For a straight-line downward-sloping demand curve, price elasticity of demand
a. increases as we move down along the demand curve from higher to lower prices.
b. decreases as we move down along the demand curve from higher to lower prices.
c. remains constant along the entire demand curve.
d. a or b depending on the actual slope of the demand curve
Refer to Exhibit 31-2. If the exhibit represents a positive externality situation, the
private benefit of expanding output from Q1 to Q2 is the area of
Exhibit 31-2
a. Q1ABQ2.
b. Q1AEQ2.
c. Q1CBQ2.
d. ABE.
If demand for a product is perfectly inelastic, a tax of $1 per unit imposed on sellers
will
a. not affect the market price of the product.
b. cause the market price to rise by $1 per unit.
c. cause the market price to decline by $1 per unit.
d. cause the market price to rise by less than $1 per unit.
e. none of the above
If labor is the variable input, then marginal cost equals
a. MPP divided by the wage rate.
b. average variable (labor) costs divided by MPP.
c. average variable (labor) costs multiplied by MPP.
d. the wage rate divided by MPP.
e. the wage rate multiplied by MPP.
Amy’s opportunity cost of going to the movies is
a. the price of the ticket.
b. zero, if she has a free pass to the movie.
c. the price of the ticket plus the value to Amy of what she would have chosen to do
with her time had she not chosen to go to the movies.
d. both b and c
Refer to Exhibit 32-3. The exhibit shows the breakdown of benefits and costs for a
five-person community considering whether to purchase a $5,000 statue of Adam Smith
to put in the center of the public square. If simple majority voting determines the
outcome, the statue _______________ be purchased, and the total costs are
______________ the total benefits of the statue.
a. will; greater than
b. will; less than
c. will not; greater than
d. will not; less than
If the demand curve for agricultural products is elastic and farmers as a group become
more productive, then prices of agricultural goods will __________ and total revenue
earned by farmers will __________.
a. decrease; increase
b. decrease; decrease
c. increase; increase
d. increase; decrease
e. We cannot answer this question without knowing how elastic the demand curve is.
According to information in the textbook, during the last year that Michael Jordan
played basketball with the Chicago Bulls he earned ___________________ times the
salary of the lowest paid player on the team.
a. 12
b. 121
c. 1,210
d. 12,121
With a constant opportunity cost between goods A and B, the PPF for goods A and B
would
a. be a straight line.
b. be a bowed-outward line.
c. be a bowed-inward line.
d. not exist.
Smith argues that American producers cannot compete with foreign producers because
wages are lower in foreign countries than in the United States. Smith is
a. advancing the foreign export subsidies argument for protectionism.
b. making the mistake of believing that high wages mean high costs.
c. advancing the antidumping argument for protectionism.
d. making the mistake of believing that productivity is higher in foreign countries than
in the United States.
e. none of the above
A negative externality exists when
a. a person’s or group’s actions cause a benefit that is felt by others.
b. a person’s or group’s actions cause a cost that is felt by others.
c. market output is less than socially optimal output.
d. a and c
e. b and c
Refer to Exhibit 1-1.The student whose study habits are illustrated here will maximize
the net benefits of studying when she has studied
Exhibit 1-1
a. 2 hours
b. 4 hours
c. 6 hours
d. 8 hours
Which of the following cost curves is never U-shaped?
a. the average total cost curve
b. the average fixed cost curve
c. the marginal cost curve
d. the average variable cost curve
Which of the following statements is true?
a. Government cannot remove individuals from a prisoner’s dilemma setting and make
them better off.
b. As long as government charges each individual a tax that is more than the gain
received by being removed from a prisoner’s dilemma setting, then government makes
that individual better off.
c. Government can remove individuals from a prisoner’s dilemma setting by changing
the payoff matrix.
d. a and c
e. all of the above
Suppose that the total utility from consuming one unit of good Z is 220 utils, the total
utility from consuming two units of good Z is 320 utils, and the total utility from
consuming three units of good Z is 400 utils.The marginal utility received from
consuming the third unit of good Z is
a. 313.33 utils.
b. 80 utils.
c. 100 utils.
d. 50 utils.
If income elasticity of demand is 2.12, it means that quantity demanded will
__________ by 2.12 percent for every __________ percent __________ in income.
a. rise; 2.12; fall
b. rise; 1.0; rise
c. fall; 1.0; rise
d. fall; 2.12; fall
e. none of the above
Refer to Exhibit 25-7. A monopolistic competitive firm earns a total profit of
__________ when it produces the profit maximizing level of output.
a. $12
b. $40
c. $20
d. $80
e. $200
Suppose health-care reform X makes it unlawful for insurance companies to deny
insurance to persons with a preexisting disease.One unintended effect of this reform is
that some people
a. will buy more health insurance than they would have without reform X.
b. may wait until they have a particular disease before they buy health insurance.
c. will try to work longer hours, to earn more income, to pay for increasing health
insurance premiums.
d. a and c
e. none of the above
When you buy a corporate bond, you are
a. borrowing funds from the corporation.
b. lending funds to the corporation.
c. selling an ownership right in the corporation.
d. acquiring an ownership right in the corporation.
e. b and d
Price rises from $9.99 to $10.99 and quantity demanded does not change for good X. It
follows that the entire demand curve for good X is
a. perfectly inelastic.
b. inelastic.
c. elastic.
d. unit elastic.
e. There is not enough information to answer the question
If a market is in disequilibrium, economists would predict that the product’s price would
__________ to reach equilibrium when the quantity demanded is __________ than the
quantity supplied.
a. rise; greater
b. fall; less
c. fall; greater
d. rise; less
e. a and b