Table 14-4
Alistair Luggage and Baine Baggage are the only firms selling luggage in the upscale
town of Montecito. Each firm must decide on whether to increase its advertising budget
to compete for customers. If one firm increases its advertising budget but the other does
not, then the firm with the higher advertising budget will increase its profit. Table 14-4
shows the payoff matrix for this advertising game.
Refer to Table 14-4. What is the Nash equilibrium in this game?
A) There is no Nash equilibrium.
B) Baine increases its advertising budget, but Alistair does not.
C) Alistair increases its advertising budget, but Baine does not.
D) Both Alistair and Baine increase their advertising budgets.
Figure 15-17
Your college decides to offer a psychology course as a MOOC that can be taken by
students anywhere in the world, whether they are actually enrolled in your college or
not. The demand and cost situation for the MOOC is shown in the figure.
Refer to Figure 15-17. You are a member of a student government and are asked to
recommend a price for the course and you argue: “I think the college should charge a
price so that it just breaks even on the course.” What price should you recommend?
A) $0
B) $40
C) $88
D) $150
Suppose the price of gasoline is $3.50 per gallon, the quantity of gasoline demanded is
150 billion gallons per year, the price elasticity of demand for gasoline is -0.06, and the
federal government decides to increase the excise tax on gasoline by $1.00 per gallon,
which increases the price of gasoline by $0.75 per gallon. How much revenue does the
federal government receive from the tax?
A) $95.44 billion
B) $111.20 billion
C) $148.27 billion
D) $161.61 billion
If, in response to an increase in the price of chocolate the quantity of chocolate
demanded decreases, economists would describe this as
A) a decrease in demand.
B) a decrease in quantity demanded.
C) a change in consumer income.
D) a decrease in consumers’ taste for chocolate.
Figure 15-3
Figure 15-3 above shows the demand and cost curves facing a monopolist.
Refer to Figure 15-3. Suppose the monopolist represented in the diagram above
produces positive output. What is the price charged at the
profit-maximizing/loss-minimizing output level?
A) $38
B) $54
C) $68
D) $75
If fixed costs do not change, then marginal cost
A) also remains constant.
B) equals the change in variable cost divided by the change in output.
C) equals the change in average variable cost divided by the change in output.
D) equals the change in average fixed cost divided by the change in output.
If you exhibit the endowment effect as a decision maker, then you are
A) deciding on the basis of sunk costs.
B) buying something you can’t really afford because you expect to save in the future.
C) ignoring non-monetary opportunity costs.
D) consuming based on celebrity endorsements.
The cross-price elasticity of demand between Coca-Cola and Pepsi-Cola is calculated
by dividing
A) the percentage change in quantity demanded of Coca-Cola by the percentage change
in the quantity demanded of Pepsi-Cola.
B) the percentage change in the price of Pepsi-Cola by the percentage change in
quantity demanded of Coca-Cola.
C) the percentage change in the price of Coca-Cola by the percentage change in the
price of Pepsi-Cola.
D) the percentage change in the quantity demanded of Coca-Cola by the percentage
change in the price of Pepsi-Cola.
Organizing a successful firm in a market economy has become ________ over the last
century.
A) legally impossible
B) politically impossible
C) less difficult
D) more difficult
An increase in the demand for green tea raises the price of green tea from $16 a pound
to $20 a pound. As a result, quantity supplied increases by 30 percent. Using the
midpoint formula, calculate the value of the price elasticity of supply?
A) 35
B) 875
C) 22
D) 5
The following equations represent the demand and supply for silver pendants.
QD = 50 – 2P
QS = -10 + 2P
What is the equilibrium price (P) and quantity (Q – in thousands) of pendants?
A) P = $15; Q = 20 thousand
B) P = $50; Q = 10 thousand
C) P = $20; Q = 15 thousand
D) P = $10; Q = 30 thousand
Prices of PlayStation 4 game systems are similar at almost every large retailer and little
price competition occurs among these retailers. An explanation for this is
A) retailers are all price takers.
B) retailers have lobbied state governments to allow them to collude legally to set the
prices of certain products.
C) pricing PlayStation 4 game systems is a repeated game. Over a long period of time a
cooperative equilibrium has been reached where retailers charge high prices for these
systems.
D) retailers are in a prisoner’s dilemma which causes them to all charge the same price
for PlayStation 4 game systems.
The price of wheat has fallen since 1950. Which of the following explains this price
decline?
A) The price elasticity of demand is less than 1 (in absolute value) and the income
elasticity of demand for wheat is low.
B) The price elasticity of demand is greater than 1 (in absolute value) and the income
elasticity of demand for wheat is low.
C) The price elasticity of demand is less than 1 (in absolute value) and wheat is an
inferior good.
D) The price elasticity of demand is greater than 1 (in absolute value) and the income
elasticity of demand for wheat is greater than 1.
Which of the following is the best example of a firm that competes in a
monopolistically competitive market?
A) the U.S. Postal Service
B) Microsoft
C) a movie theater
D) an automobile manufacturer
Since 1994, obesity rates in the United States
A) have been on a slow and steady decline.
B) have increased in all 50 states.
C) have primarily increased in the Southeast and remained constant or slightly
decreased in the remainder of the country.
D) have remained fairly constant throughout the country.
