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Figure and Table: An Indifference Curve Map
(Figure and Table: Indifference Curve Map) Look at the figure and table An
Indifference Curve Map. Combination _____ is preferred to combination _____.
A) A; B
B) B; D
C) C; A
D) B; C
(Table: Cherry Farm) Look at the table Cherry Farm. If Hank and Helen have one of
100 farms in the perfectly competitive cherry industry and if the price is $5, in the short
run the industry will supply _____ pounds.
A) 100
B) 200
C) 400
D) 500
Freshwater is considered a scarce good because:
A) not enough of it is available for all needs.
B) it does not have any uses.
C) scarce goods are not expensive.
D) not enough of it is available for all needs and because it is not expensive.
Figure: Computing Monopoly Profit
(Figure: Computing Monopoly Profit) Look at the figure Computing Monopoly Profit.
At the profit-maximizing output, total cost is:
A) P10QG.
B) P30QE.
C) P20QF.
D) FQ2.
LaToya sees honey and sugar as perfect substitutes. She is always willing to substitute 1
teaspoon of honey for 2 teaspoons of sugar. The marginal rate of substitution of sugar
for honey is:
A) 1.
B) 0.5.
C) 2.
D) undefined.
Juan spends all of his income on baseball cards and candy. At his current consumption
bundle, the marginal utility of baseball cards is 20 and the marginal utility of candy is
10. Assuming that diminishing marginal utility applies to both goods, if the price of
baseball cards is $10 and the price of candy is $2, Juan should:
A) consume more baseball cards and less candy.
B) consume more candy and fewer baseball cards.
C) continue to consume the current bundle.
D) consume equal amounts of baseball cards and candy.
If the cost to download a song from the Internet falls from $0.99 to $0.50 along an
upward-sloping supply curve, producer surplus in the market for MP3 players is likely
to:
A) increase.
B) decrease.
C) not change.
D) We cannot determine what producer surplus will do without information about
consumer surplus.
Figure: The Gasoline Market
(Figure: The Gasoline Market) Look at the figure The Gasoline Market. The pretax
equilibrium price is $3, and the equilibrium quantity before tax is 20,000 gallons. An
excise tax has been levied on each gallon of gasoline supplied by producers. Based on
the graph, the incidence of the tax on suppliers is:
A) $1.50.
B) $1.
C) $0.75.
D) $15,000.
Which of the following is NOT a major cause of poverty in the United States?
A) inadequate educational attainment
B) discrimination
C) lack of adequate health coverage
D) welfare
A farmer finds that when he produces more corn, he also has more cornstalks that he
can sell as decorations. To the farmer, corn and cornstalks are:
A) complements in production.
B) substitutes in production.
C) unrelated goods.
D) inferior goods.
An effective price floor will lead to:
A) quantity demanded being greater than quantity supplied.
B) an excess supply or a surplus.
C) the need for government to produce more of the good.
D) suppliers determining the amount of the good bought and sold in the market.
At the long-run quantity of output, where the long-run average total cost curve is at its
lowest point, it is tangent to the _____ of the corresponding short-run average total cost
curve.
A) minimum
B) maximum
C) right of the minimum
D) left of the minimum
An industry with a firm that is the only producer of a good or service for which there
are no close substitutes and for which entry by potential rivals is prohibitively difficult
is:
A) a duopoly.
B) a monopoly.
C) an oligopoly.
D) perfect competition.
(Table: Cost Data) Look at the table Cost Data. The average fixed cost of producing 4
purses is:
A) $12.50.
B) $47.50.
C) $50.00.
D) $82.50.
Figure: Tax Incidence
(Figure: Tax Incidence) Look at the figure Tax Incidence. Consumers are likely to bear
more of the burden of an excise tax in the situations illustrated by panels:
A) A and B.
B) A and D.
C) B and D.
D) B and C.
A statement that best reflects an evaluation of monopoly firms is that:
A) they are economically inefficient.
B) they have little or no market power.
C) consumers are given more choices, lower costs, and higher quality.
D) competition should replace all monopolies.
According to the Coase theorem, when negative externalities are present, a market will:
A) always reach an efficient solution.
B) reach an efficient solution if transaction costs are low and property rights are
well-defined.
C) reach an efficient solution only if the government intervenes in the market.
D) reach an efficient solution only if the negative externalities are offset by positive
externalities.
