As you consume more turkey relative to mashed potatoes, the _____ of turkey
eventually decreases.
A) price
B) usefulness
C) marginal utility
D) demand
Figure: The Demand for Bricklayers
(Figure: The Demand for Bricklayers) Look at the figure The Demand for Bricklayers.
If the equilibrium market wage for bricklayers is $100 per day, _____ bricklayers will
be hired by this masonry firm.
A) four
B) five
C) six
D) There is insufficient information to make this decision.
Which of the following is NOT true?
A) Resources are scarce when they can satisfy everyone’s wants.
B) The real cost of a choice is what you must give up to enjoy that choice.
C) People typically make choices that will make them better off.
D) Rational people use marginal analysis when making “how much” decisions.
If total utility is rising as more salsa is consumed, we can definitely say that marginal
utility is:
A) falling.
B) constant.
C) rising.
D) greater than zero.
Mario sees popcorn and pretzels as perfect substitutes. He is always willing to
substitute 3 cups of popcorn for 1 cup of pretzels. His indifference curves for popcorn
and pretzels are _____, and at the optimal consumption bundle his marginal rate of
substitution of popcorn for pretzels is _____.
A) right angles; 3
B) right angles; 0.33
C) straight lines; 3
D) straight lines; 0.33
Money that must be paid for the use of factors of production such as labor and capital is
an:
A) explicit cost.
B) accounting profit.
C) implicit cost.
D) economic profit.
Which of the following scenarios best describes an oligopolistic industry?
A) A single cable company serves customers in a small town.
B) Thousands of soybean farmers sell their output in a global commodities market.
C) Coca-Cola and Pepsi sell most of the soft drinks consumed around the world.
D) A college has one bookstore selling textbooks to students.
Suppose a monopolistically competitive firm is making a profit, but it can increase its
profits by increasing output. At the current level of output:
A) marginal revenue is greater than marginal cost.
B) price is less than marginal cost.
C) price is less than average total cost.
D) marginal revenue is less than marginal cost.
Figure: Shifts in Demand and Supply II
(Figure: Shifts in Demand and Supply II) Look at the figure Shifts in Demand and
Supply II. The figure shows how supply and demand might shift in response to specific
events. Suppose the technology for producing ethanol fuel improves. Which panel
BEST describes how this will affect the market for ethanol?
A) panel A
B) panel B
C) panel C
D) panel D
If a tax system is designed to minimize the sum of its deadweight loss and its
administrative cost, its principal goal is:
A) maximizing efficiency.
B) maximizing equity.
C) maximizing revenue.
D) minimizing the tax burden.
Budweiser is a widely recognized brand name. During the Super Bowl each year, this
beer company has many of the most successful ads. Which of the following is TRUE
about advertising for Budweiser?
A) It is designed to increase the demand for Budweiser.
B) It decreases the costs of supplying Budweiser.
C) It guarantees customers that Budweiser tastes better than other beers.
D) It is designed to increase excess capacity.
Given any downward-sloping demand curve for a good, the more inelastic the supply
curve, the _____ equilibrium output will fall and the _____ will be the deadweight loss
when the government imposes an excise tax.
A) more; smaller
B) more; larger
C) less; smaller
D) less; larger
When the price of lamps increases, the:
A) supply increases.
B) quantity supplied increases.
C) supply decreases.
D) quantity supplied decreases.
(Table: Quantity Supplied and Quantity Demanded) Using the table Quantity Supplied
and Quantity Demanded, if this market is in equilibrium and the demand and supply
curves are linear, then the value of consumer surplus is:
A) $1,225.
B) $2,450.
C) $4,900.
D) $1,500.
A person who is risk averse:
A) always makes irrational decisions.
B) always makes rational decisions.
C) is willing to pay to avoid economic loss.
D) enjoys taking risks.
(Table: Externalities from Parks) The table shows the marginal social benefit and the
marginal social cost of preserving various amounts of land in a city for a public park. If
5 acres is dedicated to the park, the park is:
A) too large.
B) the socially optimum size.
C) too small.
D) the efficient size.
