Table 9-1
Linda and Sandy own The Preppy Puppy, a dog grooming business. Table 9-1 lists the
number of dogs Linda and Sandy can each bathe and groom in one week.
Refer to Table 9-1. Select the statement that accurately interprets the data in the table.
A) Sandy has a greater opportunity cost than Linda for dog grooming.
B) Sandy’s opportunity cost for dog grooming is less than Linda’s.
C) Linda has a greater opportunity cost than Sandy for dog bathing.
D) Sandy’s opportunity cost for dog grooming and dog bathing are both greater than
Linda’s.
After having a monopoly in the diamond market for many years, by 2000 the De Beers
company faced competition from other companies. To maintain its market share, De
Beers
A) began buying so-called “blood diamonds” in order to keep these diamonds out of the
control of other diamond companies.
B) adopted a strategy of differentiating its diamonds. Each of its diamonds is now
marked with a microscopic brand.
C) bought diamond mines in Canada and Russia that had been its competitors.
D) lowered the prices of its diamonds to make the market appear less profitable to
potential competitors.
The Congressional Budget Office estimates that the payments to settle malpractice
lawsuits and the premiums doctors pay for malpractice insurance account for ________
of health care costs in the United States.
A) between 20 and 30 percent
B) roughly half
C) less than 1 percent
D) a vast majority
In an experiment that employed the dictator game,economists at Cornell University
gave student “allocators” the option of dividing $20 in only two ways (a) $18 for
themselves and $2 to another student, or (b) $10 for themselves and $10 to another
student. What was one result from this experiment?
A) Most allocators chose to give themselves $18 and $2 to the other students.
B) Most of the students who were not allocators did not like having someone else make
decisions for them.
C) A majority of the female allocators chose option (a); a majority of the male
allocators chose option (b).
D) Most of the allocators apparently valued acting fairly.
Assume that the hourly price for the services of tarot card readers has risen and sales of
these services have also risen. One can conclude that
A) the law of demand has been violated.
B) the number of tarot card readers has increased.
C) the demand for tarot card readers has increased.
D) tarot card readers are deliberately charging high prices because they provide services
for superstitious clients.
A perfectly competitive firm cannot practice price discrimination because
A) a firm that breaks even in the long run cannot afford to engage in yield management.
B) it does not advertise; this prevents the firm from marketing its product to different
segments of the market.
C) each consumer in a perfectly competitive market has the same willingness to pay.
D) the firm can only charge the market price.
Table 18-12
Table 18-12 shows income distribution data for two countries. Use this data to answer
the following questions.
Refer to Table 18-12.
a. Draw a Lorenz curve for each country.
b. Which country has the more equal distribution of income?
c. Based on the Lorenz curve for the two countries, can you determine which country
has the more progressive tax system? Explain your answer.
In the United States, corporate profits are taxed
A) only at the corporate level.
B) only when investors receive dividends.
C) at both the corporate level and when investors receive dividends.
D) neither at the corporate level nor when investors receive dividends.
A network externality occurs when
A) there is production cost savings from being networked with suppliers.
B) there is production cost savings from being networked with buyers.
C) the usefulness of a good is affected by how many others use the good.
D) the usefulness of a good is affected by celebrities who use the good.
The price elasticity of supply measures
A) the responsiveness of quantity supplied to changes in input prices.
B) the responsiveness of quantity supplied to changes in technology.
C) the responsiveness of quantity supplied to changes in price.
D) a supplier’s ability to produce a good in the face of scarcity.
The three most widely followed stock indexes in the United States include all of the
following except
A) the Dow Jones Industrial Average.
B) the S&P 500.
C) the Fortune 500.
D) The NASDAQ.
The observation that people tend to value something more highly when they own it than
when they don’t is called the
A) wealth effect.
B) endowment effect.
C) path dependent effect.
D) endorsement effect.
Consider the following actions undertaken by a firm:
a. charging the same price for products of different quality
b. charging different prices to different consumers for the same product when the
variation cannot be explained by cost differences
c. charging different prices for products of different qualities
d. charging a lower price to match a competitor’s price
Which of the above will be considered price discrimination?
