break-even
D) subsidized
Table 14.2
B’s Strategy
Refer to Table 14.2. What is the Nash equilibrium in the game?
A) (Advertise, Advertise)
B) (Don’t Advertise, Don’t Advertise)
C) (Don’t Advertise, Advertise)
D) (Advertise, Don’t Advertise)
Figure 6.5
Refer to Figure 6.5. Molly’s budget constraint is AD. If the price of CDs decreases, her
new budget constraint becomes
A) AE.
B) AO.
C) BD.
D) EF.
A country has a trade surplus when
A) its exports exceed its imports.
B) its exports equal its imports.
C) its government spending exceeds its tax revenues.
D) its exports are less than its imports.
Price reflects the ________ household willingness to pay, and marginal cost reflects the
________ of the resources needed to produce a good.
A) minimum; quantity
B) minimum; opportunity cost
C) maximum; productivity
D) maximum; availability
The marginal cost curve intersects the average variable cost curve at the ________
value of the average variable cost curve.
A) maximum
B) minimum
C) zero
D) average
Refer to Figure 3.14. A decrease in supply is represented by the movement from
A) S2 to S3.
B) S2 to S1.
C) Point B to Point A along supply curve S2.
D) Point B to Point C along supply curve S2.
The Russian transition to a market economy required
A) controls over prices.
B) 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.
C) controls over wages and interest rates.
D) controls planning overall production.
The amount of money a ________ can spend during a given time period without
increasing or decreasing its net worth is called economic income.
A) household
B) firm
C) government
D) All of the above are correct.
The $1,000 you earned last year on your money market fund is an example of
A) property income.
B) transfer income.
C) inheritance income.
D) human capital income.
A firm is currently producing in the elastic portion of its demand curve. What course of
action do you recommend for it, assuming it wants to raise revenue?
A) Continue producing at the current output level, because it maximizes its total
revenue by producing in the elastic portion of its demand curve.
B) Reduce price, because if it reduces price and demand is elastic, total revenue will
increase.
C) Increase price, because if it increases price and demand is elastic, total revenue will
increase.
D) Continue selling at the same price, but increase the amount it produces.
The marginal cost of a unit of labor in a perfectly competitive labor market is
A) its average MRP.
B) equal to product price.
C) the market wage rate.
D) equal to MRP.
Suppose you are deciding whether to spend your tax rebate check on a new iPod player
or a new digital camera. You are dealing with the concept of
A) equity.
B) comparative advantage.
C) opportunity costs.
D) the fallacy of composition.
________ capital formation has been suggested as an explanation for the ________
economic growth in many poor nations.
A) Insufficient; lack of
B) Increases in; rapid
C) Outsourced; negative
D) Subsidized; exponential
Figure 7.11
Refer to Figure 7.11. At Point A, the absolute value of the slope of the q1 = 100 isoquant
is
A) less than 2.
B) exactly equal to 2.
C) greater than 2.
D) indeterminate from this information.
The price system
A) automatically distributes scarce goods.
B) is inefficient.
C) requires government help to allocate goods.
D) is the only way to allocate goods.
Figure 20.1
Refer to Figure 20.1. Which of the following statements is true?
A) Only Canada can benefit from trade because the United States has an absolute
advantage in the production of both soybeans and alfalfa.
B) Trade will benefit both countries because the United States has a comparative
advantage in the production of soybeans and Canada has a comparative advantage in
the production of alfalfa.
C) Trade will benefit both countries because the United States has a comparative
advantage in the production of alfalfa and Canada has a comparative advantage in the
production of soybeans.
D) Trade will benefit neither country because the United States has an absolute
advantage in the production of both soybeans and alfalfa, but Canada has a comparative
advantage in the production of both soybeans and alfalfa.
If a good is income inelastic what does this imply would happen to consumption of this
good if you were to win the lottery?
Why are perfectly competitive markets considered efficient?
Graph the following equation with qd on the horizontal axis and calculate the slope:
P = 10 – 2qd.
How is the concept of present value useful in deciding whether or not to undertake an
investment project?
Why are economists less worried about industry concentration than they once were?
Using the table below calculate the marginal product and the average product. Show
where diminishing marginal productivity sets in.
Explain what will happen when the government imposes a minimum price that is
below the market equilibrium price. Why is this true?
Discuss how taxes affect product and input markets.
When the price of good X rises, the demand for good Y rises. Explain what this
relationship implies about the two goods.
Explain the difference between positive economics and normative economics.
The local barber in a small town has decided to raise the price of his haircuts by 25%
because he realizes he is the only barber in town and of course “everyone has to get a
haircut”. His rational is that the demand for his services is price inelastic? What mistake
is he making?
Why is the demand curve for new capital downward sloping?
Suppose that you are earning the maximum amount of money within the 28% tax
bracket. If you receive a $1000 raise next year this will place you in the 33% tax
bracket. Calculate your tax burden and the amount of increase in your “take-home” pay.
In 1997 the Federal Trade Commission was granted a preliminary injunction on a
proposed merger between Staples and Office Depot. The FTC was able to convince the
federal district court that allowing the merger would create the potential for
anticompetitive prices since it would give the newly merged company a 75% market
share and would only leave Office Max as the remaining office supply superstore.
Critically evaluate the FTC’s use of “office supply superstores” as the relevant market.
List four things that can shift the demand for an input.
Scenario 1
Suppose your professor grades you on ten examinations, all carrying equal weight for
the final grade in the course. Answer the following questions based on this information.
Refer to Scenario 1. The student has already taken 9 exams and scored a 80 on the 9th
one. His average is a 70 after the 9th exam. If he scores a 70 on the tenth exam what
will happen to his average?
What is marginal private cost?
Typically when firms talk about depreciation they are usually referring to the
deprecation of physical capital assets. However, how any why might it be possible for
there to be deprecation in human capital?
What is the difference between a command economy and a laissez-faire economy?
Students arriving late to class are a potential negative externality because their tardiness
may interrupt the instructor and distract students. Can you think of any way in which
this externality could be curbed? That is, can you think of any methods that could be
employed to internalize this negative externality?