Restrictions on free international trade designed to insulate domestic industries from
competitive market forces that originate beyond the borders of the country are _____
policies.
A) competitive
B) protectionist
C) free-trade
D) antitrust
Some highways have one lane; others have two, three, or more. If each lane costs $10
million per mile, an economist assumes that the total benefit of a three-lane highway
must be _____ million per mile.
A) less than $10
B) $10 to $20
C) $20 to $30
D) $30 or more
If the price of coffee cups falls and the consumer decides to buy more coffee cups
solely because they are less expensive, this describes the:
A) income effect.
B) substitution effect.
C) consumer surplus effect.
D) marginal-maximizing rule.
Figure: The Marginal Decision Rule
(Figure: Marginal Decision Rule) Look at the figure The Marginal Decision Rule. At q2,
or the _____, the _____ price is equal to marginal cost.
A) minimum-cost output; shut-down
B) profit-maximizing quantity; market
C) maximum-cost output; break-even
D) profit-minimizing quantity; break-even
Figure: Shifts in Demand and Supply IV
(Figure: Shifts in Demand and Supply IV) Look at the figure Shifts in Demand and
Supply IV. The figure shows how supply and demand might shift in response to specific
events. Suppose the Surgeon General announces that eating chocolate prevents heart
disease. Which panel BEST describes how this will affect the market for chocolate?
A) panel A
B) panel B
C) panel C
D) panel D
Figure: Monopoly Model
(Figure: Monopoly Model) Look at the figure Monopoly Model. The profit-maximizing
quantity is at point:
A) W.
B) J.
C) K.
D) L.
(Table: Workers and Output) Look at the table Workers and Output. After graduation
you achieve your dream of opening an art shop that specializes in selling mud statues.
You pay $10 per day on a loan from your uncle, and regardless of how much you
produce, you pay $10 per day to each of the workers who make the mud statues. The
total cost of producing 25 statues is:
A) $10.
B) $20.
C) $25.
D) $30.
(Table: The Market for Soda) Look at the table The Market for Soda. If the government
imposes a price ceiling of $0.50 per can of soda, the quantity of soda demanded will be:
A) 10 cans.
B) 8 cans.
C) 6 cans.
D) 4 cans.
Accountants use only _____ costs in their computations of short-run total cost.
A) opportunity
B) implicit
C) explicit
D) variable
Scenario: A Small-Town Monopolist
A monopolist sells cable subscriptions in a small town and finds that it can sell 100
subscriptions when the price is $15 a week and an additional 75 subscriptions when the
price is $10 a week. The MC for the provision of the cable is $5 a week. There are no
fixed costs.
(Scenario: A Small-Town Monopolist) Look at the scenario A Small-Town Monopolist.
Compared to charging a single price, the deadweight loss:
A) increases when this monopolist price-discriminates.
B) decreases when this monopolist price-discriminates.
C) stays the same when this monopolist price-discriminates.
D) is equal to zero.
A minimum price that the government guarantees farmers will receive for a particular
crop is:
A) a price ceiling.
B) a price floor (price support).
C) a deficiency price.
D) an export price (export subsidy).
Figure: The Demand and Supply of Wheat
(Figure: The Demand and Supply of Wheat) Look at the figure The Demand and
Supply of Wheat. What is the equilibrium quantity in this wheat market?
A) 12,000 bushels
B) 2,000 bushels
C) 10,000 bushels
D) 6,000 bushels
(Table: Exercise and Utility) Look at the table Exercise and Total Utility. Marginal
utility:
A) initially decreases but eventually increases as more exercise is consumed.
B) always decreases as more exercise is consumed.
C) initially increases but eventually decreases as more exercise is consumed.
D) initially increases but eventually stays constant as more exercise is consumed.
Table: The Production Possibilities for Cars and Leather Boots Country Cars
Leather Boots (in thousands of pairs) United States 80 40 Mexico 60 30
(Table: The Production Possibilities for Cars and Leather Boots) Look at the table The
Production Possibilities for Cars and Leather Boots. The opportunity cost of producing
one car in Mexico is:
Country Cars Leather Boots (in thousands of pairs)
United States 80 40
Mexico 60 30
A) 500 pairs of leather boots.
B) 1,000 pairs of leather boots.
C) different from the opportunity cost in the United States.
D) 2,000 pairs of leather boots, which is the same as in the United States.
Table: Lindsay’s Farm
(Table: Lindsay’s Farm) Look at the table Lindsay’s Farm. When Lindsay produces 140
units of produce, her total cost is:
A) $200.
B) $150.
C) $350.
D) $500.
Organized-gambling venues such as those at Las Vegas tend to attract:
A) risk-loving individuals only.
B) even risk-averse people because they are designed to allow individuals to win.
