If the extra output that is produced by hiring one more unit of labor adds more to _____
than to _____, the firm will increase its profit by increasing the use of labor.
A) total cost; total revenue
B) total revenue; total cost
C) marginal cost; marginal revenue
D) marginal product; marginal cost
Which of the following would make it difficult for Georgia peach suppliers to collude?
A) only a few suppliers
B) each supplier having the same costs
C) buyers of peaches having very little bargaining power, since peaches are
homogeneous
D) only a few buyers of peaches
When a consumer maximizes utility, the marginal utility per dollar spent must be the
same for all goods and services in the consumption bundle. This is referred to as:
A) the law of demand.
B) the optimal consumption rule.
C) the budget constraint.
D) consumption possibilities.
Economic models are:
A) set up and used to duplicate reality.
B) useless if they are simple.
C) made generally of wood, plastic, and/or metal.
D) often useful in forming economic policy.
Figure: Shifts in Demand and Supply III
(Figure: Shifts in Demand and Supply III) Look at the figure Shifts in Demand and
Supply III. The figure shows how supply and demand might shift in response to specific
events. Suppose the technology for producing snowboards improves. Which panel
BEST describes how this will affect the market for winter parkas, a complement in
consumption of snowboards?
A) panel A
B) panel B
C) panel C
D) panel D
Vonda and Aleiyah are shopping together at the mall for new jeans. Vonda is willing to
pay $90 and Aleiyah is willing to pay $50 for a pair of jeans. If the price of jeans is $59,
how much total consumer surplus is achieved in this market?
A) $0
B) $9
C) $31
D) $40
In 2012, which of the following demographic groups had the HIGHEST poverty rate?
A) African-Americans
B) Hispanics
C) Whites
D) female-headed families with no husband present
Wall Street is:
A) a district in New York City where all major investment companies have their
headquarters.
B) a district in New York City where most fashion designers have their headquarters.
C) an area of San Francisco where imports are received from other countries and from
which exports are shipped.
D) a street in Houston, Texas, where major oil companies have their headquarters.
You own a deli. Which of the following is most likely a fixed input at your deli?
A) the dining room
B) the bread used to make sandwiches
C) the tomato sauce used to make soups
D) the employees
Which of the following will NOT cause an increase in demand for good X?
A) a decrease in income if good X is an inferior good
B) an increase in income if good X is a normal good
C) a decrease in the price of good X
D) an increase in consumers’ taste for good X
Figure: Consumer Equilibrium IV
(Figure: Consumer Equilibrium IV) Look at the figure Consumer Equilibrium IV.
Assume that you are consuming the combination of goods at point I. Given the budget
constraint FL, utility:
A) cannot be increased.
B) can be increased by consuming more nights in a hotel room and fewer train tickets.
C) can be increased by consuming fewer nights in a hotel room and more train tickets.
D) can be increased by consuming more of both goods.
Product differentiation under monopolistic competition means that each firm:
A) charges the same price.
B) maximizes profit where MC = P.
C) faces a downward-sloping demand curve.
D) always receives economic profits.
An increase in the demand for gasoline today caused by concerns that gasoline prices
will be higher tomorrow is most likely attributable to a change in:
A) income.
B) consumer expectations.
C) consumer preferences.
D) prices of other goods.
If total revenue goes down when the price falls, demand is said to:
A) be price-inelastic.
B) be price unit-elastic.
C) be price-elastic.
D) have positive price elasticity.
If a frost destroys much of the grapefruit crop, assuming a positively sloped supply
curve and a negatively sloped demand curve, total surplus:
A) will increase.
B) will decrease.
C) will not change.
D) may change, but we cannot determine the change without more information.
(Table: Prices and Demand) Look at the table Prices and Demand. Professor
Dumbledore has a monopoly on magic hats. The marginal cost of producing a hat is
$18. Suppose Dumbledore can perfectly price-discriminate. How many hats will he
produce?
A) 3
B) 4
C) 5
D) 6
Which of the following is TRUE?
A) Instead of applying the marginal decision rule, monopoly firms just set the price as
high as possible.
B) If demand is downward-sloping, P = MR.
C) If demand is downward-sloping, P = ATC.
