Labor demand is less elastic when:
A. there are many substitutes for labor in the production process.
B. the inputs that could be substituted for labor are relatively inexpensive.
C. a large amount of labor is essential to the production process.
D. the demand for output is more elastic.
Answer:
A Wall Street Journal headline reads: “Cigar Shortage Draws New Brands into Market.”
The shortage resulted from a renewed interest in smoking cigars. What best describes
facts behind the headline?
A. Supply has shifted to the right. Price has fallen somewhat, but not enough to
equilibrate supply and demand.
B. Demand has shifted to the right. Price has risen somewhat, increasing quantity
supplied, but not enough to equal quantity demanded.
C. Demand has shifted to the right and price has risen to equilibrate supply and demand.
D. Supply has shifted to the left. Price has risen somewhat, but not enough to
equilibrate supply and demand.
Answer:
The upward-sloping portion of the short-run average total cost curve is caused by:
A. indivisible setup costs.
B. diseconomies of scale.
C. the absence of fixed inputs.
D. the presence of fixed inputs.
Answer:
How would a decline in demand for imported commodities by the Chinese affect the
market for cargo transportation to China?
A. Supply of cargo transportation shifts to the right causing an increase in quantity
demanded and decline in equilibrium price.
B. Supply of cargo transportation shifts to the right causing an increase in demand and
equilibrium quantity and a decrease in equilibrium price.
C. Demand for cargo transportation shifts to the left causing a decline in quantity
supplied and price.
D. Demand for cargo transportation shifts to the left causing a decline in supply and
equilibrium quantity and price.
Answer:
The total fixed cost curve is:
A. upward-sloping.
B. U-shaped.
C. horizontal.
D. downward-sloping.
Answer:
Elizabeth Savoca estimated that for every 1 percent increase in tuition costs at a college,
2.4 percent fewer students applied to that college. This indicates that the elasticity of
applying to college is:
A. inelastic.
B. elastic.
C. perfectly inelastic.
D. unit elastic.
Answer:
Because you can get more of one good only by giving up some of another good, the
shape of a production possibility curve is:
A. upward-sloping.
B. perfectly vertical.
C. perfectly horizontal.
D. downward-sloping.
Answer:
Refer to the table shown. The average total cost of producing 5 units of output is:
A. $5.
B. $10.
C. $15.
D. $25.
Answer:
According to work by Amartya Sen, the best way from a society’s point of view to deal
with inalienable rights is to:
A. tax their sale to raise revenue since demand for them is inelastic.
B. sell them when the marginal benefit exceeds the marginal cost.
C. purchase them when the marginal benefit exceeds the marginal cost.
D. disallow any markets for their exchange.
Answer:
In economic terminology, a free rider is someone who:
A. does not pay for his or her own consumption of a public good.
B. chooses not to consume a public good.
C. is earning economic profit.
D. raises his or her prices because all other prices are rising.
Answer:
Restaurants will add high-price food items to the menu to lure diners to choose foods
just below the high-price items. These items generally have the highest profit margin.
This is an example of:
A. price discrimination.
B. irrational behavior.
C. enlightened self-interest.
D. choice architecture.
Answer:
The foreign exchange market is the market in which:
A. foreigners buy U.S. real estate.
B. foreign stocks and bonds are bought and sold.
C. ideas from different countries are exchanged.
D. currencies of different countries are bought and sold.
Answer:
The price at which a monopolistically competitive firm sells its product:
A. exceeds the marginal cost of production.
B. produces economic profits in both the long run and the short run.
C. equals the marginal cost of production.
D. is less than the marginal cost of production.
Answer:
The cost of repositioning an automobile gas tank for greater safety is $11 per vehicle for
12.5 million vehicles. It is expected that 180 deaths will occur if the gas tank location is
not redesigned. Failure to redesign the gas tank location therefore implies that the
automobile company is implicitly valuing human life at:
A. exactly $500,000.
B. more than $736,889.
C. less than $736,889.
D. more than $1,000,000.
Answer:
When the American League instituted designated batters (pitchers are exempt from
batting), the shadow prices of throwing beanballs (a pitch aimed at the batter’s hea):
A. rose.
B. fell.
C. did not change.
D. disappeared.
Answer:
The program that redistributes the most money is:
A. Aid to Families with Dependent Children.
B. the Department of Housing and Urban Development’s housing programs.
C. Supplemental Security Income.
D. the Social Security system.
Answer:
Nepalese villagers sell their kidneys as a way to earn much-needed money.
Unfortunately, although the demand for such kidneys in developed economies is high
and the medical facilities are available to conduct kidney transplants, the selling and
buying of organs is illegal. What idea from Chapter 1 of the text does this situation best
illustrate?
