In an oligopolistic industry where the oligopolists collude, the price firms charge would
be ________, and the quantity they produce would be ________, if the industry were a
monopoly.
A) higher than; higher than
B) lower than; lower than
C) the same as; the same as
D) higher than; lower than
The less time that elapses, the
A) less price elastic is the demand for the product.
B) more price elastic is the demand for the product.
C) greater the income elasticity of demand for a product.
D) smaller the income elasticity of demand for the product.
Monopolies can earn positive economic profits in the long run while monopolistically
competitive firms cannot due to
A) economies of scale in monopolies but not in monopolistic competition.
B) barriers to entry in monopoly but not in monopolistic competition.
C) market power of monopolies while monopolistically competitive firms have no
market power.
D) the less elastic demand faced by monopolies as compared to monopolistically
competitive firms.
The slope of a vertical line is
A) negative.
B) zero.
C) continually changing.
D) infinite.
To get a profit maximizing firm in a perfectly competitive labor market to hire another
worker, the firm will need to
A) lower the wage rate paid to that last worker hired and also to all previous workers
hired.
B) raise the wage rate paid to that last worker hired and also to all previous workers
hired.
C) lower the wage rate paid to the last worker hired only.
D) raise the wage rate paid to the last worker hired only.
Related to the Economics in Practice on page 72: One explanation for the increase in
the price of the Baltimore newspaper is the new, increased regard the citizens of
Baltimore have for newspapers. This would cause the ________ Baltimore newspapers
to ________.
A) demand for; increase
B) quantity demanded of; increase
C) demand for; decrease
D) quantity demanded of; decrease
Figure 8.4
Refer to Figure 8.4. If two microwave ovens are produced, Micro Oven’s total variable
costs are
A) $350.
B) $500.
C) $850.
D) indeterminate from this information.
________ is an industry market structure with many firms, each able to differentiate
their products.
A) A monopoly
B) An oligopoly
C) Monopolistic competition
D) Perfect competition
A lawn service company has the following production possibilities. With one, two,
three, and four workers, the company can mow 4, 9, 12, and 14 lawns per day,
respectively.
The marginal product of the second worker is
A) 3
B) 4
C) 5
D) 9
If Russia has a comparative advantage in the production of wheat and China has a
comparative advantage in the production of textiles, then
A) neither country has anything to gain from specialization and trade.
B) it is reasonable to expect that specialization will benefit both countries, but trade will
not.
C) it is reasonable to expect that specialization and trade will benefit both countries.
D) it is reasonable to expect that trade will benefit both countries, but specialization will
not.
Table 8.1
Refer to Table 8.1. Assuming the price of capital (K) is $10 per unit and the price of
labor (L) is $5 per unit, what production technique should this firm use to produce 2
units of output?
A) production technique A
B) production technique B
C) The firm is indifferent between production technique A and production technique B.
D) It is impossible to determine if the firm should select production technique A or B
because total fixed costs are not given.
Figure 6.6
Refer to Figure 6.6. Bill’s budget constraint is CD. If the price of bell peppers increases,
Bill’s new budget constraint is
A) AD.
B) AO.
C) BE.
D) EF.
Figure 13.3
Refer to Figure 13.3. The firm’s ________ will be maximized at a price of $5.
A) profit
B) marginal revenue
C) total revenue
D) marginal cost
Figure 3.10
Refer to Figure 3.10. If the current quantity demanded of rollerblades is 150 per week,
you accurately predict that in this market,
A) price and quantity supplied will increase, and quantity demanded will decrease.
B) price and quantity supplied will decrease, and quantity demanded will increase.
C) price, quantity supplied, and quantity demanded will increase.
D) price, quantity supplied, and quantity demanded will decrease.
You are the owner and only employee of a company that sets odds for sporting events.
Last year you earned a total revenue of $100,000. Your costs for rent and supplies were
$50,000. To start this business you invested an amount of your own capital that could
pay you a return of $20,000 a year.
Your accounting profit last year was
A) $10,000.
B) $30,000.
C) $50,000.
D) $60,000.
Sponsors invest $100,000 in a new deli on the promise that they will earn a return of
10% per year on their investment. The deli sells 52,000 sandwiches per year. The deli’s
fixed costs include the return to investors and $42,000 in other fixed costs. Variable
costs consist of wages ($1,000 per week) plus materials, electricity, etc. ($2,000 per
week). The deli is open 52 weeks per year.
The annual total costs of the deli are ________.
A) $42,000
B) $52,000
C) $156,000
D) $208,000
Table 20.1
Refer to Table 20.1. In Mexico, the opportunity cost of 1 bushel of oranges is
A) 1/2 bushel of bananas.
B) 1 bushels of bananas.
C) 2 bushel of bananas.
D) 5 bushels of bananas.
In making labor supply decisions, households weigh
A) the market wage against the value of market produced goods.
B) the market wage against the value of their marginal product of labor.
C) the market wage against the value of leisure and time spent in unpaid household
production.
D) child care costs.
Which assumption(s) is (are) necessary for an efficient allocation of resources among
firms?
A) Factor markets are open and competitive.
B) All firms pay the same prices for inputs.
C) Firms behave so as to maximize their profits.
D) All of the above are correct.
Figure 13.5
Refer to Figure 13.5. The ________ level of output for this monopolist is 22 units of
output.
A) loss-minimizing
B) profit-maximizing
C) break-even
D) shutdown
Figure 13.1
Refer to Figure 13.1. The demand curve facing Microsoft is most likely represented by
A) Panel A.
