Both Amy and Tom are trained as nurses. Amy makes $35,000 a year working as a
nurse in an emergency room in a New York City hospital. Tom makes $20,000 working
as a community health nurse in New York City. Which of the following is true?
A) Tom is clearly worse off than Amy, because he earns $15,000 a year less.
B) Tom must be better off than Amy if he is willing to take a job at $15,000 a year less
than Amy.
C) From this information it cannot be determined who is better off because income is an
imperfect measure of well-being.
D) Even though income is an imperfect measure of well-being, Amy and Tom must be
equally well off because either is free to switch jobs.
The table shows the relationship between income and utility for Lucy.
Table 17.2
Refer to Table 17.2. From the table, we can see that Lucy is
A) risk averse.
B) risk loving.
C) risk neutral.
D) We cannot determine Lucy’s attitude toward risk from the table.
In 1991, the European Union began the process of forming the
A) largest free-trade zone in the world.
B) only continental military force in the world.
C) first international trade agreement in the world.
D) first unified currency in the world.
All else equal, more investment takes place at
A) higher market interest rates.
B) lower market interest rates.
C) higher nominal interest.
D) higher real interest rates.
Assume soybeans are produced in a perfectly competitive market. A soybean farmer is
currently maximizing his profits. If the market price of soybeans falls, after the farmer
adjusts to the new price, he will be producing ________ bushels of soybeans, and his
profit will be ________.
A) fewer; the same
B) fewer; lower
C) more; the same
D) the same number of; the same
Table 3.2
Refer to Table 3.2. If the price per cheeseburger is $6, there is a(n)
A) market equilibrium.
B) excess demand of 1,000 units.
C) excess demand of 500 units.
D) excess supply of 700 units.
If the quantity of peanut butter demanded increases by 4% when the price of jelly
decreases by 2%, the cross-price elasticity of demand between peanut butter and jelly is
A) -4.
B) -2.
C) -0.5.
D)
Marginal cost is equal to ________ when ________ is minimized.
A) average fixed cost; average fixed cost
B) average variable cost; average fixed cost
C) average total cost; average variable cost
D) average variable cost; average variable cost
As the inventory of a firm falls,
A) there is no change in its capital.
B) its intangible capital decreases.
C) its tangible capital decreases.
D) its social capital increases.
Figure 6.1
Refer to Figure 6.1. Along budget constraint AC, the opportunity cost of one hamburger
A) is 1/4 of a hot dog.
B) is 1/2 of a hot dog.
C) is 2 hot dogs.
D) changes as you move down along the budget constraint.
Equilibrium in this market occurs at the intersection of curves S and D.
Figure 4.6
In figure 4.6, consumer surplus changes by the area [E – C] if price goes from
equilibrium to
A) P1.
B) P3.
C) < P1.
D) > P3.
Figure 5.3
Refer to Figure 5.3. Using the midpoint formula, if the price of a gardenburger
increases from $6 to $7, the price elasticity of demand equals ________, and the
increase results in a(n) ________ in total revenue.
A) -.13; increase
B) -.69; decrease
C) -1.44; decrease
D) -13; decrease
Figure 1.4
Refer to Figure 1.4. Panel B shows a curve which has a slope that is
A) first positive and then negative.
B) first negative and then positive.
C) infinite throughout.
D) zero throughout.
Figure 12.1
Refer to Figure 12.1. The firm is
A) equally efficient when it produces at points A and B.
B) less efficient when it produces at point A than at point B.
C) less efficient when it produces at point B than at point A.
D) producing at least possible cost anywhere along the given ATC curve.
Relevant questions with respect to government include all of the following EXCEPT:
A) How much government involvement?
B) What kind of government involvement?
C) Should there be government?
D) How can government efficiency be improved?
People scalping tickets for the Super Bowl will be successful at selling the tickets for a
profit
A) any time the Super Bowl is popular.
B) when prices are too high.
C) when the price set by the National Football League is less than the market
equilibrium price.
D) only when there is excess supply.
Government payments made to ________ firms in order to encourage ________ are
called subsidies.
A) foreign; immigration
B) foreign; imports
C) domestic; imports
D) domestic; exports
In a ________, the amount of output that any one household gets depends on its income
and wealth.
A) Marxist economy
B) socialist economy
C) command system
D) free market system
Below are drawn cost curves for Clips Ahoy Barber Shop, a monopolistically
competitive firm.
