Assuming there are no externalities, if a firm produces an output level where the
benefits to consumers ________ the cost to suppliers to produce it, then price is
________ marginal cost.
A) are less than; greater than
B) exceed; less than
C) are less than; less than
D) equal; greater than
According to the output effect of a factor price change, if supply of labor increases, then
once the firm fully adjusts to the labor supply change it
A) increases output and thus demand for all inputs increases.
B) decreases output and thus demand for all inputs decreases.
C) increases demand for labor alone and there is no change in its output level.
D) increases output and decreases demand for labor.
Which of the following contains most of the characteristics of a public good?
A) education
B) trash collection
C) a public library
D) national defense
An increase in the wage rate will change
A) only the amount of labor hired.
B) the amount of labor employed, and it may also change the amount of other inputs
employed.
C) the price the firm charges for the product, but it will not affect the demand for any of
the inputs.
D) the firm’s profit-maximizing level output, but not its usage of inputs.
If Andrew is scalping tickets for the Stanley Cup, he will be successful at selling the
tickets for a profit
A) when the price set by the National Hockey League is less than the market
equilibrium price.
B) when prices are too high.
C) any time the Stanley Cup is popular.
D) only when there is excess supply.
Figure 9.1
Refer to Figure 9.1. This farmer’s fixed costs are
A) $0.
B) $24.
C) $45.
D) indeterminate unless we know the level of output the firm is producing.
You use $50,000 of your own money to start an espresso stand. During the first year
you earn a 10% return on that investment. If the current interest rate on savings is 8%,
you earn an economic profit of
A) -$4,000.
B) $1,000.
C) $4,000.
D) $5,000.
Table 7.2
Inputs Required to Produce a Product Using Alternative Technologies
Refer to Table 7.2. Which technology is the most capital intensive?
A) A
B) B
C) C
D) D
The ratio at which one country trades a domestic product for imported product is that
country’s
A) absolute advantage.
B) comparative advantage.
C) cost ratio.
D) terms of trade.
Figure 7.6
Refer to Figure 7.6. If the price of capital is $10 and the price of labor is $20, the
optimal production technique is
A) A.
B) B.
C) C.
D) D.
Paula was born with an aptitude for learning languages. This aptitude is an example of
________.
A) a compensating differential
B) human capital
C) property
D) natural capital
Figure 8.5
Refer to Figure 8.5. The marginal cost of the ________ oven is $50.
A) first
B) second
C) third
D) sixth
You are asked to lend a friend $20,000 for a year. At the end of the year your friend
agrees to pay you $21,000. The interest rate on this loan is
A) 50%
B) 00%.
C) 50%.
D) indeterminate from this information.
The table shows the relationship between income and utility for Jane.
Table 17.1
Refer to Table 17.1. Suppose Jane has a 1/3 chance of becoming disabled in any given
year. If she does become disabled, she will earn $0. If Jane does not become disabled,
she will earn her usual salary of $60,000. Jane has the opportunity to purchase disability
insurance which will pay her her full salary in the event she becomes disabled. On
average, how much would such a contract cost the insurance company (per person)?
A) $20,000
B) $30,000
C) $40,000
D) $60,000
A short run total cost schedule is a total variable cost schedule shifted ________ by the
amount of total fixed cost.
A) downward
B) to the right
C) upward
D) to the left
Firms are organizations that
A) take advantage of the public.
B) transform resources into products.
C) transform outputs into inputs.
D) consumer outputs.
When government imposes a tax on a firm that generates external costs, the ________
the tax.
A) firm always bears
B) consumer always bears
C) firm and the consumer usually bear
D) government only bears
Assume that local bread industry is perfectly competitive and faces constant returns to
scale. Draw a graph showing the output of bread (QC) and the price of bread (PC) in a
competitive market. Suppose that a monopolist buys all of the independent bread
companies in the local area. What will happen to the output of bread? Show this on
your graph. (Label it QM.) What will happen to the price of bread? Show this on your
graph. (Label it PM.)
The idea that consumers ultimately dictate what will be produced by choosing what to
purchase is known as
A) laissez-faire.
B) the economic problem.
C) centralized decision making.
D) consumer sovereignty.
Figure 3.4
Refer to Figure 3.4. If consumer income increases, the demand for tuna fish sandwiches
shifts from D0 to D1. This implies that tuna fish sandwiches are a(n)
A) normal good.
B) inferior good.
C) substitute good.
D) complementary good.
DVDs and DVD players are complements. An increase in the price of DVD players
would cause which of the following in the market for DVDs?
A) The equilibrium price and quantity of DVDs would increase.
B) The equilibrium price and quantity of DVDs would decrease.
C) The equilibrium price of DVDs would increase, and the equilibrium quantity would
decrease.
D) The equilibrium price of DVDs would decrease, and the equilibrium quantity would
increase.
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.
Suppose the average price per sandwich is $5.50. What is the annual profit of the deli?
A) -$22,000
B) $78,000
C) $130,000
D) $244,000
A manufacturing company designs and produces an incredibly efficient solar heating
system for large buildings and earns very large profits on it. Which of the following is
true?
A) The profits this firm earns are a return for an innovation.
B) The profits this firm earns aren’t deserved, as the firm did not take any risks.
C) This firm must not be in a competitive market if it was able to earn a profit.
D) both A and C
If the average tax rate equals the marginal tax rate, the tax would be
A) proportional.
B) regressive.
C) progressive.
D) uniform.
Figure 7.2
Refer to Figure 7.2. The average product of the second worker is ________ lawns
mowed.
A) 4
B) 5
C) 5
D) 11
Product differentiation that makes the product better than a rival’s product from
everyone’s perspective
A) always increases welfare.
B) is known as vertical differentiation.
C) is known as horizontal differentiation.
D) makes the rival’s product obsolete.
Demand determines price entirely when
A) demand is downward sloping.
B) demand is perfectly inelastic.
C) supply is perfectly inelastic.
D) supply is perfectly elastic.
If the official poverty line for a family of four is $12,000, then the Department of
Agriculture’s minimum food bundle costs a family of four ________ per year.
A) $1,000
B) $3,000
C) $4,000
D) $12,000
A ________ income tax means that those with a higher income pay a higher percentage
of their income in taxes than low-income people.
A) regressive
B) progressive
C) proportional
D) consumption-based
Economists usually assume that ________ is a fixed input in the ________ run.
A) labor; short
B) capital; short
C) labor; long
D) capital; long