If a consumer’s income rises,
a. her indifference curves shift inward
b. her indifference curves shift outward
c. her budget line shifts outward
d. her budget line shifts inward
e. the slope of her budget line increases
Exhibit 14-3
Jira is searching for a big screen television. Exhibit 14-3 shows her marginal cost and
marginal benefit from searching for the television. How many minutes should she
search?
a. 0 minutes
b. 5 minutes
c. 15 minutes
d. 40 minutes
e. cannot tell from the information given
A consumer’s indifference map is a depiction of
a. her preferences
b. her income
c. the prices of the two goods under consideration
d. the relative prices of the two goods under consideration
e. the prices of substitute and complement goods
Many eligible voters do not vote, and many who do vote don’t read the biographies of
candidates before they vote. These are examples of
a. the median-voter model
b. representative government
c. rational ignorance
d. stupidity
e. laziness
If the marginal product of the second worker hired by a firm is 14 units and the price of
a unit of output is $7 regardless of the quantity of output sold, then the marginal
revenue product of the second worker is
a. $98
b. $14
c. $7
d. $2
e. $21
Suppose that a monopolist must choose between two points on its demand curve: it can
sell 100 units for $3 each, or it can sell 150 units for $2 each. Which of the following is
true?
a. The monopolist is facing elastic demand.
b. The monopolist is facing unit elastic demand.
c. The monopolist is facing inelastic demand.
d. The monopolist is facing perfectly elastic demand.
e. The elasticity of demand cannot be determined with the information given.
The May 2007 report from the Intergovernmental Panel on Climate Change suggested
reforms that would not require any lifestyle changes.
a. True
b. False
Which of the following is not a country or region most likely to be among industrial
market countries?
a. Western Europe
b. North American
c. Australia
d. South Asia
e. Japan
In many cities, garbage collectors earn more than social workers. What could explain
this wage differential?
a. Social work provides more nonmonetary rewards than garbage collecting does.
b. There is a greater demand for social workers.
c. There is a greater supply of trash collectors.
d. Collecting garbage requires less skill.
e. Social work is a less prestigious profession.
An increase in income is represented by a shift of the budget line outward to a parallel
position.
A pollution tax
a. is itself a form of negative externality
b. is a positive externality used to offset a negative one
c. is a price per unit of discharge of pollution
d. is a tax on pollution control equipment
e. may cause a common pool problem
Exhibit 8-4
Does Exhibit 8-4 represent a long-run or a short-run situation?
a. long run because there is no fixed cost
b. short run because there is no equilibrium
c. long run because there is an equilibrium level of output
d. short run because there is fixed cost
e. long run because there is a normal profit
If $1 equals 2 euros, then 1 euro equals
a. $4.00
b. $2.00
c. $0.50
d. $1.00
e. $0.25
Exhibit 11-1
Condider Exibit 11-1. Each of the panels depict the supply and demand conditions in a
resource market. In which of the panels will the resource earnings reflect partly
opportunity cost and partly economic rent?
a. panel (a) and panel (b)
b. panel (b) only
c. panel (c), panel (d) and panel (e)
d. panel (d) only
e. panel (e) only
Which of the following statements is true? If the marginal product of labor diminishes,
a. average fixed cost rises
b. average variable cost is constant
c. marginal cost rises
d. average total cost must rise
e. total cost rises at a diminishing rate
If the United Auto Workers successfully negotiates a wage that is higher than the
competitive wage,
a. there is no excess supply of labor because everyone who wants to work at the union
wage can get a job
b. there is no excess demand for labor because everyone who wants to work at the
union wage can get a job
c. the union must ration the available jobs
d. all workers are better off
e. more workers are employed than at the competitive wage
Which of the following is notnecessarily a characteristic of perfect competition?
a. low prices
b. a large number of buyers and sellers
c. a homogeneous product
d. perfect information
e. easy entry and exit in the long run
Opportunity cost usually
a. cannot be measured
b. applies to labor but not to capital
c. is involved in calculating economic profit
d. is greater than the cash payment made to a resource
e. is less than the cash payment made to a resource
The short-run supply curve of a perfectly competitive firm is
a. its average fixed cost curve
b. the part of its marginal cost curve rising above the average variable cost curve
c. the part of its marginal cost curve below the average variable cost curve
d. marginal product curve
e. its average total cost curve
If a profit-maximizing firm hires an additional unit of labor, what must be true about
labor’s wage and marginal revenue product?
a. Its wage always equals its marginal revenue product.
b. Its wage is always greater than its marginal revenue product.
c. Its wage is always total revenue minus marginal revenue product.
d. Its wage is always greater than or equal to its marginal revenue product.
e. Its wage is always less than or equal to its marginal revenue product.
If marginal cost is less than average total cost,
a. marginal cost must be falling
b. average total cost must be increasing
c. average variable cost equals average total cost
d. average variable cost must be decreasing
e. average variable cost may be increasing or decreasing
For which of the following medical goods or services is the income elasticity of
demand likely to be largest?
a. emergency services after a car accident
b. measles shots
c. physical examinations for life insurance applications
d. medical tests to diagnose specific symptoms
e. face-lifts
The difference between a firm’s total revenue and what must be paid to attract resources
from their best alternative use is called
a. total revenue
b. utility
c. economic profit
d. cost
e. production efficiency
Exhibit 9-14
At the profit-maximizing (or loss-minimizing) level of production, the monopoly in
Exhibit 9-14 will have total revenue of
a. $308
b. $187
c. $216
d. $306
e. $272
The reward offered to households to refrain from spending their income on current
consumption and instead save their income is
a. rent
b. credit
c. utility
d. interest
e. forgone utility
Sailboats and motorboats share Emerson Lake, which nobody owns. The sailors say the
motorboats are a hazard; the motorboaters say it is the other way around. Frequent
collisions occur, with many injuries and some deaths every year. If the City of Emerson
were to buy the lake itself,
a. the problem would be solved, because the lake would have an owner
b. the problem would be solved, because no one could use the lake
c. the city would still have to assign property rights so that use of the lake would be
efficient
d. the city would give the right to use the lake to the larger group
e. the city would give the right to use the lake to the richer group
The law of demand is illustrated by a demand curve that is
a. horizontal
b. vertical
c. upward sloping
d. constant
e. downward sloping
Exhibit 8-1
The perfectly competitive firewood market is composed of 1,000 identical consumers
and 1,000 identical firms. Exhibit 8-1 shows cost data for one firm and demand data for
one consumer. What is the profit-maximizing quantity for each firm?
a. zero cords of wood
b. one cord of wood
c. two cords of wood
d. three cords of wood
e. four cords of wood
Rent seeking reduces our economy’s overall efficiency by
a. getting government to adopt legislation that actually reduces production
b. disseminating market information
c. lowering taxes
d. getting voters more interested in politics
e. reducing equity
Which of the following will cause the demand curve for gasoline to shift leftward?
a. a decrease in the price of gasoline
b. an increase in the price of gasoline
c. a leftward shift of the supply of gasoline
d. a rightward shift of the supply of cars
e. a decrease in the price of bicycles