If the number of employees who quit, are fired, or retire increases while the hiring of
new employees declines, this indicates that the
A) labor demand curve is shifting to the right.
B) labor supply curve is shifting to the right.
C) labor demand curve is shifting to the left.
D) labor supply curve and labor demand curve are both shifting to the right.
Article Summary
Just days before the 2015 Super Bowl was played in Glendale, Arizona, the average
price of a ticket on the secondary resale market was $10,352, more than three times the
average price for the 2014 game. People who were able to purchase tickets at face value
directly from the NFL paid prices ranging from $800 to $1,900 per ticket. The day
before the game, ticket broker StubHub listed its least expensive seat at $8,049, while
the most expensive seat was priced at more than $65,000.
Source: Benjamin Snyder, “Soaring Super Bowl ticket prices in one wallet-busting
chart,” Fortune, January 31, 2015.
Refer to the Article Summary above. Based on the difference between the face value of
Super Bowl tickets and the prices being charged in the resale market, the demand at the
face value of the tickets is
A) elastic.
B) inelastic.
C) unit elastic.
D) perfectly elastic.
If Paul decides to buy a $60 ticket to a Cirque du Soleil show rather than a $45 ticket
for a Blue Man Group performance, we can conclude that
A) the marginal utility per dollar spent on Cirque du Soleil is lower than the marginal
utility per dollar spent on Blue Man Group.
B) Paul’s demand for a ticket to see Cirque du Soleil is more elastic than his demand for
a ticket to see Blue Man Group.
C) Paul is not making a rational choice.
D) the marginal utility per dollar spent on Cirque du Soleil is higher than the marginal
utility per dollar spent on Blue Man Group.
Classifying a good as excludable means
A) that someone can be barred from consuming the good based on race, creed, or some
other irrelevant characteristic.
B) that anyone who does not pay for the good cannot consume it.
C) that consumption of the good causes no externalities.
D) that a producer with patent or copyright protection can exclude any other producer
from selling his product.
Figure 16-6
Watanabe Sensei operates the only martial arts school in Hartfield. For simplicity,
assume that consumers have identical demand curves and that Sensei knows what this
demand curve is. Figure 16-6 shows this demand curve.
Refer to Figure 16-6. If Sensei acts as a monopolist and charges the profit-maximizing
price, what is the consumer surplus received by his customers?
A) the area A + B + C + D
B) the area A + B + C + D + E
C) the area A + B
D) the area A + C + H
Which of the following statements is true about optimal two-part tariff and perfect price
discrimination for a given demand curve?
A) The total revenue received under the two pricing schedules is the same.
B) The total revenue received under an optimal two-part tariff exceeds that received
under perfect price discrimination.
C) The total revenue received under an optimal two-part tariff is less than that received
under perfect price discrimination.
D) The total revenue received under an optimal two-part tariff could be greater than,
less than, or equal to that received under perfect price discrimination, depending on the
fixed-fee portion of the two-part tariff.
In economics, all of the following is counted as “capital” except
A) money.
B) machine tools.
C) factory buildings.
D) warehouses.
Table 17-6
Refer to Table 17-6. The Hair Cuttery, a new hair salon, is ready to start hiring. The
table above shows the relationship between the number of hairdressers the firm hires
and the quantity of haircuts it produces.
a. Suppose the price of haircuts is $8. Complete the table by filling in the values for
marginal product and marginal revenue product.
b. The Hair Cuttery is an input price-taker. Suppose the wage paid to hairdressers is $40
per day. What is the profit-maximizing number of hairdressers?
c. Suppose the wage rate rises to $60 per day.
(i) What happens to the firm’s demand curve for hairdressers?
(ii) What happens to the profit-maximizing quantity of hairdressers?
d. Suppose the wage rate is $40 per day and the price of haircuts is now $10.
(i) What happens to the firm’s demand curve for hairdressers?
