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Assume that two combinations of two goods yield the same level of satisfaction. We
can conclude that these combinations are always on:
A) the same price line.
B) the same budget constraint.
C) the same indifference curve.
D) different indifference curves.
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 his income increases to $6?
A) A
B) B
C) C
D) D
Those who are critical of advertising argue that it:
A) tends to make markets behave more like perfectly competitive markets.
B) leads to a shortage of high-cost, high-quality goods.
C) results in higher prices to consumers.
D) encourages competition through price comparison.
Figure: Efficiency and Pollution
(Figure: Efficiency and Pollution) Look at the figure Efficiency and Pollution. If the
government imposed an environmental standard that did NOT allow the quantity of
pollution to exceed 30 tons, there would be:
A) a socially optimal quantity of pollution.
B) too little pollution, because its marginal social benefit would exceed its marginal
social cost.
C) too much pollution, because its marginal social cost would exceed its marginal social
benefit.
D) too much pollution, because any pollution is too much from an economist's
perspective.
Since the United States imports a large quantity of textiles from Asia, the overall wages
of U.S. textile workers has _____, while the price of textiles in the United States has
_____.
A) decreased; decreased
B) increased; decreased
C) decreased; increased
D) increased; not changed
The marginal social cost of a unit of pollution:
A) is the additional cost imposed on society by that unit.
B) is easy to calculate, since pollution produces costs.
C) is often overestimated.
D) remains constant as more of a good is produced.
_____ and _____ taxes are the largest sources of state and local government revenue.
A) Profit; sales
B) Property; sales
C) FICA; income
D) Sales; income
Ms. Sweettooth always consumes iced tea and sugar in fixed proportions: 8 ounces of
iced tea to 3 teaspoons of sugar. This implies that for Ms. Sweettooth the marginal rate
of substitution of iced tea for sugar is:
A) 0.375.
B) 2.67.
C) diminishing but between 8 and 3.
D) undefined.
Table: The Benefit of Producing Gadgets Quantity of Gadgets Total Benefit 0 $ 0 1
200 2 215 3 225 4 230 5 233
(Table: The Benefit of Producing Gadgets) Look at the table The Benefit of Producing
Gadgets. The marginal benefit of consuming gadgets is:
Quantity of Gadgets Total Benefit
0 $ 0
1 200
2 215
3 225
4 230
5 233
A) constant and equal to $5.
B) decreasing at a constant rate of $5.
C) decreasing at a decreasing rate.
D) increasing at a decreasing rate.
(Table: Cherry Farm) Look at the table Cherry Farm. If Hank and Helen have one of
100 farms in the perfectly competitive cherry industry and if the price is $3, in the short
run the industry will supply _____ pounds.
A) 0
B) 100
C) 200
D) 300
Scenario: Music Downloads and Streamed Movies
Phillip has an income of $300 per month, which he uses to purchase music downloads
(MD) and streamed movies (SM). Each music download costs $1 and each streamed
movie costs $5.
(Scenario: Music Downloads and Streamed Movies) Read the scenario Music
Downloads and Streamed Movies. Phillip's optimal consumption bundle will be one
whose:
A) budget line is tangent to his highest indifference curve.
B) budget line intersects his highest indifference curve.
C) budget line intersects the music download axis.
D) indifference curve intersects the streamed movies axis.
When all of a firm's inputs are doubled, input prices do not change, and this results in
the firm's level of production more than doubling, a firm is operating:
A) on the upward-sloping portion of its long-run average total cost curve.
B) on the downward-sloping portion of its long-run average total cost curve.
C) at the minimum of its long-run average total cost curve.
D) on the upward-sloping portion of its marginal cost curve.
Figure: Hot Drinks Sold and Temperature
(Figure: Hot Drinks Sold and Temperature) Look
at the figure Hot Drinks Sold and Temperature. If we move from point L to point M in
the figure, the outside temperature has ______ degrees and the number of hot drinks
sold has ______.
