Table 16.5
Refer to Table 16.5. A point on the market demand curve for this public good would be:
at a price of ________ quantity demanded would be ________.
A) $15; 5
B) $25; 3
C) $50; 1
D) $55; 1
Figure 5.4
Refer to Figure 5.4. The demand for milkshakes is unit elastic at Point C. If the
milkshake price falls from P1 to P2, total revenue will
A) increase.
B) decrease.
C) remain constant.
D) either increase or decrease.
Households derive the majority of their income from ________.
A) wages and salaries
B) property
C) inherited wealth
D) government transfers
The income elasticity of demand for education is 3.5. Thus, a 6% decrease in income
will
A) decrease the quantity of education demanded by 3.5%.
B) decrease the quantity of education demanded by 21%.
C) increase the quantity of education demanded by 6%.
D) increase the quantity of education demanded by 21%.
Your employer pays for your cell phone. The monetary value of this cell phone payment
is
A) included in your economic income, but not your money income.
B) not included in your economic income, but included in your money income.
C) not included in either economic income or money income.
D) included in both economic and money income.
A monopolistically competitive firm maximizes profits where
A) marginal revenue equals price.
B) its marginal revenue curve lies above its demand curve.
C) its marginal revenue curve intersects the quantity axis.
D) marginal revenue equals marginal cost.
Figure 15.3
Refer to Figure 15.3. Gwen’s Country Curtains is currently manufacturing 1,000 pairs
of curtains per month. This firm
A) should reduce the number of pairs of curtains it manufacturers to maximize profit.
B) should increase the number of pairs of curtains it manufacturers to maximize profit.
C) should continue to produce 1,000 pairs of curtains; it is already maximizing profits.
D) could increase profits by either increasing or decreasing the number of pairs of
curtains it manufactures.
________ looks to relative factor endowments to explain trade flows.
A) The Heckscher-Ohlin theorem
B) Ockham’s razor
C) Say’s law
D) The Sherman Antitrust Act
Figure 3.17
Refer to Figure 3.17. At a quantity demanded of 750, there is an excess
A) demand of 450 sunglasses if the price is $60.
B) demand of 450 sunglasses if the price is $30.
C) demand of 300 sunglasses if the price is $60.
D) supply of 300 sunglasses if the price is $30.
Figure 19.1
Refer to Figure 19.1. Prior to the imposition of the payroll tax, this labor market
________ at a wage of $7.00 and employment of 800 workers.
A) was employing too many workers
B) was in equilibrium
C) was employing too few workers
D) was paying too high a wage rate
Which of the following is a positive question?
A) Will the level of teenage unemployment increase if the minimum wage is increased?
B) Should the minimum wage be set at one-half the average manufacturing wage to
guarantee individuals a decent standard of living?
C) Wouldn’t it be more equitable if the minimum wage increased automatically with the
cost of living?
D) Wouldn’t it be better to try to increase people’s wages through job-training programs
rather than by requiring employers to pay minimum wages?
The MEI (marginal efficiency investment) curve is the demand for investment.
Figure 1
Refer to Figure 11.1. If the market rate of interest is 8%, this firm’s investment will total
A) $5,000.
B) $7,000.
C) $12,000.
D) $15,000.
Figure 20.1
Refer to Figure 20.1. Which of the following statements is true?
A) Only Canada can benefit from trade.
B) Only the United States will benefit from trade.
C) Trade will benefit both countries.
D) Trade will benefit neither country.
The theory of distributional justice was developed by ________.
A) John Stuart Mill
B) John Rawls
C) Karl Marx
D) Jeremy Bentham
The idea that consumers determine what is produced in the economy through their
demands is known as
A) a laissez-faire economy.
B) a command economy.
C) consumer sovereignty.
D) free enterprise.
Regardless of industry structure, the profit-maximizing level for all firms is the output
level where
A) TR = MC.
B) P = MC.
C) ATC = P.
D) MC = MR.
If there is a decrease in industry supply while the industry demand curve remains the
same, then an individual firm in a perfectly competitive industry currently earning
losses will see its losses ________.
A) increase
B) not change
C) decrease
D) impossible to determine
In a(n) ________ industry, firms are small relative to the total market.
A) monopolistic
B) monopolistically competitive
C) oligopolistic
D) Both B and C are correct.
Air pollution generated by a steel mill is an example of
A) a positive production externality.
B) a negative production externality.
C) a public good.
D) the free-rider problem.
The many types of pollution do NOT include ________ pollution.
A) air
B) price
C) water
D) sound
The two most important forms of capital income are
A) rents and profits.
B) investments and rents.
C) dividends and depreciation.
D) interest and profits.
Consumer sovereignty
A) is dependent on profits.
B) is the idea that consumers can buy whatever they want to.
C) is the idea that consumers determine what is produced in the economy through their
demands.
D) is only possible in a monarchy.
If the product derived from the last dollar spent on labor is greater than the product
derived from the last dollar spent on capital, then the firm should
A) make no changes since it is minimizing costs.
B) use more labor and less capital to minimize costs.
C) use less labor and more capital to minimize costs.
D) increase the price paid to labor and decrease the price paid to capital to minimize
costs.
