The firm depicted in Table 2.4 is likely to face diminishing returns because:
Table 2.4
A) the amount of fertilizer can only be increased to 5.
B) land and fertilizer are both fixed.
C) land and fertilizer are both variable.
D) land is fixed but fertilizer is variable.
CARFAX is a company that compiles and sells histories of used cars. CARFAX reduces
the:
A) number of cars exchanged in the used car market.
B) information asymmetry in the used car market.
C) number of used cars offered for sale in the market.
D) cost of used cars in the market.
Gasoline stations carrying the same fuel brand (e.g., Chevron) are able to charge
different prices in San Francisco because:
A) location is a source for product differentiation.
B) gasoline stations are perfect price discriminators.
C) gasoline station operators for a cartel to act as a monopoly.
D) fuel quality varies across stores.
Daily Output of Japan and U.S.
Table 18.2
Refer to Table 18.2. The opportunity cost of stereos in Japan is:
A) 2 tractors.
B) 1/4 tractor.
C) 1/2 tractor.
D) 4 tractors.
The marginal benefit of labor equals the marginal-revenue product of labor which is:
A) the change in output from one additional unit of labor.
B) the extra revenue generated by one additional unit of labor.
C) equal to price of output only.
D) equal to marginal cost only.
If incomes decrease and electricity is a normal good, then:
A) the demand for electricity increases.
B) the demand for electricity decreases.
C) the quantity demanded for electricity decreases.
D) the quantity demanded for electricity increases.
Lower input prices in large firms might lead to:
A) upward-sloping marginal cost curves.
B) upward-sloping short-run average cost curves.
C) upward-sloping long-run average cost curves.
D) downward-sloping long-run average cost curves.
Table 2.5
What happened to the real value of the minimum wage between 1974 and 2011?
A) It remained the same.
B) It increased.
C) It decreased.
D) It could not be determined from the given information.
If the first copy cost of producing a R&B music video is $350,000 and the marginal
cost is $0, how much total cost would the firm incur if it produces 5 million copies?
A) zero
B) $350,000
C) $5 million
D) $5 million + $350,000
What defines a situation where a person consumes a good without having to pay for it?
A) the rival problem
B) the rival in consumption problem
C) the free-rider problem
D) the nonrival in consumption problem
Patents are barriers to entry created by:
A) contractual agreement.
B) consumer associations.
C) industry associations.
D) governments.
The path of the game in Figure 12.7 will be:
A) Fred chooses a large quantity and Barney stays out.
B) Fred chooses a large quantity and Barney enters.
C) Fred chooses a small quantity and Barney stays out.
D) Fred chooses a small quantity and Barney enters.
To think at the margin means to consider:
A) how nothing remains constant over time.
B) how a small change in one variable affects another variable.
C) how people behave in their own self-interest.
D) how people will decide what to purchase.
Figure 18.2
Refer to Figure 18.2. In autarky, the maximum amount of cheese that Pizzaland can
produce is:
A) 150.
B) 90.
C) 80.
D) 120.
Recall the application about measuring diminishing marginal utility with new
techniques, what was shown in the study that the neuroscientists did on subjects and
their reaction to varying monetary rewards?
A) It showed that general rewards are subject to diminishing marginal utility.
B) It showed a direct demonstration of the law of diminishing marginal utility.
C) It showed a direct demonstration of the subject’s opportunity cost.
D) Nothing was shown in the study.
Additional Application
The 2005-2006 Florida citrus harvest has been tallied and is over $1 billion. This is the
highest dollar amount since the 1999-2000 season. This year’s production was 3%
greater than last year, which was dramatically reduced due to three hurricanes that
struck the state last year. While the overall production increase was relatively small, the
prices for all types of citrus increased significantly. On the wholesale level oranges
alone realized a 56% price increase over the previous year after experiencing a 1.3%
decrease from last year. One explanation of this increase was Hurricane Wilma striking
Florida in October 2005 and causing a reduction in this year’s supply of citrus. The
higher citrus prices this year resulted in a 38% increase in revenues to growers over the
previous year.
How can the increased revenues to the citrus producers be explained? The law of
demand states if the price increases, the quantity demanded decreases. The concept of
price elasticity of demand explains that the percentage decrease in quantity demanded
may be greater than or less than the percentage increase in price. Is the demand for
citrus elastic or inelastic?
