Figure: The Demand for Bricklayers
(Figure: The Demand for Bricklayers) Look at the figure The Demand for Bricklayers.
If there is an increase in technology that increases the productivity of bricklayers, then
the value of the marginal product of the sixth bricklayer will be _____ than _____.
A) less; $80
B) greater; $100
C) less; $60
D) greater; $110
Figure: Supply and Demand in the Orange Juice Market
(Figure: Supply and Demand in the Orange Juice Market) Look at the figure Supply
and Demand in the Orange Juice Market. The market is in equilibrium at point C. A
reputable scientist asserts in a major scientific publication that drinking orange juice
will increase your life span. What will be the most likely new equilibrium point in the
orange juice market?
A) A
B) B
C) D
D) E
Figure: Budget Lines for Oranges and Apples
(Figure: Budget Lines for Oranges and Apples) Look at the figure Budget Lines for
Oranges and Apples. For some time, Antonio has had $5 per month to spend on oranges
and apples. The price of an orange is $0.50 and the price of an apple is $0.25. Which of
the charts shows what will happen to his budget line if the price of an orange falls to
$0.25?
A) A
B) B
C) C
D) D
(Table: Demand for Solar Water Heaters) Look at the table Demand for Solar Water
Heaters. The marginal cost of producing solar water heaters is zero, and only two firms,
Rheem and Calefi, produce them. Suppose they agree to produce only 25 water heaters
each. If Rheem cheats on the agreement and produces 30 water heaters, what is the
price effect for Rheem?
A) “$1,000
B) “$2,500
C) $2,000
D) $1,000
If an economy has NOT achieved efficiency, there must be ways to:
A) increase opportunity costs.
B) eliminate inequity.
C) make some people better off without making others worse off.
D) increase the incentives for its citizens to follow their own self-interest.
Figure: Market Failure
(Figure: Market Failure) In the figure Market Failure, if production in this competitive
market is at quantity G:
A) marginal benefit is less than marginal cost.
B) marginal benefit is equal to marginal cost.
C) marginal benefit is greater than marginal cost.
D) price is equal to marginal cost and less than marginal benefit.
If the price of chocolate-covered peanuts decreases from $1.10 to $0.90 and the
quantity demanded does not change, then the price elasticity of demand (by the
midpoint method) is:
A) 0.
B) 0.5.
C) 1.
D) 2.
If a perfectly competitive firm is producing a quantity where P = MC, then profit:
A) is maximized.
B) can be increased by decreasing the quantity.
C) can be increased by decreasing the price.
D) can be increased by increasing production.
Table: Linda’s Copy Shop Production
(Table: Linda’s Copy Shop Production) Look at the table Linda’s Copy Shop
Production. Linda’s production runs into diminishing returns to her variable inputs
when she employs the _____ unit.
A) second
B) third
C) fourth
D) fifth
Figure: The Profit-Maximizing Firm in the Short Run
(Figure: The Profit-Maximizing Firm in the Short Run) Look at the figure The
Profit-Maximizing Firm in the Short Run. Which of these curves is the AVC curve?
A) curve M
B) none of the curves
C) curve N
D) curve O
(Table: Lilly’s Apple Orchard) Look at the table Lilly’s Apple Orchard. Lilly is the
price-taking owner of an apple orchard. Her orchard has fixed costs of $30. If the price
of a bushel of apples is $25, how many bushels will Lilly produce to maximize profit?
A) 0
B) 1
C) 2
D) 3
(Table: Variable Costs for Lots) Look at the table Variable Costs for Lots. During the
winter, Alexa runs a snow-clearing service in a perfectly competitive industry. Assume
that costs are constant in each interval; that is, the variable cost of clearing anywhere
from 1 through 10 lots is $200. Her only fixed cost is $1,000 for a snowplow. Her
variable costs include fuel, her time, and hot coffee. If the price to clear a lot is $60,
how many lots should Alexa clear?
A) 50
B) 40
C) 30
D) 20
Figure: The Market for Productivity Apps
(Figure: The Market for Productivity Apps) Look at the figure The Market for
Productivity Apps. If the government imposes a tax of $1 in this market, consumers will
pay _____ more per app and purchase _____ fewer apps.
