Pizza is a normal good. If students’ incomes at your college increase, the effect on pizza
will be:
A) an increase in the demand.
B) an increase in the quantity demanded.
C) a decrease in the demand.
D) no change in the demand.
The law of demand is illustrated by a demand curve that is:
A) horizontal.
B) downward-sloping.
C) vertical.
D) upward-sloping.
A nurse willing to work the midnight to 8 A.M. shift may make more than one who
works 8 A.M. to 4 P.M. because of:
A) discrimination.
B) market power.
C) compensating differentials.
D) efficiency wages.
The fixed cost curve is:
A) positively sloped.
B) negatively sloped.
C) vertical.
D) horizontal.
If the price elasticity of supply is less than 1, then supply is:
A) price-elastic.
B) price-inelastic.
C) price unit-elastic.
D) very responsive to price changes.
(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. If the price of a power cord is $4 and the market wage rate is $120 per
hour, the profit-maximizing quantity of labor is _____ workers.
A) zero
B) two
C) three
D) four
Figure: MSB and MSC of Pollution
(Figure: MSB and MSC of Pollution) Look at the figure MSB and MSC of Pollution.
Suppose pollution is unregulated. What level of emissions tax would move the level of
pollution to the socially optimal level?
A) $100
B) $800
C) $500
D) $300
If a monopoly market structure is transformed to a perfectly competitive one, price will
_____ and output will _____.
A) fall; fall
B) fall; increase
C) increase; increase
D) increase; fall
(Table: Supply of Lemonade) Look at the table Supply of Lemonade. When the price of
lemonade is $1 per cup, the quantity of lemonade supplied by Eli will be:
A) 40 cups.
B) 90 cups.
C) 10 cups.
D) 25 cups.
The two principles of tax fairness are:
A) the minimize-distortions principle and the maximize-revenue principle.
B) the benefits principle and the ability-to-pay principle.
C) the proportional-tax principle and the ability-to-pay principle.
D) the equity principle and the efficiency principle.
(Table: Marginal Benefit of Sweatshirts) Look at the table Marginal Benefit of
Sweatshirts. The marginal benefit of producing the fifth sweatshirt is:
A) $70.
B) $14.
C) $13.
D) $12.
The value of the marginal product is calculated as:
A) MP / MR.
B) MP / P.
C) MP × P.
D) MR / MP.
In which of the following situations does overt collusion take place?
A) Smaller firms in an industry have an unspoken agreement to charge the same price
as the largest firm.
B) Firms in an industry agree openly on price and output, and they jointly make other
decisions aimed at achieving monopoly profits.
C) Competition among a large number of small firms generates similar but slightly
different prices.
D) Competition among a large number of small firms generates a stable market price.
Government intervention in the form of binding price floors or binding price ceilings
will:
A) always enhance the efficiency of the market.
B) result in either surpluses or shortages.
C) move the market toward its equilibrium quantity more quickly.
D) often be seen as necessary to decrease the activity of black markets.
In Colorado, there has been a drought, and rural communities are fighting with urban
areas over water. This statement best represents this economic concept:
A) Resources are scarce.
B) Resources should be used as efficiently as possible to achieve society’s goals.
C) When markets don’t achieve efficiency, government intervention can improve
society’s welfare.
D) Government policies can change spending.
An effective price ceiling will most likely result in:
A) an increase in producer surplus.
B) an increase in consumer surplus.
C) a decrease in consumer surplus.
D) no change in either producer or consumer surplus.
(Table: Expected Exam Scores from Studying Economics and Accounting) Look at the
table Expected Exam Scores from Studying Economics and Accounting. If you studied
for a total of three hours, your combined scores would be maximized by spending
_____ hours studying economics.
A) one
B) two
C) three
D) four
Figure: Shifts in Demand and Supply II
(Figure: Shifts in Demand and Supply II) Look at the figure Shifts in Demand and
Supply II. The graph shows how supply and demand might shift in response to specific
events. Suppose scientists discover that eating pomegranates causes aging. Which panel
BEST describes how this will affect the market for pomegranates?
A) panel A
B) panel B
C) panel C
D) panel D
Figure: Collusion
(Figure: Collusion) Look at the figure Collusion. The quantity of output produced by
firm 2 when there is collusion in the industry is shown by:
A) H.
B) J.
C) K.
D) L.
Figure: Short-Run Costs
(Figure: Short-Run Costs) Look at the figure Short-Run Costs. B is the _____ cost
curve.
A) average total
B) average variable
C) marginal
D) total
Adam has a monthly income of $20 that can be spent on books (B) and pencils (P). The
price of a book is $5 and the price of a pencil is $0.50. Which of the following bundles
of books and pencils lies ON Adam’s budget line?
A) 3 books and 5 pencils
B) 1 book and 40 pencils
C) 2 books and 20 pencils
D) no books and 20 pencils
After swimming 100 laps at the pool, Erik decides to swim 10 more before lifting
weights. This statement best represents this economic concept:
A) Resources are scarce.
B) The real cost of something is what you must give up to get it.
C) “How much” is a decision at the margin.
D) There are gains from trade.
Scenario: The Production of Wheat and Toys
The table describes the production of two goods,
wheat and toys, in country A and country B. Each country has a linear production
possibility frontier with respect to its production of the two goods. The numbers in each
column represent the total number of units each country could produce if it used all of
its resources to produce the good.
(Scenario: The Production of Wheat and Toys) Look at the scenario Production of
Wheat and Toys. If each country specializes in the good for which it has the
comparative advantage, then the price of wheat in terms of toys will be:
A) between two units of toys and one-third unit of toys.
B) between two units of toys and three units of toys.
C) three units of toys.
D) between one-third unit of toys and one-half unit of toys.
Which of the following is NOT one of the five principles for understanding how
individual choices interact?
A) There are gains from trade.
B) Markets move toward equilibrium.
C) Resources should be used as efficiently as possible to achieve society’s goals.
D) Markets always lead to efficiency.
If New York City had no medallion system for taxicabs, assuming that the supply curve
of taxicab rides is upward-sloping and the demand curve for taxicab rides is
downward-sloping, the price of a taxicab ride would:
A) increase because of the higher safety hazards.
B) not change from its current level.
C) decrease.
D) increase, but only slightly.
Andreas is a political consultant with his own firm. He travels the country and provides
campaign advice for political candidates. Last year he earned $250,000 in revenue for
his services. He pays one employee $50,000 to manage the small office back home and
pays $30,000 on rent and utilities for that office. His accountant tells him that if he sold
all of the equipment, he could put that money in the bank and earn $3,000 in interest
next year. Andreas also has received an offer to teach political science at a college at a
salary of $100,000. Andreas’s accounting profit is equal to _____ and his economic
profit is equal to _____.
A) $175,000; $67,000
B) $170,000; $67,000
C) $200,000; $72,000
D) $170,000; $70,000
In 2008, the Social Security (FICA) tax was levied only on incomes up to $102,000.
Which of the following statements about this tax is CORRECT?
A) A worker with an annual income of $50,000 and one with an annual income of
$100,000 paid the same dollar amount of FICA tax.
B) A worker with an annual income of $200,000 and one with an annual income of
$102,000 paid the same dollar amount of FICA tax.
C) The top 20% of income earners earned over 50% of total U.S. incomes in 2001, and
they paid approximately 60% of the total FICA taxes collected that year.
D) The percentage of income paid in FICA taxes was the same for a worker with an
annual income of $50,000 and a worker with an annual income of $100,000.