Deadweight losses arising from an excise tax are greatest when demand:
A) and supply are relatively inelastic.
B) is relatively inelastic and supply is relatively elastic
C) is relatively elastic and supply is relatively inelastic.
D) and supply are relatively elastic.
When a firm is a perfect competitor in the product market, its demand curve for labor
will _____ because the _____ product declines as additional workers are hired.
A) slope downward; marginal
B) be horizontal; average
C) slope upward; marginal
D) slope downward; average
Scarcity in economics means that:
A) we do not have sufficient resources to produce all of the goods and services we
want.
B) the wants of people are limited.
C) there must be poor people in rich countries.
D) economists are clearly not doing their job.
Consumer surplus for an individual buyer is equal to:
A) the consumer’s willingness to pay for the good minus the marginal cost of producing
the good.
B) the price of the good minus the marginal cost of producing the good.
C) the consumer’s willingness to pay for the good minus the price of the good.
D) the marginal cost of the good minus the consumer’s willingness to pay for the good.
A characteristic of public goods is that:
A) people pay for them in proportion to the benefits received.
B) the costs of producing them are less than if they were private goods.
C) their benefits cannot be withheld from anyone, regardless of whether a person pays
for them.
D) they are produced only by the private sector, not by the public sector.
(Table: Production
Possibilities Schedule II) Look at the table Production Possibilities Schedule II. If an
economy is producing at alternative W, the opportunity cost of producing at X is _____
unit(s) of consumer goods per period.
A) 0
B) 1
C) 4
D) 18
As the number of firms in an oligopoly decreases:
A) barriers to entry are likely to shrink.
B) firms are less likely to engage in tacit collusion.
C) firms are more likely to engage in tacit collusion.
D) it becomes more difficult for the oligopoly to restrict output.
Tax incidence refers to:
A) who writes the check to the government.
B) who really pays the tax.
C) the deadweight loss from the tax.
D) the total revenue that the government collects from the tax.
If the marginal cost of the first sports jersey is $21, the marginal cost of the second
sports jersey is $40, and the marginal cost of the third jersey is $17, what is the total
variable cost of producing three jerseys?
A) $26
B) $78
C) $17
D) $61
Figure: The Shrimp Market
(Figure: The Shrimp Market) Look at the figure The Shrimp Market. If the government
wants to limit shrimp sales to 250 pounds, it can impose a _____ excise tax on sellers,
and the total tax revenue generated will be _____.
A) $5; $2,500
B) $7.50; $7,500
C) $10; $2,500
D) The answer cannot be determined from the information provided.
Which of the following is TRUE?
A) Profit-maximizing behavior occurs only in perfectly competitive markets.
B) Additional units of a good should be produced as long as MR < MC.
C) The profit-maximizing solution occurs where MR = MC.
D) The profit-maximizing solution occurs where MR > MC.
Figure: Producer Surplus II
(Figure: Producer Surplus II) Look at the figure Producer Surplus II. At a price of P2,
producer surplus equals the area:
A) LMK.
B) P1K0.
C) P2M0.
D) P2P1KM.
(Table: Willingness to Pay for Peanuts) Using the table Willingness to Pay for Peanuts,
if the price of a bag of peanuts is $2:
A) all of the consumers would purchase a bag.
B) everyone except Dave would purchase a bag.
C) everyone except George would purchase a bag.
D) no one would purchase a bag.
Figure: Market I
(Figure: Market I) Look at the figure Market I. A price floor of $5 imposed on this
market would:
A) result in a surplus of the good.
B) have no effect.
C) increase production of this good.
D) increase consumer spending on this good.
At a monopoly’s profit-maximizing level of output:
A) marginal revenue equals marginal cost.
B) marginal revenue is greater than marginal cost.
C) marginal revenue is less than marginal cost.
D) price is less than marginal cost.
Common resources tend to be overused because:
A) individuals tend to ignore the cost to others of their use of the resource.
B) the individual marginal cost is greater than the marginal social cost.
C) common resources are nonrival and nonexcludable.
D) the marginal cost of allowing one more unit of consumption is zero.
(Figure: Marginal Product of Labor) Look at the figure The Marginal Product of Labor.
The total product for three workers is _____ bushels.
A) 51
B) 45
C) 39
D) 15
Scenario: The Market for Good X: The market for good X can be depicted with the
following demand and supply equations: Demand: P = 50 ” 0.5Q Supply: P = 0.33Q
where P is price per unit and Q represents quantity in units. Policy makers plan on
imposing a $1 per unit tax on this good.
