(Table: Cherry Farm) Look at the table Cherry Farm. How much will the industry
produce in long-run equilibrium?
A) 600 pounds
B) 500 pounds
C) 400 pounds
D) 0 pounds
(Table: Value of the Marginal Product of Labor and Demand) In the figure Value of the
Marginal Product of Labor and Demand, the total product of labor is shown for the
hourly production of power cords. Assume that the market for power cords is perfectly
competitive. If the price of a power cord is $4 and the market wage rate is $80 per hour,
the profit-maximizing quantity of labor is _____ worker(s).
A) one
B) three
C) five
D) seven
Hank operates a perfectly competitive firm in the long run. For several periods the
market price has been $20, and his break-even price is $22. Given the chance to change
his fixed costs, Hank should:
A) stay in the industry, since he can cover his fixed costs.
B) exit the industry, since he is making losses.
C) stay in the industry, since he is a perfect competitor and must take the price as given.
D) wait for the short-run period.
Lower wages in China reflect _____ labor productivity in China than in the United
States. This means that if the United States moved high-tech industries to China, the
overall cost of production would be _____ in China than in the United States.
A) lower; higher
B) lower; lower
C) higher; higher
D) higher; lower
(Table: Production Possibilities for the United States and Canada) Look at the table
Production Possibilities for the United States and Canada. Both nations can produce
cars and lumber. In _____, the opportunity cost of _____ cars is _____ board feet of
lumber.
A) the United States; 1 million; 10 million
B) the United States; 10 million; 1 million
C) Canada; 1 million; 6 million
D) Canada; 1 million; 166,000
Figure: City with Two Polluters
(Figure: City with Two Polluters) Look at the figure City with Two Polluters. If the
government issued licenses to emit a total of 1,600 tons of pollution, the market price to
emit 1 ton of emissions would equal:
A) $100.
B) $200.
C) $300.
D) $400.
Price elasticities of demand and supply will NOT play a major role in determining:
A) the ability of policy makers to change consumption of a good via the imposition of
an excise tax.
B) the deadweight loss arising from the imposition of an excise tax.
C) the burden of the tax on consumers and producers.
D) administrative costs of imposing an excise tax.
(Table: Cherry Farm) Look at the table Cherry Farm. At what price will the industry be
in long-run equilibrium?
A) $2
B) $3
C) $4
D) $5
(Table: Tonya’s Production Function for Apples) Look at the table Tonya’s Production
Function for Apples. Tonya is operating:
A) in the long run.
B) in the short run.
C) in a very expensive location.
D) at a loss.
(Table: Production Function for Soybeans) Look at the table Production Function for
Soybeans. Assume that the fixed input, capital, is 10 acres of land and a tractor, which
have a combined cost of $150 per day. The cost of labor is $100 per worker per day.
The variable cost of producing 60 bushels of soybeans is:
A) $5.
B) $100.
C) $150.
D) $300.
Assuming a downward-sloping demand curve, a decrease in production costs for firms
in a perfectly competitive market initially in long-run equilibrium will cause a(n):
A) permanent increase in the price.
B) economic profit for firms in the short run.
C) increase in demand.
D) increase in firms’ marginal revenue.
Micah is considering turning pro before his senior year basketball season. If he turns
pro, Micah expects a pro contract worth $2 million in present value. If he does not turn
pro, there is a 50% chance an injury will prevent him from playing professionally and a
50% chance he will get a pro contract worth $4 million in present value. What is the
expected present value of Micah’s pro contract if he stays in college for his senior year?
A) $3.5 million
B) $5 million
C) $2 million
D) $0
Suppose that the Yankee Cap Company is a profit-maximizing firm with a monopoly in
the production of baseball caps. The firm sells its baseball caps for $25 each. For this
information, we can assume that the Yankee Cap Company is producing a level of
output at which:
A) marginal revenue equals $25.
B) marginal cost equals marginal revenue.
C) average total cost equals $25.
D) average total cost is greater than $25.
Marginal revenue is a firm’s:
A) ratio of the change in total revenue to the change in output.
B) ratio of average revenue to total revenue.