A) a, b, c, and d
B) a, b, and d only
C) b and d only
D) a and b only
Assume that after the record year for U.S. farm income in 2013, farmers are expected to
break even in 2014. This means that at the quantity being produced in 2014
A) MC =AVC.
B) MR =MC.
C) MR =ATC.
D) AVC =ATC.
Holding everything else constant, a decrease in the price of bicycles will result in
A) a decrease in the quantity of bicycles demanded.
B) an increase in the demand for bicycles.
C) a decrease in the supply of bicycles.
D) an increase in the quantity of bicycles demanded.
When you buy newly-issued shares of Facebook stock, this transaction takes place in
the
A) primary market.
B) bond market.
C) secondary market.
D) bear market.
Many colleges and universities practice yield management. As a result, they offer
different financial aid packages to different students. One result of yield management is
that colleges often
A) offer a less generous financial aid package to students who apply for an early
admission decision.
B) offer a more generous financial aid package to students who apply for an early
admission decision.
C) offer a less generous financial aid package to students with relatively high family
incomes.
D) offer a less generous financial aid package to students who don’t participate in many
extracurricular activities when they are in high school.
The extra cost associated with undertaking an activity is called
A) net loss.
B) marginal cost.
C) opportunity cost.
D) foregone cost.
Financial contributions to the campaigns of members of Congress, state legislators and
other elected officials by firms that seek special interest legislation that make the firms
better off are
A) examples of rent seeking.
B) illegal.
C) the result of the voting paradox.
D) irrational because elected officials will almost always act in the interest of the voters
who have to pay the cost of the legislation.
To calculate the price elasticity of demand we divide
A) the percentage change in quantity demanded by the percentage change in price.
B) the percentage change in price by the percentage change in quantity demanded.
C) rise by the run.
D) the average price by the average quantity demanded.
Which of the following statements is true?
A) An explicit cost is an actual cost; an implicit cost is a theoretical cost.
B) Economic costs include both explicit costs and implicit costs.
C) An explicit cost is more important, dollar for dollar, than an implicit cost.
D) Explicit costs are accounting costs, not economic costs; implicit costs are economic
costs, not accounting costs.
Medical research that ends in a cure for a serious disease produces positive
externalities. What is the impact of this positive externality on economic efficiency?
A) At equilibrium, less than the economically efficient quantity of medical research is
produced.
B) A deadweight loss occurs because at equilibrium the marginal social cost of medical
research is greater than the marginal social benefit.
C) At equilibrium, more than the economically efficient quantity of medical research is
produced.
D) A deadweight loss occurs because at equilibrium the marginal social cost equals the
marginal social benefit.
Which of the following is a reason why it is difficult to estimate the extent of economic
discrimination in the labor market?
A) Employers who discriminate are likely to do so in overt ways such as awarding
some workers with benefits-in-kind.
B) Ultimately, employers who discriminate cannot remain profitable.
C) Employers who discriminate pay an economic penalty.
D) Differences in wages can be attributed to many other factors as well, such as
differences in productivity and preferences.
Figure 2-9
Figure 2-9 shows the production possibilities frontiers for Pakistan and Indonesia. Each
country produces two goods, cotton and cashews.
Refer to Figure 2-9. What is the opportunity cost of producing 1 pound of cashews in
Indonesia?
A) 3/8 of a bolt of cotton
B) 5/8 of a bolt of cotton
C) 2 2/3 bolts of cotton
D) 320 bolts of cotton
Figure 14-2
The government of a developing country plans to award two firms, Gigacom and
Xenophone, the exclusive rights to share the market for high speed internet service.
Gigacom and Xenophone can both provide the service either via television cable lines
or via direct subscriber line (DSL). Suppose the government is considering a proposal
to delay one firm’s entry into the market on the grounds that it wants to prevent
“harmful” competition. Figure 14-2 shows the decision tree for this game.
