Over the past several years, the demand for phone operators has fallen dramatically.
Which of the following would account for this development?
A) an increase in the number of automated answering services
B) a decrease in the technology associated with phone equipment
C) an increase in the supply of phone operators
D) higher prices for long-distance service
A firm that has diminishing returns in the management’s ability to use and disseminate
information as it increases production in the long run best demonstrates:
A) economies of scale.
B) diseconomies of scale.
C) being too small for the relevant market.
D) not having enough managers.
Which of the following is an example of marginal analysis?
A) ordering a pizza rather than eating leftover meatloaf
B) deciding whether to eat one more slice of pizza
C) using a coupon to save $2 on a pizza
D) writing a check to pay for the pizza rather than using a credit card
Figure: The Demand and Supply of Wheat
(Figure: The Demand and Supply of Wheat) Look at the figure The Demand and
Supply of Wheat. If a price of $8 temporarily exists in this market, a _____ of _____
bushels will result.
A) shortage; 2,000
B) surplus; 4,000
C) shortage; 4,000
D) surplus; 6,000
Figure: Market Failure
(Figure: Market Failure) Look at the figure Market Failure. Suppose the supply curve
represents the marginal cost of providing streetlights in a neighborhood that is
composed of two people, Ann and Joe. Suppose the supply curve represents the
marginal cost of providing streetlights in a neighborhood that is composed of two
people, Ann and Joe. The demand curve represents the marginal benefit that Ann
receives from the streetlights. Suppose that Joe’s marginal benefit from the streetlights
is a constant amount equal to AC. How much is Ann willing to pay for G streetlights?
A) 0
B) A
C) B
D) C
The market for dentists in most communities can be considered _____ because the
market has a large number of similar but not identical dental services.
A) monopolistic competition
B) a monopoly
C) perfect competition
D) an oligopoly
The price elasticity of demand for gasoline in the short run has been estimated to be 0.1.
If a war in the Middle East causes the price of oil (from which gasoline is made) to
increase, how will that affect total expenditures on gasoline in the short run, all other
things equal?
A) Quantity demanded will stay the same, but total expenditures will fall.
B) Quantity demanded will decrease, but total expenditures will rise.
C) Total expenditures will remain unchanged.
D) Quantity demanded will not change much, but total expenditures will rise.
(Table: Natasha’s Total Utility) Look at the table Natasha’s Total Utility. Natasha’s
marginal utility _____ as her income increases. The marginal utility of income between
$30,000 and $32,500 is _____ utils per dollar, while it is _____ utils per dollar between
$47,500 and $50,000.
A) increases; 0.48; 0.64
B) increases; 0.12; 0.36
C) diminishes; 0.50; 0.25
D) diminishes; 0.32; 0.04
According to the relative price rule, the optimal consumption bundle between hot dogs
and beer takes place when the _____ rate of substitution is _____ their relative price.
A) total; equal to
B) marginal; equal to
C) marginal; higher than
D) total; lower than
Suppose a monopoly can separate its customers into two groups. If the monopoly
practices price discrimination, it will charge the lower price to the group with:
A) the higher price elasticity of demand.
B) the lower price elasticity of demand.
C) the fewer close substitutes.
D) The answer cannot be determined with the information given.
A firm’s total output times the price at which it sells that output is _____ revenue.
A) net
B) total
C) average
D) marginal
While at the grocery store, Sidney sees that the price of Grape-Nuts is twice that of
Cheerios. If Sidney buys both goods, then Sidney must:
A) get twice as much marginal utility from Grape-Nuts as from Cheerios.
B) get twice as much marginal utility from Cheerios as from Grape-Nuts.
C) not be maximizing utility.
D) buy twice as much Cheerios.
Indifference curves that are convex to the origin imply:
A) increasing marginal utility.
B) diminishing marginal rate of substitution.
C) that as we move down an indifference curve, the slope gets steeper.
D) constant prices of goods.
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. If
Ben buys one fewer pumpkin and Cindy sells one more pumpkin than in equilibrium,
total surplus will _____ by _____.
A) increase; $15
B) increase; $12
C) decrease; $15
D) decrease; $3
Because most communities have a large number of similar but not identical substitutes,
the market for financial planners is best considered to be:
A) a monopoly.
B) an oligopoly.
C) perfect competition.
D) monopolistically competitive.
If the income elasticity for hybrid cars is positive:
A) there are many substitutes for hybrid cars.