B) Panel B.
C) Panel C.
D) Panel D.
When resources are misallocated, or allocated inefficiently,
A) market failure occurs.
B) then there must be external costs or benefits in production.
C) then it must be the case that there is imperfect information in the market.
D) then it must be the case that the good is a public good.
The marginal utility of the first smoothie that Jimmy drinks in the morning is worth
$3.00. The marginal utility of the 4th smoothie he drinks is positive while the marginal
utility of the 5th smoothie he drinks in the morning is worth $0. This implies that at a
price of $0, Jimmy would drink
A) zero smoothies per morning.
B) at most 5 smoothies per morning.
C) more than 5 smoothies per morning, but the actual number is indeterminate from this
information.
D) an infinite number of smoothies each morning.
The government imposes a price ceiling on gasoline that is below the market price. You
are asked to suggest a rationing scheme that will minimize the misallocation of
resources. You suggest
A) using rationing coupons that can be resold.
B) using rationing coupons that cannot be resold.
C) using rationing on a first-come, first-served basis.
D) using rationing only on weekdays.
In an output market,
A) consumers purchase products.
B) firms purchase resources.
C) households earn income.
D) land, labor and capital may be exchanged.
If the price of labor falls,
A) we can conclude that the demand for capital will always decrease because only the
factor substitution effect is relevant.
B) we can conclude that the demand for capital will always increase because only the
output effect is relevant.
C) the change in the demand for capital cannot be predicted because the factor
substitution effect and output effect work in opposite directions.
D) the demand for capital will be unaffected, because only a change in the price of
capital would change the demand for capital.
Figure 1.5
Refer to Figure 1.5. As income decreases, consumption decreases by a decreasing
amount. If consumption is graphed on the vertical axis and income is graphed on the
horizontal axis, the relationship between consumption and income would look like
which of the following panels?
A) A
B) B
C) C
D) D
The primary assumption made in Rawlsian justice is that
A) people are risk averse.
B) the marginal utility of income is decreasing.
C) each individual tries to maximize his or her own well-being at the expense of
everyone else.
D) each person will produce according to his or her ability regardless of the reward.
Hudson has two job offers when he graduates from college. Hudson views the offers as
identical, except for the salary terms. The first offer is at a fixed annual salary of
$45,000. The second offer is at a fixed salary of $25,000 plus a possible bonus of
$40,000. Hudson believes that he has a 50-50 chance of earning the bonus. If Hudson
takes the offer that maximizes his expected utility and he is risk loving, then
A) he will take the first offer.
B) he will take the second offer.
C) he is indifferent between the offersboth yield the same expected utility.
D) Indeterminate from the given informationwe cannot say what he will do.
Table 10.1
Refer to Table 10.1. The marginal revenue product of the third worker is
A) $5.
B) $25.
C) $125.
D) $375.
Figure 19.1
Refer to Figure 19.1. Initially after the payroll tax is imposed, the difference in the
firm’s cost per unit of labor and the workers’ take home pay is ________ per hour.
A) $2
B) $3
C) $5
D) $7
Figure 1.3
Refer to Figure 1.3. If a 45 degree line were also graphed, the existing line shown on
the graph would ________ it.
A) lie above
B) lie below
C) cross
D) indeterminate from this information
Capital, wages and income are
A) factors of production.
B) inputs.
C) resources.
D) all of the above
Figure 9.7
Refer to Figure 9.7. Suppose demand for wheat is initially D2. If consumer incomes
increase, then demand for wheat will shift to ________. This will ________ the
equilibrium price of wheat, and individual profit maximizing firms will produce
________ bushels of wheat.
A) D3; increase; 15
B) D1; increase; 10
C) D3; decrease; 7
D) D1; decrease; 0
Why is it difficult for one country to determine if another country is guilty of the
practice of dumping?
What is general equilibrium?
Assume a desert island economy in which labor is the only scarce resource and labor
can be used to gather food (coconuts) or to build huts. There are six equally productive
individuals on the island. Each inhabitant can gather 25 coconuts in one day or build
one hut in one day.
Compute the opportunity cost of building two more huts in one day.
If incomes grow during the next year, what will happen in the market for RVs? (Assume
that RVs are normal goods.)
Because of the quantity and quality of its resources, the U.S. has an absolute advantage
in the production of many goods and services. Does this imply that the U.S. cannot
benefit from trading with a developing country that has less productive ability? Why or
why not?
Use a graph to explain why a perfectly competitive firm will overproduce if a negative
externality is present.
Give an example where a government subsidy can correct an externality. Explain how
the subsidy would lead to a more efficient outcome.
What is venture capital?
Using a graph, show how economic growth affects the production possibility frontier.
Explain why the costs of most services like haircuts and college education have risen at
a faster rate relative to the costs of manufactured goods?
Is the United States a command economy, a laissez-faire economy, or neither? Explain.
Explain how a firm makes an investment decision.
Why is it a bad business practice to assume that raising prices will lead to increases in
total revenue?
What is the Celler-Kefauver Act?
What happens to a firm’s profit-maximizing level of output if the price of the product
rises? Use a graph to explain your answer.
The cross-price elasticity between X and Y is positive. Illustrate on two graphs, one for
good X and one for good Y, what will happen if the supply of X decreases.
In the 1960 nations could be divided into three distinct groups. Discuss these three
groups and offer examples of countries that fit into each of these categories.
The issue of fairness in taxes is a very controversial one. Compare and contrast both the
ability-to-pay principle with that of the benefits received principle.