C) people who may be irrational in their choice of gambling and are often risk-averse.
D) only professional gamblers.
Which of the following goods is likely to have the largest price elasticity of demand?
A) a bicycle
B) a mountain bike
C) a Cannondale mountain bike
D) a green Cannondale mountain bike
The term diminishing returns refers to:
A) a falling interest rate that can be expected as one’s investment in a single asset
increases.
B) a reduction in profits caused by increasing output beyond the optimal point.
C) a decrease in total output due to the firm hiring uneducated workers.
D) a decrease in the extra output due to the use of an additional unit of a variable input
when all other inputs are held constant.
An advantage of tradable emissions permits is that:
A) pollution costs are easier to measure than emissions taxes.
B) nondegradable pollutants can be more easily controlled than degradable pollutants.
C) the value that future generations place on pollution damages can be determined.
D) they provide incentives for firms to develop technologies that are less polluting.
An industry is made up of five firms. Three of the firms make up 20% of the total
market sales, one firm makes up 25%, and the remaining firm makes up 15%. What is
the HHI for this industry?
A) 100
B) 1,200
C) 2,050
D) 1,800
Measured by the amount of money spent by the U.S. government, which of the
following U.S. welfare programs is the largest?
A) food stamps
B) unemployment insurance
C) Medicare
D) Social Security
One of the earliest actions of antitrust policy was the breakup of:
A) the Standard Oil Company.
B) Bell Telephone.
C) Microsoft.
D) IBM.
_____ is the practice of selling _____ product(s) at different prices to different
consumers, without corresponding differences in costs.
A) Price discrimination; the same
B) Privatizing; the same
C) Monopolizing; similar
D) Price fixing; different
Figure: The Market for Economics Textbooks
(Figure: The Market for Economics Textbooks) Look at the figure The Market for
Economics Textbooks. At a price ceiling of $40, the market outcome would be a _____
of _____ textbooks.
A) surplus; 30
B) surplus; 10
C) shortage; 30
D) shortage; 10
When the economy turns down and the incomes of many people decrease, vacationers
are more likely to take car trips than to fly. Which of the following provides one
possible explanation for this phenomenon?
A) Air travel and travel by car are complementary goods.
B) Air travel and travel by car are both normal goods.
C) Air travel is a normal good and travel by car is an inferior good.
D) Air travel is an inferior good and travel by car is a normal good.
Which of the following countries has a single-payer system funded through taxes in
which the government is the principal payer of medical bills for all of its citizens?
A) United States
B) Canada
C) France
D) Great Britain
Rent controls usually set a ceiling below the equilibrium price, and therefore:
A) quantity supplied exceeds the quantity demanded.
B) quantity demanded exceeds the quantity supplied.
C) a surplus of rental units will result.
D) all low-income recipients will clearly be helped.
For the Colorado beef industry to be classified as perfectly competitive, ranchers in
Colorado must have _____ on prices and beef must be a _____ product.
A) no noticeable effect; standardized
B) a huge effect; standardized
C) a huge effect; differentiated
D) no noticeable effect; differentiated
The principle of diminishing marginal utility means that when Sarah eats pizza, her
satisfaction from the second slice of pizza is probably _____ that from the first.
A) greater than
B) equal to
C) less than
D) not comparable to
You have one ticket for a raffle with a grand prize of $1,000. There are two prizes worth
$100 and five prizes worth $20. If only 100 tickets have been distributed, what is the
expected value of your winnings?
What are some factors that contribute to a firm achieving increasing returns to scale (or
economies of scale) in the long run?
You are risk-neutral. You are considering the purchase of a $10 ticket for a raffle with a
grand prize of $1,000. There are two prizes worth $100 and five prizes worth $20. If
you know that only 100 tickets will be sold, should you purchase the ticket?
All else equal, when the demand for oil increases, the price will increase. Some
economists say that this is only a short-run worry because in the long run a more elastic
supply curve will benefit consumers. Do you agree? Explain.
You are considering the purchase of one ticket for a raffle with a grand prize of $1,000.
There are two prizes worth $100 and five prizes worth $20. If you know that only 100
tickets will be sold, what is the most you would pay for one raffle ticket?
In August 2005, Hurricane Katrina damaged or destroyed oil platforms in the Gulf of
Mexico, refineries along the Gulf coast, and the pipeline infrastructure that transports
oil and gas to customers across the eastern United States. The winter of 2006 was
unusually cold in many parts of the country. How did these events affect the market for
natural gas?
You and your roommate are taking the same economics class. When it comes to doing
homework assignments, your roommate draws beautifully precise graphs, while you are
an extremely fast typist. Therefore, you and your roommate work on the assignments
together. Which of the 12 principles is at work here?
Why do many clothing stores have big after-Christmas sales on their merchandise?