The demand curve for a monopoly is:
A) the MC curve above the AVC curve.
B) the MR curve above the horizontal axis.
C) identical to the MR curve.
D) also the industry demand curve.
Suppose the elasticity of demand for tickets to Broadway shows is 2.0 for men and 0.3
for women. To use price discrimination to increase profits, the producers should charge
lower prices to _____ because their demand is _____.
A) men; elastic
B) men; inelastic
C) women; elastic
D) women; inelastic
Which of the following is an example of a tariff?
A) A regulation specifying that each imported Yamaha motorcycle must meet certain
emission exhaust guidelines.
B) A limit on the total number of Yamaha motorcycles imported from Japan.
C) A tax of 5% of the value of each Yamaha motorcycle imported from Japan.
D) A tax of $250 on each Yamaha motorcycle produced in the United States.
Figure: Illustrating Slope
(Figure: Illustrating Slope) Look at the figure Illustrating Slope. In the graph, line 1
depicts X and Y to be:
A) positively related.
B) nonlinearly related.
C) unrelated.
D) negatively related.
The amount that consumers are willing to pay for the quota limit quantity is the:
A) demand price.
B) supply price.
C) quota rent.
D) price ceiling.
Figure: Firms in Monopolistic Competition
(Figure: Firms in Monopolistic Competition) Look at the figure Firms in Monopolistic
Competition. A long-run equilibrium is illustrated at the profit-maximizing price _____
in panel _____.
A) F; (A)
B) G; (A)
C) H; (B)
D) I; (C)
(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. The price of a power cord is $2, the market wage rate is $20 per hour, and
eight workers are hired. Profit can be maximized by hiring _____ worker(s).
A) one more
B) two more
C) one fewer
D) two fewer
Figure: Y = f(X)
(Figure: Y = f(X) Look at the figure Y = f(X). The slope of the relation between x and y:
A) is positive and constant.
B) is negative and getting steeper.
C) is positive and getting steeper.
D) is positive and getting flatter.
Figure: The Profit-Maximizing Firm in the Short Run
(Figure: The Profit-Maximizing Firm in the Short Run) Look at the figure The
Profit-Maximizing Firm in the Short Run. At q2, ATC is the vertical distance between q2
on the horizontal axis and:
A) curve M.
B) curve N.
C) curve O.
D) P4.
Figure: The Production Possibilities for Two Countries
(Figure: The Production Possibilities for Two Countries) Look at the figure The
Production Possibilities for Two Countries. If Malaysia specializes completely in the
production of the good of its comparative advantage, it will produce:
A) 800 radios.
B) 1,600 radios.
C) 800 tires.
D) 1,200 tires.
If the estimated price elasticity of demand for foreign travel is 4:
A) a 20% decrease in the price of foreign travel will increase quantity demanded by
80%.
B) the demand for foreign travel is inelastic.
C) a 10% increase in the price of foreign travel will increase quantity demanded by
40%.
D) a 20% increase in the price of foreign travel will increase quantity demanded by
80%.
For a public good, the marginal social benefit:
A) equals the sum of the individual marginal benefits for all of the consumers of that
unit.
B) equals the sum of each consumer’s willingness to pay for that unit.
C) is greater than any individual marginal benefit.
D) equals the sum of the individual marginal benefits of all consumers of that unit, or
the sum of each consumer’s willingness to pay for that unit, and it is greater than any
individual marginal benefit.
For a nonrival good like pay-per-view television programs, the private market will lead
to:
A) production of too much of the good.
B) consumption of too much of the good.
C) consumption of too little of the good.
D) outsourcing its production.
Figure: Long-Run Average Cost
(Figure: Long-Run Average Cost) Look at the figure Long-Run Average Cost. This firm
has _____ in the output region from 0 to A.
A) diseconomies of scale
B) constant returns to scale
C) economies of scale
D) negative costs of production
Scenario: Buying Shares
Geordie is considering buying shares in two companies, Apple and Microsoft. If he
invests $1,000 in Apple, there is a 40% probability that his investment will be worth
only $800 and a 60% probability that it will be worth $1,200 at the end of a year. If he
invests $500 in Apple, there is a 40% probability that his investment will be worth $400
and a 60% probability that it will be worth $600 at the end of a year. The corresponding
numbers for investment in Microsoft are identical.
