Figure: The Market for Yachts
(Figure: The Market for Yachts) Look at the figure The Market for Yachts. If the
government imposes a $30,000 tax on yachts (collected from the producers), consumers
will pay _____ of the tax and producers will pay _____.
A) $20,000; $10,000
B) $15,000; $15,000
C) $10,000; $20,000
D) $5,000; $25,000
(Table: Firm’s Willingness) The table Firm’s Willingness explains the relation between
the number of reports a firm is willing to produce and the lowest price it is willing to
accept to prepare those reports. If the price of reports is $15, how many reports will the
firm produce, and what will the producer surplus be?
A) one; $0
B) three; $23
C) five; $0
D) five; $33
(Table: Total Cost and Output) Look at the table Total Cost and Output, which describes
Sergei’s total costs for his perfectly competitive all-natural ice cream firm. If the market
price of a tub of ice cream is $67.50, how much is Sergei’s total revenue at the
profit-maximizing output?
A) $270.00
B) $170.00
C) $135.00
D) $67.50
(Table: Costs of Birthday Cakes) Look at the table Costs of Birthday Cakes. Assume
that fixed costs are $10. What is the average total cost of 5 cakes?
A) $110
B) $60
C) $12
D) $2
Figure: Short-Run Costs II
(Figure: Short-Run Costs II) Look at the figure Short-Run Costs II. Curve 2 is the
_____ cost curve.
A) average total
B) average variable
C) marginal
D) total
When farmers raise hogs, there are a number of external costs. In particular, hogs
generate methane gas. If the marginal external cost is $100 per hog and the government
imposes a tax of $200 per hog, then at the equilibrium price and quantity of hogs:
A) too few hogs will be raised.
B) the price will be less than the marginal social cost.
C) the price will be less than the marginal social benefit.
D) the price will be less than the marginal cost to hog farmers.
The slope of a long-run average total cost curve exhibiting diseconomies of scale is:
A) zero.
B) infinite.
C) positive.
D) negative.
(Table: Cakes) Look at the table Cakes. Pat is opening a bakery to make and sell special
birthday cakes. She is trying to decide how many mixers to purchase. Her estimated
fixed and average variable costs if she purchases one, two, or three mixers are shown in
the table. Assume that average variable costs do not vary with the quantity of output. If
Pat purchases one mixer and bakes 400 cakes per day, what is her average fixed cost?
A) $0.025
B) $2.50
C) $1,000
D) $400,000
If the accounting profit for a firm is negative:
A) the economic profit must be positive.
B) the economic profit must be negative.
C) the firm should produce more.
D) the firm will not owe any taxes.
(Table: Prices and Demand) Look at the table Prices and Demand. The New Orleans
Saints have a monopoly on Saints logo hats. The marginal cost of producing a hat is
$18. If the Saints were a perfectly competitive firm in a perfectly competitive industry,
their profit-maximizing price and output, respectively, would be:
A) $24 and 3.
B) $30 and 0.
C) $18 and 6.
D) $8 and 6.
The excess capacity in monopolistic competition may be viewed as:
A) the cost of product diversity.
B) efficient.
C) the reason P = MR = MC in monopolistic competition.
D) the advantage of monopolistic competition over monopoly.
The value of the marginal product is equal to:
A) marginal product times the wage rate.
B) average product times the wage rate.
C) marginal product times the price per unit of output.
D) average product times the price per unit of output.
Scenario: Countries A and B Two countries, A and B, produce two goods, wheat (W)
and steel (S). Each has a linear production possibility frontier in both goods. If country
A spends all of its available resources to produce wheat, it can produce 500 tons of
wheat and no steel. If it uses all of its resources to produce steel, it can produce 250
tons of steel and no wheat. If country B spends all of its available resources producing
wheat, it can produce 400 tons of wheat, and if it spends all of its resources on the
production of steel, it can produce 400 tons of steel.
(Scenario: Countries A and B) Look at the scenario Countries A and B. If country B
produces 300 tons of steel, how many tons of wheat can it produce?
A) 100
B) 200
C) 300
D) 400
Figure: Efficiency and Pollution
(Figure: Efficiency and Pollution) Look at the figure Efficiency and Pollution. In the
absence of government intervention, the amount of pollution will be _____ tons.
A) 20
B) 30
C) 40
D) 45
Diminishing returns to an input occur:
A) when all inputs are fixed.
B) when some inputs are fixed and some are variable.
C) when all inputs are variable.
D) only when there are no fixed inputs.
Increases in the price of the good measured on the horizontal axis will make the
horizontal intercept _____ and make the budget line _____.
A) larger; steeper
B) larger; flatter
C) smaller; steeper
D) smaller; flatter
The notch problem occurs when a poor family that has been receiving aid:
A) has an increase in earnings that reduces means-tested aid from programs, hence
reduces their combined incomes.
B) finds that it no longer needs aid but is unable to refuse it.
C) is unable to receive more aid when its earnings fall even lower.
D) faces lower marginal tax rates on additional earnings.
Figure: Wireless Mouse Market
(Figure: Wireless Mouse Market) Use the graph to calculate consumer surplus when the
market is at equilibrium.
A) $4,000
B) $5,000
C) $2,000
D) $3,000
A firm’s long-run average total costs increase as it produces more output. This firm has:
A) economies of scale.
B) constant returns to scale.
C) diseconomies of scale.
D) a spreading effect.
The 1990 “yacht tax” caused a large deadweight loss because demand for luxury yachts
made in the United States is:
A) very elastic.
B) very inelastic.
C) perfectly inelastic, since rich people will pay whatever is necessary.
D) very steeply sloped.
Josh is a house painter who always purchases two paintbrushes for every gallon of
paint, regardless of the relative prices. In a graph, these indifference curves would
appear as:
A) straight downward-sloping lines.
B) downward-sloping lines with a diminishing marginal rate of substitution.
C) right angles.
D) upward-sloping straight lines.
An increase in demand, all other things unchanged, will result in _____ in equilibrium
price and _____ in equilibrium quantity.
A) an increase; an increase
B) a decrease; a decrease
C) a decrease; an increase
D) an increase; a decrease
Determining the price elasticity of demand involves all of the following factors
EXCEPT:
A) the slope of the supply curve.
B) the proportion of the budget spent on the item.
C) time .
D) the number of available substitutes.
(Figure and Table: Variable, Fixed, and Total Costs) Look at the figure and table
Variable, Fixed, and Total Costs. When 96 bushels of wheat is produced, the average
fixed cost is _____, average variable cost is _____, and average total cost is _____.
A) $7.84; $11.76; $19.60
B) $133.33; $200.00; $333.33
C) $4.17; $16.67; $20.83
D) $5.33; $13.33; $18.67
A firm that is a natural monopoly will:
A) attempt to break even, not profit-maximize.
B) maximize profit by producing where MR = MC.
C) face increasing costs of production.
D) face greater market instability than a regular monopoly.
Peanut butter and jelly are complements in consumption. Assuming that the supply
curve of peanut butter is upward-sloping, if there is a decrease in the price of jelly,
producer surplus in the peanut butter market:
A) will increase.
B) will decrease.
C) will not change.
D) may change, but it is impossible to tell whether it will increase or decrease.
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 a spring frost destroys one-third of the nation’s artichoke crop. Which
panel BEST describes how this will affect the market for mayonnaise, which is a
complement to artichokes?
A) panel A
B) panel B
C) panel C
D) panel D