Barbara, the consummate hostess, proudly announced as she served dessert, “A port is
often the perfect end to a meal, sipped with a piece of my scrumptious chocolate cake.”
Evidently, Barbara views port and chocolate cake as
A) luxury items.
B) necessities.
C) complementary goods.
D) substitutes for other desserts.
If a straight line passes through the point x = 24 and y = 8 and also through the point x =
8 and y = 16, the slope of this line is
A) negative 8 divided by 4.
B) seven-tenths.
C) negative one-half.
D) one and one-half.
If a 5 percent increase in income leads to a 10 percent decrease in quantity demanded
for a product, this product is
A) an income elastic good.
B) an inferior good.
C) a necessity.
D) a luxury good.
Marginal utility is
A) the change in total utility divided by the price of the last unit of a good or service
consumed.
B) the change in total utility a person receives from consuming an additional unit of a
good or service.
C) the utility from consuming a given quantity of a good or service.
D) the decrease in total utility from consuming more and more units of a good or
service.
Table 14-5
Ming and Henri each run one of the two dry cleaning facilities in the town of Scaraby.
Both consider offering free pickup and delivery services. Table 14-5 shows the payoff
matrix containing the expected quarterly profits for each firm.
Refer to Table 14-5. What is the Nash equilibrium in this game?
A) There is no Nash equilibrium.
B) Ming offers free pickup and delivery, but Henri does not.
C) Henri offers free pickup and delivery, but Ming does not.
D) Both Ming and Henri offer free pickup and delivery.
Hogrocket, which developed the Tiny Invaders game for the iPhone, found that to
maintain sales in a profitable competitive market, the price of a product
A) will usually rise.
B) will usually fall.
C) will usually remain stable.
D) will eventually fall to zero.
Which of the following statements explains the difference between diminishing returns
and diseconomies of scale?
A) Diminishing returns are the result of changes in explicit costs. Diseconomies of
scale are the result of changes in explicit costs and implicit costs.
B) Diminishing returns refer to production while diseconomies of scale refer to costs.
C) Diminishing returns cause a firm’s marginal cost curve to rise; diseconomies of scale
cause a firm’s marginal cost curve to fall.
D) Diminishing returns apply only to the short run; diseconomies of scale apply only in
the long run.
The complexity of the U.S. federal income tax system results in significant annual
deadweight losses. The opportunity cost of the hours taxpayers spend on record keeping
and completing their tax returns amounts to billions of dollars.
a. If the tax system was simplified, how would this benefit the economy?
b. Why hasn’t the tax system been simplified?
When production reflects consumer preferences, ________ occurs.
A) allocative efficiency
B) productive efficiency
C) equity
D) efficient central planning
A sole proprietorship is
A) the easiest type of business to set up.
B) the most difficult type of business to set up.
C) the most expensive type of business to set up.
D) the least profitable type of business to set up.
The income effect of a wage increase is observed when
A) the higher wage income causes workers to take more leisure and work less.
B) leisure’s higher opportunity cost causes workers to take less leisure and work more.
C) the higher wage income causes workers to take less leisure and work more.
D) leisure’s higher opportunity cost causes workers to take more leisure and work less.
Stricter laws and regulations to protect intellectual property rights
A) will help to create a more successful market system.
B) will only benefit those companies whose intellectual property rights have in the past
been ignored.
C) will tend to have little impact on an economy since intellectual property is not
tangible.
D) will create a stronger and more successful black market for intellectual property.
A price maker is
A) a person who actively seeks out the best price for a product that he or she wishes to
buy.
B) a firm that has some control over the price of the product it sells.
C) a firm that is able to sell any quantity at the highest possible price.
D) a consumer who participates in an auction where she announces her willingness to
pay for a product.
The demand curve of a monopolistically competitive firm
A) is horizontal because the firm must cut its price to sell more.
B) is perfectly elastic.
C) is downward-sloping because it sells an identical product.
D) is downward-sloping because it must cut its price to sell more.
Because a monopoly’s demand curve is the same as the market demand curve for its
product
A) the monopoly’s marginal revenue equals its price.
B) the monopoly is a price taker.
C) the monopoly must lower its price to sell more of its product.
D) the monopoly’s average total cost always falls as it increases its output.
Figure 13-2
Refer to Figure 13-2. The marginal revenue from selling the additional unit Qb instead
of Qa equals
A) the area (G + H).
B) the area (H – E).
C) the area (E + F) – (G + H).
D) the area G.
When members of Congress vote to pass new legislation, they will
A) always vote for the alternative favored by a majority of the voters.
B) fail to consistently represent the underlying preferences of voters.
C) always vote for the alternative favored by a plurality of the voters if there is no
majority position.
D) always fail to represent the underlying preferences of voters.
Figure 12-9
Figure 12-9 shows cost and demand curves facing a profit-maximizing, perfectly
competitive firm.
Refer to Figure 12-9. Identify the firm’s short-run supply curve.
A) the marginal cost curve
B) the marginal cost curve from a and above
C) the marginal cost curve from b and above
D) the marginal cost curve from d and above
Professor Parallax chooses two students in his economics class, Jasmine and Cassandra,
to participate in the ultimatum game. He chooses Jasmine to be the allocator and
Cassandra to be the recipient. He gives Jasmine $50 and as the allocator, she gets to
decide how to split the money with Cassandra. If Cassandra decides to accept the
amount allocated to her by Jasmine, both students get to keep the money. If Cassandra
decides to reject her allocation, neither student gets to keep the money. How much will
each student end up with if each student acts as if fairness is important? How much will
each student end up with if only Cassandra acts as if fairness is important? How much
will each student end up with if neither student cares about fairness?