B) there are few substitutes for hybrid cars.
C) hybrid cars are a normal good.
D) hybrid cars are an inferior good.
Antonio derives more utility from spending an additional dollar on boots than on
gloves. We can assume that:
A) the marginal utility per dollar spent on boots is greater than the marginal utility per
dollar spent on gloves.
B) the marginal utility per dollar spent on boots is equal to the marginal utility per
dollar spent on gloves.
C) the marginal utility per dollar spent on boots is less than the marginal utility per
dollar spent on gloves.
D) boots cost less than gloves.
Figure: A Perfectly Competitive Firm in the Short Run
(Figure: A Perfectly Competitive Firm in the Short Run) Look at the figure A Perfectly
Competitive Firm in the Short Run. The firm’s total cost of producing its most
profitable level of output is:
A) BS.
B) DK.
C) 0FKD.
D) 0ESB.
Figure: Shifts in Demand and Supply III
(Figure: Shifts in Demand and Supply III) Look at the figure Shifts in Demand and
Supply III. The figure shows how supply and demand might shift in response to specific
events. Suppose a wet and sunny year increases the nation’s corn crop by 20 percent.
Which panel BEST describes how this will affect the market for corn?
A) panel A
B) panel B
C) panel C
D) panel D
Consider an economy with just two citizens. If Sanjay’s marginal benefit from mosquito
control is $10 and Anjuli’s marginal benefit is $25, then the optimal level of a public
good like mosquito control occurs when the marginal cost of mosquito control is:
A) $25.00.
B) $17.50.
C) $10.00.
D) $35.00.
(Table: Coffee and Salmon Production Possibilities) Look at the table Coffee and
Salmon Production Possibilities. The table shows the maximum amounts of coffee and
salmon that Brazil and Alaska can produce if they just produce one good. The
opportunity cost of producing 1 unit of salmon for Alaska is:
A) 2 coffees.
B) 0.25 coffee.
C) 1 coffee.
D) 0.5 coffee.
Figure: Profits in Monopolistic Competition
(Figure: Profits in Monopolistic Competition) Look at the figure Profits in Monopolistic
Competition. A positive economic profit is earned if the profit-maximizing price is
_____ in panel _____.
A) E; (B)
B) B; (A)
C) A; (A)
D) N; (C)
Figure: Demand and Marginal Revenue
(Figure: Demand and Marginal Revenue) The figure Demand and Marginal Revenue
refers to a software upgrade. The producer incurred fixed costs of $10 million to
produce the upgrade; the marginal cost of allowing consumers to download the upgrade
is zero. What is the efficient level of output for the upgrade?
A) 0
B) 80,000
C) 125,000
D) 250,000
When the government policy is to regulate the quantity of a good that can be bought
and sold rather than the price at which it is transacted, it uses a:
A) quota.
B) price control.
C) price ceiling.
D) price floor.
The lowest point on a perfectly competitive firm’s short-run supply curve corresponds
to the minimum point on the _____ curve.
A) ATC
B) AVC
C) AFC
D) MC
When the price of gas goes down, the demand for tires goes up. A likely possibility is
that tires and gas are:
A) substitutes.
B) complements.
C) both inferior goods.
D) both inexpensive.
If the price of chocolate-covered peanuts decreases from $1.05 to $0.95 and the
quantity demanded increases from 180 bags to 220 bags, then the price elasticity of
demand (by the midpoint method) is:
A) 0.5.
B) 1.
C) 2.
D) greater than 2.
Scenario: The Decision to Hire Labor
Assume that both the product market and the labor market are perfectly competitive.
The price of this firm’s product is $5. The firm’s total product with respect to labor is
given in the table that follows.
(Scenario: The Decision to Hire Labor) Look at the scenario The Decision to Hire
Labor. Holding everything else constant, if the demand for this firm’s product
decreases:
A) its value of marginal product curve shifts to the right, and it will hire more workers.
B) its value of marginal product curve shifts to the left, and it will hire more workers.
C) its value of marginal product curve shifts to the left, and it will hire fewer workers.
D) the firm will not change its hiring, since it is a perfectly competitive firm.
Figure: The Demand for Notebook Computers
(Figure: Demand for Notebook Computers) Look at the figure The Demand for
Notebook Computers. Total revenue at point V equals the:
A) area 0TVN.
B) area 0PSVN.
C) distance 0T.
D) distance NV.