1) In the circular-flow diagram, one loop represents the flow of goods, services, and
factors of production, and the other loop represents the corresponding flow of dollars.
a.True
b.False
2) Scenario 14-1
Assume a certain firm in a competitive market is producing Q = 1,000 units of output.
At Q = 1,000, the firm‘s marginal cost equals $15 and its average total cost equals $11.
The firm sells its output for $12 per unit.
At Q = 999, the firm‘s total costs equal
a. $10,985.
b. $10,990.
c. $10,995.
d. $10,999.
3) Figure 21-20
The following graph illustrates a representative consumer’s preferences for
marshmallows and chocolate chip cookies:
Refer to Figure 21-20. Assume that the consumer depicted the figure has an income of
$50. Based on the information available in the graph, which of the following
price-quantity combinations would be on her demand curve for chocolate chips if the
price of marshmallows is $2.50?
a. P=$2.50, Q=6
b. P=$2.50, Q=10
c. P=$5.00, Q=3
d. P=$5.00, Q=5
4) For a monopoly firm,
a.price always exceeds average revenue.
b.price always exceeds marginal revenue.
c.any price-quantity combination will maximize profits.
d.All of the above are correct.
5) The change in consumption that results when a price change moves the consumer
along a given indifference curve to a point illustrating the new marginal rate of
substitution is called the
a.income effect.
b.substitution effect.
c.Giffen good effect.
d.inferior good effect.
6) Table 15-6
A monopolist faces the following demand curve:
If the monopolist has a constant marginal cost for her product equal to $7, what is her
profit- maximizing price?
a.$6
b.$9
c.$12
d.$15
7) The supply of a good or service is determined by
a.those who buy the good or service.
b.the government.
c.those who sell the good or service.
d.both those who buy and those who sell the good or service.
8) At the local park there is a playground for children to use. While anyone is allowed
to use the playground, it is often very busy, reducing the enjoyment of many of the
children who use it. The playground is a
a.private good.
b.club good.
c.common resource.
d.public good.
9) Assume that Zimbabwe and Portugal can switch between producing toothbrushes and
producing hairbrushes at a constant rate.
Portugal has an absolute advantage in the production of
a.toothbrushes and a comparative advantage in the production of toothbrushes.
b.toothbrushes and a comparative advantage in the production of hairbrushes.
c.hairbrushes and a comparative advantage in the production of toothbrushes.
d.hairbrushes and a comparative advantage in the production of hairbrushes.
10) Peter was recently hired as a salesman for a national consulting firm. His job
involves spending a significant portion of his time out of the office visiting prospects
and attending conferences. Which of the following is a strategy the consulting firm may
employ to discourage Peter from shirking his responsibilities?
a.Tell Peter that the shareholders want to earn a large profit this year.
b.Pay Peter commissions on what he sells after the work has been completed.
c.Allow Peter to set his own schedule and work from home frequently.
d.Pay Peter a lower wage than he would earn in a similar job at another firm.
11) Which of the following principles is not one of the four principles of individual
decisionmaking?
a.People face tradeoffs.
b.Trade can make everyone better off.
c.People respond to incentives.
d.Rational people think at the margin.
12) A monopolist maximizes profit by producing an output level where marginal cost
equals price.
a.True
b.False
13) To display information on two variables, an economist must use
a.a bar graph.
b.a pie chart.
c.the coordinate system.
d.a time-series graph.
14) Which of the following statements best represents the principle represented by the
adage, There is no such thing as a free lunch?
a.Michelle can attend the concert only if she takes her sister with her.
b.Michael is hungry and homeless.
c.Andrea must repair the tire on her bike before she can ride it to class.
d.Dani must decide between going to Florida or Brazil for spring break.