Avner is maximizing total utility by buying sports magazines and protein supplements.
For him to buy more sports magazines
A) the price of protein supplements. has to fall.
B) the price of sports magazines has to fall.
C) the price of sports magazines has to rise.
D) Since Avner is maximizing his utility, nothing can change the consumption of sports
magazines.
Marginal utility is the
A) total satisfaction received from consuming a given number of units of a product.
B) average satisfaction received from consuming a product.
C) extra satisfaction received from consuming one more unit of a product.
D) satisfaction achieved when a consumer has had enough of a product.
Long-run economic profits would most likely exist in which market structure?
A) monopoly, monopolistic competition, and oligopoly
B) monopoly and oligopoly
C) monopoly and monopolistic competition
D) monopoly only
A new area of economics studies situations in which people appear to be making
choices that do not appear to be economically rational. This area is called
A) behavioral economics.
B) irrational economics.
C) social economics.
D) new wave economics.
Assume that the price elasticity of demand for gasoline is -0.06. If the government tax
causes the price of gasoline to increase by 50 percent, what will be the decrease in the
quantity of gasoline demanded?
A) 5 percent
B) 0 percent
C) 33 percent
D) 50 percent
All of the following can be used to compute average profit except
A) marginal profit minus marginal cost.
B) total profit divided by quantity.
C) average revenue minus average total cost.
D) price minus average total cost.
Table 14-1
Godrickporter and Star Connections are the only two airport shuttle and limousine
rental service companies in the mid-sized town of Godrick Hollow. Each firm must
decide on whether to increase its advertising spending to compete for customers. Table
14-1 shows the payoff matrix for this advertising game.
Refer to Table 14-1. Let’s suppose the game starts with each firm adhering to its
original budget so that Godrickporter earns a profit of $6,000 and Star Connections
earns a profit of $12,000. Is there an incentive for any one firm to increase its
advertising budget?
A) No, neither firm has an incentive to raise its advertising budget.
B) Yes, both firms have an incentive to raise their advertising budgets.
C) Yes, Star Connections has an incentive to increase its advertising budget, but
Godrickporter does not.
D) Yes, Godrickporter has an incentive to increase its advertising budget, but Star
Connections does not.
The change in a firm’s revenue as a result of hiring one more worker
A) is the definition of the marginal product of labor.
B) is equal to the firm’s marginal cost.
C) is the definition of the marginal revenue product of labor.
D) will be negative if the demand for the firm’s output is inelastic.
Table 10-3
Refer to Table 10-3. The table above shows Lee’s marginal utility from consuming ice
cream cones and cans of Lime Fizz Soda. Select the phrase that completes the following
statement. “We can determine the number of ice cream cones and cans of Lime Fizz
Soda Lee should consume to maximize his utility
A) if we know what Lee’s income is.”
B) if we know what Lee’s income is and the price of an ice cream cone and the price of
a can of Lime Fizz Soda.”
C) by adding up the marginal utilities for ice cream cones and Lime Fizz Soda.”
D) if we know the values of the marginal utility per dollar for ice cream cones and Lime
Fizz Soda.”
A perfectly elastic demand curve is
A) vertical.
B) horizontal.
C) curvilinear.
D) upward sloping.
Figure 14-9
Refer to Figure 14-9. Uniguest, Inc. is a company that provides PCs with internet
access and touch-sensitive screens to hotels. Suppose the Hard Rock Hotel and Casino
in Las Vegas informs Uniguest that it is considering installing these systems in its hotel
rooms. The Hard Rock expects to be able to charge higher prices for these rooms if it
installs Uniguest’s systems in its rooms. The two companies begin bargaining over what
price the Hard Rock will pay Uniguest for its systems, and the decision tree shown
above illustrates this bargaining game. Note that the profit figures listed in the decision
tree are additional profits for the Hard Rock and total profits for Uniguest.
a. Suppose the Hard Rock offers Uniguest $1,200 per system. Will Uniguest accept or
reject this offer? Why?
b. Suppose the Hard Rock offers Uniguest $800 per system. Will Uniguest accept or
reject this offer? Why?
c. Suppose Uniguest attempts to obtain a favorable outcome from the bargaining by
telling the Hard Rock it will reject an $800-per-system offer. If the Hard Rock does not
believe the threat is credible, what will it do? Why? What will Uniguest do? Why?
d. Is there a subgame-perfect equilibrium in this situation? Explain.
According to an article the Wall Street Journal, “The big car makers are pushing a wide
array of new technology into production, responding to relentless competitive pressure,
rising energy prices and consumer demand for better safety.
Source: Joseph B. White, “Ford, GM Eye Shift in Buying Habits,” Wall Street Journal,
May 22, 2006.
Which of Porter’s competitive forces does this statement allude to?
A) the threat of competition from new entrants
B) competition from foreign auto manufacturers
C) competition from existing firms within the industry
D) competition from substitute products from outside the industry
What is the profit-maximizing rule for a monopolistically competitive firm?
A) to produce a quantity that maximizes market share
B) to produce a quantity that maximizes total revenue
C) to produce a quantity such that marginal revenue equals marginal cost
D) to produce a quantity such that price equals marginal cost