Refer to Figure 14-2. If the government delays Gigacom’s entry and Xenophone moves
first, is a threat by Gigacom that it will provide DSL service if Gigacom provides cable
service a credible threat?
A) No, because Gigacom will lose $4.5 million in profits if it carries out its threat.
B) Yes, because Gigacom’s DSL service will drive Xenophone out of business.
C) No, because as a second mover, it has no choice but to abide by the choices of the
first mover.
D) Yes, Xenophone stands to lose $3 million in profit.
Recent changes occurring within the U.S. health care system, including lower insurance
reimbursement rates, have resulted in
A) a growing number of doctor’s choosing to open private practices.
B) more medical practices being owned by hospitals than by individual doctors.
C) a majority of hospitals closing routine medical practices in order to focus only on
emergency care facilities.
D) a majority of doctors working directly for insurance companies.
A product is considered to be nonexcludable if
A) you can keep those who did not pay for the item from enjoying its benefits.
B) you cannot keep those who did not pay for the item from enjoying its benefits.
C) your consumption of the product reduces the quantity available for others to
consume.
D) it is jointly owned by all members of a community.
To minimize the economic inequality within developing nations, studies suggest that the
nations can boost incomes of their poorest citizens by ________.
A) rejecting globalization and sheltering themselves from exploitation
B) embracing globalization and integrating themselves into the global economy
C) fortifying trade barriers and discouraging exports
D) encouraging economic independence and restricting imports
Figure 12-5
Figure 12-5 shows cost and demand curves facing a typical firm in a constant-cost,
perfectly competitive industry.
Refer to Figure 12-5. The firm’s manager suggests that the firm’s goal should be to
maximize average profit. If the firm does this, what is the amount of profit that it will
earn?
A) $6,600
B) $6,750
C) $12,150
D) $36,000
Figure 16-5
Refer to Figure 16-5. Suppose the firm represented in the diagram decides to use a
two-part pricing strategy such that it charges a fixed fee and a per-unit price equal to the
monopoly price. What is the per-unit price?
A) $28
B) $24
C) $12
D) $8
Traditionally, Wall Street investment banks had been organized as partnerships, but by
2000 they had converted to being publicly traded companies. As partnerships, the
principal-agent problem is ________ because there is ________ separation of
ownership from control.
A) reduced; much
B) reduced; little
C) increased; much
D) increased; little
The ABC Company manufactures routers that are used to provide high-speed Internet
service. ABC sells an average of 1,000 routers each month, but to exhaust economies of
scale in its industry ABC would have to sell 3,000 routers each month. Therefore
A) ABC is experiencing diseconomies of scale.
B) ABC is experiencing diminishing returns.
C) to reach minimum efficient scale ABC would have to sell at least 3,000 routers each
month.
D) ABC will soon go out of business.
Figure 16-6
Watanabe Sensei operates the only martial arts school in Hartfield. For simplicity,
assume that consumers have identical demand curves and that Sensei knows what this
demand curve is. Figure 16-6 shows this demand curve.
Refer to Figure 16-6. If Sensei charges the competitive price for his classes, what is the
maximum amount of admission fee that he can collect from his customers?
A) the area A + B
B) the area A + B + C + D
C) the area A + B + C + D + E
D) the area A + C + D + G + H
Table 6-7
The town of Bloomfield is well known for its basketball team. The price of basketball
game tickets is determined by market forces. Table 6-7 above shows the demand and
supply schedules for basketball games tickets.
Refer to Table 6-7. What is the numerical value of the price elasticity of supply?
A) 1
B) greater than 0 but less than 1
C) 0
D) greater than 1
In September 2012, the average price of gasoline in the United States was $3.91 per
gallon, and consumers purchased nearly 5 percent less gasoline than they had during
September 2011, when the average price of gasoline was $3.66 per gallon. Based on
these figures, when the price of gasoline rose from $3.66 per gallon to $3.91 per gallon,
total revenue
A) increased.
B) decreased.
C) did not change.
D) There is not enough information to determine what happened to total revenue.