ECON 117 Homework

Document Type
Test Prep
Book Title
Microeconomics: Principles-- Problems-- & Policies (McGraw-Hill Series in Economics) 20th Edition
Authors
Campbell McConnell, Sean Flynn, Stanley Brue
1)
Refer to the above graphs. They show the long-run average total cost (LRATC) for cars.
For which graph is the output level Q0 at minimum efficient scale?
A.Graph A
B.Graph B
C.Graph C
D.Graph D
2) An indifference curve:
A.may be either upsloping or downsloping, depending on whether the two products are
complements or substitutes.
B.is downsloping and convex to the origin.
C.is upsloping and has a constant slope.
D.is downsloping and concave to the origin.
3) Suppose a firm offers its workers a cafeteria plan in which it allows workers to
allocate a set amount of fringe benefit money toward specific insurance. Mary, who has
five kids needing braces, selects the family dental coverage. This is an example of the:
A.free-rider problem.
B.principal-agent problem.
C.adverse selection problem.
D.moral hazard problem.
4)
Refer to the diagram. For output level Q, per unit costs of B are:
A.unattainable and imply the inefficient use of resources.
B.unattainable, given resource prices and the current state of technology.
C.attainable, but imply the inefficient use of resources.
D.attainable and imply least-cost production of this level of output.
5) In the long run, the price charged by the monopolistically competitive firm
attempting to maximize profits:
A.must be less than ATC.
B.must be more than ATC.
C.may be either equal to ATC, less than ATC, or more than ATC.
D.will be equal to ATC.
6) Economists regard expenditures on education as investments because:
A.they are subject to tax deductions at the same rate as are expenditures on machinery
and equipment.
B.education is economically beneficial at the same time it is being acquired.
C.such expenditures are current costs that are intended to enhance future earnings.
D.they differ from expenditures on health and worker mobility.
7) A tariff can best be described as:
A.an excise tax on an imported good.
B.a government payment to domestic producers to enable them to sell competitively in
world markets.
C.an excise tax on an exported good.
D.a law that sets a limit on the amount of a good that can be imported.
8) Which of the following is a positive statement?
A.A humidity level of 90 percent is too high.
B.It is too hot to run outside when the temperature exceeds 80 degrees.
C.The temperature is 92 degrees today.
D.Summer evenings are nice when it cools off to around 70 degrees.
9) Which of the following statements about interest rates is false?
A.Interest rates typically reflect the risk involved in extending a loan
B.Interest rates are affected by households' spending decisions
C.The equilibrium interest rate is determined by the intersection of the supply and
demand schedules for loanable funds
D.The supply of loanable funds is independent of the rate of interest
10) Given the table below, what is the short-run profit-maximizing level of output for
the firm?
A.2 units
B.3 units
C.4 units
D.5 units
11) Which of the following is a cause of growing income inequality in the United States
since 1975?
A.Exporting to other countries by major U.S. industries
B.Industrial restructuring from services to goods production
C.A widening wage gap between skilled and unskilled workers
D.An increase in the progressivity of the Federal tax system
12) If a monopolist's marginal revenue is $3.00 and its marginal cost is $4.50, it will
increase its profits by:
A.reducing output and raising price.
B.reducing both output and price.
C.increasing both price and output.
D.raising price while keeping output unchanged.
13) If in the short run the demand for mass transit is inelastic and in the long run the
demand is elastic, then a price:
A.Increase will decrease total revenue in the short run but increase total revenue in the
long run
B.Increase will increase total revenue in the short run but decrease total revenue in the
long run
C.Decrease will increase total revenue in the short run but decrease total revenue in the
long run
D.Decrease will decrease total revenue in the short run and decrease total revenue in the
long run
14)
Refer to the short-run data. Which of the following is correct?
A.This firm will maximize its profit at 440 units of output.
B.Any level of output between 100 and 440 units will yield an economic profit.
C.This firm's marginal revenue rises with output.
D.Any level of output less than 100 units or greater than 440 units is profitable.
15) Resources are efficiently allocated when production occurs at that output level
where price:
A.Equals marginal cost
B.Equals marginal revenue
C.Is greatest over average cost
D.Is equal to average total cost
16) The economic incentive for price discrimination is based upon:
A.Prejudices of business managers
B.Differences among sellers' costs
C.A desire to evade antitrust legislation
D.Differences among buyers' elasticities of demand
17) The demand for Cheerios cereal is more price-elastic than the demand for cereals as
a whole. This is best explained by the fact that:
A.Cheerios are a luxury
B.Cereals are a necessity
C.There are more substitutes for Cheerios than for cereals as a whole
D.Consumption of cereals as a whole is greater than consumption of Cheerios
18) Which of the following is the best example of a market failure to conserve a
resource resulting from poorly-defined property rights?
A.Preserving elephants in Africa
B.Drilling for oil in Saudi Arabia
C.Mining of oil shale in Canada
D.Hunting of deer in the United States
19) Dorothy likes to invest in gold as part of her overall financial investment portfolio,
as her gut tells her it will increase dramatically in value. Her favorite and generally only
source of investment advice is Wizard's Gold Hour on the OZ cable channel. As a result
of this advice, Dorothy's portfolio mix is suboptimal, as it is too heavily weighted in
gold. Behavioral economists would say that Dorothy suffers from:
A.framing effects.
B.confirmation bias.
C.self-serving bias.
D.planning fallacy.
20) The price elasticity of demand is a measure of the:
A.Effect of changes in demand on the price
B.Relationship between price and profitability
C.Responsiveness of buyers of a good to changes in its price
D.Sensitivity of a good's price to changes in demand

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