A) decreased by 30; increased by 30
B) increased by 20; decreased by 20
C) increased by 30; decreased by 30
D) increased by 40; decreased by 40
Mountain River Adventures offers whitewater rafting trips down the Colorado River. It
costs the firm $100 for the first raft trip per day, $120 for the second, $140 for the third,
and $160 for the fourth. If the market price for a raft trip is $150, Mountain River
Adventures will offer _____ trips per day and will have producer surplus equal to
_____.
A) three; $90
B) three; $10
C) two; $220
D) four; $80
When individuals act in their own self-interest:
A) efficiency is always achieved.
B) equity is always achieved.
C) society may be worse off in some cases.
D) all opportunities have been taken to make some people better off without making
other people worse off.
People are willing to buy insurance because of:
A) risk aversion.
B) the status quo.
C) the miscalculation of opportunity costs.
D) bounded rationality.
Expenses associated with factors of production may be _____ costs.
A) implicit
B) opportunity
C) explicit
D) implicit, opportunity, or explicit
As the _____ of labor used in production increases, ceteris paribus, eventually the
_____ will _____.
A) price; supply of labor; increase
B) quantity; marginal product of labor; fall
C) quantity; marginal product of labor; rise
D) quantity; value of the marginal product of labor; rise
The organization that oversees global trade negotiations and settles trade disputes
among its members is the:
A) World Bank.
B) European Union.
C) World Trade Organization.
D) North American Free Trade Agreement.
An increase in demand with no change in supply will lead to _____ in equilibrium
quantity and _____ in equilibrium price.
A) an increase; an increase
B) an increase; a decrease
C) a decrease; an increase
D) a decrease; a decrease
If a monopolist is producing a quantity that generates MC = MR, then profit:
A) is maximized.
B) is maximized only if MC = P.
C) can be increased by increasing production.
D) can be increased by decreasing production.
A _____ can be generated from indifference curves by changing _____.
A) supply curve; the price of both goods simultaneously
B) demand curve; the price of one good
C) demand curve; income
D) budget line; utility
Barry's Brewpub is considering hiring more brewmasters. A pint of brew sells for $3.
The market wage of a brewmaster is $150 per day. Assuming that the market for beer is
perfectly competitive, Barry's Brewpub will hire another brewmaster only if Barry
believes the new brewmaster will:
A) produce the same number of pints per day as the last brewmaster hired.
B) produce 50 or more pints per day.
C) raise total production to 50 or more pints per day.
D) increase the marginal product by $150 per day.
Sales taxes are considered to be:
A) proportional.
B) progressive.
C) degressive.
D) regressive.
If your purchases of shoes increase from 9 pairs per year to 11 pairs per year when your
income increases from $19,000 to $21,000 a year, other things equal, for you, shoes are
considered:
A) a normal good.
B) an inferior good.
C) a complementary good.
D) a substitute good.
Figure: The Market for MP3 Players
(Figure: The Market for MP3 Players) Look at the figure The Market for MP3 Players.
Assume that Sd represents the domestic supply curve and Dd represents the domestic
demand curve. If the world price equals $100 and there is free trade, this country:
A) will import 150,000 MP3 players.
B) will export 150,000 MP3 players.
C) has a domestic supply equal to 250,000 MP3 players.
D) has a domestic demand equal to 100,000 MP3 players.
An industry with only two firms is generally called:
A) a monopoly.
B) monopolistic competition.
C) a duopoly.
D) perfect competition.
Figure: Pricing Strategy in Cable TV Market II
(Figure: Pricing Strategy in Cable TV Market II) Look at the figure Pricing Strategy in
Cable TV Market II. The dominant strategy for CableSouth:
A) is to charge a high price.
B) is to charge a low price.
C) is to charge what CableNorth does.
D) does not exist.
Figure: Short-Run Costs
(Figure: Short-Run Costs) Look at the figure Short-Run Costs. The vertical difference
between curve B and curve C at any quantity of output is _____ cost.
A) marginal
B) fixed
C) average fixed
D) average variable
There are benefits resulting indirectly from pollution because:
A) we obtain goods and services we enjoy even though in the process we pollute.
B) firms pollute the environment only if it allows them to provide people with goods
and services they desire at a higher cost.
C) businesses and consumers receive a perverse satisfaction from polluting.
D) it can often be beneficial to wildlife.