(ii) What happens to the profit-maximizing quantity of hairdressers?
Which of the following are necessary conditions for successful price discrimination?
a. zero transactions costs
b. a perfectly competitive market structure
c. an imperfectly competitive market structure
d. at least two different markets with different price elasticities of demand
e. at least two different markets with different price elasticities of supply
A) a, b, and d only
B) c and d only
C) a, c, d, and e only
D) a and c only
If a straight line passes through the point x = 14 and y = 3 and also through the point x =
4 and y = 10, the slope of this line is
A) negative 11 divided by 6.
B) seven-tenths.
C) negative seven-tenths.
D) 6 divided by 11.
Joss is a marketing consultant. Iris and Daphne are potential customers interested in
commissioning Joss to undertake a market survey and compile the findings in a report.
Iris is willing to pay $500 for the service while Daphne is willing to pay $800. Suppose
that the opportunity cost of Joss’s time is $1,200. Assume that Iris and Daphne do not
know each other. If the price of the report is $500 per copy
A) only Iris will purchase Joss’s services and Joss will undertake the job for her.
B) only Daphne will purchase Joss’s services and Joss will undertake the job for her.
C) both Iris and Daphne will purchase Joss’s services and Joss will undertake the job.
D) both Iris and Daphne will want to purchase Joss’s services but Joss will not be
willing to undertake the job.
Economic surplus
A) does not exist when a competitive market is in equilibrium.
B) is equal to the sum of consumer surplus and producer surplus.
C) is the difference between quantity demanded and quantity supplied when the market
price for a product is greater than the equilibrium price.
D) is equal to the difference between consumer surplus and producer surplus.
In January, buyers of gold expect that the price of gold will rise in February. What
happens in the gold market in January, holding all else constant?
A) The supply curve shifts to the right.
B) The demand curve shifts to the left.
C) The demand curve shifts to the right.
D) The quantity demanded increases.
Which of the following statements is true?
A) As output increases, average fixed cost becomes smaller and smaller.
B) Average fixed cost does not change as output increases.
C) The marginal cost curve intersects the average fixed cost curve at its minimum point.
D) When marginal cost is greater than average fixed cost, average fixed cost increases.
Figure 4-1
Figure 4-1 shows Arnold’s demand curve for burritos.
Refer to Figure 4-1. If the market price is $2.00, what is the consumer surplus on the
second burrito?
A) $0
B) $1.00
C) $2.00
D) $4.50
In many business situations one firm will act first, and then other firms will respond. To
help analyze these types of situations economists use
A) retaliation games.
B) follow-the-leader-games.
C) sequential games.
D) bargaining games.
An inward shift of a nation’s production possibilities frontier can occur due to
A) a reduction in unemployment.
B) a natural disaster like a hurricane or bad earthquake.
C) a change in the amounts of one good desired.
D) an increase in the labor force.
Which of the following equations is incorrect?
A) ATC – AFC = AVC
B) AVC + AFC = ATC
C) AFC = ATC – AVC
D) ATC = AVC – AFC
In situations where new technologies are considered substitutes for workers, demand
for these workers will ________, resulting in ________ in the equilibrium wage.
A) increase; a decrease
B) increase; an increase
C) decrease; a decrease
D) decrease; an increase
Suppose that when the price of hamburgers decreases, the Ruiz family increases their
purchases of ketchup. To the Ruiz family,
A) hamburgers and ketchup are complements.
B) hamburgers and ketchup and substitutes.
C) hamburgers and ketchup are normal goods.
D) hamburgers are normal goods and ketchup is an inferior good.
In the short run, why does a production function eventually display diminishing returns
to labor?
A) As the number of workers increases it becomes difficult to monitor them.
B) As a firm hires more workers the skills and the work ethic of the additional workers
will eventually decline.
C) As the number of workers increases eventually the gains from the division of labor
and specialization are used up.
D) The opportunity cost of hiring additional workers must eventually rise.