A demand curve which is ________ represents perfectly inelastic demand, and a
demand curve which is ________ represents inelastic demand.
A) downward sloping; vertical
B) horizontal; downward sloping
C) vertical; downward sloping
D) upward sloping; horizontal
A reason why a perfectly competitive firm’s demand for labor curve slopes downward is
that
A) each additional unit of labor hired is less efficient than previously hired units.
B) in the short run, as more labor is hired, labor’s marginal product falls because of the
law of diminishing returns.
C) the extra cost of hiring additional units of labor increases as a firm hires more units
of labor.
D) the firm’s demand curve for the product that uses labor is downward sloping.
Table 18-6
Table 18-6 shows the income tax brackets and tax rates for single taxpayers in
Calpernia.
Refer to Table 18-6. Calculate the income tax paid by Sasha, a single taxpayer with an
income of $60,000.
A) $22,800
B) $14,400
C) $13,800
D) $13,642
Figure 11-2
Refer to Figure 11-2. Diminishing returns to labor set in
A) after L1.
B) after L2.
C) after L3.
D) immediately.
If the selling price of a firm’s product is $500 and the estimated average cost of
producing this product is $400, what is the firm’s markup?
A) 15 percent
B) 20 percent
C) 25 percent
D) 40 percent
Which of the following statements is true?
A) If the price of a good is lowered and total revenue decreases, demand is elastic.
B) If the price of a good is raised and total revenue does not change, demand is
perfectly elastic.
C) If the price of a good is raised and total revenue increases, demand is inelastic.
D) If the price of a good is lowered and total revenue increases, demand is inelastic.
The demand curve for each seller’s product in perfect competition is horizontal at the
market price because
A) each seller is too small to affect market price.
B) the price is set by the government.
C) all the sellers get together and set the price.
D) all the demanders get together and set the price.
Figure 6-8
Refer to Figure 6-8. Identify the two goods which are substitutes.
A) Good X and Good Y
B) Good Y and Good Z
C) Good X and Good Z
D) It is not possible to distinguish any relationship among the goods.
Which of the following is a positive economic statement?
A) The standard of living in the United States should be higher.
B) If the price of iPhones falls, a larger quantity of iPhones will be purchased.
C) The government should revamp the health care system.
D) The U.S. government should not have bailed out U.S. auto manufacturers.
A perfectly competitive firm has to charge the same price as every other firm in the
market. Therefore, the firm
A) faces a perfectly inelastic demand curve.
B) is not able to make a profit in the short run.
C) is a price taker.
D) faces a perfectly elastic supply curve.
Economic models do all of the following except
A) answer economic questions.
B) portray reality in all its minute details.
C) make economic ideas explicit and concrete for use by decision makers.
D) simplify some aspect of economic life.
If Dawson prefers pizza to hamburgers and hamburgers to hot dogs, then if preferences
are transitive
A) at times she could be indifferent among the three items.
B) she must prefer pizza to hot dogs.
C) she could prefer hamburgers to pizza on some occasions but not hot dogs to pizza.
D) she could prefer hot dogs to pizza on some occasions but not hamburgers to hot
dogs.
In the long run which of the following is true?
A) Total cost = fixed cost + variable cost.
B) The size of a firm’s physical plant can be changed but the firm cannot adopt new
technology.
C) There are no fixed costs.
D) The firm can vary its explicit costs but not its implicit costs.
From 1950 to 2015 the number of people who lived on farms fell from 23 million to
fewer than 3 million? Which of the following factors have contributed to this trend?
A) increases in the cost of farming and a desire for young adults to move to urban areas
B) rapid growth in farm production and low income and price elasticities for food
products
C) slow growth in agricultural productivity and low income elasticities for food
products
D) government policies that have increased the cost of living and working on farms
Total revenue is equal to
A) the amount of funds earned by a firm minus its costs of production.
B) the total quantity sold of a product over a given period of time.
C) the price of a product multiplied by the number of units of the product sold.
D) the monetary value of the capital (for example, plant and equipment) a firm owns.
A four-firm concentration ratio measures
A) the extent to which industry sales are concentrated among the four largest firms in
the industry.
B) the price elasticity of demand among the four largest firms in an industry.
C) the number of firms in an industry.
D) the price elasticity of demand in an industry.
Last year, Sefton purchased 60 pounds of potatoes to feed his family of five when his
household income was $30,000. This year, his household income fell to $20,000 and
Sefton purchased 80 pounds of potatoes. All else constant, Sefton’s income elasticity of
demand for potatoes is
A) negative, so Sefton considers potatoes to be an inferior good.
B) positive, so Sefton considers potatoes to be an inferior good.
C) positive, so Sefton considers potatoes to be a normal good and a necessity.
D) negative, so Sefton considers potatoes to be a normal good.
The Wilfer Resort Hotel has a spectacular view of a pine forest along a river bank.
Suppose a commercial logger has purchased the pine forest and is planning to clear-cut
the forest in a way that has a negative impact on the resort. Can the two parties arrive at
a Coasian solution and if so what might that solution be?
If the marginal product of labor is 45 units of output and the marginal product of capital
is 56 units of output while the wage rate is $20 per worker and the cost of capital is $28
per machine, are these two inputs being used in the least-cost combination and what
should be done if they are not?