Related to the Economics in Practice on page 175: When there are a few empty seats in
a movie theater, the marginal cost of adding extra customers to occupy those seats
A) is probably close to zero.
B) will be negative.
C) is generally quite high.
D) will primarily depend on the number of customers waiting to see the movie.
A firm is currently hiring capital and labor so that MPL/PL < MPK/PK, if the firm
wishes to maximize profits it should hire
A) less labor and less capital.
B) more capital and more labor.
C) more labor and less capital.
D) less labor and more capital.
A minimum price, set by the government, that sellers may charge for a good is known
as
A) a price floor.
B) a price rationing mechanism.
C) a price ceiling.
D) a subsidy.
The ________ tax rate is the tax rate paid on any additional income earned.
A) average
B) total
C) marginal
D) proportional
The price-leadership model assumes all of the following EXCEPT:
A) Demand elasticity in response to an increase in price is different from the demand
elasticity in response to a price cut.
B) The industry is made up of one large firm and a number of smaller, competitive
firms.
C) A dominant firm maximizes profit.
D) A dominant firm allows the smaller firms to sell all they want at the price the leader
has set.
At the point where total product is maximized, marginal product
A) is zero, but average product is still positive.
B) and average product are negative.
C) is positive, but average product is negative.
D) and average product are positive.
Figure 2.5
Refer to Figure 2.5. The economy is currently at Point B. The opportunity cost of
moving from Point B to Point A is the
A) 40 plasma TVs that must be forgone to produce 120 additional LCD TVs.
B) 20 plasma TVs that must be forgone to produce 30 additional LCD TVs.
C) 30 LCD TVs that must be forgone to produce 40 additional plasma TVs.
D) 120 LCD TVs that must be forgone to produce 20 additional plasma TVs.
Professional female basketball players make far less income than do professional male
basketball players. Why?
A) gender discrimination
B) The supply of female players is far greater than the supply of male players.
C) The demand for female players is far less than the demand for male players.
D) compensating differentials
A good whose demand is directly related to income is a(n)
A) normal good.
B) inferior good.
C) regular good.
D) new good.
An important distinction between perfect competition and monopoly is that in
A) perfect competition, there is no distinction between the firm and the industry.
B) perfect competition, the firm is the industry.
C) monopoly, the firm faces the market demand curve.
D) monopoly, the firm produces less than the total quantity supplied.
Figure 19.1
Refer to Figure 19.1. The payroll tax imposed is ________ per unit of labor.
A) $2
B) $3
C) $5
D) $10
Consider the following game. You roll a six-sided die and each time you roll a 6, you
get $30. For all other outcomes you pay $6. Since the expected value of this game is $0,
the game is called a(n) ________.
A) gamble
B) fair bet
C) even game
D) zero sum game
The colluding oligopoly will face market demand and produce up until the point at
which
A) price and marginal cost are equal and price will be set equal to marginal cost.
B) marginal revenue and marginal cost are equal and price will be set above marginal
cost.
C) price and marginal revenue are equal and price will be set below marginal cost.
D) marginal revenue and marginal cost are equal and price will be set below marginal
cost.
During an economic upturn when consumer income rises, the demand for caviar
increases and the demand for hummus decreases. This implies that caviar
A) and hummus are complements.
B) is a normal good and hummus is an inferior good.
C) is an inferior good and hummus is a normal good.
D) is an economic bad and hummus is an economic good.
A consumer satisfies the condition MUx/Px = MUy/Py when his indifference curve
________ his budget constraint.
A) is completely above
B) is completely below
C) is just tangent to
D) crosses
Table 9.1
Refer to Table 9.1. If the market price is $17, then in the long run the firm will
A) operate and expand.
B) operate but not expand.
C) shut down, but not go out of business.
D) go out of business.
The formula for MC is
A) TVC/q.
B) q/TVC.
C) ΔTVC/q.
D) ΔTVC/Δq.
The table shows the relationship between income and utility for Terri.
Table 3
Refer to Table 17.3. Suppose Terri has a 25% chance of becoming disabled in any given
year. If she does become disabled, she will earn $0. If Terri does not become disabled,
she will earn her usual salary of $80,000. Terri has the opportunity to purchase
disability insurance which will pay her her full salary in the event she becomes
disabled. How much would such an insurance policy be worth to Terri?