Table 16-3
Julie plans to start a pet-sitting service. She surveyed her neighborhood to determine the
demand for this service. Assume that each person surveyed demands only one hour of
pet sitting services per period. Table 16-3 above shows a portion of her survey results.
Refer to Table 16-3. Suppose Julie’s marginal cost of providing this service is constant
at $7 and she charges $7. How many hours will be purchased and what is her total
revenue?
A) 5 hours; total revenue = $35
B) 4 hours; total revenue = $28
C) 3 hours; total revenue = $21
D) 2 hours; total revenue = $14
The principle of opportunity cost is that
A) in a market economy, taking advantage of profitable opportunities involves some
money cost.
B) the economic cost of using a factor of production is the alternative use of that factor
that is given up.
C) taking advantage of investment opportunities involves costs.
D) the cost of production varies depending on the opportunity for technological
application.
Which of the following products comes closest to having a perfectly inelastic demand?
A) gasoline
B) cholesterol medication in general
C) iPhones
D) bus rides
Which of the following is an experiment which tests whether fairness is important in
consumer decision making?
A) the fair trade principle
B) the ultimatum game
C) the preferential treatment game
D) the behavioral experiment
How does the long-run equilibrium of a monopolistically competitive industry differ
from that of a perfectly competitive industry?
A) A firm in monopolistic competition will earn economic profits but a firm in perfect
competition earns zero profit.
B) A firm in monopolistic competition will charge a price higher than the average cost
of production but a firm in perfect competition charges a price equal to the average cost
of production.
C) A firm in monopolistic competition does not take full advantage of its economies of
scale but a firm in perfect competition produces at the lowest average cost possible.
D) A firm in monopolistic competition produces an allocatively efficient output level
while a firm in perfect competition produces a productively efficient output level.
There are two firms in the residential paint industry, Cool Shades (C) and Warm Hues
(W). They collude to share the market equally. They jointly set a monopoly price and
split the quantity demanded at that price. Here are their options:
i. They continue to collude (no cheating) and make $12 million each in profits.
ii. One firm cheats and the other does not. The firm that cheats makes a profit
of $14 million whereas the firm that doesn’t makes a profit of $9 million.
iii. They both cheat and each firm makes a profit of $7 million.
a. Construct a payoff matrix for these two firms.
b. How does this situation relate to the prisoner’s dilemma?
c. If each firm acted noncooperatively, how much profit would each make?
d. Are the firms better off colluding (with no cheating) or competing? Explain.
A standard which came to the market first, such as the QWERTY letter layout in
typewriters, can become entrenched (this layout is still used for computer keyboards
today). What is this phenomenon called?
A) network externalities
B) path dependency
C) sunk cost
D) comparative advantage
In economics, the accumulated skills and training that workers have is known as
A) human capital.
B) entrepreneurship.
C) physical capital.
D) innovation.
Figure 2-10
Figure 2-10 shows the production possibilities frontiers for Tahiti and Bora Bora. Each
country produces two goods, milk and honey.
Refer to Figure 2-10. What is the opportunity cost of producing one gallon of milk in
Tahiti?
A) 1/2 of a gallon of honey
B) 5/6 of a gallon of honey
C) 2 gallons of honey
D) 5 gallons of honey
A quota
A) makes domestic consumers better off.
B) makes both domestic producers and consumers better off.
C) makes everyone worse off.
D) makes domestic producers better off.
Figure 4-5
Figure 4-5 shows the market for apartments in Springfield. Recently, the government
imposed a rent ceiling of $1,000 per month.
Refer to Figure 4-5. What is the value of the deadweight loss after the imposition of the
ceiling?
A) $50,000
B) $125,000
C) $175,000
D) $260,000
If production displays diseconomies of scale, the long-run average cost curve is
A) above the short-run average total cost curve.
B) above the long-run marginal cost curve.
C) upward sloping.
D) downward sloping.