(Table: Marginal Utility per Dollar of M&Ms) Look at the table Marginal Utility per
Dollar of M&Ms. The price of M&Ms is $2 per bag. If the price of M&Ms decreases to
$1 per bag, the marginal utility per dollar for each bag of M&Ms will:
A) increase.
B) decrease.
C) remain constant.
D) fluctuate randomly.
Price discrimination leads to a _____ price for consumers with a _____ demand.
A) higher; less elastic
B) higher; more elastic
C) higher; perfectly elastic
D) lower; less elastic
An e-book is similar to a published book in that it is _____, but it is also similar to
national defense in that it is _____.
A) rival in consumption; nonexcludable
B) nonrival in consumption; excludable
C) excludable; nonrival in consumption
D) nonexcludable; rival in consumption
Jim is being paid $7.25 an hour to work at a restaurant. In the circular flow this is an
example of a:
A) business selling goods and services in the product market.
B) household buying goods and services in the product market.
C) household buying goods and services in the factor market.
D) household selling a resource in the factor market.
(Table: The Utility of Macaroni and Cheese) Look at the table The Utility of Macaroni
and Cheese. Carmen loves macaroni and cheese for Thanksgiving. The marginal utility
she derives from the second serving she eats is:
A) 35.
B) 15.
C) 10.
D) 5.
If policy makers provide only enough tradable permits to provide efficient use of a
common resource, only those who _____ will use the resource.
A) gain the most
B) initially obtain the permit
C) have the largest market share
D) have monopoly power
You notice that the price of Blu-ray players falls and the quantity of Blu-ray players
sold increases. This set of observations can be the result of the _____ Blu-ray players
shifting to the _____.
A) demand for; right
B) demand for; left
C) supply of; right
D) supply of; left
(Table: Comparative Advantage I) Look at the table Comparative Advantage I. Finland
has an absolute advantage in producing:
A) cell phones only.
B) herring only.
C) both cell phones and herring.
D) neither cell phones nor herring.
In analyzing the impact of a progressive tax system, economists focus on the _____ tax
rate.
A) average
B) opportunity
C) total
D) marginal
Joan loves sushi. Her first piece of sushi normally gives her a marginal benefit of $5.
Each additional piece yields a marginal benefit that declines by $0.25 per piece. If her
favorite sushi bar charges $2.75 per piece of sushi, how many pieces should she eat?
A) 8
B) 10
C) 5
D) 11
Which of the following is a common resource?
A) fish
B) forests
C) a dorm kitchen
D) fish, forests, and a dorm kitchen
Customers used to pay inside before pumping gas. When gas stations introduced paying
at the pump, thus decreasing production costs, there was a shift to the _____ in the
_____ curve and _____ pressure on gas prices _____.
A) right; supply; eased
B) left; supply; increased
C) right; demand; increased
D) left; demand; eased
Suppose the government of the oil-rich country Saudi Arabia sets gasoline prices at
$0.25 per gallon when the market price is $1.50. The Saudi government’s actions will:
A) improve efficiency, since the low prices will force producers to find cheaper
production methods.
B) result in gasoline surpluses even in an oil-rich country.
C) cause gasoline shortages even in an oil-rich country.
D) improve equality between rich and poor, since the poor can now afford gasoline.
How much utility is gained by spending an additional dollar on coffee pots?
A) the average utility of coffee pots divided by the price of coffee pots
B) MUPots / PPots
C) TUPots / PPots
D) MUCoffee / PCoffee
Scenario: Accounting and Economic Profit
Rather than put the $100,000 that his grandmother left him in a mutual fund that earns
5% each year, Tommy Wang quit his job, which paid $60,000 per year, and started
Wang’s Wicker Furniture Store. He rented a showroom for $20,000 for the year,
purchased $60,000 in wicker furniture, and incurred costs of $40,000 for sales help and
advertising. Instead of using the capital for his own business, he could rent it to a rival
firm and earn $5,000 a year. In his first year, his revenue was $150,000.
