An analytical approach through which strategic choices can be assessed is called:
A) cost”benefit analysis.
B) econometric theory.
C) game theory.
D) monopolistic competition.
The opportunity cost of an hour of leisure:
A) is always assumed to be equal to the minimum wage.
B) is the hourly wage rate.
C) increases if the hour of leisure time is spent in an unproductive activity.
D) decreases if the hour of leisure is spent in a productive activity.
Which of the following LACK(S) is (are) associated with poverty?
A) adequate employment
B) education
C) proficiency in English
D) adequate employment, education, and proficiency in English
Table: Utility from Oranges and Star Fruit Pounds of Oranges Total Utility from
Oranges Pounds of Star Fruit Total Utility 0 0 0 0 1 24 1 70 2 44 2 130 3 60 3 180 4
72 4 220 5 80 5 250 6 84 6 270 7 84 7 280
(Table: Utility from Oranges and Star Fruit) Look at the table Utility from Oranges and
Star Fruit. Oranges cost $2 per pound and star fruit costs $5 per pound. Calvin has $26
to spend. If Calvin spends all of his money on oranges, how many pounds of oranges
can he buy?
Pounds of Oranges Total Utility from Oranges Pounds of Star Fruit Total Utility
0 0 0 0
1 24 1 70
2 44 2 130
3 60 3 180
4 72 4 220
5 80 5 250
6 84 6 270
7 84 7 280
A) 6
B) 7
C) 9
D) 13
Attempts by the federal government to prevent the exercise of monopoly power in the
United States are known as _____ policy.
A) stabilization
B) antitrust
C) fiscal
D) government
In the graph of a curve, the vertical intercept is:
A) the value of the y-variable when the value of the x-variable is equal to zero.
B) the change in the y-variable between two points divided by the change in the
x-variable between those same two points.
C) the value of the y-variable when the value of the slope is equal to zero.
D) the value of the x-variable when the value of the y-variable is equal to zero.
Typically the government limits the quantity of a good that can be bought and sold by:
A) licensing the suppliers.
B) setting a price floor below the equilibrium price.
C) maintaining the equilibrium price regardless of changes in demand and supply.
D) setting a price ceiling above the equilibrium price.
Because most communities have a large number of similar but not identical substitutes,
the market for chiropractors is best considered to be:
A) an oligopoly.
B) perfect competition.
C) monopolistically competitive.
D) a monopoly.
Assume that a tariff is imposed on Chinese imports into the United States. This tariff is
likely to _____ U.S. producers and _____ Chinese producers.
A) penalize; penalize
B) benefit; benefit
C) benefit; penalize
D) penalize; benefit
Figure: Long-Run Average Cost
(Figure: Long-Run Average Cost) Look at the figure Long-Run Average Cost. This firm
has _____ in the output region from 0 to A.
A) decreasing returns to scale
B) constant returns to scale
C) increasing returns to scale
D) negative costs of production
(Table: Amy’s Utility Function) Look at the table Amy’s Utility Function. Amy is an
entrepreneur with current income equal to $40,000. Amy is considering development of
a new product. The probability that her new product earns Amy $10,000 in additional
income is 0.5, and the probability that Amy incurs a reduction of $10,000 from her
current income is also 0.5. Suppose Amy can buy a fair insurance policy that will
compensate her for any losses. Amy’s premium will be _____, her guaranteed income
will be _____, and her expected utility will be _____ utils.
A) $5,000; $10,000; 200
B) $10,000; $30,000; 500
C) $10,000; $40,000; 620
D) $30,000; $50,000; 720
Table: Pumpkin Market
(Table: Pumpkin Market) There are two consumers, Andy and Ben, in the market for
pumpkins. Their willingness to pay for each pumpkin is shown in the table Pumpkin
Market. There are two producers of pumpkins, Cindy and Diane, and their costs are also
shown. The equilibrium price for pumpkins is $8 and the equilibrium quantity is 5. At
the equilibrium price and quantity, total surplus is:
A) $40.
B) $36.
C) $24.
D) $8.
Suppose Billy Bud’s Bucking Broncos employs 20 workers at a daily wage of $60 each.
The average product of labor is 30 bucking broncos per day; the marginal product of the
last worker is 12 bucking broncos per day; and total fixed cost is $3,600 for equipment.
What is the marginal cost of the last bucking bronco produced?
A) $0.20
B) $5.00
C) $240.00
D) $720.00
If the marginal social benefit received from pollution is equal to its marginal social cost:
A) society’s well-being can be improved if the quantity of pollution increases.
B) society’s well-being can be improved if the quantity of pollution decreases.
C) society has achieved its socially optimal level of pollution.
