The wage rate is the opportunity cost of
A) working.
B) working overtime.
C) leisure.
D) consumption.
Jake sells Star Wars memorabilia on eBay. His annual revenue is $42,000 per year, the
explicit costs of his business are $10,000, and the opportunity costs of his business are
$18,000 per year. What are the implicit costs of his business?
A) $8,000
B) $18,000
C) $24,000
D) $32,000
With an optimal two-part tariff
A) consumer surplus equals producer surplus.
B) all consumer surplus is transformed into profit.
C) consumers maximize consumer surplus.
D) the firm earns zero profit.
________ is an experiment that tests the significance of fairness in consumer decision
making.
A) The fairness challenge
B) The consumer choice paradigm
C) The ultimatum game
D) The Giffen paradox
If the market price is $25 in a perfectly competitive market, the marginal revenue from
selling the fifth unit is
A) $5.
B) $12.50.
C) $25.
D) $125.
All of the following are characteristics of game theory except
A) rules that determine what actions are allowable.
B) payoffs that are the results of the interaction among players’ strategies.
C) strategies that players employ to attain their objectives.
D) independence among players.
The slope of an isoquant measures
A) the price ratio of the two inputs.
B) the average product of labor.
C) the ratio of the marginal utility of the two inputs.
D) the rate at which inputs can be substituted for each other keeping total output
constant.
For the top 1 percent of income distribution, the share of total income earned by
households in this group was about ________ percent in 2015.
A) 9
B) 17
C) 44
D) 68
Allocative efficiency is achieved when firms produce goods and services
A) at the lowest possible cost.
B) that consumers value most.
C) at the lowest opportunity cost.
D) at a marginal cost of zero.
Figure 12-10
Refer to Figure 12-10. The firm’s short-run supply curve is its
A) marginal cost curve.
B) marginal cost curve from b and above.
C) marginal cost curve from c and above.
D) marginal cost curve from d and above.
Article Summary
RealtyTrac, a provider of housing data and analytics for the real estate industry,
conducted an analysis of home values, appreciation, and property taxes in zip codes
where either a Whole Foods Market or a Trader Joe’s are located. The findings are as
follows:
-Homeowners near a Trader Joe’s experienced an average 40 percent increase in home
value since the date of purchase, had average home values of just over $590,000, and
paid an average of $8,536 in annual property taxes.
-Homeowners near a Whole Foods Market experienced an average 34 percent increase
in home value since the date of purchase, had average home values of just over
$560,000, and paid an average of $5,382 in annual property taxes.
– Homeowners in general for all zip codes nationwide experienced an average 34
percent increase in home value since the date of purchase, had average home values of
just over $260,000, and paid an average of $3,239 in annual property taxes.
Source: Jennifer Von Pohlmann, “Better to own near Trader Joe’s or Whole Foods?,”
realtytrac.com, August 11, 2015.
Refer to the Article Summary above. Assuming the findings are correct and all else
equal, people who do not shop at Trader Joe’s can still benefit from living near the store,
as is shown by the higher home values. As a result, the marginal social benefit from
living near a Trader Joe’s is ________ the marginal private benefit to those who shop at
Trader Joe’s.
A) equal to
B) greater than
C) less than
D) unrelated to
Which of the following are positive economic statements and which are normative
economic statements?
a. An increase in the price of gasoline will decrease the quantity of gasoline purchased.
b. The government should eliminate the minimum wage.
c. All states should raise the minimum wage to at least $10 per hour.
d. The government should scrap its current income tax structure in favor of a flat tax.
e. Unemployment has increased since the onset of the recession.
f. The government should not bail out investment banks during a financial crisis.
The first important federal law passed to regulate monopolies in the United States was
the
A) Cellar-Kefauver Act.
B) Clayton Act.
C) Federal Trade Commission Act.
D) Sherman Act.