A) $0
B) less than $20,000 but more than $0
C) $20,000 or more
D) indeterminate from the given information
To find the optimal level of provision for a public good, the government must know
________.
A) the marginal revenue of selling the good
B) the supply curve of the government
C) everyone’s preferences
D) the price elasticity of demand of each buyer
When the government imposes a tax on a firm that generates external costs, the tax is
A) always borne entirely by the firm.
B) always borne entirely by the consumer.
C) usually borne by both the firm and the consumer.
D) borne only by the government.
Which of the following is an example of a positive statement?
A) There should be no unemployment in an advanced industrial society.
B) Higher prices cause consumers to purchase less.
C) Consumption should be distributed fairly in society.
D) People should pollute as little as possible.
The outcome of any free market is ultimately ________ because some people become
very rich while others remain very poor.
A) efficient
B) inequitable
C) equitable
D) market failure
Our economic system produces ________ goods that firms use as inputs to produce
future goods and services.
A) investment
B) capital
C) tangible
D) depreciation
Unlike a monopolistic firm’s product, a monopolistically competitive firm’s product
A) is homogeneous.
B) is a unique product.
C) has many close substitutes.
D) has no close substitutes.
Figure 15.2
Refer to Figure 15.2. If We Do Hair maximizes profits as a monopolistically
competitive firm, it ________ of $320.
A) is suffering a loss of
B) receives a total revenue
C) is earning a profit
D) has a total cost
Figure 13.4
Refer to Figure 13.4. This firm’s ________ will be maximized at a price of $10.
A) marginal cost
B) total revenue
C) marginal revenue
D) profit
Figure 20.1
Refer to Figure 20.1. The United States has a(n) ________ advantage in the production
of soybeans and a(n) ________ advantage in the production of alfalfa.
A) comparative; absolute
B) comparative; comparative
C) absolute; absolute and comparative
D) comparative; absolute and comparative
Figure 18.4
Refer to Figure 18.4. The wealthiest fifth of families earned ________% of income in
Outland.
A) 20
B) 40
C) 60
D) 95
Investors put up $104,000 to construct a building and purchase all equipment for a new
restaurant. The investors expect to earn a minimum return of 10 percent on their
investment. The restaurant is open 52 weeks per year and serves 900 meals per week.
The fixed costs are spread over the 52 weeks (i.e. prorated weekly). Included in the
fixed costs is the 10% return to the investors and $2,000 in other fixed costs. Variable
costs include $2,000 in weekly wages, and $600 per week in materials, electricity, etc.
The restaurant charges $6 on average per meal.
In the long run, the restaurant will want to
A) operate and expand.
B) operate but not expand.
C) shut down, but not go out of business.
D) go out of business.
Figure 9.1
Refer to Figure 9.1. This farmer will earn ________ economic profit if the price is $10.
A) -$2.
B) $0.
C) $2.
D) $7.
If perfectly competitive firms do NOT account for external costs of production, then at
the equilibrium level of output
A) P = MC.
B) P < MSC.
C) MC = MSC.
D) Both A and B are correct.
A monopoly is an industry with
A) a single firm in which the entry of new firms is blocked.
B) a small number of firms each large enough to impact the market price of its output.
C) many firms each able to differentiate their product.
D) many firms each too small to impact the market price of its output.
For most people, as their income increases, their utility from that income ________ at
a(n) ________ rate.
A) increases; increasing
B) decreases; decreasing
C) increases; decreasing
D) decreases; increasing
Figure 7.9
Refer to Figure 7.9. The firm’s isocost line would shift from CE to CD if
A) the price of capital increased.
B) the price of labor increased.
C) the firm’s total expenditure on inputs increased.
D) either the price of labor increased or the firm’s total expenditure on inputs increased.
What is the function of the World Bank?
What is the difference between total utility and marginal utility?
In a game theory model, how is Nash equilibrium achieved?
List the characteristics of a monopolistically competitive market.
What is the difference between capital goods and consumer goods?