D) the market is producing too much pollution.
In the model of perfect competition:
A) the consumer is at the mercy of powerful firms that can set prices wherever they
prefer.
B) individual firms can influence the price, but only slightly.
C) no individual or firm has enough power to affect price.
D) the price is determined by how many years are left in the product’s patent.
Figure: Joanna’s Time Allocation Budget Line
(Figure: Joanna’s Time Allocation Budget Line) Joanna’s Time Allocation Budget Line
depicts what happens when she can choose how to spend 40 hours. If Joanna’s wage
rate increases and she ends up working more hours, for her:
A) the substitution effect dominates.
B) the income effect dominates.
C) the substitution and income effects cancel each other out.
D) the substitution effect becomes ineffective.
(Table: Income and Utility for Whitney) Look at the table Income and Utility for
Whitney. Whitney’s income next year is uncertain: there is a 40% probability she will
make $40,000 and a 60% probability she will make $80,000. The expected value of
Whitney’s income is:
A) $64,000.
B) $80,000.
C) $40,000.
D) $56,000.
In 2002, the steel industry argued that higher tariffs on steel were necessary to help
fight the war on terrorism. This is an example of the _____ argument.
A) infant industry
B) national security
C) job creation
D) predatory pricing
What is difficult about using cost-benefit analysis to estimate the level of a public good
that will maximize social welfare?
A) The government cannot use cost-benefit analysis to estimate this.
B) It is difficult to estimate the marginal costs of supplying a public good.
C) It is difficult to estimate the marginal social benefits of supplying a public good.
D) The costs of using it may make the provision of the public good prohibitive.
The airline industry often engages in price wars. This means that firms often _____
prices until profits _____.
A) raise; are maximized
B) lower; are maximized
C) lower; approach zero
D) raise; approach zero
It is very difficult for Julia to find inexpensive inputs for her business. Because of this,
we predict that Julia’s price elasticity of supply is:
A) elastic.
B) inelastic.
C) unit-elastic.
D) perfectly elastic.
Suppose that the market for candy canes operates under conditions of perfect
competition, that it is initially in long-run equilibrium, that the price of each candy cane
is $0.10, and that the market demand curve is downward-sloping. The price of sugar
rises, increasing the marginal and average total cost of producing candy canes by $0.05;
there are no other changes in production costs. Once all of the adjustments to long-run
equilibrium have been made, the price of candy canes will equal:
A) $0.05.
B) $0.10.
C) $0.15.
D) The question is impossible to answer without knowing exactly how many firms
entered and/or left the industry.
Leisure is considered a normal good, since people:
A) consume more of it all the time.
B) cannot consume more, it being limited.
C) consume more of it when their income rises.
D) find it to be a luxury to take time off from their job.
You work in an office and one of your coworkers has announced his retirement. You
have offered to purchase the retirement gift, so you place a collection jar in the lunch
room for anonymous donations to help pay for the gift. After a week you find very little
money in the jar, so you end up paying for a large share of the retirement gift. You are
the victim of the _____ problem.
A) common resource
B) private good
C) overuse of a common resource
D) free-rider
A friend comes up to you and offers you a free ticket to a professional baseball game
that night. You decide to attend the game. The game takes five hours and costs you $15
for transportation. If you had not attended the game, you would have worked at your
part-time job for $8 an hour. What is the cost to you of attending the game?
A) The cost is zerothe ticket is free.
B) $65
C) $40
D) $55
Figure: Pricing Strategy in Cable TV Market I
(Figure: Pricing Strategy in Cable TV Market I) Look at the figure Pricing Strategy in
Cable TV Market I. If both CableNorth and CableSouth advertise, then without any
collusion:
A) CableNorth will stop advertising to maximize profits.
B) CableSouth will stop advertising to maximize profits.
C) there will be no tendency for either CableNorth or CableSouth to stop advertising.
D) there is a tendency for both CableNorth and CableSouth to stop advertising.
A factor that has been associated with the increase in income inequality in the United
States is the:
A) decrease in households headed by single women.
B) reduction in the percentage of the population over age 65.
C) increase in immigration.
D) slowdown in technological change.
Which of the following is an environmental standard?
A) tradable pollution permits
B) taxes on the level of pollution
C) legal limits on sulfur dioxide emissions
D) production subsidies
Accounting profit differs from economic profit because:
A) of differences in the manner in which revenue is calculated.
B) economic costs include explicit costs, while accounting costs do not.
C) accounting costs are generally higher than economic costs because accounting costs
include explicit and implicit costs, while economic costs include only explicit costs.
D) economic costs are generally higher than accounting costs because economic costs
include all opportunity costs, while accounting costs include explicit costs only.