Which of the following are examples of goods and services that have been subject to
maximum prices or may be subject to maximum prices in the near future?
A) gasoline
B) rental housing
C) medical goods and services
D) all of the above
Recall the Application. After being caught cheating, the economics professor called
each student into his office individually. Each student was given two options: 1. If the
student confessed, he or she would receive a zero on the final exam but suffer no other
consequences. 2. If the student did not confess, he or she would go before the Office of
Student Judicial Affairs, and any confessions by the other two students would be used
as evidence. Based on the prisoners’ dilemma, how many of the three students would be
expected NOT to confess?
A) 0
B) 1
C) 2
D) 3
Recall the Application about the benefits provided by the LoJack auto recovery
system to answer the following question(s).
Recall the Application. LoJack is system that allows the police to track stolen cars. This
provides an external benefit by:
A) getting the owner back his car.
B) reducing car theft.
C) giving profits to the producers of LoJack.
D) all of the above.
Figure 16.5 depicts the market effects of a gasoline tax. How much of the gasoline tax
per gallon is shifted backward on to input suppliers?
Figure 16.5
A) –
B) –
C) –
D) There is not sufficient information.
The extra benefit resulting from a small increase in an activity is called the:
A) opportunity cost.
B) marginal benefit.
C) marginal cost.
D) diminishing returns of the activity.
If the price of output decreases the labor ________ curve shifts to the ________.
A) demand; left
B) demand; right
C) supply; left
D) supply; right
Refer to Figure 18.2. In autarky, the maximum amount of spears that Macadamia can
produce is:
Figure 18.2
A) 40.
B) 100.
C) 120.
D) 160.
Suppose that the price of a box of shotgun shells is $5. Morris’s marginal cost of
producing boxes of shotgun shells is $3.50 for the first box, Tommy’s marginal cost of
producing boxes of shotgun shells is $4 for the second box, Pat’s marginal cost of
producing boxes of shotgun shells is $5.50 for the third box, and Al’s marginal cost of
producing boxes of shotgun shells is $6 for the fourth box. In equilibrium, what is the
producer surplus from producing boxes of shotgun shells?
A) $1.50
B) $2.50
C) $3.50
D) $4.00
Suppose that in a month the price of pizza increases from $4 to $5. At the same time,
the quantity of pizzas demanded decreases from 200 to 190. The price elasticity of
demand for pizza (calculated using the midpoint formula) is:
A) zero.
B) inelastic.
C) unitary elastic.
D) elastic.
When economists assume that people are rational and respond to incentives, they mean:
A) people act with kindness.
B) people are altruistic.
C) people act in their own self-interest.
D) people are selfish.
Refer to Figure 8.1. The marginal product of the second worker is ________ lawns
moved.
A) 4
B) 5
C) 5.5
D) 11
One of the main differences between the long run and the short run is that:
A) the firm can earn a profit.
B) the firm can operate at a loss.
C) there are no diminishing returns in the short run.
D) there are no diminishing returns in the long run.
With respect to output production, a monopolistically competitive firm produces:
A) more amount of output than a perfectly competitive firm.
B) identical amount of output as a perfectly competitive firm.
C) less amount of output than a perfectly competitive firm.
D) none of the above.
Refer to Figure 7.2. The ________ movie rental has a marginal utility of zero.
A) fourth
B) third
C) second
D) first
The quantity demanded of a product increases as:
A) consumer income rises.
B) the prices of other products fall.
C) the price of the product rises.
D) the price of the product falls.
________ is a cost that independent of the quantity produced by the firm and is incurred
by the firm in the short run.
A) Fixed cost
B) Economic cost
C) Variable cost
D) Average total cost
For country A, an export is a good produced in:
A) country B and purchased by residents of country B.
B) country B and purchased by residents of country A.
C) country A and purchased by residents of country B.
D) country A and purchased by residents of country A.
In a monopolistically competitive industry, there are many firms because:
A) there are relatively large economies of scale.
B) there are relatively small economies of scale.
C) individual firms are not distinguishable from the total market.
D) products are easily produced.
A small change in a relevant variable is:
A) an average change.
B) a ceteris paribus change.
C) an efficient change.
D) a marginal change.
A consumer with a relatively low opportunity cost of search time will have a ________
marginal cost of search and will spend ________ time searching for lower prices.
A) lower; more
B) lower; less
C) higher; more
D) higher; less
Examples of spillover benefits associated with a college education include:
A) no external benefits.
B) workplace externalities only.
C) civic externalities only.
D) both workplace and civic externalities.
In a market-based economy, the government:
A) allocates production.
B) decides how much to produce.
C) encourages insurance risk.
D) enforces property rights.
In Figure 17.3 a decrease in the demand for labor will cause the equilibrium:
A) wage and hours of labor used to increase.
B) wage and hours of labor used to decrease.
C) wage to increase and hours of labor used to decrease.
D) wage to decrease and hours of labor used to increase.
Suppose that the quantity demanded for cars exceeds the quantity supplied of cars. We
would expect that:
A) the price of cars will increase.
B) the price of cars will decrease.
C) the supply will increase to meet the demand.
D) the demand will decrease to meet the supply.
Figure 1A.1
The slope of the line between the points where income equals 50 and income equals
200 is:
A) 0.2.
B) 5.
C) 10.
D) 50.
Suppose there are two firms maintaining a cartel agreement. If one firm suddenly drops
its price, the other firm could interpret this as signaling:
A) a change in market conditions.
B) limit pricing.
C) cartel pricing.
D) cooperative pricing.
If a firm is operating in the long run the firm is flexible in the following:
A) altering all inputs.
B) building a new production facility.
C) modifying an existing facility.
D) all of the above
Refer to Scenario 9.1. Suppose that 21st Century Pen Inc. continues to produce the
same level of output and hires the same number of workers. 21st Century Pen Inc. will
shut down in the short run if the price falls below:
Scenario 9.1: 21st Century Pen Inc. produces 2000 pens per day, and hires 20 workers
at a cost of $200 per day per worker. The price of each pen is $5 each. 21st Century Pen
Inc. pays a daily rental rate of $60 on its factory and a daily insurance rate of $20. 21st
Century Pen Inc. has a ten year lease on the factory and insurance contract for a year,
the company has no other expenses.
A) $3.
B) $2.
C) $1.
D) $4.
Suppose that the wage for teachers decreases relative to other occupations. We know
that ________ people will work as teachers, and the total number of hours worked will
________.
A) more; increase
B) more; decrease
C) fewer; increase
D) fewer; decrease
An increase in supply of a product results when:
A) taxes on the product are increased.
B) the companies that produce the product have higher materials costs.
C) technological innovations are introduced in the manufacturing process.
D) the government reduces subsidies on the product.
Suppose that a product benefits from a successful advertising campaign. The result is
that:
A) the demand for the product increases.
B) the demand for the product decreases.
C) the supply of the product increases.
D) the supply of the product decreases.
The best example of a monopolistically competitive industry is:
A) music stores.
B) grocery stores.
C) mobile phone service.
D) A and B are correct.