Arnie Ziffel has $20 per week to spend on any combination of pineapples and green tea.
The price of a pineapple is $4 and the price of a bottle of green tea is $2. The table
below shows Arnie’s utility values. Use the table to answer the questions that follow the
table.
a. Complete the table by filling in the blank spaces.
b. Suppose Arnold purchases 4 pineapples and 2 bottles of green tea. Is he consuming
the optimal consumption bundle? If so, explain why. If not, what combination should he
buy and why?
Monopolistically competitive firms can differentiate their products
A) by producing at minimum efficient scale.
B) by producing where marginal revenue equals marginal cost.
C) by equating price and average total cost.
D) through marketing.
Which of the following is true for a monopolistically competitive firm in long-run
equilibrium?
A) P = ATC and MR = MC.
B) P = ATC and P = MC.
C) P > ATC and P > MR.
D) P > MR and MC = ATC.
Assuming zero transactions costs, if your local grocer buys oranges at a low price from
an orchard and resells them to you at a higher price, then the grocer’s revenue minus
costs is known as
A) arbitrage profits.
B) transactions profits.
C) pure profits.
D) excess profits.
Which of the following is a characteristic of stock?
A) Stock represents a promise to repay a fixed amount of funds.
B) The face value or principal plus interest is repaid at a specified period of time.
C) The length of coupon payments is fixed by the stated maturity period.
D) Stock represents ownership in a firm.
A sequential game can be used to analyze whether a retail firm should build a large
store or a small store in a city, when the correct choice depends on whether a competing
firm will build a new store in the same city. Which of the following is used to analyze
this type of decision?
A) a decision tree
B) a decision matrix
C) a sequential matrix
D) an either-or graph
Figure 11-2
Refer to Figure 11-2. The curve labeled “F” is
A) the total product curve.
B) the average product curve.
C) the marginal product curve.
D) the output supply curve.
Suppose a tax equal to the value of the marginal external cost at the optimal output is
imposed on a pollution generating good. All of the following will result from the tax
except
A) an increase in the equilibrium market price.
B) a decrease in the equilibrium quantity produced and consumed.
C) a decrease in market supply of the good.
D) an increase in demand for the good.
For a perfectly competitive firm, which of the following is not true at profit
maximization?
A) Market price is greater than marginal cost.
B) Marginal revenue equals marginal cost.
C) Total revenue minus total cost is maximized.
D) Price equals marginal cost.
Table 9-6
Production and
Consumption Production
Without Trade With Trade
Denmark and Belize can produce both clocks and hats. Table 9-6 shows the production
and consumption quantities without trade, and the production numbers with trade.
Refer to Table 9-6. All of the following are terms of trade that could possibly benefit
both countries except
A) 1/5 of a hat : 1 clock
B) 1/3 of a hat : 1 clock
C) 1/2 of a hat : 1 clock
D) 3/4 of a hat : 1 clock
When the price of tortilla chips rose by 10 percent, the quantity of tortilla chips sold fell
4 percent, and the sale of dips (like salsa and bean dip) fell 8 percent. This set of facts
indicates that the cross-price elasticity between tortilla chips and dips is ________, so
the two are ________.
A) 0.8; substitutes
B) -0.4; complements
C) -0.8; complements
D) 4; substitutes
A supply schedule
A) is a table that shows the relationship between the price of a product and the quantity
of the product supplied.
B) is a curve that shows the relationship between the price of a product and the quantity
of the product supplied.
C) is the relationship between the supply of a product and the cost of producing the
product.
D) is a table that shows the relationship between the price of a product and the quantity
of the product that producers and consumers are willing to exchange.
If at a price of $24, Octavia sells 36 home-grown orchids and at $30 she sells 24
home-grown orchids, the demand for her orchids is
A) elastic.
B) inelastic.
C) unit elastic.
D) perfectly elastic.
Figure 11-5
Refer to Figure 11-5. Curve G approaches curveF because
A) marginal cost is above average variable costs.
B) average fixed cost falls as output rises.
C) fixed cost falls as capacity rises.
D) total cost falls as more and more is produced.
As a group, people with high incomes are likely to have
A) greater-than-average family inheritances and greater than average SAT scores.
B) greater-than-average holdings of stocks and bonds and lower-than-average
productivity.
C) greater-than-average productivity and greater-than-average amounts of capital.
D) a stable marriage and no children.
What are liabilities?
A) anything of value owned by a person or a business
B) anything a person or a business owes to entities outside the business
C) the total cost of labor for a firm
D) only those unpaid expenses for which a business or person is making interest
payments
The term “derived demand” refers to
A) the demand for financial products called derivatives.
B) the demand for a factor of production that is derived from the demand for the good
the factor produces.
C) a firm’s estimated demand curve derived from sales data.
D) a demand curve that derives from the availability of resources.
The collection and analysis of massive amounts of data, with the goal of measuring
aspects of people’s behavior is referred to as
A) marginal utility.
B) big data.
C) mega processing.
D) the Internet of Things.
Figure 4-4
Refer to Figure 4-4. The figure above represents the market for pecans. Assume that
this is a competitive market. If the price of pecans is $9
A) economic surplus is maximized.
B) too many consumers want to buy pecans.
C) the quantity supplied is greater than the economically efficient quantity.
D) the quantity demanded is economically efficient but the quantity supplied is
economically inefficient.
Figure 13-13
Refer to Figure 13-13. If the diagram represents a typical firm in the market, what is
likely to happen to its average cost of production in the long run?
A) It will probably fall since the firm must be cost efficient to remain competitive.
B) It will probably fall since the firm will be selling less than its current amount.
C) It will probably rise since the firm will be producing less than its current amount.
D) It will probably rise since its long-run demand is likely to be higher.
Which of the following is not a shortcoming of the concentration ratio as a measure of
the extent of competition in an industry?
A) Concentration ratios do not include sales in the United States by foreign firms.
B) Concentration ratios are calculated for the national market, even though the
competition in some industries is mainly local.
C) Concentration ratios assign weights to only the four largest firms in an industry.
D) Concentration ratios do not address the fact that competition sometimes exists
between firms in different industries.
If the price of milk was $2.50 a gallon and it is now $3.25 a gallon, what is the
percentage change in price?
A) 13 percent
B) 30 percent
C) 75 percent
D) 77 percent
Which of the following pricing strategies allows a firm to earn economic profit?
A) price discrimination
B) charging a price equal to marginal cost
C) charging a price equal to the average total cost of production
D) charging a price equal to the average variable cost of production
Figure 10-1
Refer to Figure 10-1. When the price of hoagies increases from $5.00 to $5.75,
quantity demanded decreases from Q1 to Q0. This change in quantity demanded is due
to
A) the price and output effects.
B) the income and substitution effects.
C) the fact that marginal willingness to pay falls.
D) the law of diminishing marginal utility.
Suppose the demand curve for a product is represented by a typical downward-sloping
curve. Now suppose the demand for this product increases. Which of the following
statements accurately predicts the resulting increase in price?
A) The more elastic the supply curve, the greater the price increase.
B) The more elastic the supply curve, the smaller the price increase.
C) The increase in price is not affected by the elasticity of the supply curve.
D) There will be no increase in price if the supply curve is perfectly inelastic.
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
competitive price. (This is also called an optimal two-part tariff.) What is the value of
the consumer surplus from this pricing strategy?
A) $2,560
B) $5,760
C) $7,870
D) 0
If a restaurant like Buffalo Wild Wings has higher costs than a comparable Hooters
restaurant, the only way it can have higher profits is if
A) it has more locations than Hooters.
B) its marginal revenue is lower than the marginal revenue of Hooters.
C) the demand for its food is higher than the demand for food at Hooters.
D) it sells the quantity associated with its minimum average total cost.
Consider a firm that uses two inputs, labor and capital, to produce its output. Assume
labor is measured on the horizontal axis and capital on the vertical axis. Which of the
following best explains why the marginal rate of technical substitution decreases in
absolute value as we move down an isoquant?
A) The law of diminishing returns: for a given decline in capital, decreasing amounts of
labor are required to produce the same level of output.
B) The law of increasing marginal opportunity cost: if a firm uses less and less capital it
must use more and more labor, which drives up the cost of labor.
C) The law of diminishing returns: for a given decline in capital, increasing amounts of
labor are required to produce the same level of output.
D) The law of imperfect substitutability: labor and capital are not perfect substitutes;
therefore, a firm must replace decreases in capital with increases in labor.
If the United States and other developed nations pay the cost of reducing public
emissions, developing nations such as China could benefit from the reduction while not
contributing to it. In this sense, one can think of reducing carbon emissions as being
like a
A) public good.
B) private good.
C) quasi-private good.
D) quasi-public good.
Figure 2-8
Figure 2-8 above shows the production possibilities frontier for Vidalia, a nation that
produces two goods, roses and orchids.
Refer to Figure 2-8. What is the opportunity cost of 100 dozen roses?
A) 8 dozen orchids
B) 5 dozen orchids
C) 40 dozen orchids
D) 80 dozen orchids