Figure 15.1
Refer to Figure 15.1. If Clips Ahoy maximizes profits, its ________ equals $320.
A) total cost
B) total revenue
C) profit
D) variable cost
Goods and services of value to households are
A) inputs in the production process.
B) outputs in the production process.
C) both inputs and outputs in the production process.
D) unrelated to the production process.
In 2006, the smallest population group (810 million people) belonged to countries
classified as
A) low-income.
B) lower-middle income.
C) upper-middle income.
D) high-income.
We refer to the whole class of goods that firms will ________ in a completely
unregulated market economy as public goods.
A) underproduce
B) overproduce
C) not produce at all
D) Both A and C are correct.
The best measurement of individual well-being is
A) wealth.
B) income.
C) occupation.
D) utility.
Issuing coupons, waiting in line and catering to favored customers are all methods of
A) unbiased favoritism.
B) exploiting wealth.
C) income distribution.
D) nonprice rationing.
A maximum 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.
Figure 5.4
Refer to Figure 5.4. The demand for milkshakes is unit elastic at Point C. If a store
increases the price of a milkshake from P4 to P3, its total revenue will
A) increase.
B) decrease.
C) remain constant.
D) either increase or decrease.
You own a business that answers telephone calls for physicians after their offices close.
You have an incentive to substitute capital for labor if the
A) price of capital increases.
B) price of labor decreases.
C) price of capital decreases.
D) marginal product of labor increases.
Figure 8.4
Refer to Figure 8.4. The marginal cost of the sixth microwave oven is
A) $133.33.
B) $150.
C) $350.
D) indeterminate from this information.
A monopolistic firm faces a(n) ________ demand curve.
A) upward-sloping
B) downward-sloping
C) horizontal
D) vertical
Figure 2.3
Refer to Figure 2.3. Assume that this society’s production possibility frontier is
represented by Panel C. The marginal rate of transformation of sailboats for surfboards
is
A) 1/10.
B) -1/10.
C)10
D) -10.
Characteristics of economic development include all of the following EXCEPT
A) improvements in basic education.
B) an increase in the standard of living.
C) an increase in life expectancy.
D) a decrease in literacy.
Table 7.1
Inputs Required to Produce a Product Using Alternative Technologies
Refer to Table 7.1. If the hourly price of capital is $20 and the hourly wage rate is $14,
which production technology should be selected?
A) A
B) B
C) C
D) D
What is government failure?
Define what a firm is and its role in the market.
Comment on the following statement: “Firms should maximize the difference between
marginal revenue and marginal cost.”
SCENARIO 1: The following diagram represents the U.S. market for oil.
Refer to Scenario 1. Use the midpoint formula to calculate the price elasticity of
demand between $18 and $16.
According to the idea of consumer sovereignty, what will happen in the market for
widgets if consumers decide they no longer desire widgets?
When an oligopolist chooses a maximin strategy, how is that helpful and what is being
assumed about the other players?
What does a labor supply curve represent? What does it look like?
A firm is currently selling its output for $10 per unit and is producing where marginal
revenue equals marginal cost at an output level of 100 units. If the firm’s total variable
costs are $900 and its fixed costs are $300 should it produce in the short run or shut
down?
Your younger brother likes to yell at the dinner table so the rest of the family will give
him what he wants. Assume that this has proved quite successful for him time and
again. Let’s say that you are from a family of eight and every member of your family
starts to adopt the same strategy. Would this work? Why or why not? Explain.
Define social overhead capital.
At which time is the opportunity cost likely to be higher to go to war, during a recession
or during an economic boom? Explain your answer fully.
IBM went to the trouble of adding five separate microchips to its F-series printers to
slow them down and sell them as E-series printers for a lower price. How could any
firm justify adding extra costs to production for a good that will carry a lower price tag?
What is meant by utility?
A firm producing ink pens reports the following production information:
The pens sell in a competitive market at a price of $0.50 per box. The firm hires
workers in a competitive labor market at a wage of $9 per hour. How many workers
should the firm hire? Explain your answer.
Assume that you start by hiring one worker at a time. Each time you hire an additional
worker the average productivity remains the same. What does this imply about the
marginal productivity of each worker that you hire? What will the marginal productivity
function look like when graphed?
What is a Gini coefficient?