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Suppose the price elasticity of demand for blueberries is 1.5. If climate change destroys
one-fourth of the nation's blueberry crop, how will that affect total revenue, all other
things unchanged?
A) Total revenue will rise.
B) Total revenue will fall.
C) Total revenue will remain unchanged.
D) The information is insufficient to answer the question.
Figure: The Linear Demand Curve II
(Figure: The Linear Demand Curve II) Look at the figure Linear Demand Curve II. If
price was initially set at $8 and then increased to $10, total revenue would:
A) decrease, as the price effect is dominated by the quantity effect.
B) increase, as the price effect dominates the quantity effect.
C) stay the same, as both the price and quantity effects remain unchanged.
D) stay the same, but the price effect is dominated by the quantity effect.
An important determinant of the price elasticity of demand is the:
A) proportion of the household budget spent on the good.
B) level of technology.
C) quantity of the good supplied.
D) extent of government regulation.
An individual will continue to use a common resource until his or her:
A) marginal benefit is zero.
B) marginal cost is zero.
C) marginal benefit exceeds marginal cost.
D) marginal benefit equals the marginal social cost.
The short-run supply curve for a perfectly competitive firm is its:
A) demand curve above its marginal revenue curve.
B) marginal revenue curve to the right of its marginal cost curve.
C) marginal cost curve above its average variable cost curve.
D) average total cost curve below its marginal cost curve.
The De Beers company is described as a monopolist in the production of:
A) diamonds.
B) software.
C) oil.
D) beer.
In the circular-flow diagram, a household is:
A) an entity that sells goods and services.
B) an individual or group of people who share their income.
C) an entity that purchases factors of production.
D) a member of a group that is prohibited from buying imported goods and services.
Assume Alex is maximizing utility by working 51 hours per week and his wage is $15
per hour. Which of the following statements is CORRECT?
A) In equilibrium, the value of an additional hour of leisure for Alex is less than $15.
B) Alex is probably not on the highest indifference curve that touches the time
allocation budget line.
C) The marginal utility Alex gets from the extra money he earns from an additional
hour spent working is equal to the marginal utility of an additional hour of leisure.
D) In equilibrium, the value of an additional hour of leisure for Alex is more than $15.
Scenario: Ben and Nick
Ben and Nick are the only members of a community. They have revealed the marginal
private benefits they each receive from a public good whose marginal social benefit is
known. In addition, the marginal social cost (MSC) of the public good is known and is
constant.
(Scenario: Ben and Nick) Look at the figure and scenario Ben and Nick. At Q2, the
marginal social benefit from the last unit of the public good:
A) is equal to the marginal social cost.
B) is equal to P4 + P3.
C) is the optimal level of provision of the public good.
D) does not benefit Nick very much.
If farmer Sam MacDonald can produce 200 pounds of cabbages and no potatoes or no
cabbages and 100 pounds of potatoes and if he faces a linear production possibility
frontier, the opportunity cost of producing an additional pound of potatoes is _____
pound(s) of cabbage.
A) 0.5
B) 2
C) 100
D) 200
Figure: The Demand for Shirts
(Figure: The Demand for Shirts) Look at the figure The Demand for Shirts. By the
midpoint method, the price elasticity of demand for the segment DE is approximately:
A) 0.3.
B) 0.7.
C) 1.
D) greater than 10.
A player's best action regardless of the action taken by the other player in a game is
called a _____ strategy.
A) competitive
B) trigger
C) dominant
D) tit-for-tat
If the price of a good rises along an upward-sloping supply curve, then producer
surplus:
A) will increase.
B) will decrease.
C) will remain the same.
D) may change, but we can't tell how.
(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
quantity effect for Rheem?
A) $1,000
B) $4,500
C) $2,000
D) $9,000
(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 profit would be:
A) $10,000.
B) $5,000.
C) $2,500.
D) $1,600.
For the same amount of pollution emitted, an emissions tax is said to be more efficient
than an environmental standard because all polluters:
A) emit pollution up to the point at which the marginal benefit of polluting is equal to
the emissions tax.
B) emit the same amount of pollution, regardless of the marginal benefit of polluting.
C) pay the same total tax bill for their pollution.
D) reduce pollution emissions to zero.
Suppose that supply increases and demand decreases. What is the most likely effect on
price and quantity?
A) The price will increase, but quantity may increase, decrease, or stay the same.
B) The price will decrease, but quantity may increase, decrease, or stay the same.
C) The price will decrease and quantity will decrease.
D) The price will increase and quantity will increase.
On a graph representing two variables:
A) a positive slope of a curve means the variables are negatively related.
B) a negative slope of a curve means the two variables are positively related.
C) a line that is horizontal has a zero slope.
D) a line that is vertical has a zero slope.
You have to pay a fee every time you use your community swimming pool. This is an
example of the _____ principle.
A) regressive tax
B) ability-to-pay
C) progressive tax
D) benefits
Suppose the income of canned pinto bean consumers rises. All else equal, we can
conclude that:
A) the income elasticity of demand is positive if beans are a normal good.
B) the income elasticity of demand is positive if beans are an inferior good.
C) the cross-price elasticity between beans and other goods is positive.
D) the cross-price elasticity between beans and other goods is negative.
Scenario: Monopolist
The demand curve for a monopolist is P = 75 " 0.5Q, and the monopolist has the
following MC expressed as P = 2Q. Assume also that ATC at the profit-maximizing
level of production is equal to $12.50.
(Scenario: Monopolist) Look at the scenario Monopolist. The profit-maximizing output
is _____ units and the profit-maximizing price is _____.
A) 25; $75.00
B) 20; $62.50
C) 25; $75.50
D) 25; $62.50
A regulation that specifies the maximum amount of a good or service that may be
imported during a specified period is a(n):
A) import quota.
B) tariff.
C) nontariff barrier.
D) export quota.
Overall, trade between China and the United States will:
A) benefit the United States more than China.
B) benefit China more than the United States.
C) benefit both countries.
D) hurt both countries.
Figure: Slope
(Figure: Slope) Look at the figure Slope. This graph depicts ______ relation between X
and Y.
A) a positive
B) a negative
C) an independent
D) no
A profit-maximizing firm will base its decision to hire workers on the additional costs
and benefits of each worker. If the extra output that is produced by hiring one more unit
of labor adds more to _____ than to _____, the firm will increase its profit by
increasing the use of labor.
A) total cost; total revenue
B) total revenue; total cost
C) marginal cost; marginal revenue
D) marginal cost; total cost
In the market for wheat, if the price of ethanol (which is made from corn, a substitute in
production) increased dramatically, the _____ wheat would _____.
A) supply of; increase
B) supply of; decrease
C) demand for; increase
D) demand for; decrease
The market structure that is characterized by only a small number of producers is:
A) oligopoly.
B) perfect competition.
C) monopoly.
D) monopolistic competition.
Suppose there are 10 identical firms in an industry and each produces 10% of the total
market sales. The HHI for this industry would indicate that the industry is:
A) competitive.
B) monopolistic.
C) oligopolistic.
D) Cannot be determined from the information provided.
If demand is elastic, the _____ effect dominates the _____ effect, and a(n) _____ in
price will cause total revenue to rise.
A) price; quantity; decrease
B) price; quantity; increase
C) quantity; price; increase.
D) quantity; price; decrease