A. Sunk costs do not matter in making decisions.
B. Marginal revenue should equal marginal cost.
C. Social and political forces sometimes rein in market forces.
D. Microeconomics and macroeconomics are very much interrelated.
Answer:
In economics, the context in which decisions are presented is referred to as:
A. self-confirming equilibrium.
B. enlightened self-interest.
C. choice architecture.
D. shadow prices.
Answer:
By promising to raise taxes only on those whose income exceeds $250,000, President
Obama promised that the federal tax system will become:
A. more progressive.
B. less progressive.
C. proportional.
D. regressive.
Answer:
Refer to the following graph.
Demand and supply are initially D and S1 respectively. Which of the following best
describes the effect of a $0.50 per pound tariff on Danish hams imported into the United
States?
A. Supply shifts from S1 to S2; quantity sold rises to 100 thousand pounds and price
paid by consumers declines to $1.75 a pound.
B. Neither supply nor demand shift, but price paid by consumers declines to $1.50 a
pound while quantity sold remains at 80 thousand pounds.
C. Supply shifts from S1 to S0; quantity sold declines to 60 thousand pounds and price
paid by consumers rises to $2.50 a pound.
D. Supply shifts from S1 to S0; quantity sold declines to 60 thousand pounds and price
paid by consumers rises to $2.25 a pound.
Answer:
A perfectly competitive firm in the long run:
A. can earn positive or negative economic profits.
B. can earn negative accounting profits as long as economic profits are positive.
C. makes zero economic profits.
D. makes zero accounting profits.
Answer:
A Nash equilibrium assumes that a player follows his or her best strategy:
A. given that the other players follow a random strategy.
B. given that the other players follow their worst strategy.
C. given that the other players follow their best strategy.
D. regardless of what other players do.
Answer:
In economics, the purpose of competition is to:
A. ensure that every firm survives.
B. motivate firms to make the highest possible profit.
C. motivate firms to make better goods at lower cost.
D. prevent unemployment.
Answer:
Milton Friedman argues that medical licensure benefits doctors because it:
A. allows them to restrict supply, increase prices, and significantly increase their
incomes.
B. protects them from malpractice suits.
C. ensures that they will not have to compete against one another for patients.
D. prevents other doctors from advertising and stealing their patients.
Answer:
Production Possibility Schedules for Two South Pacific Island Nations
Refer to the table shown. A comparative advantage in the production of mangoes is held
by:
A. Kiribati.
B. Tuvalu.
C. both countries.
D. neither country.
Answer:
If a monopolist increases output from 14 to 15 by lowering its price from $32 to $31,
marginal revenue is:
A. $1.
B. $17.
C. $448.
D. $465.
Answer:
A set of strategies in which no player can improve his or her payoff by changing his or
her own action is called:
A. a Nash equilibrium.
B. a Vickrey position.
C. a framing strategy.
D. a dominant strategy
Answer:
Refer to the table shown. The maximum profit that the perfectly competitive firm
represented by the above data could earn is:
A. $25.
B. $35.
C. $45.
D. $55.
Answer:
Refer to the graph shown. Assuming that the industry operates under conditions of
perfect competition and that the cost curves do not shift, the price of construction in a
long-run competitive equilibrium will be:
A. $60 per square foot.
B. $55 per square foot.
C. $50 per square foot.
D. In the long run no construction will be supplied at any price.
Answer:
Production Possibility Schedules for Two South Pacific Island Nations
Refer to the table shown. In Tuvalu, the opportunity cost of producing one coconut (in
terms of mangoes) is:
A. 0.
B. 1/3.
C. 3.
D. 400.
Answer:
Suppose that in Slovakia one unit of labor can produce either 16 tons of wheat or 32
tons of soy and in Poland one unit of labor can produce either 4 tons of wheat or 2 tons
of soy. Given this information, which of the following statements is true?
A. Slovakia has a comparative advantage in producing neither wheat nor soy.
B. Slovakia has a comparative advantage in producing both wheat and soy.
C. Poland has a comparative advantage in producing soy but not wheat.
D. Poland has a comparative advantage in producing wheat but not soy.
Answer:
Suppose Paul has chosen a combination of two goods, A and B, such that the marginal
utility per dollar spent for good A (MUA/PA) is .6 and the marginal utility per dollar
spent for good B (MUB/PB) is 1. To increase utility with the same amount of money,
Paul should:
A. increase the number of B consumed and decrease the number of A consumed.
B. increase the number of A consumed and decrease the number of B consumed.
C. increase the number of both A and B consumed.
D. do nothing; he cannot increase total utility.
Answer: