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Figure: The Marginal Decision Rule
(Figure: Marginal Decision Rule) Look at the figure The Marginal Decision Rule. To
the left of point C (e.g., at q1):
A) economic profit is the vertical distance between curves B and MC.
B) the firm is not maximizing profits.
C) the firm is maximizing profits.
D) the firm should produce less.
A firm that can price-discriminate should adjust prices so that customers with _____
demand pay _____ prices than (as) those with _____ demand.
A) price-inelastic; lower; elastic
B) price-inelastic; the same; elastic
C) price-elastic; lower; inelastic
D) price-elastic; higher; inelastic
If an economy has to sacrifice increasing amounts of good X for each additional unit of
good Y produced, then its production possibility frontier is:
A) bowed out.
B) bowed in.
C) a straight line.
D) a vertical line.
(Table: Security in a Residential Community) Look at the table Security in a Residential
Community. The marginal cost of hiring the second security guard is _____, and the
marginal social benefit is _____.
A) $150; $200
B) $450; $1,800
C) $150; $600
D) $450; $600
Assume that in the short run a perfectly competitive firm does not produce output and
has economic losses. This occurs at the quantity where MR = MC and:
A) P = ATC and FC = 0.
B) P < AVC and FC > 0.
C) AVC > P > ATC and FC = 0.
D) AVC < P < ATC and FC > 0.
Figure: Oreos and Apples
(Figure: Oreos and Apples) Look at the figure Oreos and Apples, which provides an
indifference curve map for Diego. As Diego moves along an indifference curve from
point F to point E, he buys _____ Oreos to obtain _____ apples.
A) fewer; more
B) more; more
C) the same number of; more
D) no; more
(Figure: Marginal Product of Labor) Look at the figure The Marginal Product of Labor.
The total product of labor for eight workers is _____ bushels.
A) 40
B) 35
C) 96
D) 75
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. Suppose that after one month, the cable providers follow a
tit-for-tat strategy. Eventually they will achieve a tacit collusive equilibrium at which:
A) both firms set a low price and each earns $90,000 per month.
B) both firms set a high price and each earns $100,000 per month.
C) CableNorth sets a high price and earns $80,000 per month and CableSouth sets a
low price and earns $130,000 per month.
D) CableNorth sets a low price and earns $130,000 per month and CableSouth sets a
high price and earns $80,000 per month.
(Figure: Wine and Wheat) Look at the
figure Wine and Wheat. If this economy is producing on the production possibility
frontier, what would allow it to produce at point C?
A) an improvement in technology
B) a decrease in resources
C) a decrease in production
D) elimination of unemployment
Figure: PPV
(Figure: PPV) Look at the figure PPV, which shows the demand and marginal revenue
for a pay-per-view football game on cable TV. Assume that the marginal cost and
average cost are a constant $20. If the cable company is in a perfectly competitive
industry, how many subscriptions will it sell?
A) 2
B) 4
C) 6
D) 8
In large shopping malls, the retail clothing market is most illustrative of:
A) monopolistic competition.
B) monopoly.
C) perfect competition.
D) perfect oligopoly.
Figure: Labor Force Participation Rate
(Figure: Labor Force
Participation Rate) Look at the figure Labor Force Participation Rate. Using the figure,
the labor force participation rate for women was ______ during 1970"1985 and ______
during 1998"2006.
A) increasing; slightly decreasing
B) increasing; increasing
C) decreasing; increasing
D) decreasing; constant
A perfectly competitive firm will maximize profits when the:
A) marginal revenue equals marginal cost.
B) marginal revenue is lower than average variable cost.
C) price is lower than marginal cost.
D) price is higher than marginal cost.
Figure: The Gains from Trade
(Figure: The Gains from Trade) Look at the figure The Gains from Trade. What is the
total surplus in this market when the demand curve is D2 and the market is in
equilibrium?
A) $31.25
B) $45.00
C) $62.50
D) $90.00
One reason that wage discrimination based on gender or ethnicity can continue is:
A) market interference or market failure associated with above-equilibrium wages.
B) market competition making it profitable to engage in discrimination.
C) it is justified by the marginal productivity theory of income distribution.
D) the South African experience with apartheid showed that discrimination led to more
rapid economic growth.
Steven consumes staples and paper clips. He is maximizing his utility in consumption
of both goods. The price of paper clips rises. Assuming that diminishing marginal utility
applies to both goods, as he adjusts to this event, the marginal utility of staples will
_____, and the marginal utility of paper clips will _____.
A) rise; fall
B) fall; rise
C) rise; rise
D) fall; fall
(Table: Income and Utility for Tyler) The table Income and Utility for Tyler shows the
utility Tyler receives at various income levels, but she does not know what her income
will be next year. There is a 40% chance her income will be $20,000, a 40% chance her
income will be $30,000, and a 20% chance her income will be $40,000. What level of
certain income matches her expected utility, given the uncertainty?
A) $28,000
B) $25,000
C) $26,516
D) $29,000
Given any downward-sloping demand curve for a good, the more price-elastic the
supply curve, the _____ equilibrium output will fall and the _____ will be the
deadweight loss when the government imposes an excise tax.
A) more; smaller
B) more; larger
C) less; smaller
D) less; larger
When a nation's economy grows:
A) its production possibility frontier shifts outward.
B) its production possibility frontier shifts inward.
C) it has been able to reach full employment.
D) it has moved to a more consumer-oriented position on its production possibility
frontier.
(Table: Production Possibilities for Machinery and Petroleum) Look at the table
Production Possibilities for Machinery and Petroleum. The opportunity cost in the
United States of producing 30 units of petroleum is _____ units of machinery.
A) 60
B) 80
C) 100
D) 120
Some smaller retailers often go out of business when Walmart opens a new store. The
most likely reason for this development is that:
A) Walmart practices unfair pricing methods that reduce consumer surplus over time.
B) consumers in those areas receive no consumer surplus from Walmart.
C) consumers in those areas receive a larger consumer surplus from shopping at
Walmart than from the smaller stores.
D) smaller stores increase prices to compete.
Figure: The Profit-Maximizing Output and Price
(Figure: The Profit-Maximizing Output and Price) Look at the figure The
Profit-Maximizing Output and Price. Assume that there are no fixed costs and AC =
MC = $200. The profit-maximizing price for a monopolist is:
A) $800.
B) $200.
C) $600.
D) $1,000.
Figure: Water Works
(Figure: Water Works) Look at the figure Water Works, which describes a small town's
water works, a natural monopoly. If the water works is unregulated and maximizes
profit, consumer surplus will be:
A) $6,400.
B) $3,200.
C) $1,600.
D) $800.
A lump-sum tax, such as the fee for a driver's license, does not take into consideration:
A) efficiency.
B) the benefits principle.
C) the ability-to-pay principle.
D) the tax base.
The _____ effect of a _____ wage causes individuals to substitute _____.
A) substitution; higher; labor for leisure
B) income; higher; labor for leisure
C) substitution; lower; labor for leisure
D) complementary; constant; leisure for labor
Figure: Monopolistic Competition IV
(Figure: Monopolistic Competition IV) The firm in the figure Monopolistic
Competition IV is producing at the output level that maximizes profits (minimizes
losses). The shaded rectangle depicts the level of:
A) profit.
B) loss.
C) fixed cost.
D) variable cost.
Which of the following goods is most likely a public good?
A) the Internet
B) a city park
C) a pair of pants
D) fire protection
If a firm's economic profits are equal to zero, its accounting profits are most likely:
A) less than zero.
B) greater than economic profits.
C) less than economic profits.
D) equal to zero.
Which of the following does NOT partially explain wage differentials?
A) different amounts of human capital
B) compensating differentials
C) differences in talent
D) differences in capital
(Table: Johnson's Income and Expenditures) Look at the table Johnson's Income and
Expenditures. By the midpoint method, Johnson's income elasticity of demand for
pizzas is:
A) "1.4.
B) approximately "0.7.
C) 0.
D) approximately 0.7.