Figure: The Production Possibility Frontiers for Jackson and Tahoe
(Figure: The Production Possibility Frontiers for Jackson and Tahoe) Look at the figure
The Production Possibility Frontiers for Jackson and Tahoe. In autarky, Jackson
produces and consumes 30 head of cattle and 80 bushels of wheat, while Tahoe
produces and consumes 80 head of cattle and 60 bushels of wheat. If the two countries
engage in international trade and specialize completely and if the price of 1 head of
cattle equals the price of 2 bushels of wheat, world production of cattle will:
A) remain constant.
B) increase by 90 head.
C) increase by 120 head.
D) decrease by 30 head.
(Table: Optimal Choice of Milk and Honey) Look at the table Optimal Choice of Milk
and Honey. The price of milk is $2 per gallon, and the price of honey is $4 per jar. Hal’s
income is $16. Assuming that Hal spends all of his income on honey and milk, if he
buys 3 jars of honey, he can buy _____ gallons of milk .
A) 4
B) 3
C) 2
D) 1
Figure: Demand for DVDs
(Figure: Demand for DVDs) Look at the figure Demand for DVDs. A decrease in the
price of movie tickets (a substitute) would result in a change illustrated by the move
from:
A) f to g in panel A.
B) h to i in panel B.
C) j to k in panel C.
D) l to m in panel D.
When the price of chocolate-covered peanuts increases from $1.55 to $2.00, the
quantity demanded decreases from 220 to 180. If the price is $1.55, total revenue is
_____, and if the price is $2.00, total revenue is _____.
A) $360; $440
B) $341; $279
C) $440; $279
D) $341; $360
Figure: Market for Hamburgers
(Figure: The Market for Hamburgers) The figure The Market for Hamburgers shows the
weekly market for hamburgers in Irvine, Kentucky. If the price of burgers falls from
$1.50 to $1.00, there is a loss in producer surplus. How much of the loss accrues
because of the change in the quantity supplied?
A) $50
B) $45
C) $75
D) $90
Which of the following is a reason for governments imposing or maintaining price
controls?
A) Some consumers and producers can benefit from price controls.
B) Price controls recapture the deadweight loss of equilibrium.
C) The government benefits from price controls.
D) Price controls improve the efficiency of the market.
Figure: The Market for MP3 Players
(Figure: The Market for MP3 Players) Look at the figure The Market for MP3 Players.
Assume that Sd represents the domestic supply curve and Dd represents the domestic
demand curve. If the world price equals $100 and there is free trade, consumer surplus
_____ and producer surplus _____ compared to autarky.
A) increases; decreases
B) increases; increases
C) decreases; increases
D) decreases; decreases
Cindy just graduated from college and started working at a large accounting firm.
Although the firm will match her contributions to a retirement account, Cindy wants to
wait several years before participating, since there are so many things she needs to buy
right now. What type of behavior does this represent?
A) unrealistic expectations about the future
B) loss aversion
C) mental accounting
D) risk aversion
The price of a gallon of gasoline increases 10% this year. As a result, which of the
following events is MOST likely to occur?
A) More people will drive their cars.
B) Public transportation usage will decrease.
C) Gasoline expenditures will increase if gasoline is an inelastic good.
D) Fewer people will ride bicycles, a substitute for car travel.
The source of the inefficient use of artificially scarce goods is similar to the source of
inefficiencies created by:
A) externalities.
B) an oligopoly.
C) price discrimination.
D) a natural monopoly.
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 the prices of the two goods fall
by 20%?
A) A
B) B
C) C
D) D
A simplified version of reality that is used to clarify economic situations is called a(n):
A) economic fact.
B) current event.
C) model.
D) scarce resource.
Betsy loves to garden, and her rose garden is enjoyed by everyone in her neighborhood.
Because her consumption of rosebushes provides a positive externality to the
community, the government should _____ because the market quantity of rosebushes is
_____ than the socially optimal quantity.
A) provide a subsidy; greater
B) impose a tax; lower
C) provide a subsidy; lower
D) impose a tax; greater