Figure 5.1
Refer to Figure 6.1. Assume Tom is on budget constraint AC and the price of a hot dog
is $2.50. Tom’s monthly income is
A) $16.
B) $50.
C) $80.
D) $100.
For a monopolist to sell more units of output,
A) the price must be increased.
B) the price must be reduced.
C) demand must become more elastic.
D) the other competing firms must sell fewer units.
Related to the Economics in Practice on page 5: According to the Economics in
Practice, a majority of the $10 retail value of the Barbie doll
A) is needed to pay for the cost of the Taiwanese plastic used to make the dolls.
B) pays for the Chinese labor used to assemble the doll.
C) is captured in the United States.
D) goes to the Japanese manufacturer of the hair which is used for the dolls.
One reason to require medical practitioners to be licensed is that
A) medical care involves substantial externalities.
B) medical care is so expensive.
C) medical care is a public good.
D) medical care consumers lack perfect information.
In a centrally planned economy,
A) unemployment has always been very widespread.
B) wages tend to be exceptionally high for low-skill jobs and low for high-skill jobs.
C) the labor market does not function freely and there is essentially no such thing as
unemployment.
D) laborers have remained unemployed because of technology displacement.
Table 8.2
Refer to Table 8.2. If Danica produces four pairs of earrings, her average fixed costs are
A) $2.
B) $10.
C) $12.50.
D) $50.
Double taxation of saving may
A) reduce the saving rate.
B) increase the rate of investment.
C) increase the rate of economic growth.
D) increase the budget deficit.
Table 20.1
Refer to Table 20.1. In Guatemala, the opportunity cost of 1 bushel of bananas is
A) 1/2 bushel of oranges.
B) 1 bushels of oranges.
C) 2 bushel of oranges.
D) 4 bushels of oranges.
A tax on imports is a(n)
A) import quota.
B) tariff.
C) voluntary import restriction.
D) quality barrier.
If the marginal revenue product of land is greater than its price, a firm should
A) use more land.
B) use less land.
C) try to decrease the productivity of land.
D) decrease the price it is willing to pay for land.
With microfinance, the mechanism of ________ is a way to avoid the problem of
imperfect information.
A) requiring no collateral
B) peer lending
C) making only small loans
D) accepting savings deposits
Figure 7.4
Refer to Figure 7.4. The average product of four workers is
A) 2.
B) 12.5.
C) 20.
D) 34.
The Latin phrase economists use that means all else equal is
A) ceteris paribus.
B) cogito ergo sum.
C) carpe diem.
D) caveat emptor.
Figure 12.1
Refer to Figure 12.1. The firm is
A) equally efficient when it produces at points A and B.
B) more efficient when it produces at point A than at point B.
C) more efficient when it produces at point B than at point A.
D) producing at least possible cost anywhere along the given ATC curve.
The marginal cost curve intersects the ________ at its minimum.
A) average variable cost curve
B) average total cost curve
C) average fixed cost curve
D) A and B are both correct.
Ameritech® has a monopoly over local telephone service. If Ameritech® is producing
where marginal revenue is less than marginal cost, the firm
A) could increase profits by reducing output.
B) could increase profits by increasing output.
C) is maximizing profits.
D) must be earning a zero profit.
Which of the following statements is false?
A) An income tax taxes savings twice only if consumption is the measure used to gauge
a person’s ability to pay.
B) Proponents of income as a tax base argue that you should not be taxed on what you
draw out of the common pot, but rather on the basis of your ability to draw from the
pot.
C) The double taxation of saving tends to increase the saving rate because people have
to save more to keep the after-tax yield constant.
D) At this time, there is not clear consensus on what the best tax base is.
The Coase theorem will apply only if
A) the courts can be used to determine the amount of compensation that must be made
to the damaged party.
B) the amount of compensation that must be made to the damaged party is small.
C) the number of people involved is small.
D) an individual who is not affected by the externality can negotiate a settlement
between the parties imposing the externality and the parties that are harmed by the
externality.
Assume that capital and labor are complementary inputs. If the firm increases the
amount of capital it employs, this would
A) cause the firm to move down along the MP schedule for labor.
B) cause the firm to move up along its MP schedule for labor.
C) shift the firm’s MP schedule for labor to the left.
D) shift the firm’s MP schedule for labor to the right.
Proponents of income redistribution argue that redistribution ________.
A) increases the welfare of all members of society
B) will not take place absent government intervention as the market for charity, a
private good, is imperfect
C) would be agreed to by all members of society if they were risk-loving and
contracting from the “original position”
D) helps those who, through no fault of their own, are unable to earn an adequate
income
If a firm shuts down in the short run, then
A) its economic profits are zero.
B) its losses are equal to its fixed costs.
C) its fixed costs are greater than its variable costs.
D) its total costs are zero.
Wilbur’s Widgets, a widget company, produces 100 widgets. Its average fixed cost is $6
and its total variable cost is $400. The total cost of producing 100 widgets is
A) $306.
B) $400.
C) $600.
D) $1,000.
If the government used the revenue from the excise tax on alcohol to fund research on
alcoholism treatment programs, this would be an example of
A) an ability-to-pay tax.
B) a benefits-received tax.
C) a vertical equity tax.
D) a user fee.
When the government pays part of my university education, it is
A) internalizing an external cost.
B) using taxes to discourage an external cost.
C) subsidizing an external benefit.
D) using direct regulation to discourage an external cost.
Suppose that you purchased a ticket to a jazz festival for $100 from an online ticket
broker. Once you arrived at the festival, you discovered that parking costs you an
additional $15. In this situation, the additional $15 you pay for parking is an example of
A) an economic loss.
B) opportunity cost.
C) marginal cost.
D) an inefficient cost.
The present discounted value of R dollars to be paid in t years is
A) the future market value of receiving R dollars in t years.
B) equal to R × t years.
C) the amount you have to put aside now if you want to ensure that you end up with R
dollars t years from now.
D) the amount you will have to save in the future to allow you to consume R dollars
today.
Consumer surplus is
A) the difference between the maximum a person is willing to pay and current market
price.
B) the difference between current market price and full costs of production for the firm.
C) the difference between the maximum a person is willing to pay and full costs of
productions for the firm.
D) current market price.
For normal goods, the substitution and income effects of a price increase will do which
of the following?
A) Both will decrease the quantity of the good demanded.
B) Both will increase the quantity of the good demanded.
C) The substitution effect will increase the quantity of the good demanded while the
income effect will decrease the quantity of the good demanded.
D) The substitution effect will decrease the quantity of the good demanded while the
income effect will increase the quantity of the good demanded.
________ is an industry with a single firm in which the entry of new firms is blocked.
A) A monopoly
B) Monopolistic competition
C) An oligopoly
D) Perfect competition
Figure 13.4
Refer to Figure 13.4. This firm’s marginal revenue will be positive at
A) prices above $20.
B) prices above $10.
C) all prices.
D) prices between $4 and $8.
Figure 3.7
Refer to Figure 3.7. If pizza and beer are complementary goods, a decrease in the price
of beer will cause a movement from Point B on demand curve D2 to
A) demand curve D1.
B) demand curve D3.
C) Point A on demand curve D2.
D) Point C on demand curve D2.
In the Cournot model, each firm’s ________ shows the firm’s optimal,
profit-maximizing output given its rival’s output.
A) price leadership decision
B) reaction function
C) collusive response
D) dominant strategy