A) $1; 5
B) $1; 25
C) $0.50; 5
D) $0.50; 20
Suppose a monopoly is producing output so that marginal revenue equals marginal cost.
If the monopolist reduces output, it:
A) can charge a higher price.
B) will increase profits.
C) will decrease marginal revenue.
D) can charge a higher price and it will increase profits.
Paying a tax of $20 on an income of $100, a tax of $15 on an income of $200, and a tax
of $12 on an income of $300 is an example of a:
A) flat tax.
B) proportional tax.
C) progressive tax.
D) regressive tax.
An industry that consists of two firms is:
A) a duopoly.
B) a monopoly.
C) a monopsony.
D) monopolistic competition.
Economists’ and psychologists’ attempts to understand and explain why people make
decisions that appear to be irrational is the field of study called _____ economics
A) international
B) irrational
C) rational
D) behavioral
Suppose that an increase in the price of a good leads to an increase in total revenue.
Ignoring other factors (like supply), at its current price the good must be:
A) price-inelastic.
B) price-elastic.
C) perfectly price-elastic.
D) inferior.
Economic profits are calculated by:
A) taking the difference between total revenue and the sum of explicit and implicit
costs.
B) taking the difference between total revenue and explicit costs only.
C) taking the difference between the total revenue and implicit costs only.
D) summing total revenue, explicit costs, and implicit costs.
The firm’s value of marginal product curve slopes downward:
A) only if the firm is a perfect competitor in the product market.
B) because of diminishing returns.
C) only if the firm is a perfect competitor in the labor market.
D) only if the firm is a perfect competitor in both the labor and product markets.
_____ occurs when the only two firms in an industry openly agree to fix the price at a
given level.
A) Overt collusion
B) Price leadership
C) Contestability
D) Tacit collusion
Assigning property rights helps to correct the problems associated with common
resources:
A) because it allows property owners to exclude users and to manage the resource more
efficiently.
B) because it allows the government to determine the amount that would lead to the
socially optimal amount.
C) because it makes the good nonrival in consumption.
D) and therefore allows the market to better assess the marginal social benefits.
For the United States in 2012, a Gini coefficient of 0.47 suggests that:
A) the United States has almost achieved income equality.
B) the average household income is $49,445.
C) compared to most European countries, the United States has unusually high levels of
income inequality.
D) the median household income for the United States is $49,445.
The shut-down point in the short run is:
A) the point at which economic profit is zero.
B) the minimum point of AVC.
C) the intersection of the MC and ATC curves.
D) the minimum point of AFC.
Which of the following programs is NOT an antipoverty program?
A) the Earned Income Tax Credit
B) Temporary Assistance for Needy Families
C) Social Security
D) Medicaid
Positive externalities are:
A) similar to negative externalities in their ease of measuring marginal benefits.
B) likely to be solved with the use of a Pigouvian tax.
C) difficult to measure, since marginal social benefits are hard to observe.
D) result from greater than optimal production of a good.
One point on a standard indifference curve is 8 cookies and 2 brownies; another is 6
cookies and 4 brownies. Which of the following combinations of cookies and brownies
could lie on this indifference curve?
A) 6 cookies and 10 brownies
B) 7 cookies and 6 brownies
C) 4 cookies and 4 brownies
D) 4 cookies and 8 brownies
The firm’s value of the marginal product of labor curve:
A) is the firm’s demand curve for labor.
B) is the industry’s demand curve for labor.
C) is the same as the marginal cost curve for labor.
D) slopes upward.
Suppose that a monopoly firm is required to pay a new annual license fee to do business
in its city and that the fee is somewhat less than the economic profit the firm is now
earning. In response to the increase in fees, the firm will:
A) raise its price by less than the amount of the license fee.
B) raise its price by the amount of the license fee.
C) raise its price by somewhat more than amount of the license fee.
D) not change its price.
Which of the following is an environmental policy based on tradable pollution permits?
A) a charge of $0.10 to automobile drivers for a given level of emitted emissions
B) paying automobile drivers $0.10 for each 10% reduction in automobile emissions
C) allowing automobile drivers to buy and sell the right to a certain level of automobile
emissions
D) ignoring pollution and letting private markets operate without government
interference