C) profit per unit times the number of units sold.
D) increase in profit when it sells an additional unit of output.
The Taco Hut charges the same price for everything on its menu: $3 will buy a taco, a
burrito, or nachos. You buy the taco and think that if you had not purchased the taco,
you would have purchased the burrito. The opportunity cost of the taco is:
A) $3.
B) your enjoyment of the burrito.
C) $3 and your enjoyment of the burrito.
D) $3, your enjoyment of the burrito, and your enjoyment of the nachos.
For which of the following is the cross-price elasticity of demand most likely a large
positive number?
A) hockey pucks and hockey sticks
B) DVDs and milk
C) french fries and onion rings
D) all of these, because the cross-price elasticity is always a positive number
An increase in the fixed costs of a monopoly firm would _____ price and _____
quantity in the short run.
A) increase; decrease
B) increase; increase
C) not change; not change
D) decrease; decrease
(Table: Demand Schedule for Gadgets) Look at the table Demand Schedule for
Gadgets. The market for gadgets consists of two producers, Margaret and Ray. Each
firm can produce gadgets at a marginal cost of $2 and no fixed cost. If these two
producers formed a cartel, agreed to split production of output evenly, and acted to
maximize total industry profits, total industry output would be _____ and the price
would be _____.
A) 1,000; $10
B) 100; $9
C) 400; $6
D) 500; $5
Which of the following best describes a negative externality?
A) Your neighbor loves to bake bread and always brings you a loaf fresh and hot from
the oven.
B) Your neighbor has an ornamental pond that breeds mosquitoes.
C) Your neighbor has invested in beautiful landscaping, increasing the value of all of
the houses on the block.
D) Your neighbor has a pool and has given you an open invitation to come over and
swim.
We predict the long-run price elasticity of demand for gasoline to be _____ the
short-run price elasticity of demand for it.
A) less than
B) larger than
C) equal to
D) not comparable to
Figure: Profit Maximization in Monopolistic Competition
(Figure: Profit Maximization in Monopolistic Competition) Look at the figure Profit
Maximization in Monopolistic Competition. A firm in monopolistic competition will
maximize profits by producing so that:
A) P = MC.
B) MR = MC.
C) P = MR.
D) P ” ATC (i.e., economic profit per unit) is the largest.
Which of the following is NOT a source of product differentiation?
A) price
B) location
C) style
D) quality
When a market begins to engage in international trade:
A) producers in the exporting industry may be better off.
B) consumers of the imported good may be worse off.
C) consumers of the exported good may be better off.
D) producers in the importing industry are better off.
All of the following are examples of price discrimination EXCEPT:
A) discounts for senior citizens at the movies.
B) discounts for families with young children at motels.
C) generally lower prices at Walmart than at Target.
D) cheaper air fares if the traveler stays over a Saturday.
A software program is similar to an apple in that it is _____, but it is also similar to
public safety in that it is _____.
A) rival in consumption; nonexcludable
B) nonrival in consumption; excludable
C) excludable; nonrival in consumption
D) nonexcludable; rival in consumption
Which of the following goods best fits the characteristics of a private good?
A) national defense
B) clean water
C) a pizza
D) police protection
The demand curve facing a monopolist is always:
A) the same as the industry’s demand curve.
B) perfectly elastic.
C) unit-elastic.
D) perfectly inelastic.
A(n) _____ is nonexcludable and nonrival in consumption.
A) private good
B) artificially scarce good
C) public good
D) common resource
A person’s optimal labor supply choice:
A) is similar to a person’s optimal consumption rule.
B) is not useful in determining how many hours a person should work.
C) reveals little about a person’s labor”leisure choices.
D) results in people working too much for too little pay.
(Table: Cost Data) Look at the table Cost Data. The average fixed cost of producing 5
purses is:
A) $0.
B) $50.
C) $25.
D) $10.
For a student who owns his or her own home and doesn’t plan to live in the dorm, the
cost of going to college is:
A) tuition and the cost of housing.
B) tuition, the cost of housing, and the cost of books.
C) tuition, the cost of books, and forgone income.
D) forgone income only.