Figure 6.1
Refer to Figure 6.1. Tom’s budget constraint is AC. His choice set includes all points
A) to the right of budget constraint AC.
B) bounded by the area OAC.
C) along budget constraint AC.
D) along the vertical and horizontal axes.
If the supply of oranges is unit elastic, the price elasticity of supply of oranges is
A) 0.
B) 0.
C) -1.0.
D) -100.0.
Figure 18.2
Refer to Figure 18.2. Ultimately, Molly and Pam will be at point ________.
A) A
B) C
C) D
D) The actual point reached will depend upon Molly and Pam’s initial endowments of
wealth, skills, etc., and it is impossible to determine which point will be achieved from
the given information.
Figure 3
The marginal product of the second worker is ________ yards raked.
A) 2
B) 5
C) 17
D) 27
Your next-door neighbor has a beautiful rose garden, but you are allergic to roses and
cannot use your yard because of the rose pollen that drifts into your yard. In this case,
the rose garden is an example of a
A) public good.
B) good that imposes an external cost.
C) good that provides an external benefit.
D) Pareto good.
Table 2.1
Refer to Table 2.1. For Mark, the opportunity cost of writing six TV commercials is
________ poems made.
A) 2
B) 18
C) 24
D) an indeterminate number of
If the Herfindahl-Hirschman Index of an industry is greater than 1,800, then the
Antitrust Division of the Justice Department
A) will not challenge any merger.
B) considers the industry unconcentrated.
C) considers the industry moderately concentrated.
D) will challenge any merger that raises the index by more than 50 points.
Related to the Economics in Practice on page 235: India’s plan to spend more than 8
billion dollars U.S. to improve its road network is best described as an example of
investment in
A) intangible capital.
B) human capital.
C) social capital.
D) physical capital.
The conclusion that firms in oligopoly always produce where price exceeds marginal
cost is true for all models of oligopoly EXCEPT the
A) collusive oligopoly model.
B) price-leadership model.
C) Cournot model.
D) contestable market model.
Advocates of a ________ transition approach from socialism to a market economy
recommend moderate changes starting with the development of market institutions, the
gradual decontrol of prices, and the privatization of only the cost efficient firms.
A) gradualism
B) shock therapy
C) temporary
D) hard-line
The table shows the relationship between income and utility for Lucy.
Table 17.2
Refer to Table 17.2. Lucy earns $20,000 annually. She has the opportunity to bet her
entire salary on the upcoming super bowl. If Lucy takes the bet, she will pick the
Packers. She believes that the Packers have a 50-50 chance of winning the game. If the
Packers win, Lucy will double her money ($40,000) but if they lose she loses her entire
salary ($0). Lucy’s utility if she does not take the bet is
A) 20 and her expected utility from the bet is 40.
B) 20 and her expected utility from the bet is 20.
C) 20 and her expected utility from the bet is 0.
D) 40 and her expected utility from the bet is 10.
Table 3.1
Refer to Table 3.1. If the price per pizza is $12, the price will
A) remain constant because the market is in equilibrium.
B) increase because there is an excess demand in the market.
C) decrease because there is an excess demand in the market.
D) decrease because there is an excess supply in the market.
Table 16.3 shows the situation facing two firms, both of which are polluting. Assume
that each firm emits 5 units of pollution.
Table 16.3
Refer to Table 16.3. Suppose the government wants to reduce the total amount of
pollution from the current level of 10 to 4. To do this, the government caps each firm’s
emissions at 2 units and issues 2 permits to each firm. If firms are allowed to trade
permits, what is the total cost of the pollution reduction?
A) $0
B) $30
C) $52
D) $55
Figure 13.5
Refer to Figure 13.5. If this firm is producing the profit-maximizing quantity and
selling it at the profit-maximizing price, the firm’s profit will be
A) $0.
B) $88.
C) $154.
D) $242.
MPL multiplied by PX is the ________ while the wage rate is the ________, where L
denotes labor and X denotes output.
A) cost of a marginal unit of labor; value of labor’s marginal product
B) value of labor’s marginal product; cost of a marginal unit of labor
C) marginal revenue of a unit of output; marginal cost of a unit of output
D) marginal cost of a unit of output; marginal revenue of a unit of output
Figure 7.1
Refer to Figure 7.1. This corn producer produces 100 bushels of corn and sells each
bushel at $5. The cost of producing each bushel is $2. This corn producer’s total
revenue is ________ and profit is ________.
A) $200; $300
B) $300; $200
C) $500; $200
D) $500; $300
Stanley Jevons, an economist in the nineteenth century, noted a high correlation
between economic prosperity and sunspots. Based on this observation he developed a
‘sunspot theory” of how the economy operated. We now know that Jevons
A) committed the fallacy of composition.
