Exhibit 9-3
The total cost for the firm in Exhibit 9-3, a monopolist that maximizes profit while
charging all customers the same price, is
a. $3,300
b. $3,400
c. $2,808
d. $2,340
e. $1,638
Necessities and luxuries are both types of normal goods.
a. True
b. False
In a world of perfect information, if consumers could costlessly contract with private
contractors to produce a good and there were no economies of scale,
a. firms would be unnecessary
b. markets would be unnecessary
c. consumers would be unnecessary
d. consumers would face greater production costs
e. firms would be more efficient than the market
A requirement for development is
a. an unreliable system of financial institutions
b. a lack of saving by households and firms
c. low confidence in domestic currency
d. low and predictable inflation that encourages saving
e. None of the answers is correct
Suppose a soccer coach has been making $25,000 per year but gives up his coaching
job in order to make lace doilies. If his revenue from the sale of these doilies is $50,000
and his materials cost $20,000, then his economic profit is
a. $5,000
b. $25,000
c. $30,000
d. $50,000
e. $80,000
Suppose consumers spent $42 million on Christmas trees last year when the average
tree cost $30 and this year spent $42 million when the average tree costs $25. Assuming
nothing else changed, this data suggests that
a. consumers bought the same number of Christmas trees this year as last year
b. the price of Christmas trees stayed the same
c. total revenues to tree producers rose this year
d. the demand for trees is unit elastic
e. the demand for trees is inelastic
Rationality in the household decision-making process means that
a. all households make the same decisions
b. everyone in the household agrees on all decisions
c. households act in their own best interests
d. households want to earn as much income as possible
e. all households would make the same decisions given the same information on
products qualities and prices
At its present rate of output, Barrel O’ Biscuits, a perfectly competitive firm, finds that
its marginal cost exceeds its marginal revenue and price exceeds average variable cost.
To maximize profit, the firm should
a. lower the price
b. raise the price
c. increase output
d. reduce output
e. maintain its current rate of output
An industry with a strong union (e.g., UAW)
a. will increase wages in the nonunion sector of the industry
b. will increase employment for union workers when wages increase
c. can force employers to hire all unions members regardless of the wage
d. can increase the demand for union workers by increasing turnover and reducing
productivity
e. can bargain for wages that are greater than the market’s equilibrium wage
The market for chewing gum is competitive with a current price of 50 cents per pack
and quantity of 100,000 packs. Which of the following events would lead to a new
equilibrium price of 40cents and quantity of 80,000 packs?
a. an increase in the price of other kinds of candy
b. an increase in the price of the ingredients used to make chewing gum
c. a decrease in the number of young people in the population
d. an agreement by workers in the chewing gum industry to work for lower wages
e. an improvement in chewing gum production technology
Exhibit 7-15 Long and Short-Run cost of Producing Color Printers
The firm represented in Exhibit 7-15 experiences diseconomies of scale from
a. Q1 to Q3 only
b. Q2 to Q3 only
c. Q2 to Q4 only
d. Q3 to Q5 only
e. the question cannot be answered with the information given
The incidence of a tax refers to
a. who receives the benefits from the revenue generated by the tax
b. the changes in the marginal tax rate as income increases
c. whether the tax is regressive, proportional, or progressive
d. who bears the burden of the tax
e. whether the tax is based on the ability-to-pay principle
If we say that demand has increased, we mean that there has been
a. a leftward movement along the demand curve
b. a rightward movement along the demand curve
c. a leftward shift of the demand curve
d. a rightward shift of the demand curve
e. an increase in the slope of the demand curve
Which of the following characterizes a perfectly competitive market?
a. a few firms fiercely competing by slashing prices
b. product differentiation through aggressive advertising
c. perfect information
d. limited resource mobility
e. barriers to entry such as licenses
Positive marginal utility implies increasing total utility.