(Scenario: Buying Shares) Look at the scenario Buying Shares. The probability that
Geordie will sustain a loss (i.e., that his investment at the end of the year will be worth
less than $1,000) is _____ if he invests $1,000 in either Apple or Microsoft and is
_____ if he invests $500 apiece in Apple and in Microsoft.
A) 40%; 40%
B) 40%; 16%
C) 80%; 20%
D) 40%; 80%
If the marginal cost curve is upward-sloping, as output increases, marginal costs will:
A) increase.
B) decrease.
C) stay constant.
D) become downward-sloping.
In the long run, monopolistically competitive firms tend to have:
A) high economic profits.
B) zero economic profits.
C) negative economic profits.
D) substantial economic losses.
Which of the following programs provides in-kind transfers?
A) the Earned Income Tax Credit
B) Temporary Assistance for Needy Families
C) Social Security
D) Medicaid
Figure: The Wireless Mouse Market
(Figure: Wireless Mouse Market) Look at the figure Wireless Mouse Market. Calculate
the change in producer surplus when the price increases from $10 to $15.
A) $250
B) $1,000
C) $625
D) $1,125
A monopolist responds to an increase in demand by _____ price and _____ output.
A) increasing; decreasing
B) increasing; increasing
C) decreasing; increasing
D) decreasing; decreasing
When markets don’t achieve efficiency:
A) they must achieve equity.
B) government must be participating in the market.
C) government may intervene to improve society’s welfare.
D) they should be closed.
Figure: The Market for Gas Stations
(Figure: The Market for Gas Stations) Look at the figure The Market for Gas Stations.
Assume that the market for gas stations is characterized by many firms, differentiated
products, easy entry, and easy exit. The typical gas station will maximize profits at a
quantity of:
A) Q1.
B) Q2.
C) Q3.
D) Not enough information is given to answer the question.
If the state government allocates additional spending on education, the opportunity cost
is:
A) zero.
B) the dollar amount of the additional spending.
C) considered only if taxes have to be raised to fund the spending.
D) measured in terms of the best alternative uses for that money.
In the market for corn tortilla chips, what would cause a price increase?
A) Doctors tell their patients that tortilla chips are unhealthy.
B) There is a technological advance in tortilla chip production.
C) A fungus kills much of the corn crop in Nebraska.
D) The price of salsa triples.
(Table: Demand for Solar Water Heaters) Look at the table Demand for Solar Water
Heaters. The marginal cost of producing solar water heaters is zero, and only two firms,
Rheem and Calefi, produce them. Suppose they agree to produce only 25 water heaters
each. By how much does Rheem’s profit rise if it cheats on the agreement and produces
30 water heaters?
A) $3,000
B) $2,700
C) $2,000
D) $5,000
Table: The Market for Taxi Rides
(Table: The Market for Taxi Rides) Look at the table The Market for Taxi Rides. If a
government quota limit at 9 million rides is imposed, the quota rent that will accrue to
the owner of a taxi medallion will be _____ per ride, but there will be a total missed
opportunity (inefficiency) to consumers and producers of _____ million rides.
A) $1; 1
B) $2; 2
C) $3; 3
D) $4; 4
Figure: The Production Possibility Frontiers for Jackson and Tahoe
(Figure: The Production Possibility Frontiers for Jackson and Tahoe) Look at the figure
The Production Possibility Frontiers for Jackson and Tahoe. In autarky, Jackson
produces and consumes 30 head of cattle and 80 bushels of wheat, while Tahoe
produces and consumes 80 head of cattle and 60 bushels of wheat. If both nations
specialize completely in the good of their comparative advantage and Jackson exports
120 bushels of wheat to Tahoe in exchange for 60 head of cattle, then the new
consumption point for Jackson after trade is _____ bushels of wheat and _____ head of
cattle.
A) 120; 30
B) 120; 60
C) 80; 60
D) 200; 100
A definition of poverty that compares the individual’s level of income with that of other
individuals in the country:
A) is an absolute measure.
B) would show that poverty has remained constant in the United States for the past 50
years.
C) is a relative measure.
D) is a relatively little used measure.
(Table: Johnson’s Income and Expenditures) Look at the table Johnson’s Income and
Expenditures. By the midpoint method, Johnson’s income elasticity of demand for
movies is:
A) infinite.
B) 1.
C) 0.
D) “1.
Figure and Table: The Changing Slope of an Indifference Curve
(Figure and Table: The Changing Slope of an Indifference Curve) Look at the figure
and table The Changing Slope of an Indifference Curve. The slope between points W
and X is:
A) 5.
B) “5.
C) 0.2.
D) “0.2.