Jeanette is willing to pay $100 for the first pair of shoes, $80 for the second pair, $50
for the third, and $30 for the fourth. If shoes cost $50, Jeanette will buy _____ pairs of
shoes and her total consumer surplus equals _____.
A) four; $110
B) three; $230
C) three; $80
D) four; $80
Figure: The Marginal Cost Curve
(Figure: The Marginal Cost Curve) Look at the figure The Marginal Cost Curve. The
approximate total cost of mowing seven lawns is:
A) $175.
B) $113.
C) $50.
D) $24.
The costs associated with variable inputs are _____, and the costs associated with
_____ inputs are _____.
A) variable; fixed; fixed
B) fixed; fixed; variable
C) variable; fixed; variable
D) fixed; fixed; fixed
If the price of chocolate-covered peanuts decreases from $1.10 to $0.90 and the
quantity demanded increases from 190 bags to 210 bags, then the price elasticity of
demand (by the midpoint method) is:
A) 0.
B) 0.5.
C) 1.
D) 2.
Table: Denise’s Consumption of Coffee and Gasoline
(Table: Denise’s Consumption of Coffee and Gasoline) Look at the table Denise’s
Consumption of Coffee and Gasoline. When Denise maximizes her utility, her marginal
utility per dollar spent per gallon on gasoline equals _____ utils per dollar.
A) 0.6
B) 0.8
C) 0.5
D) 1.6
A customer with significant buying power in an industry would:
A) make a tacit price agreement more difficult to achieve.
B) make a tacit price agreement easier to achieve.
C) have no effect on tacit pricing agreement negotiations.
D) result in a kinked demand curve.
(Table: Willingness to Pay for Basketball Sneakers) The table Willingness to Pay for
Basketball Sneakers shows each player’s willingness to pay for basketball sneakers.
Assume that each player wants to buy at most, one pair of sneakers. If the price of
basketball sneakers is $130, how many pairs will be purchased?
A) none
B) one
C) two
D) three
In the long run, perfect competitors and monopolistic competitors are similar in that
they:
A) set price where MR < MC.
B) produce an output level at which P = ATC.
C) produce a product that is standardized and hard to differentiate.
D) earn a positive economic profit.
Bessie wants to calculate the accounting and economic profits of her cattle farm in
Nebraska. She pays $30,000 per year in overhead, $80,000 in wages, and $20,000 in
insurance. She forgoes $30,000 per year that she could make as a teacher. If her total
revenue equals $140,000, that means her accounting profit is _____ and her economic
profit is _____.
A) $10,000; “$20,000
B) $30,000; “$30,000
C) “$10,000; “$10,000
D) $60,000; $30,000
Gary’s Gas and Frank’s Fuel are the only two providers of gasoline in their town. Gary
and Frank decide to form a cartel. Later, Gary summarizes his pricing strategy as, “I’ll
cheat on the cartel because regardless of what Frank does, cheating gives me the best
payoff.” This is an example of:
A) a dominant strategy.
B) a tit-for-tat strategy.
C) an irrational strategy.
D) product differentiation.
Figure: The Market for Hamburgers
(Figure: The Market for Hamburgers) The figure The Market for Hamburgers shows the
weekly market for hamburgers in Tuscaloosa. If the price of a burger is $2, consumer
surplus will equal:
A) $650.
B) $400.
C) $225.
D) $450.
The purpose of medallions issued in New York City in the 1930s was to:
A) limit the number of people who used the subway during rush hour.
B) ensure that taxicabs met standards of safety and cleanliness.
C) give the owner the right to buy and sell securities on the New York Stock Exchange.
D) encourage citizens to buy their own cars.
At Hamill Manufacturing of Pennsylvania highly skilled senior machinists are paid
$70,000, excluding benefits, but the average skilled machinist generates approximately
$137,000 in value added. This difference is due to the fact that:
A) the marginal productivity theory of income distribution does not apply in this case.
B) the value of the marginal product of the last machinist hired is less than the average
of all machinists employed.
C) the value of the marginal product of the last machinist hired is greater than the
average of all machinists employed.
D) the value of the marginal product of the last machinist hired is equal to the average
of all machinists employed.
Which of the following is NOT a common mistake that leads to irrational decisions?
A) mental accounting
B) loss aversion
C) risk aversion
D) misperceptions about opportunity costs
Steven consumes staples and paper clips. He is maximizing his utility in consumption
of both goods. The price of staples falls. After the change in price Steven should
consume _____ staples and _____ paper clips.
A) more; more
B) more; fewer
C) fewer; fewer
D) fewer; more
If a quota is set above the equilibrium quantity, there will be:
A) incentives for illegal activities.
B) missed opportunities in the form of mutually beneficial transactions that don’t occur.
C) a supply price for the quantity transacted that will exceed the demand price of the
quantity transacted.
D) no effect.
The price elasticity of supply measures:
A) the response of a supply shift to changes in technology.
B) how much supply changes when the prices of inputs change.
C) the responsiveness of the quantity supplied to changes in the price of the good.
D) the response of a supply shift to changes in technology and to changes in prices.
A strategy in which players cooperate initially but then mimic what the other players do
is referred to as a:
A) prisoners’ dilemma.
B) tit-for-tat strategy.
C) price leadership model.
D) kinked demand curve model.
For most goods, purchases tend to rise with increases in buyers’ incomes and to fall
with decreases in buyers’ incomes. Such goods are known as:
A) inferior.
B) direct.
C) normal.
D) indirect.
Economic signals:
A) result in shortages and surpluses.
B) interfere with the trades that can be mutually beneficial.
C) guide decision makers in their transactions in the marketplace.
D) never provide adequate information to consumers.
(Table: Utility from Pizza and Beer) Look at the table Utility from Pizza and Beer. At
All-Sports Bar, a bottle of beer costs $4; a slice of pizza costs $2. Denard has $10 to
spend on beer and pizza. To maximize his utility, Denard will consume _____ slice(s)
of pizza and _____ bottle(s) of beer.
A) 5; no
B) 3; 1
C) 1; 2
D) 4; 3
If the demand for golf is unit-price elastic and your local public golf course increases
the greens fees for using the course, you expect:
A) a decrease in total revenue received by the course.
B) an increase in total revenue received by the course.
C) a decrease in the amount of golf played on the course.
D) no change in the amount of golf played on the course.
Which of the following countries does NOT provide health care to all of its citizens?
A) United States
B) Canada
C) France
D) Great Britain
(Table: Prices and Demand) Look at the table Prices and Demand. The New Orleans
Saints have a monopoly on Saints logo hats. The marginal cost of producing a hat is
$18. The Saints sell at most one hat to each customer, and the table shows each
customer’s willingness to pay. If the Saints were a perfectly competitive firm in a
perfectly competitive industry, at their profit-maximizing price and output total surplus
would be _____. If the Saints were a profit-maximizing monopoly, at their
profit-maximizing price and output total surplus would be _____.
A) $0; $0
B) $27; $36
C) $36; $27
D) $18; $27
A simplified representation that is used to study a real situation is called a(n):
A) model.
B) production possibility frontier.
C) assumption.
D) trade-off.
Figure: Market I
(Figure: Market I) Look at the figure Market I. If a price floor of $15 is imposed on this
market and the government chooses to purchase the surplus, the government must buy
_____ units of the good and spend a total amount of _____ on its purchase.
A) 5; $75
B) 10; $150
C) 9; $135
D) 9; $81