Economic incentives are designed to make individual self-interest coincide with social
interest. According to economists, which of the following methods of pollution control
best uses economic incentives to reduce pollution?
A) Rewarding environmental groups for monitoring the activities of private firms that
produce products which generate pollution.
B) Imposing quantitative limits on the amount of pollution and imposing a penalty for
non-compliance with these limits.
C) Requiring the installation of specific pollution control devices.
D) Instituting a system of tradable emission allowances.
Figure 2-5
Refer to Figure 2-5. If the economy is currently producing at point W, what is the
opportunity cost of moving to point X?
A) 3 million tons of steel
B) 19 million tons of steel
C) 5 million tons of paper
D) 9 million tons of paper
What is the shape of the labor supply curve implied by the following statements?
a. “I’m sorry, kids, but now that I’m earning more, I just can’t afford to come home early
in the afternoon, so I won’t be here when you get home from school.”
b. “They can pay me a lot or they can pay me a little. I’ll still put in my 8 hours a day.”
c. “Now that I have received a salary increase, I am going to work 36 hours instead of
40 hours a week”
Which of the following is a characteristic of an oligopolistic market structure?
A) There are few dominant sellers.
B) Each firm sells a unique product.
C) It is easy for new firms to enter the industry.
D) Each firm need not react to the actions of rivals.
Figure 13-7
Figure 13-7 shows short-run cost and demand curves for a monopolistically competitive
firm in the footwear market.
Refer to Figure 13-7. Which of the following is the area that represents the profit or
loss experienced by the firm?
A) A loss represented by the rectangle P2uvP1.
B) A loss represented by the rectangle P2uwP0.
C) A loss represented by the rectangle P1vwP0.
D) An accounting profit equal to P1vwP0.
Figure 9-2
Suppose the U.S. government imposes a $0.40 per pound tariff on rice imports. Figure
9-2 shows the impact of this tariff.
Refer to Figure 9-2. The tariff causes domestic consumption of rice
A) to fall by 27 million pounds.
B) to fall by 11 million pounds.
C) to rise by 6 million pounds.
D) to rise by 16 million pounds.
In October, market analysts predict that the price of platinum will fall in November.
What happens in the platinum market in October, holding everything else constant?
A) The supply curve shifts to the right.
B) The supply curve shifts to the left.
C) The quantity of platinum demanded and the quantity of platinum supplied both
increase.
D) The demand curve shifts to the right.
Figure 10-7
Manuri has $300 to spend on Pilates classes and Yoga classes. The price of a group
Pilates class is $20 and the price of a group Yoga class is $10. Manuri’s optimal bundle
is given by “A” in Figure 10-7.
Refer to Figure 10-7. Suppose the price of Pilates sessions rise to $30 while income
and the price of Yoga sessions remain unchanged. The substitution effect of this price
change is represented by the movement from
A) A to B.
B) A to C.
C) A to D.
D) D to B.
Which of the following is an example of rent seeking behavior?
A) Apple earned large profits from the development and sale of the iPhone.
B) Amazon introduced the Kindle to compete with Sony’s Digital Reader. Amazon was
motivated by the desire to earn profits from the Kindle but also increased the choice of
digital music players available to consumers.
C) U.S. sugar firms convinced Congress to impose a quota on imports of sugar.
D) Recent increases in cigarette taxes faced little opposition from voters, many of
whom were rationally ignorant with respect to the tax.
Figure 13-18
Refer to Figure 13-18. The diagram demonstrates that
A) in the short run, the monopolistic competitor produces an output Qb but in the long
run after it adjusts its capacity, it will produce the allocatively efficient output, Qa.
B) it is not possible for a monopolistic competitor to produce the productively efficient
output level, Qa, because of product differentiation.
C) it is possible for a monopolistic competitor to produce the productively efficient
output level, Qa, if it is willing to lower its price from Pb to Pa.
D) in the long run, the monopolistic competitor produces the minimum-cost output
level, Qa, but in the short run its output of Qb is not cost minimizing.