Related to the Economics in Practice on page 10: A study on the effect of roommates on
college grades found that there were strong roommate effects on grade point average,
effort in school, and fraternity membership. Which of the following is an example of a
normative statement concerning this study?
A) The effects of roommates on grade point average are strong.
B) The effects of roommates on effort in school are strong.
C) The effects of roommates on fraternity membership are strong.
D) In order to maintain a high grade point average, students should only choose
roommates who have a high grade point average.
Price and total revenue move in the same direction when demand is
A) price elastic.
B) price inelastic.
C) unit price elastic.
D) perfectly price elastic.
Figure 14.7
Refer to Figure 14.7. Four chewing gum producing firms form a cartel. The firms have
identical cost structures. If the cartel produces the profit-maximizing output level, each
firm should produce
A) 3,000 packs of chewing gum.
B) 4,000 packs of chewing gum.
C) 12,000 packs of chewing gum.
D) indeterminate output levels from this information.
Suppose that you rent a house next to a factory. The factory legally emits a chemical
into the air that smells like feet. You now have to spend $300 more per month on air
fresheners because the firm pollutes the air. You could move to another house far
enough away from the factory, but the rent for that house is $200 more than you now
pay. The efficient solution to this problem is that
A) the factory owner should compensate you $300 so that you can pay for the
additional expenses you incur.
B) you should move to the new house because the additional rent on that new house is
less than the additional expenses you incur from living next to the factory.
C) the factory owner should reimburse you $100, the difference between your expenses
and the higher rent on the new house.
D) the firm should be able to continue to pollute because only one person is being
harmed by the factory’s pollution.
If a firm’s economic profit is $0, then it must be true that
A) TR equals TC.
B) TR equals TVC.
C) TR equals TFC.
D) TFC is zero.
Which of the following taxes is most easily shifted?
A) an income tax that allows for no deductions of exemptions
B) a retail sales tax
C) a uniform tax on land
D) a tax on imported rice
Figure 16.4
Refer to Figure 16.4. At 15 units of output, there are external ________ per unit.
A) costs of $0
B) benefits of $2
C) costs of $6
D) benefits of $8
Figure 2.3
Refer to Figure 2.3. The law of ________ opportunity costs is best depicted by the
production possibilities frontier in panel A.
A) increasing
B) constant
C) decreasing
D) zero
Figure 15.5
Refer to Figure 15.5. Assume The Custom Sweater Shop has fixed costs of $500 and is
a monopolistically competitive firm. If the firm produces the profit-maximizing level of
output and sells it at the profit-maximizing price, the firm ________ of $400.
A) suffers a loss
B) earns a profit
C) has total revenue
D) has total cost
In 2009, the highest incidence of poverty was
A) women living in households with no husband present.
B) individuals over 65.
C) Hispanic families.
D) black men.
In college you could barely afford to dine in restaurants. Now you earn $80,000 a year
and dine out at least three times per week. We can safely conclude that you consider
restaurant meals to be a(n)
A) normal good.
B) inferior good.
C) substitute good.
D) complementary good.
Figure 9.1
Refer to Figure 9.1. This farmer’s shutdown point is at a price of
A) $0.
B) $4.
C) $7.
D) $10.
Give an example where individuals “vote with their feet” in choosing among bundles of
public goods and tax rates.
What is a bond?
Wally’s Widgets currently hires 8 workers. The average product of labor is 15 widgets
per day, and the marginal product of a 9th worker is expected to be 13 widgets per day.
If the firm hires the 9th worker, what will happen to the average product of labor?
Explain.
Explain the two reasons why the United States Social Security payroll tax is regressive.
Could the payroll tax be made a progressive tax? Why or why not?
If ration coupons are used to determine who gets the products available, what happens
if the government allows individuals to trade them?
What is meant by the marginal rate of transformation?
What does the elasticity of supply measure? How is it calculated?
What decision must be made by firms with market power that is not made by firms
which operate in perfectly competitive markets? Explain.
Why cannot firms leave the industry in the short run?
What types of things are sold in input or factor markets? Who are the buyers and
sellers in these markets?
The graph below reflects the market for tickets to a movie theater in a small
Midwestern town. Using the graph, show what happens if the price of a movie rental at
the local video rental store rises. What happens to the equilibrium price and quantity?
What is an imperfectly competitive industry?
Assume a desert island economy in which labor is the only scarce resource and labor
can be used to gather food (coconuts) or to build huts. There are six equally productive
individuals on the island. Each inhabitant can gather 25 coconuts in one day or build
one hut in one day.
If half the workers build huts and half of the workers gather
coconuts, what would be the production on the island?
Define tax incidence.
Comment on the following statement: “Taxes on externality-producing activities are
generally used to eliminate externalities.”
The following table shows output per hour for Martha and Stewart who make gift
baskets and potholders:
What is the opportunity cost of a gift basket for Martha? What is the opportunity cost of
a gift basket for Stewart? Who has a comparative advantage in producing gift baskets?
How can you tell?
Frank’s Burgers employs workers in a competitive market. It currently has 15
employees. The marginal revenue product of the 15th worker hired is $8.50 per hour.
The market equilibrium wage is $10 per hour. Is this firm maximizing profit? Explain.
Explain how the market demand curve can be derived. Does the law of demand
apply to the market demand curve?