(Scenario: The Market for Good X) Look at the scenario The Market for Good X. If a
$1 per unit tax is imposed, the price of good X will increase by:
A) $20.00.
B) $0.60.
C) $1.00.
D) $1.50.
Figure: The Market for Hybrid Cars
(Figure: The Market for Hybrid Cars) Look at the figure The Market for Hybrid Cars. If
there were a binding price ceiling in the market for hybrid cars, one possible price
would be equal to _____; consumers would demand _____; and producers would
supply _____.
A) P1; Q1; Q3
B) P2; Q2; Q2
C) P1; Q3; Q1
D) P3; Q3; Q1
(Table: Cakes) Look at the table Cakes. Pat is opening a bakery to make and sell special
birthday cakes. She is trying to decide how many mixers to purchase. Her estimated
fixed and average variable costs if she purchases one, two, or three mixers are shown in
the table. Assume that average variable costs do not vary with the quantity of output. If
Pat purchases one mixer and bakes 100 cakes per day, what is her average total cost?
A) $1,010
B) $20
C) $15
D) $10
(Table: Production Possibilities for the United States and Canada) Look at the table
Production Possibilities for the United States and Canada. Both nations can produce
cars and lumber. If these nations trade, Canada has the comparative advantage in _____
and should trade _____ to the United States in exchange for _____.
A) cars; cars; lumber.
B) lumber; lumber; cars
C) lumber; cars; lumber
D) cars; lumber; cars
A small college employs two economists. Rob has been employed by the college for 15
years, and Nasrin has been employed for 1 year. Rob’s salary is significantly higher than
Nasrin’s, although both have their doctoral degrees in economics. Each professor
averages one publication per year, and both are excellent teachers. Given this
information, the wage difference is best explained by:
A) compensating differentials.
B) differences in human capital.
C) discrimination.
D) differences in talent.
Sri Lanka’s comparative advantage over the United States in textiles can be explained
by its:
A) labor abundance.
B) mild climate.
C) advanced technology.
D) increasing returns.
Profit is the difference between _____ and _____.
A) total sales; total revenues
B) total profits; total costs
C) total revenues; total costs
D) marginal costs; marginal revenues
To practice effective price discrimination, a monopolist must be able to:
A) estimate its own production and cost functions.
B) avoid detection by government regulatory agencies.
C) prevent the resale of goods among groups of buyers.
D) calculate the utility level of each buyer in the market.
Figure: Oreos and Apples
(Figure: Oreos and Apples) Look at the figure Oreos and Apples, which provides an
indifference curve map for Diego. The consumption bundle that provides the highest
level of utility is bundle:
A) A or C.
B) B or D.
C) E or F.
D) A or B.
(Table: Production Function for Soybeans) Look at the table Production Function for
Soybeans. Assume that the fixed input, capital, is 10 acres of land and a tractor, which
have a combined cost of $150 per day. The cost of labor is $100 per worker per day.
The fixed cost of producing 25 bushels of soybeans is:
A) $50.
B) $100.
C) $150.
D) $250.
A shift in demand for a given factor of production will NOT occur if:
A) the price of that factor falls.
B) the productivity of that factor increases.
C) the productivity of that factor decreases.
D) there is a decrease in the price of a substitute factor.
The marginal social cost of pollution emissions _____ as the quantity of pollution
emissions _____.
A) decreases; increases
B) increases; increases
C) increases; decreases
D) remains constant; decreases
Austin’s total fixed cost is $3,600 a month at his cupcake bakery. Austin employs 20
workers and pays each worker $600 a month. If labor is his only variable cost, what is
Austin’s total cost?
A) $3,600
B) $1,200
C) $15,600
D) $12,000
Figure: Consumer and Producer Surplus
(Figure: Consumer and Producer Surplus) Look at the figure Consumer and Producer
Surplus. An increase in supply will:
A) increase consumer surplus.
B) decrease producer surplus.
C) increase total surplus.
D) increase consumer surplus and total surplus.
The belief that importing goods from low-wage countries will hurt the standard of
living of workers in the importing country is known as the:
A) Heckscher”Ohlin theory.
B) pauper labor fallacy.
C) sweatshop labor fallacy.
D) theory of absolute advantage.