There are several close substitutes for Bayer aspirin but fewer substitutes for a complete
medical examination. Therefore, all other things equal, you would expect the demand
for:
A) medical exams to be more price-elastic.
B) Bayer aspirin to be more price-elastic.
C) Bayer aspirin to be more price-inelastic.
D) the two to be equally price-elastic.
When the San Francisco city manager faces a complaint that the city council chamber
podium is not accessible to individuals with disabilities, he responds that the $1 million
improvement will not happen because “that money could be spent building 70 curb
ramps.” This statement best represents this economic concept:
A) Resources are scarce.
B) The real cost of something is what you must give up to get it.
C) “How much” is a decision at the margin.
D) When markets don’t achieve efficiency, government intervention can improve
society’s welfare.
Figure: Efficiency and Pollution
(Figure: Efficiency and Pollution) Look at the figure Efficiency and Pollution. If the
government imposed an environmental standard that did NOT allow the quantity of
pollution to exceed 40 tons, there would be:
A) a socially optimal quantity of pollution.
B) too little pollution, because its marginal social benefit would exceed its marginal
social cost.
C) too much pollution, because its marginal social cost would exceed its marginal social
benefit.
D) too much pollution, because any pollution is too much from an economist’s
perspective.
Marla will make $10 by tutoring for an additional hour, but she will lose an hour of
studying for her economics test. Marla decides to study rather than tutor. Marla’s choice
indicates that she:
A) values an additional hour of studying more than the $10 she would earn tutoring.
B) values an hour of studying less than the $10 she would earn tutoring.
C) does not understand that there is no benefit from studying.
D) doesn’t need the money.
Amtrak is a publicly owned company that provides rail service. This means that
Amtrak’s prices tend to be _____ than if it were a private company, and the quality of
service tends to be _____ than if it were a private company.
A) higher; worse
B) higher; better
C) lower; worse
D) lower; better
If a good that involves external costs is priced to take these costs into account, then its
price will:
A) fall, and output will go up.
B) rise, and output will fall.
C) not change, but output will fall.
D) rise, but output will stay the same.
(Table: Street Cleanings) Look at the table Street Cleanings. Increasing the number of
street cleanings per month from _____ would yield a marginal social benefit (for Peter
and Wendy together) equal to $12.
A) one to two
B) two to three
C) three to four
D) four to five
(Table: Costs of Birthday Cakes) Look at the table Costs of Birthday Cakes. Assume
that fixed costs are $10. What is the average fixed cost of 5 cakes?
A) $1
B) $2
C) $5
D) $10
You like to read Vogue and Sports Illustrated. You have only $5 to spend, so you buy
only Sports Illustrated. This statement best represents this economic concept:
A) Resources are scarce.
B) The real cost of something is what you must give up to get it.
C) “How much” is a decision at the margin.
D) There are gains from trade.
If the technology of producing peanuts improves, total surplus in the peanut butter
market:
A) will increase.
B) will decrease.
C) will not change.
D) may change, but we cannot determine the change without more information.
Efficient production occurs when the economy is:
A) operating inside its production possibility frontier.
B) operating on its production possibility frontier.
C) operating outside its production possibility frontier.
D) moving beyond its production possibility frontier.
A negative relationship between quantity demanded and price is called the law of:
A) demand.
B) increasing returns.
C) market clearing.
D) supply.
Figure: A Profit-Maximizing Monopoly Firm
(Figure: A Profit-Maximizing Monopoly Firm) Look at the figure A Profit-Maximizing
Monopoly Firm. This firm’s profit per unit is:
A) $5.
B) $12.
C) $15.
D) $20.
Liyun owns a small flower shop, and the industry is perfectly competitive. She is
considering whether to hire an additional worker. The wage rate for the worker is $500
per week; the marginal product of the additional worker would be 100 units per week;
and the price of the units is $10 each. What should Liyun do?
A) hire the additional worker
B) not hire the additional worker
C) raise the price of the flower arrangements that she sells
D) Not enough information is given to answer the question.
Which of the following is usually associated with a positive externality?
A) smoking cigarettes
B) listening to a new CD with earbuds
C) innovation in the semiconductor industry
D) an indoor classical music concert with tickets that cost $50
Figure: The Market for Computers
(Figure: The Market for Computers) Look at the figure The Market for Computers.
Assume that PA is the autarky price and PW is the world price. Consumer surplus with
international trade is area:
A) W + X + Y.
B) W.
C) Y.
D) W + X.
A manufacturing company that benefits from lower costs per unit as it grows is an
example of a firm exhibiting:
A) increasing returns to scale.
B) decreasing returns to scale.
