If at a given quantity _____, the decision maker should do _____ of the activity.
A) MB < MC; that amount
B) MB < MC; less
C) MB > MC; less
D) MB > MC; none
(Table: Alaina’s Utility from Consuming Cups of Coffee) Look at the table Alaina’s
Utility from Consuming Cups of Coffee. Diminishing marginal utility:
A) is not present in Alaina’s consumption of coffee, since her total utility keeps
increasing.
B) is present in Alaina’s consumption of coffee, since her total utility increases at a
decreasing rate with each cup consumed.
C) is equal to zero.
D) is not present, since Alaina exhibits increasing marginal utility.
An advantage of employment-based insurance is that it:
A) reduces moral hazard.
B) helps reduce the problem of adverse selection.
C) increases government tax revenues.
D) guarantees better care than is provided by government insurance such as Medicare.
Consumers buy both alcoholic and nonalcoholic beverages. If the government tries to
discourage people from drinking alcoholic beverages by imposing an excise tax on
them but gives consumers an income subsidy to keep the consumers on their original
indifference curves:
A) the same amount of both goods will be consumed.
B) fewer alcoholic and more nonalcoholic beverages will be consumed.
C) more alcoholic and fewer nonalcoholic beverages will be consumed.
D) it is impossible to determine what will happen to the consumption of alcoholic and
more nonalcoholic beverages.
When Aishe’s Bar-B-Que produces 10 pork sandwiches, the total cost is $5. When 11
pork sandwiches are produced, the total cost rises to $6. From this we know that the
marginal cost of the eleventh pork sandwich:
A) is equal to the average cost of 11 pork sandwiches.
B) is greater than the average cost of 11 pork sandwiches.
C) is less than the average cost of 11 pork sandwiches.
D) can’t be calculated without more information.
(Table: Cost Data) Look at the table Cost Data. The average variable cost of producing
2 purses is:
A) $190.
B) $70.
C) $50.
D) $35.
Figure: The Demand and Supply of Wheat
(Figure: The Demand and Supply of Wheat) Look at the figure The Demand and
Supply of Wheat. If there is an increase in demand of 2,000 bushels at each price, the
equilibrium price and quantity will be _____ and _____ bushels, respectively.
A) $5; 5,000
B) $6; 7,000
C) $7; 7,000
D) $8; 8,000
(Table: Optimal Choice of Milk and Honey) Look at the table Optimal Choice of Milk
and Honey. The price of milk is $2 per gallon, and the price of honey is $4 per jar. Hal’s
income is $16. Assuming that Hal spends all of his income on honey and milk, the
combination of milk and honey that will maximize his total utility is _____ jars of
honey and _____ gallons of milk.
A) 8; 8
B) 3; 2
C) 2; 4
D) 1; 6
A maximum price legislated by the government is called:
A) a price support.
B) a price floor.
C) a price ceiling.
D) the parity price.
Figure: PPV
(Figure: PPV) Look at the figure PPV, which shows the demand and marginal revenue
for a pay-per-view football game on cable TV. Assume that the marginal cost and
average cost are a constant $20. If the cable company is a monopoly, how much is
consumer surplus when the monopolist maximizes profit?
A) $20
B) $40
C) $80
D) $160
Egg producers know that the elasticity of demand for eggs is 0.1. If they want to
increase sales by 5%, they will have to lower price by:
A) 0.1%.
B) 1%.
C) 5%.
D) 50%.
The United States and the European Union impose price floors on many agricultural
products. These price floors lead to unwanted surpluses. To deal with a surplus:
A) the U.S. government typically pays farmers to produce as much as possible.
B) the U.S. government in some cases has destroyed the surplus production.
C) the European Union pays farm exporters to sell products for a profit overseas.
D) the U.S. government holds auctions to sell the surplus to the highest bidder.
When a decision maker chooses the option leading to the outcome that he or she most
prefers, he or she has made a _____ decision.
A) irrational
B) rational
C) profit-maximizing
D) loss-minimizing
Suppose Mike wants to pay efficiency wages to help in the construction of his beach
home. If the prevailing wage rate for electricians is $22 per hour in his area, he will
probably pay:
A) $22.
B) $26.
C) $18.
D) the minimum wage.
The consumption of a(n) _____ good increases when income decreases.
A) substitute
B) complementary
C) normal
D) inferior
The basic concern of microeconomics is:
A) to keep business firms from losing money.
B) to prove that capitalism is better than socialism.
C) to study the choices people make.
D) to use unlimited resources to produce goods and services to satisfy limited wants.
(Table: Hours Studied and
Quiz Score) Look at the table Hours Studied and Quiz Score. The table shows data for
students in an economics class. If we were to graph these data and draw a line through
the points, we would choose ______ to be the independent variable; the vertical
intercept of our line would be ______; and the slope of our line would be ______.
A) quiz score; y = 2; “2
B) quiz score; x = 0; “2
C) hours studied; y = 0; +2
D) hours studied; y = 2; +2
Which of the following is sold in the factor market?
A) hamburgers
B) video games
C) haircuts
D) labor
Kaile Cakes produces 10 cakes per day. The marginal cost of the tenth cake is $24, and
average total cost of 10 cakes is $6. The average total cost of 9 cakes is:
A) $4.
B) $5.
C) $6.
D) $8.
Assume that diminishing marginal utility applies to both dish soap and floor wax and
that Minh is spending all of her income. If Minh purchases a combination of dish soap
and floor wax such that MUDishsoap / PDishsoap = 50 and MUFloorwax / PFloorwax = 30, to
maximize utility, Minh should buy _____ soap and _____ floor wax.
A) less; less
B) more; more
C) more; less
D) less; more
(Table: Consumer Surplus) Look at the table Consumer Surplus. Assume that each
student wants to buy one ticket. If the price of a ticket to see The Nutty Nutcracker is
$75 and there is no other market for tickets, the total consumer surplus for the five
students is:
A) $190.
B) $125.
C) $40.
D) $0.
Which pair of events is likely to be positively correlated?
A) stock prices of computer companies and of tire companies
B) hurricane damage in Florida and earthquake damage in California
C) sales of ice cream and cars on a hot summer day
D) a week-long power outage due to a large hurricane and battery sales
Suppose government officials have set an emissions tax to reduce pollution. Assume the
optimal tax would be $500 but government officials have set the tax at $900. At the
equilibrium with the $900 tax:
A) there will be too much pollution.
B) the marginal social cost of pollution will be less than $900.
C) the marginal social benefit of pollution will be $900.
D) the marginal social benefit of pollution will be more than $900.
Alison is offered two jobs. One pays $45,000 per year and offers three weeks of
vacation, while the other offer provides two weeks of vacation and a salary of $54,000.
What is the opportunity cost for Alison if she chooses the job offer of $54,000?
A) $45,000 plus the three weeks of vacation
B) $45,000 per year
C) one week of vacation
D) two weeks of vacation
Which of the following statements about opportunity cost is FALSE?
A) Opportunity cost may be larger than monetary cost.
B) Opportunity cost includes both explicit and implicit costs.
C) The real or opportunity cost of something is what you must give up to get it.
D) Opportunity cost is synonymous with explicit cost.
(Table: Demand for Lenny’s Coffee) Look at the table Demand for Lenny’s Coffee.
Lenny’s Café is the only source of coffee for hundreds of miles in any direction. If
Lenny increases the quantity sold from five cups to six, his marginal revenue will be:
A) $4.
B) $24.
C) “$1.
D) $5.