If quantity supplied responds substantially to a relatively small change in price, supply
is:
A) price-elastic.
B) price-inelastic.
C) negatively sloped.
D) insensitive to changes in price.
Along a given supply curve, an increase in the price of a good will:
A) increase producer surplus.
B) decrease producer surplus.
C) increase consumer surplus.
D) decrease producer surplus and increase consumer surplus.
(Table: Soybean Cost) Look at the table Soybean Cost. What is the break-even price for
this farmer?
A) $13.00
B) $13.50
C) $14.00
D) $14.50
If the marginal tax rate is higher than the average rate, the tax system is:
A) proportional.
B) progressive.
C) constant.
D) regressive.
In perfect competition, _____ are _____, and _____ are price takers.
A) all goods; standardized; all market participants
B) some goods; standardized; consumers but not producers
C) all goods; differentiated; producers but not consumers
D) some goods; differentiated; consumers but not producers
The break-even price for a perfectly competitive firm is equal to:
A) the minimum value of average variable cost.
B) the marginal revenue, provided that marginal revenue is equal to marginal cost.
C) the average fixed cost at the given output level.
D) the minimum value of average total cost.
After a price decrease, the quantity effect tends to:
A) decrease total revenue.
B) increase total revenue.
C) make the price effect stronger.
D) make the price effect weaker.
For a normal good, the income elasticity of demand will be:
A) negative.
B) positive.
C) zero.
D) determined by the direction of the change in income.
Figure: The Demand Curve
(Figure: The Demand Curve) Look at the figure The Demand Curve. By the midpoint
method the price elasticity of demand between $3 and $4 is approximately:
A) 0.19.
B) 0.54.
C) 1.00
D) 1.86.
The market structure characterized by a few interdependent firms and barriers to entry
is called:
A) monopolistic competition.
B) perfect competition.
C) oligopoly.
D) monopoly.
Nico rents 10% more DVDs when his income increases by 20%. Based on this
information, we know that DVDs:
A) are a normal good.
B) are an inferior good.
C) have many substitutes.
D) have come down in price.
The difference between the demand price and the supply price at the quota limit amount
is the:
A) demand price.
B) supply price.
C) quota rent.
D) price floor.
(Table: Value of the Marginal Product of Labor and Demand) In the figure Value of the
Marginal Product of Labor and Demand, the total product of labor is shown for the
hourly production of power cords. Assume that the market for power cords is perfectly
competitive. The price of a power cord is $2, the market wage rate is $40 per hour, and
four workers are hired. Profit can be maximized by hiring _____ worker(s).
A) one more
B) two more
C) one fewer
D) two fewer
A mortgage-backed security is an asset that:
A) only homeowners are allowed to purchase.
B) provides earnings to its owner based on payments made by people on their home
loans.
C) the Federal Reserve uses to implement monetary policy.
D) is an important part of the circular-flow diagram.
If the income elasticity of demand for a good is _____, the good is said to be _____.
A) positive; inferior
B) negative; a substitute
C) positive; normal
D) positive; positive
Figure: Harold’s Indifference Curves The figure shows three of Harold’s indifference
curves for bread and cheese.
(Figure: Harold’s Indifference Curves) Look at the figure Harold’s Indifference Curves.
If the price of bread is $1 per loaf, the price of cheese is $2 per pound, and Harold has
$10 to spend on bread and cheese, Harold’s optimal consumption bundle is _____
loaves of bread and _____ pounds of cheese.
A) 6; 4
B) 4; 3
C) 3; 2
D) 2; 8
(Table: Total Cost for a Perfectly Competitive Firm) Look at the table Total Cost for a
Perfectly Competitive Firm. If the market price is $5.50, the profit-maximizing quantity
of output is _____ units.
A) 5
B) 7
C) 8
D) 9
According to the _____, in a perfectly competitive economy each factor of production
is paid its equilibrium value of the marginal product.
A) theory of labor supply
B) efficiency-wage model
C) theory of compensating differentials
D) marginal productivity theory of income distribution
The _____ cost curve continually declines as more output is produced in the short run.
A) marginal
B) average variable
C) average fixed
D) average total
Compared to a generation ago, benefits from public aid programs, adjusted for inflation,
are:
A) zero.
B) less.
C) more.
D) about the same.
Ms. Sweettooth always consumes iced tea and sugar in fixed proportions: 8 ounces of
iced tea to 3 teaspoons of sugar. Which of the following combinations of iced tea and
sugar will give Ms. Sweettooth the highest total utility?
A) 8 ounces of iced tea and 3 teaspoons of sugar
B) 24 ounces of iced tea and 3 teaspoons of sugar
C) 8 ounces of iced tea and 9 teaspoons of sugar
D) All of the combinations noted give the same total utility.
An efficient market for risk, such as an insurance market, is most likely to exist:
A) when there is a level playing field, so that all participants have approximately the
same wealth and the same degree of risk aversion.
B) when the sellers of insurance are risk-averse but the purchasers are not.
C) when there are significant differences between individuals’ wealth levels and
attitudes toward risk.
D) in the presence of private, or asymmetric, information.
Figure: Income and Substitution Effects
(Figure: Income and Substitution Effects) Look at the figure Income and Substitution
Effects. Carlos is originally consuming his optimal consumption bundle at point A when
the price of gasoline falls. The movement from K1 to K2 reflects the _____ the decrease
in the price of gasoline.
A) total change in quantity demanded due to
B) income effect of
C) substitution effect of
D) income and substitution effects of
(Table: Economics Textbooks) The table Economics Textbooks shows how much
money four consumers would be willing to pay for a new economics textbook. If the
price of the textbook is $100, what is the total consumer surplus received by these
consumers?
A) $125
B) $500
C) $100
D) $75
A tariff _____ the price received by domestic producers and _____ the price paid by
domestic consumers.
A) decreases; increases
B) increases; decreases
C) decreases; decreases
D) increases; increases
The amount by which an additional unit of an activity increases total cost is:
A) net benefit.
B) marginal benefit.
C) negative benefit.
D) marginal cost.
Figure: The Consumption of Video Games and E-Books
(Figure: The Consumption of Video Games and E-Books) Look at the figure The
Consumption of Video Games and E-Books. Which chart shows the effects of an
increase in the price of video games when video games and e-books are substitutes but
not perfect substitutes?
A) A
B) B
C) C
D) D
Which of the following is NOT a resource in the production of rice?
A) fertile land
B) labor
C) capital equipment
D) money
On a linear demand curve, demand at lower prices will be:
A) price-inelastic.
B) price-elastic.
C) price unit-elastic.
D) perfectly price-elastic.