(Table: Quantity Supplied and Quantity Demanded) Look at the table Quantity Supplied
and Quantity Demanded. If a price ceiling of $10 is imposed in this market:
A) the quantity demanded will be greater than the quantity supplied.
B) the quantity supplied will be greater than the quantity demanded.
C) an equilibrium quantity will result.
D) excess supply equal to 25 units will result.
Britain must give up the production of 75 hats to produce 25 additional sweaters. The
opportunity cost of producing 3 hats is _____ sweater(s).
A) 1
B) 3
C) 22
D) 28
(Table: Producer Surplus and Phantom Tickets) The table Producer Surplus and
Phantom Tickets shows the minimum price at which each of the students is willing to
sell a ticket to Phantom of the Opera. Assume that each student has only one ticket to
sell. Given the information in the table, if the price for Phantom tickets is $55, total
producer surplus for the five students is:
A) $54.
B) $79.
C) $84.
D) $64.
Since a monopolistically competitive firm faces a downward-sloping demand curve, its
price will be _____ revenue.
A) equal to marginal
B) less than marginal
C) greater than marginal
D) equal to total
If Canada imposes a tariff of $5 per bottle on French wine, the most likely effect will be
to raise the price of wine in Canada by:
A) more than $5 per bottle.
B) $5 per bottle.
C) less than $5 per bottle and lower the price of wine in France by less than $5 per
bottle.
D) less than $5 per bottle without affecting the price of wine in France.
Scenario: Monopolistically Competitive Firm
For a monopolistically competitive firm, Q = 160 ” P; MC = 20 + 2Q; and TC = 20Q +
Q2 + 20.
(Scenario: Monopolistically Competitive Firm) Given the information in the scenario
Monopolistically Competitive Firm, what is the fixed cost for this firm?
A) There is none, since this is the long run.
B) Fixed costs equal $160.
C) Fixed costs equal $20.
D) Fixed costs equal $180.
The perfectly competitive model assumes all of the following EXCEPT:
A) a great number of buyers.
B) easy entry to and exit from the market.
C) a standardized product.
D) that firms attempt to maximize their total revenue.
(Table: Consumer Equilibrium) Look at the table Consumer Equilibrium. Assume that
the price of good X is $2 per unit, the price of good Y is $1 per unit, and you have $10
to spend on both goods. To maximize utility, you would consume _____ units of X and
_____ units of Y.
A) 3; 4
B) 2; 3
C) 2; 6
D) 5; no
Whenever marginal benefit is less than marginal cost, the decision maker should do
_____ of the activity.
A) less
B) that exact amount
C) more
D) none
Figure: The Monopolist III
(Figure: The Monopolist III) Look at the figure The Monopolist III. If this monopolist
profit-maximizes, it will produce _____ units and charge a price equal to _____. Its
producer surplus will be _____, its consumer surplus will be _____, and the deadweight
loss is _____.
A) 50; $30; $1,200; $600; $100
B) 35; $65; $1,225; $612.50; $612.50
C) 100; $65; $1,500; $615.50; $1,000
D) 70; $35; $1,225; $615.50; $615.50
An increase in the price of hamburger would probably result in _____ in the demand for
hamburger buns.
A) a decrease
B) an increase
C) no change
D) random fluctuations
(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 total cost of producing 70 bushels of soybeans is:
A) $250.
B) $400.
C) $550.
D) $1,024.
An electronic book is an artificially scarce good because the private market _____
prevent consumption by people who do not pay for it. Further, the same e-book _____
be consumed by more than one person at the same time.
A) can; can
B) cannot; cannot
C) can; cannot
D) cannot; can
Suppose the market demand for TV remotes is given by the equation Qd = 100 ” 2P,
where P is the price and Qd is the number of TV remotes. If the market price of TV
remotes is $40, then the quantity demanded equals _____ and the value of consumer
surplus is _____.
A) 20; $100
B) 100; $20
C) 40; $200
D) 2; $40
Figure: Budget Lines for Oranges and Apples
(Figure: Budget Lines for Oranges and Apples) Look at the figure Budget Lines for
Oranges and Apples. For some time, Antonio has had $5 per month to spend on oranges
and apples. The price of an orange is $0.50 and the price of an apple is $0.25. Which of
the charts shows what will happen to his budget line if his income decreases to $2.50?
A) A
B) B
C) C
D) D
The dictator of a small country restricts the price of cars to an amount less than or equal
to $1,200 (a price below the equilibrium price for cars). Such a policy would set a:
A) price floor.
B) price ceiling.
C) quota.
D) tariff.
(Table: Demand Schedule for Gadgets) Look at the table Demand Schedule for
Gadgets. The market for gadgets consists of two producers, Margaret and Ray. Each
firm can produce gadgets at a marginal cost of $2 and no fixed cost. If industry output is
300 gadgets produced by Margaret and 200 gadgets produced by Ray and if Ray
decides to increase output by 100, industry output will be:
A) 700.
B) 600.
C) 500.
D) 400.
Figure: The Restaurant Market
(Figure: The Restaurant Market) The figure The Restaurant Market shows curves facing
a typical restaurant. Assume that many firms, differentiated products, and easy entry
and exit characterize the restaurant market. In long-run equilibrium, the economic profit
earned by the typical restaurant in the community will be:
A) negative.
B) zero.
C) equal to the level shown in the figure.
D) Not enough information is given to answer the question.
If the demand for golf is price-inelastic and your local public golf course increases the
greens fees for using the course, you expect:
A) a decrease in total revenue received by the course.
B) an increase in total revenue received by the course.
C) an increase in the amount of golf played on the course.
D) no change in the amount of golf played on the course.
In the importing country, the most likely effect of a tariff is to:
A) raise the price and decrease the quantity demanded.
B) raise the price and increase the quantity demanded.
C) raise the price without affecting the quantity demanded.
D) decrease the quantity supplied.
When the United States and Mexico trade:
A) the United States will be worse off because wages in Mexico are so low.
B) Mexico will be worse off because the United States is a stronger economic power.
C) both Mexico and the United States will be better off.
D) both Mexico and the United States will be worse off.
When a firm has diminishing marginal returns:
A) its output is falling.
B) marginal product is falling but is likely to be still positive.
C) total product falls because marginal product is falling and positive.
D) marginal product is always negative.
You insure your car against theft. Consequently, you rarely lock the car. This describes
the problem of:
A) adverse selection.
B) moral hazard.
C) positive correlation.
D) risk aversion.
Monopolistic competition is an industry structure characterized by:
A) a product with no close substitutes.
B) a horizontal demand curve.
C) a large number of firms.
D) barriers to entry and exit.
(Figure and Table: Variable, Fixed, and Total Costs) Look at the figure and table
Variable, Fixed, and Total Costs. The marginal cost of increasing production from 51 to
64 bushels of wheat is:
A) $16.00.
B) $15.38.
C) $12.50.
D) $18.75.
Figure: A Profit-Maximizing Monopoly Firm
(Figure: A Profit-Maximizing Monopoly Firm) Look at the figure A Profit-Maximizing
Monopoly Firm. This firm’s price per unit is:
A) $20.
B) $25.
C) $30.
D) $35.