C) increasing opportunity costs.
D) scale reduction.
(Table: Price, Quantity Demanded, and Quantity Supplied) Look at the table Price,
Quantity Demanded, and Quantity Supplied. The data in the figure suggest a nonlinear
relation between:
A) price and quantity demanded.
B) price and quantity supplied.
C) quantity demanded and quantity supplied.
D) The table does not show a nonlinear relation.
Scenario: Music Downloads and Streamed Movies
Phillip has an income of $300 per month, which he uses to purchase music downloads
(MD) and streamed movies (SM). Each music download costs $1 and each streamed
movie costs $5.
(Scenario: Music Downloads and Streamed Movies) Read the scenario Music
Downloads and Streamed Movies. The slope of Phillip’s budget line is equal to:
A) “0.2.
B) “5.
C) “0.4.
D) “2.5.
Although horses were once a very important factor of production, the development of
automobiles and other machinery reduced the demand for their use. This is an example
of:
A) technological progress shifting the demand for horses to the left.
B) higher marginal costs for horses shifting demand for horses to the right.
C) technological progress shifting the demand for horses to the right.
D) higher marginal costs for horses having no impact on the demand for horses.
(Table: Comparative Advantage I) Look at the table Comparative Advantage I. The
opportunity cost of producing 1 box of herring for Finland is _____ box(es) of cell
phones.
A) 10
B) 0.2
C) 5
D) 0.1
Figure: Total Revenue and Total Cost
(Figure: Total Revenue and Total Cost) Look at the figure Total Revenue and Total
Cost. The most profitable level of output occurs at quantity:
A) F.
B) K.
C) L.
D) M.
Which of the following is a likely outcome of price controls and quota limits?
A) prices higher than the market equilibrium price
B) illegal activity as people invent ways to get around the market constraint
C) shortages and units of output that must be disposed of
D) shortages and inefficiency caused by buyers searching for units of the good
A blockade at the border between the United States and Canada prevents the entry of all
lumber products to the United States from Canada. This blockade will:
A) increase the consumer surplus for American lumber consumers.
B) decrease the producer surplus for Canadian lumber producers.
C) increase the total surplus for the American lumber market.
D) increase the total surplus for the Canadian lumber market.
Figure: The Demand for Shirts
(Figure: The Demand for Shirts) Look at the figure The Demand for Shirts. By the
midpoint method, the price elasticity of demand for the segment AB is:
A) less than the price elasticity of demand for the segment BC.
B) less than the price elasticity of demand for the segment EF.
C) zero.
D) greater than the price elasticity of demand for the segment BC.
Because people usually exploit opportunities to make themselves better off, if the price
of gasoline falls and stays low for an extended period, we expect people to:
A) reduce their reliance on gasoline-powered cars.
B) buy larger and less fuel-efficient cars.
C) use more public transportation.
D) ride bicycles.
Figure: Income and Substitution Effects
(Figure: Income and Substitution Effects) Look at the figure Income and Substitution
Effects. Carlos is consuming his optimal consumption bundle at point A when the price
of gasoline falls. The movement from K2 to K3 reflects the _____ the decrease in the
price of gasoline.
A) total change in quantity demanded due to
B) income effect of
C) substitution effect of
D) income and substitution effects of
Figure: The Demand Curve
(Figure: The Demand Curve) Look at the figure The Demand Curve. If the price is $5,
total revenue is:
A) $5.
B) $10.
C) $20.
D) $25.
Average variable cost is the ratio of:
A) total cost to the marginal cost.
B) variable inputs to fixed inputs.
C) variable cost to the quantity of output.
D) fixed costs to variable cost.
In looking at a chart of the positive relationship between police officers and crime, the
mayor remarks that more police officers cause more crime. The mayor may be wrong
because she did not consider:
A) the features of construction.
B) omitted variables.
C) reverse causality.
D) tangent lines.
The benefits principle says that:
A) the amount of tax paid depends on the measure of value.
B) those who benefit from public spending should bear the burden of the tax that pays
for that spending.
C) those with greater ability to pay should pay more tax.
D) those who benefit from the tax should pay the same percentage of the tax base as
those who do not benefit.
Scenario: The Production of Wheat and Toys
The table describes the production of two goods,
wheat and toys, in country A and country B. Each country has a linear production
possibility frontier with respect to its production of the two goods. The numbers in each
column represent the total number of units each country could produce if it used all of
its resources to produce the good.
(Scenario: The Production of Wheat and Toys) Look at the scenario Production of
Wheat and Toys. The opportunity cost of producing a unit of toys in country A is _____
unit(s) of wheat.
A) 0.5
B) 1
C) 50
D) 100