(Scenario: Accounting and Economic Profit) Look at the scenario Accounting and
Economic Profit. The accounting profit of Wang’s Wicker Furniture Store is:
A) $200,000.
B) $60,000.
C) $30,000.
D) $0.
For most goods, as we move down an indifference curve:
A) the slope gets flatter.
B) the slope gets steeper.
C) the slope stays the same.
D) total utility decreases.
Sometimes healthy people drop their health insurance, leaving only sicker people to buy
insurance. This creates a situation known as:
A) moral hazard.
B) an efficient free market outcome.
C) adverse selection.
D) maximizing profits.
If the market for smartphones is initially in equilibrium at a price of $250 and
consumption is reallocated so that Amanda, who values a phone at $300, is required to
give it to Brent, who values a phone at $225, total surplus in the smartphone market
will increase.
Which of the following countries has a health care system that directly employs health
care workers and runs hospitals and clinics that are free to the public?
A) United States
B) Canada
C) France
D) Great Britain
The price elasticity of a good will tend to be larger:
A) the longer the relevant time.
B) the fewer the number of substitute goods available.
C) if it is a staple or necessity with few substitutes.
D) if the share of income spent on the good is small.
Figure: A Market with a Tax
(Figure: A Market with a Tax) Look at the figure A Market with a Tax. The efficiency
loss resulting from this tax is:
A) (P1 ” P3)Q2.
B) (P1 ” P2)Q1
C) 0.5(P1 ” P3)(Q2 ” Q1).
D) 0.5(P1 ” P3)Q1.
Figure: The Shrimp Market
(Figure: The Shrimp Market) Look at the figure The Shrimp Market. If the government
imposes a quota limiting sales of shrimp to 250 pounds, it will have the same effect on
transactions as a price floor of:
A) $17.50
B) $10
C) $7.50
D) The answer cannot be determined from the information provided.
Britain must give up the production of 75 hats to produce 25 additional sweaters. The
opportunity cost of producing 4 sweaters is _____ hats.
A) 4
B) 12
C) 71
D) 79
Both emissions taxes and tradable emissions permits:
A) are efficient cost-minimizing methods of pollution reduction.
B) work only if they are coupled with environmental standards.
C) encourage more pollution.
D) are usually less effective than environmental standards.
You have hired a student intern to calculate some elasticity measures so that you can
present the findings at a prestigious economics conference. For the measures that
follow, provide a quick interpretation, and then determine whether you should trust the
intern’s work or not. After all, it will be you in front of that critical audience of
professionals, not the intern. A) “The income elasticity of demand for movie theatre
tickets is “1.5.” B) “The price elasticity of demand for milk is 0.4 in the short run and
0.9 in the long run.” C) “The cross-price elasticity of demand for Cheerios with respect
to the price of Wheaties is “2.”
Which of the following taxes is the largest source of government revenue?
A) sales
B) property
C) individual income
D) death
A monopolist responds to a decrease in demand by _____ price and _____ output.
A) increasing; decreasing
B) increasing; increasing
C) decreasing, increasing
D) decreasing; decreasing
Nate and Dylan are brothers. They have to mow the lawn and clean their rooms before
they can go to the high school football game. Nate mows the lawn and Dylan picks up
the rooms, and they make it to the football game on time. This statement best represents
this economic concept:
A) People usually exploit opportunities to make themselves better off.
B) There are gains from trade.
C) Markets usually lead to efficiency.
D) One person’s spending is another person’s income.
Figure: Monopolistic Competition III
(Figure: Monopolistic Competition III) The figure Monopolistic Competition III shows
the demand, marginal revenue, marginal cost, and average total cost curves for Pat’s
Pizza Parlor, a monopolistic competitor in the food-to-go industry. The optimal level of
output for Pat’s Pizza Parlor is _____ and the profit-maximizing price is _____.
A) 350; $3.50
B) 350; $7.00
C) 590; $5.60
D) 500; $5.50