“States citrus crop tops $1 billion for first time in six years.” September 22, 2006.
palmbeachpost.com. Retrieved October 3, 2006, from http://www.palmbeachpost.com
If the price of citrus rose and the revenues from citrus production increase, we know
that the price elasticity of demand for citrus is:
A) greater than one.
B) less than one.
C) equal to one.
D) equal to zero.
A public utility is a classic example of:
A) a natural monopoly.
B) perfect competition.
C) an oligopoly.
D) monopolistic competition.
One of the problems with calculating the true amount of discrimination that takes place
in the labor market is:
A) the difficulty in measuring average wage differentials.
B) inadequate reporting of discrimination.
C) the difficulty of measuring productivity differences across workers.
D) that inflation leads to higher wages over time.
If a firm in a monopolistically competitive market uses advertising to lower the price
elasticity of demand for its product:
A) it will likely increase its price.
B) it will likely lead to a monopoly, as other firms exit the market.
C) it will increase the level of competition in the market.
D) none of the above
We do NOT use microeconomic analysis:
A) to make personal and managerial decisions.
B) to evaluate the merits of public policies.
C) to explain why the U.S. is in a recession.
D) to understand markets and predict changes.
Refer to Figure 10.9. The profit-maximizing level of output for the monopolist is:
A) 500.
B) 600.
C) 800.
D) 1200.
A charity that used to offer contributors private goods such as coffee mugs, books, or
magazine subscriptions, but no longer does, is likely to ________ the free-rider
problem and lead to a ________ level of contribution to the public good.
A) increase; smaller
B) increase; larger
C) reduce; smaller
D) reduce; larger
When Bob, a recent college grad, took an internship at an accounting firm, he is
accumulating which factor of production?
A) physical capital
B) human capital
C) entrepreneurship
D) natural resources
The result of the Interstate Bakeries and Continental Bakery case was that the firms
were:
A) allowed to merge only if one of the firms sold off some of its divisions.
B) blocked from merging because a merger would have created a monopoly in some
locations.
C) fined substantial amounts for engaging in a trust.
D) forced to split up into several smaller firms.
An example of a market failure due to a firm fully bearing the costs of its production
decision is:
A) a levee.
B) pollution.
C) profit.
D) imperfect information.
The price elasticity of demand for coffee is 2.2 and the price elasticity of supply for
coffee is 1.8. If demand increases by 20%, the percentage change in the equilibrium
price of coffee will:
A) rise by 5%.
B) fall by 5%.
C) rise by 0.2%.
D) fall by 0.2%.
Consider two individuals, Nigel and Mia, who produce hair pins and bandanas. Nigel’s
and Mia’s hourly productivity are shown in Table 3.3.
Table 3.3
Which of the following is true?
A) Mia has an absolute advantage in producing hair pins but not bandanas.
B) Mia has an absolute advantage in producing bandanas but not hair pins.
C) Mia has an absolute advantage in producing both goods.
D) Mia does not have an absolute advantage in producing either good.
The Sherman Act:
A) enhanced firms’ ability to enforce cartel agreements.
B) made it illegal to engage in practices that result in a restraint of trade.
C) was passed to encourage judicial leniency in the review of cooperative agreements.
D) was passed to clarify the Clayton Act.
Last semester there were 5000 parking spaces available on campus. The price of a
parking permit was $80 per semester, and the quantity demanded equaled the quantity
supplied at this price. Suppose the number of parking spaces increases by 10% and the
elasticity of demand for parking is 0.5. Parking Services should ________ the price of a
permit by ________ to guarantee that quantity demanded will equal quantity supplied.
A) decrease; 10%
B) decrease; 20%
C) decrease; 5%
D) increase; 10%
A government report that makes working in a particular industry less attractive to
workers will most likely ________ the number of workers hired in that industry, and
________ the wage paid to those workers.
A) increase; increase
B) increase; decrease
C) decrease; increase
D) decrease; decrease
In a contestable market the costs of entering and leaving the market are very:
A) high.
B) low.
C) low, but firms have no incentive to enter or leave.
D) high and firms have no incentive to leave.