a. True
b. False
A decrease in the supply of chocolate chips would usually result in a
a. higher equilibrium price and a lower equilibrium quantity
b. lower equilibrium price and a lower equilibrium quantity
c. lower equilibrium price and a higher equilibrium quantity
d. higher equilibrium price and a higher equilibrium quantity
e. decrease in the demand for chocolate chips
The marginal social cost of air quality increases as air quality increases. If the dirtiest
production process would create 700 tons of pollutants, then
a. eliminating the first 20 tons of pollution is cheaper than eliminating the last 20 tons
b. eliminating the last 20 tons of pollution is cheaper than eliminating the first 20 tons
c. more damage will be done by the first 20 tons of pollution than by the last 20 tons
d. more damage will be done by the last 20 tons of pollution than by the first 20 tons
e. the optimal level of air quality is to reduce pollution by 700 tons
By requiring that policyholders pay a deductible on a claim, insurers guard against
a. symmetrical information
b. adverse selection
c. natural selection
d. moral hazard
e. the winner’s curse
The demands for wheat, soybeans, milk, and eggs tend to be
a. price inelastic
b. price elastic
c. price inelastic only in the long run
d. price elastic only in the short run
e. price elastic only in the long run
Smokers and loud talkers who ignore the external effects of their actions are being
rational in the economic sense.
a. True
b. False
The Salvation Army is an example of a(n)
a. military organization
b. not-for-profit organization
c. partnership
d. S-corporation
e. U.S. government agency
Exhibit 6-26
Consider Exhibit 6-26. Three budget lines are shown. Which of the following
statements is true about the budget lines?
a. Budget line B2 reflects the same income and price for DVDs as budget line B1 but a
higher price for books.
b. Budget line B3 reflects a higher income but the same price for both books and DVDs
as budget line B2.
c. Budget line B3 reflects higher income and the same prices for both books and DVDs
as budget line B1.
d. Budget line B1 reflects lower income than budget line B2.
e. Budget line B3 reflects a lower price ration than budget line B3.
IBM’s marginal rate of return on investment curve equals its
a. supply of loanable funds curve
b. supply of investment curve
c. marginal revenue product curve
d. marginal revenue cost curve
e. investment demand curve
The law of diminishing marginal utility states that
a. total utility falls as more of a good is consumed, other things constant
b. total utility falls as marginal utility falls, other things constant
c. marginal utility falls as total utility increases, other things constant
d. marginal utility falls as more of a good is consumed, other things constant
e. marginal utility falls as less of a good is consumed, other things constant
According to the search model, Consumer Reports magazine benefits consumers by
increasing the marginal benefit of information.
a. True
b. False
The current international monetary system is
a. a flexible exchange rate system
b. a fixed exchange rate system
c. a system combining fixed and flexible exchange rates
d. a gold standard
e. a gold exchange rate system
The slope of a steep upward-sloping line is a smaller value than the slope of a nearly
flat upward-sloping line.
a. True
b. False
Which of the following would be an example of a resource market?
a. the market for tires
b. the market for baseball games
c. the market for compact discs
d. the market for economists
e. the market for downloadable music
According to William Shepherd’s examination of competitive trends in the U.S.
economy, a market is effectively competitive if
a. the top four firms supply more than 60 percent of the market, have stable market
shares, and cooperate with each other
b. the top four firms supply more than 60 percent of the market, have stable market
shares, and compete with each other
c. the industry exhibits low concentration, few barriers to entry, and little or no
collusion
d. the industry exhibits low concentration and little or no collusion, despite significant
barriers to entry
e. the dominant firm has two close rivals
Exhibit 15-2
The welfare loss associated with the unregulated natural monopoly in Exhibit 15-2 is
shown by the area
a. cef
b. abc
c. adf
d. dfeg
e. bcfd
Exhibit 12-9
In Exhibit 12-9, the labor supply and labor demand in a unionized labor market is
represented by the demand curve D0 and Supply curve S0. Which of the market
equilibria is the most likely outcome of the union raising iniation fees?
a. a
b. b
c. c
d. d
e. either a or d
Exhibit 5-30
Refer to Exhibit 5-30. Consumers will pay a greater share of a new tax under supply
curve S” than under supply curve S.
a. True
b. False