In a single year, the Netherlands can raise 100 tons of beef or produce 1,000 boxes of
tulips. In the same growing season, Belgium can raise 50 tons of beef or produce 750
boxes of tulips. From this information, we know that:
A) the Netherlands has a comparative advantage in raising beef.
B) the Netherlands has a comparative advantage in raising tulips.
C) Belgium has a comparative advantage in raising beef.
D) Belgium has an absolute advantage in raising beef.
Suppose the cross-price elasticity between two goods is 1.5. If the price of one good
increases by 10%, then the quantity demanded of the other good will:
A) decrease by 15%.
B) increase by 15%.
C) decrease by 1.5%.
D) increase by 1.5%.
Sally devotes all of her income to the consumption of apples and Reese's Peanut Butter
Cups. At her current level of consumption the marginal utility of an apple is 6 and the
marginal utility of a Reese's Peanut Butter Cup is 8. Assume that diminishing marginal
utility applies to both apples and Reese's Peanut Butter Cups. Suppose the price of an
apple is $0.10, while the price of a Reese's Peanut Butter Cup is $0.25. To maximize her
total utility, assuming that the goods are divisible, she would:
A) consume more Reese's Peanut Butter Cups and fewer apples.
B) consume less of both goods.
C) consume more apples and fewer Reese's Peanut Butter Cups.
D) There is not enough information to justify a change in her current level of
consumption.
In the market for tacos, you observe that the equilibrium price and quantity have
increased. This can be caused only by:
A) an increase in the price of beef.
B) an increase in the wages of taco shop workers.
C) fewer taco shops.
D) an increase in the incomes of people who eat tacos.
Figure: The Domestic Supply and Demand for SUVs in the United States
(Figure: The Domestic Supply and Demand for SUVs in the United States) Look at the
figure The Domestic Supply and Demand for SUVs in the United States. Suppose the
world price equals $50,000 and there is free trade. Calculate the loss of consumer
surplus.
A) $41,250 million
B) $30,000 million
C) $52,500 million
D) $22,250 million
The pair of items that is likely to have the highest cross-price elasticity of demand is:
A) baseball and baseball glove.
B) spaghetti and meatballs.
C) coffee and tea.
D) peanut butter and jelly.
Mario sees popcorn and pretzels as perfect substitutes. He is always willing to
substitute 3 cups of popcorn for 1 cup of pretzels. If Mario consumes only popcorn,
then we know that the relative price of popcorn in terms of pretzels is:
A) less than 0.33.
B) greater than 0.33.
C) between 0.33 and 3.
D) greater than 3.
Figure: Revenues, Costs, and Profits for Tomato Producers
(Figure: Revenues, Costs, and Profits for Tomato Producers) Look at the figure
Revenues, Costs, and Profits for Tomato Producers. The market for tomatoes is
perfectly competitive. The market price of a bushel of tomatoes is $18. At the
profit-maximizing quantity of output in the figure, the farmer's total revenue is _____,
total cost is _____, and profit is _____.
A) $90; $14; $76
B) $90; $70; $20
C) $30; $42; "$12
D) $48; $56; "$8
If you know the cross-price elasticity between two goods is positive, then you know the
two goods are:
A) substitutes.
B) complements.
C) normal goods.
D) inferior goods.
If you are willing to give up 15 units of good A (on the vertical axis) for 5 units of good
B (on the horizontal axis) and your level of satisfaction is unchanged, the marginal rate
of substitution of B for A is:
A) 2.
B) 3.
C) 5.
D) 10.
You are analyzing a trade-off when you compare the _____and _____ of doing
something.
A) direct costs; opportunity costs
B) marginal benefits; total benefits
C) costs; benefits
D) direct costs; total costs
Figure: The Average Total Cost Curve
(Figure: The Average Total Cost Curve) Look at the figure The Average Total Cost
Curve. The total cost of producing three pairs of boots is approximately:
A) $24.
B) $72.
C) $75.
D) $216.
Annual _____ taxes are paid on the value of a home.
A) income
B) profits
C) sales
D) property
(Table: Consumer Surplus) Look at the table Consumer Surplus. Assume that each
student wants to buy one ticket. If the price of a ticket to see The Nutty Nutcracker is
$75, Lois's consumer surplus is:
A) $25.
B) $60.
C) $75.
D) $100.
When demand is _____, a rise in price leads to a(n) _____ in total revenue.
A) perfectly inelastic; decrease
B) perfectly elastic; increase
C) inelastic; increase
D) elastic; decrease