Consider the following characteristics:
a. a market structure with barriers to entry
b. demand curves that are easily identified
c. firm cannot make zero profits in the long run
d. firm can reap long-run profits.
Which of the characteristics in the list above is shared by an oligopolist and a
monopolist?
A) a, b, c, and d
B) a, b, and d
C) a, c, and d
D) a and d
Long-run equilibrium in a monopolistically competitive market is similar to long-run
equilibrium in a
perfectly competitive market in that in both markets, firms
A) produce at the minimum point of their average total cost curves.
B) produce where price equals marginal cost.
C) break even.
D) produce where price equals marginal revenue.
Bubba’s Hula Shack bar and bistro has begun giving customers who can show proof
that they arrived at the establishment by public transportation a 10 percent discount on
their total bill. This is an example of
A) arbitrage.
B) two-part tariff pricing.
C) price discrimination.
D) odd pricing.
If diminishing marginal returns have already set in for Golden Lark Woodworks, and
the marginal product of the 6th carpenter is 8 chairs, then the marginal product of the
7th carpenter is
A) negative.
B) less than 8 chairs.
C) more than 8 chairs.
D) zero.
Figure 2-3
Refer to Figure 2-3. Sergio Vignetto raises cattle and llamas on his land. A portion of
his land is more suitable for raising cattle, and the other portion is better suited for
raising llamas. Which of the graphs in Figure 2-3 represent his production possibilities
frontier?
A) Graph A
B) Graph B
C) Graph C
D) either Graph A or Graph C
E) either Graph B or Graph C
Figure 3-7
Refer to Figure 3-7. Assume that the graphs in this figure represent the demand and
supply curves for almonds. Which panel best describes what happens in this market
when there is an increase in the productivity of almond harvesters?
A) Panel (a)
B) Panel (b)
C) Panel (c)
D) Panel (d)
A situation in which a country does not trade with other countries is called
A) autarky.
B) self-actualization.
C) autonomy.
D) independence.
When the demand for a product is more elastic than the supply
A) consumers pay the majority of the tax on the product.
B) consumers pay the entire tax on the product.
C) firms pay the majority of the tax on the product.
D) firms pay the entire tax on the product.
Suppose you have just opened a store to sell espresso machines. Both you and a
competing store buy this machine from a manufacturer for $130 each. Your competitor
who has a store of the same size as yours is currently selling about 10 machines a
month at a price of $200 per machine. You expect to sell about 6 machines a month at a
price of $220 per machine. If you lower your price, you expect to make a loss. Which of
the following could explain why your competitor is able to profitably sell the machine
at a lower price although the cost of purchasing the machine is the same for the both of
you?
A) The competing store probably has a lower marginal cost of production.
B) The competing store probably has a lower average variable cost of production.
C) The competing store’s goal is to maximize revenue and not profit.
D) The competing store probably has a lower average cost because average fixed cost
falls as output increases.
Table 18-1
Suppose $1 billion is available in the budget and Congress is considering allocating the
funds to one of the following three alternatives: 1) Subsidies for education, 2) Research
on Alzheimer’s or 3) Increased border security. Table 18-1 shows three voters’ rankings
of the alternatives.
Refer to Table 18-1. Suppose a series of votes are taken in which each pair of
alternatives is considered in turn. If the vote is between allocating funds to research on
Alzheimer’s and increased border security
A) Ivy and Jasmine vote for Alzheimer’s research, Rose votes for increased border
security, and Alzheimer’s research wins.
B) Ivy and Rose vote for increased border security, Jasmine votes for Alzheimer’s
research, and increased border security wins.
C) Jasmine and Rose vote for Alzheimer’s research, Ivy votes for increased border
security, and Alzheimer’s research wins.
D) Jasmine and Ivy vote for increased border security, Rose votes for Alzheimer’s
research, and increased border security wins.