Suppose the consumer’s income increases while the prices of the goods remain constant.
Then the
A) budget constraint shifts inward parallel to the original budget constraint.
B) budget constraint shifts outward parallel to the original budget constraint.
C) indifference curves shift outward away from the origin.
D) indifference curves become flatter.
Figure 2-4
Figure 2-4 shows various points on three different production possibilities frontiers for
a nation.
Refer to Figure 2-4. A movement from ________ is the result of negative technological
change in plastic production.
A) V to X
B) X to W
C) W to Z
D) Z to Y
A situation in which each firm chooses the best strategy given the strategies chosen by
other firms is called a
A) Nash equilibrium.
B) dominant strategy.
C) collusion.
D) payoff matrix.
Table 13-4
Table 13-4 lists estimated revenues and costs (per week) for plastic vials (100 vials per
box) for the Victoria Biological Supplies Company. Victoria sells plastic vials to
university and private research laboratories.
Refer to Table 13-4. Victoria’s profit-maximizing quantity sold (Q) and price (P) are
A) Q = 3; P = $7.
B) Q = 4; P = $6.
C) Q = 5; P = $5.
D) Q = 6; P = $4.
Auctions in recent years have resulted in higher prices paid for letters written by John
Wilkes Booth than those written by Abraham Lincoln. Which of the following events
would cause the price differences in these letters to get smaller?
A) The demand for Booth letters increases.
B) The supply of Lincoln letters increases.
C) The demand for Lincoln letters increases and the supply of Booth letters increases.
D) The demand for Lincoln letters decreases and the demand for Booth letters
increases.
Higher isocost lines correspond to higher
A) profits.
B) total costs of production.
C) input prices.
D) sales revenue.
Figure 13-17
Refer to Figure 13-17. What is the productively efficient output for the firm
represented in the diagram?
A) Qf units
B) Qg units
C) Qh units
D) Qj units
The marginal product of labor is
A) the payment made to workers for their contribution to the output they produce.
B) equal to the demand for labor.
C) the change in a firm’s revenue as a result of hiring one more worker.
D) the additional output a firm produces as a result of hiring one more worker.
A firm that can effectively price discriminate will charge a higher price to
A) customers who have the more elastic demand for the product.
B) customers who have the more inelastic demand for the product.
C) buyers who belong to the largest market segment.
D) buyers who are members of the smallest market segment.
The marginal productivity theory of income distribution was developed by
A) Edward Lazear.
B) George Akerlof.
C) William Stanley Jevons.
D) John Bates Clark.
In perfect competition
A) the market demand curve and the individual’s demand curve are identical.
B) the market demand curve is perfectly inelastic while demand for an individual
seller’s product is perfectly elastic.
C) the market demand curve is perfectly elastic while demand for an individual seller’s
product is perfectly inelastic.
D) the market demand curve is downward sloping while demand for an individual
seller’s product is perfectly elastic.
Suppose that American firms claim that protectionism in Canada is on the rise as the
Canadian government attempts to protect its infant industries with a “Buy Canadian”
provision. This policy, similar to the original “Buy American” provision in the 2009
U.S. stimulus bill, is likely to cause
A) exporting countries to retaliate by placing trade barriers on Canadian imports.
B) Canadian manufacturers to become more efficient.
C) Canadian companies to pay lower prices for protected products.
D) most countries to reduce their own trade barriers to be able to better compete with
Canadian imports at home.
If the quantity of soccer balls demanded is represented by the equation QD = 80 – 2P
then the corresponding price of soccer balls is represented by the equation
A) P = 1.6QD + 80.
B) P = 80 – QD.
C) P = 40 – 0.5QD.
D) P = QD + 160.
The long run refers to a time period
A) during which a firm is able to purchase all of its inputs, including its plant and
equipment.
B) long enough for a firm to vary all of its inputs, to adopt new technology, and change
the size of its physical plant.
C) long enough for a firm to pay all of its creditors in full.
D) long enough for a firm to change the use of its variable inputs.
A firm using a two-part tariff faces a tradeoff because
A) the only way to increase the fixed-fee portion of the price is to lower the per-unit
portion of the price.
B) the only way to increase total revenue is to lower per-unit profit.
C) any increase in consumer surplus must be offset by a decrease in producer surplus.
D) the smaller the variation between the parts of the price, the greater the deadweight
loss generated by the pricing scheme.
Economies of scale can lead to an oligopolistic market structure because
A) if larger firms have lower costs, new small entrants will not be able to produce at the
low costs achieved by the big established firms.
B) if economies of scale are insignificant, only a few firms are able to produce at the
low costs achieved by the big established firms.