B) committed the ceteris paribus error.
C) was confusing causality.
D) showed good reasoning for the nineteenth but not the twentieth century.
Figure 2.4
According to Figure 2.4, the point where only hybrid cars are produced is
A) A.
B) B.
C) C.
D) D.
Demand for one item goes down when the price of another item goes up. These items
must be
A) substitutes.
B) complements.
C) normal goods.
D) inferior goods.
The collection and use of data to test economic theories is
A) empirical economics.
B) descriptive economics.
C) normative economics.
D) positive economics.
A group of firms explicitly colluding to make price and output decisions is called
A) a concentrated industry.
B) an oligopoly.
C) a cartel.
D) price leadership.
If a household’s income is cut in half, its budget constraint will
A) shift out parallel to the old one.
B) pivot at the Y-intercept.
C) shift in parallel to the old one.
D) be unaffected.
The Gini coefficient is ________.
A) the most common way of representing the income distribution graphically
B) a commonly used measure of the degree of inequality in an income distribution
C) a commonly used measure of the degree of inequity in a property distribution
D) the ratio of the percentage of total income received by the top 20% of families to the
percentage of total income received by the bottom 20% of families
The formula for the average product of labor is
A) Δq/ΔL.
B) ΔL/Δq.
C) q/L.
D) L/q.
Burning Bob’s Salsa House serves 30 customers in an hour when it hires one worker. It
serves 60 customers in an hour when it hires two workers. The marginal product of the
second worker is ________ customers served per hour.
A) 20
B) 30
C) 50
D) 5
If revenues exceed ________, economic profit is ________.
A) total cost; negative
B) total cost; positive
C) variable cost; negative
D) variable cost; positive
Compensation sent back to family in the home country by recent emigrants is known as
A) remittances.
B) transaction costs.
C) outsourcing.
D) capital flight.
A soybean farmer sells soybeans in a perfectly competitive market and hires labor in a
perfectly competitive market. The market price of soybeans is $6 a bushel, the wage
rate is $30, and the farmer employs eight workers. If the farmer is maximizing his
profits, then the marginal product of the eighth worker is ________.
A) 2 bushels
B) 5 bushels
C) 20 bushels
D) indeterminate from the given information.
Related to the Economics in Practice on page 69: Consumption of coffee has been on
the rise in China. Since tea and coffee are generally considered ________, a decrease in
the price of tea should ________ the demand for coffee, ceteris paribus.
A) substitutes; increase
B) substitutes; decrease
C) complements; increase
D) complements; decrease
Horizontal equity holds that
A) those with equal ability to pay should bear unequal tax burdens.
B) those with equal ability to pay should bear equal tax burdens.
C) those who benefit the most from government services should bear the higher tax
burden.
D) those who benefit the most from government services should have the greatest voice
in determining what gets produced.
Figure 8.4
Refer to Figure 8.4. Micro Oven’s average fixed costs of producing two units of output
are
A) $250.
B) $425.
C) $500.
D) indeterminate from this information.
Tom’s Donuts can invest in a new espresso machine that costs $500 and will yield
expected profits of $350 each year for two years. What is the present discounted value
of the expected profits from this investment if the interest rate is 4%?
A) $323.59
B) $480.77
C) $660.13
D) $673.08
Name the four types of market structure in order from most competitive to least
competitive.
How does price serve as a signal to resource owners?
What are the arguments against the redistribution of income?
What are the common characteristics of developing countries?
SCENARIO 1: Consider the following data for the harvest of crabs versus the harvest
of fish off the coast of Virginia in answering the following questions.
Refer to Scenario 1. If this economy is currently producing 30 crabs and 40 fish how is
it possible for it to produce more of both?
What is meant by marginal revenue?
Why does an efficient distribution of outputs among households occur in perfectly
competitive markets?
Assume that two countries are the same in every way except that one
allocated more of its resources to the production of capital goods as opposed to
consumer
goods.
Graphically illustrate the production choices on a production possibilities frontier.
Which country’s PPF will likely move out farther in the future and why?
Draw total fixed cost, total variable cost, and total cost on the same set of axes.
Critically evaluate the following statement. “The presence of risk and uncertainty poses
a problem for the workings of the market.”
Why is it that people who have to fly at a moment’s notice often pay some of the
highest air fares whereas people who wait until the last minute to buy a ticket to a live
performance of play may be able to get a better price than someone who bought their
ticket months in advance.
In the figure below, is the slope positive or negative? Calculate the slope.
In what ways can expectations change your demand for a product today?
What is measured by marginal revenue product?
What critical resource is likely to be the culprit for the impending doom of Social
Security regarding tax collection? Explain.