D) If demand is downward-sloping, P > MR.
The market for breakfast cereal contains hundreds of similar products, such as Froot
Loops, cornflakes, and Rice Krispies, that are considered to be different products by
different buyers. This situation violates the perfect competition assumption of:
A) many buyers and sellers.
B) a standardized product.
C) ease of entry.
D) ease of exit.
After earning your BA, you have to decide whether to take a job that will pay you
$45,000 per year or spend an additional two years earning an MBA. If you decide to
pursue the graduate degree, your annual expenses for tuition, books, board, and lodging
will be $32,000. You have been offered a scholarship for $10,000 per year, but to pay
the remaining $22,000 per year, you would have to cash in savings bonds from your
grandparents that have been earning $500 in interest per year. The annual opportunity
cost of earning your MBA is:
A) $67,500.
B) $77,000.
C) $99,000.
D) $77,500.
At the optimal consumption bundle:
A) the marginal utility of all goods consumed is equal.
B) the marginal utility per dollar spent is equal for all goods consumed.
C) the price of all goods consumed is equal.
D) total utility from all goods consumed is equal.
If an increase in output results in a decrease in average total cost, the corresponding
marginal cost is:
A) less than average total cost.
B) greater than average total cost.
C) equal to average total cost.
D) negative.
Common resource goods are similar to:
A) public goods because they are both nonexcludable and nonrival in consumption.
B) goods with negative externalities because not all users take into account the external
costs imposed on society.
C) private goods because they are both excludable and rival.
D) artificially scarce goods because they are both are excludable and nonrival in
consumption.
The purpose of the trusts established in the United States in the late 1800s was to:
A) engage in monopoly pricing.
B) promote international trade.
C) promote competition in the transportation industry.
D) limit the involvement of government in providing health care.
Which of the following will NOT shift the labor supply curve?
A) a change in preferences and social norms
B) changes in wealth
C) changes in opportunities
D) a change in the wage rate
Figure: Market Failure
(Figure: Market Failure) Look at the figure Market Failure. Suppose the supply curve
represents the marginal cost of providing streetlights in a neighborhood that is
composed of two people, Ann and Joe. The demand curve represents the marginal
benefit that Ann receives from the streetlights. Suppose that Joe’s marginal benefit from
the streetlights is a constant amount equal to AC. Providing E streetlights is _____
because the marginal social benefit is _____ the marginal cost.
A) efficient; equal to
B) efficient; greater than
C) inefficient; greater than
D) inefficient; less than
Figure: The Optimal Quantity
(Figure: The Optimal Quantity) Look at the figure The Optimal Quantity. If the
marginal benefit of lawn mowing increased, the _____ curve in the figure would shift to
the _____ and the optimal quantity would be _____ five lawns mowed.
A) marginal benefit; right; more than
B) marginal cost; right; fewer than
C) marginal benefit; left; fewer than
D) marginal cost; left; more than
If personal income up to and including $30,000 is not taxed, income of $30,001 to
$60,000 is taxed at 10%, and income over $60,000 is taxed at 25%, then a family
earning an income of $100,000 will pay _____ in personal taxes.
A) $6,000
B) $10,000
C) $13,000
D) $25,000
A higher rate is most likely to decrease the amount of revenue that the government
collects from an excise tax if demand is _____ and supply is _____.
A) elastic; elastic
B) elastic; inelastic
C) inelastic; elastic
D) inelastic; inelastic
Economists usually assume that production is subject to increasing opportunity costs
because:
A) higher production usually results in more inflation.
B) not all resources are equally suited to producing every good.
C) individuals desire constantly increasing opportunities to make themselves better off.
D) if production is efficient, it is not possible to increase the production of all goods
simultaneously.
Most Americans receive their health insurance through:
A) Medicare.
B) Medicaid.
C) their employer.
D) direct purchase.
A trade-off between equity and efficiency may exist because of all of the following
EXCEPT that:
A) allocating resources fairly may cause efficiency.
B) an efficient allocation of resources may lead to an outcome that most people
consider unfair.
C) policies that promote equity often come at a cost of decreased efficiency.
D) allocating resources fairly may cause inefficiency.