C) a few firms can force rivals to produce at low levels of output.
D) a few firms can use high profits to keep out new entrants.
The corporate income tax is ultimately paid by all of the following except
A) owners of the corporation.
B) the corporation’s debtors in the form of lower rates of return on the corporation’s
bonds.
C) customers in the form of higher prices.
D) employees in the form of lower wages.
In economics, the study of the decisions of firms in industries where the profits of each
firm depend on its interactions with other firms is called
A) decision theory.
B) game theory.
C) market structure analysis.
D) profit analysis.
Figure 9-3
Since 1953 the United States has imposed a quota to limit the imports of peanuts.
Figure 9-3 illustrates the impact of the quota.
Refer to Figure 9-3. If there was no quota, how many pounds of peanuts would
domestic consumers purchase?
A) 10 million
B) 28 million
C) 34 million
D) 40 million
If, when a firm doubles all its inputs, its average cost of production decreases, then
production displays
A) diminishing returns.
B) economies of scale.
C) diseconomies of scale.
D) declining fixed costs.
Which of the following is not one of the five competitive forces?
A) the threat from potential entrants
B) the bargaining power of buyers
C) the firm’s ability to differentiate its product
D) the bargaining power of suppliers
The justification for occupational licensing laws is that they protect the public from
incompetent practitioners (for example, lawyers and medical doctors), but the laws also
result in
A) higher prices and restrictions on the number of people who can enter the professions
affected by the laws.
B) economies of scale.
C) ownership of a key input.
D) an increase in the amount of output required to achieve minimum efficient scale.
Which of the following must a firm in a market economy do today to succeed?
A) Produce the goods and services that consumers want at a lower cost than consumers
themselves can produce.
B) Organize the factors of production into a functioning, efficient unit.
C) Have access to sufficient funds.
D) Market firms today must do all of these things.
Which of the following is not part of an oligopolist’s business strategy?
A) meeting worker health and safety standards required of all firms
B) deciding the level of total output of a new product
C) determining the amount of advertising a new product needs
D) setting the product’s price after considering what rivals will do
An asset is
A) anything of value owned by a person or a firm.
B) a payment by a corporation to its shareholders.
C) a nonmonetary opportunity cost.
D) anything owed by a person or a firm.
Which of the following statements is true?
A) Whenever a firm raises its price its total revenue will increase.
B) When a firm lowers its price its total revenue may either increase or decrease.
C) Whenever a firm increases its quantity sold its revenue will increase.
D) Total revenue will equal zero when the demand for a product is unit elastic.
If a restaurant was a natural monopoly, its
A) marginal cost curve would still be declining when it crossed the demand curve.
B) average total cost curve would still be declining when it crossed the demand curve.
C) marginal revenue curve would be the same as its demand curve.
D) marginal revenue curve would be horizontal.
Table 2-7
Table 2-7 shows the output per month of two people, Fred and Barney. They can either
devote their time to making pogo sticks or making unicycles.
Refer to Table 2-7. What is Barney’s opportunity cost of making a pogo stick?
A) 1/2 of a unicycle
B) 2 unicycles
C) 1/3 of a unicycle
D) 4 pogo sticks
Price discrimination is the practice of
A) charging different prices for the same good when the price differences are not due to
differences in cost.
B) charging different prices for the same good when the price differences arise because
of differences in cost.
C) charging different prices for different qualities of a product.
D) charging higher prices for brand-named goods and lower prices for generic versions
of the goods.
Figure 16-7
The Lizard Lounge is well known for its exotic cocktails. Figure 16-7 shows its
estimated demand curve for cocktails.
Refer to Figure 16-7. The owners of the Lizard Lounge are considering the following
four pricing options:
a. A single price scheme where the cocktail price equals the monopoly price.
b. A single price scheme where the cocktail price equals the competitive price.
c. A two-part tariff: a monopoly cocktail price and a cover charge that will generate
total revenue equal to the area X.
d. A two-part tariff: a competitive cocktail price and whatever cover charge that will
generate a total revenue equivalent to the area X + Y + Z.
Which pricing scheme(s) achieve the economically efficient outcome?
A) schemes a and c
B) scheme b
C) schemes b and d
D) scheme d only
Table 9-2
Sarita and Gabriel own S&G Bakery. Table 9-2 lists the number of pies and cakes Sarita
and Gabriel can each bake in one day.
Refer to Table 9-2. Select the statement that accurately interprets the data in the table.
A) Sarita has a comparative advantage in baking pies.
B) Gabriel has a comparative advantage in baking cakes.
C) Sarita has a comparative advantage in baking pies and baking cakes.
D) Sarita has a comparative advantage in baking cakes.