Figure 10.6 shows prices, demands, and cost data for the only restaurant in a small
town. What is its profit from senior customers under the senior discount policy of a $7
senior price and a $10 non-senior price?
A) $1,200
B) $1,500
C) $2,280
D) $2,560
Recall the Application. Among the losers when there is an increase in labor migration to
the United States are:
A) U.S. consumers
B) U.S. firms.
C) U.S. workers with the same skill level of the immigrants.
D) all of the above.
If the quantity supplied is infinitely responsive to any change in price, the supply curve
is:
A) upward sloping.
B) downward sloping.
C) horizontal.
D) vertical.
Suppose that next year the government fixes the number of pollution permits at a
quantity less than the number sold this year. If nothing else changes, next year the price
of a pollution permit will be:
A) greater than the price of a permit this year.
B) less than the price of a permit this year.
C) equal to the price of a permit this year.
D) equal to the price set by the government.
Andy does not bother to lock the door to his house because he has theft insurance. This
is an example of:
A) a positive spillover.
B) moral hazard.
C) adverse selection.
D) irrational behavior.
A monopolist maximizes profits by setting the quantity where:
A) marginal revenue equal to marginal cost.
B) marginal revenue greater than marginal cost.
C) marginal revenue less than marginal cost.
D) total revenue as high as possible.
Providing unemployment insurance is one way a government can:
A) break up monopolies.
B) enforce rules of exchange.
C) create public-works programs.
D) reduce economic uncertainty.
One reason that professional baseball players earn higher incomes than college
professors is that:
A) the training costs to enter the baseball profession are low.
B) there no barriers to entry in the baseball profession.
C) few people have the skill to play professional baseball.
D) being a college professor requires less education.
Which of the following situations will arise in the domestic market following the
removal of an import quota?
A) imports increase, domestic production increases, prices increase
B) imports increase, domestic production decreases, prices decrease
C) imports decrease, domestic production increases, prices decrease
D) imports decrease, domestic production decreases, prices increase
When economists say a market has “barriers to entry” they refer to:
A) monopolists being prohibited from selling their products to certain customers.
B) a policy that some countries establish to reduce imports from other countries.
C) factors that prevent other firms from challenging a firm with market power.
D) economic profits that are positive, but too high to encourage entry.
Asymmetric information in the health insurance market causes prices to ________ and
the mix of insured customers to become ________ healthy on average.
A) rise; less
B) fall; more
C) rise; more
D) fall; less
Suppose a monopolist has costs such that when output is 500 units per hour, average
costs are $3. If the monopolist is regulated by a policy of average-cost pricing, the
monopolist will charge a price of:
A) $3.
B) $3 only if the quantity demanded is 500 units per hour at a price of $3.
C) $3 only if the quantity demanded is greater than 500 units at a price of $3.
D) $3 only if the quantity demanded is less than 500 units per hour at a price of $3.
The four-firm concentration ratio measures the:
A) percentage of total output in a market produced by the four largest firms.
B) elasticity of demand of the four largest firms in an industry.
C) average cost of the four largest firms in an industry.
D) number of firms in an industry.
Recall the Application about the marginal cost involved in utilizing idle capital to
answer the following question(s).
Recall the Application. If a firm is able to use idle capital when increasing production,
the marginal cost incurred when increasing production is:
A) increasing.
B) decreasing.
C) not changing.
D) negative.
Which of the following is NOT a way to overcome the free-rider problem?
A) offer contributors private goods in return
B) arrange for matching contributions
C) have the government “volunteer” a wealthy person to pay for it by lottery
D) appeal to the individual’s sense of civic or moral responsibility
Recall the application on economic detective and the case of margarine prices, the
margarine industry is an example of a constant-cost industry because as the total output
of the industry changes the price of the key inputs to the production of margarine don’t
change as a result:
A) the demand decreases by the same amount.
B) the supply increases by the same amount.
C) the unit of cost is unaffected by changes in total output.
D) the unit of cost is affected by changes in total output.
Alex’s Furniture Mart produces and sells tables in a perfectly competitive market. When
Alex’s Furniture Mart produces and sells 250 tables, its marginal cost is equal to $200,
and AVC is rising. If the market price of tables is equal to $150, Alex’s Furniture Mart
should:
A) decrease its level of table production.
B) increase its level of table production.
C) continue producing 250 tables.
D) raise the price of its tables.
Figure 14.1 represents the market for used bikes. Suppose buyers are willing to pay
$200 for a plum (high-quality) used bike and $50 for a lemon (low-quality) used bike.
If buyers have pessimistic expectations about the used bikes in the market, how many
used plums (high-quality used bikes) will be sold?
A) 0
B) 8
C) 12
D) 16
When firms compete with each other rather than cooperate:
A) consumers will end up better off.
B) the firms will end up better off.
C) prices will be higher.
D) output will be lower.
A supply curve is defined as the relationship between:
A) the price of a good and the quantity that consumers are willing to buy.
B) the price of a good and the quantity that producers are willing to sell.
C) the income of consumers and the quantity of a product that consumers are willing to
buy.
D) the income of consumers and the quantity of a product that producers are willing to
sell.
A bumper crop would be bad news for farmers if their crop has an inelastic demand
because their total revenue would:
A) rise along with price.
B) rise as price falls.
C) fall as price rises.
D) fall along with price.
Recall the Application. In most cases where satellite TV service is introduced in an area
with cable TV service, if the price of cable TV increases, then consumer surplus:
A) increases.
B) decreases.
C) drops to zero.
D) becomes negative.
Table 3.1 illustrates Willy and Blythe’s hourly production for apples and carrots. From
the table, we can conclude that:if Willy and Blythe choose to specialize and trade, then:
Table 3.1
A) Willy will specialize in apples and trade apples for carrots.
B) Willy will specialize in carrots and trade carrots for apples.
C) Blythe will specialize in carrots and trade carrots for apples.
D) None of the above; specialization and trade are not beneficial for Willy and Blythe.
Refer to Figure 8.4. The marginal cost of the 10th basketball is:
A) $2.
B) $30.
C) $28.
D) $1.
Figure 6.9 depicts a hypothetical fish market with a horizontal supply curve. The
consumer surplus at the initial equilibrium is shown by:
A) Triangle A.
B) Triangle A + Rectangle B.
C) Triangle A + Rectangle B + Triangle C.
D) Triangle A + Rectangle B + Rectangle D.
The members of NAFTA are the United States, Canada, and:
A) France.
B) Japan.
C) Chile.
D) Mexico.
The slope of a nonlinear curve:
A) is constant.
B) is negative.
C) is zero.
D) changes along the curve.
Which of the following is true for all units of output produced?
A) Marginal cost is less than average total cost.
B) Marginal cost is greater than average total cost.
C) Average variable cost is less than average total cost.
D) Average fixed cost is less than average variable cost.
Assuming that leisure is a normal good, if an individual’s labor supply curve is
backward bending, then the:
A) income effect outweighs the substitution effect.
B) substitution effect outweighs the income effect.
C) income effect and the substitution effects are equal.
D) income effect is zero.
Voluntary Export Restraints (VERs):
A) have the same effect as an import quota.
B) are legal under the WTO rules.
C) violate the spirit of international trade agreements.
D) all of the above
The marginal benefit of search ________ with the discovered price, while the marginal
cost of search is ________.
A) increases; decreased
B) increases; constant
C) decreases; negative
D) increases; negative