Table 11-7
Table 11-7 shows cost data for Lotus Lanterns, a producer of whimsical night lights.
Refer to Table 11-7. What is the average total cost of production when the firm
produces 120 lanterns?
A) $1,680
B) $72
C) $14
D) $12.3
Figure 9-1
Figure 9-1 shows the U.S. demand and supply for leather footwear.
Refer to Figure 9-1. Under autarky, the deadweight loss is
A) $0.
B) $15.
C) $30.
D) $40.
If Callum is consuming his utility maximizing bundle and the price of one good rises,
what happens to the marginal utility per dollar spent on this good (MU/P), and what
should Callum do?
A) MU/P has increased and Callum should buy more of this good.
B) MU/P has increased and Callum should buy less of this good.
C) MU/P has decreased and Callum should buy more of this good.
D) MU/P has decreased and Callum should buy less of this good.
Which of the following is a reason why it is difficult to estimate the extent of economic
discrimination in the labor market?
A) Employers who discriminate are likely to do so in overt ways such as awarding
some workers with benefits-in-kind.
B) Ultimately, employers who discriminate cannot remain profitable.
C) Employers who discriminate pay an economic penalty.
D) Differences in wages can be attributed to many other factors as well, such as
differences in productivity and preferences.
Table 13-3
Table 13-3 shows the demand and cost schedules for a monopolistically competitive
firm.
Refer to Table 13-3. What is its average variable cost of production at its optimal output
level?
A) $0 (because its optimal output = 0)
B) $15
C) $14.75
D) $29
Figure 12-1
Refer to Figure 12-3. If the firm is charging a price of $12 per unit
A) it breaks even.
B) it is making a profit.
C) it is selling 700 units.
D) it is not selling any output.
The long-run average cost curve shows
A) the lowest average cost of producing every level of output in the long run.
B) where the most profitable level of output occurs.
C) the average cost of producing where diminishing returns are not present.
D) the plant size or scale that the firm should build.
After getting an A on your economics exam, you decide to go to your favorite Mexican
restaurant to celebrate. You are having trouble deciding whether to order the chipotle
chicken chimichanga or the cilantro seafood enchiladas. Use the rule of equal marginal
utility per dollar to determine which one to purchase: (a) the chimichanga for $8 which
gives you 120 units of utility, or (b) the enchiladas for $15 which gives you 195 units of
utility?
Which of the following is a microeconomics question?
A) How much will be saved and how much will be produced in the entire economy?
B) What will the level of economic growth be in the entire economy?
C) What factors determine the price of carrots?
D) What determines the average price level and inflation?
A proprietorship or partnership can raise funds for expansion in all of the following
ways except
A) borrowing from someone or an institution willing to lend the funds.
B) reinvesting profit back into the business.
C) taking on a partner or more partners.
D) issuing stock through financial markets.
Economic efficiency is defined as a market outcome in which the marginal benefit to
consumers of the last unit produced is equal to the marginal cost of production, and in
which
A) the sum of consumer surplus and producer surplus is at a maximum.
B) economic surplus is minimized.
C) the sum of the benefits to firms is equal to the sum of the benefits to consumers.
D) the sum of consumer surplus and producer surplus is minimized.
If a perfectly competitive firm achieves productive efficiency then
A) it will raise its price in order to earn an economic profit.
B) the price of the good it sells is equal to the benefit consumers receive from
consuming the last unit of the good sold.
C) it is producing at minimum efficient scale.
D) it is producing the good it sells at the lowest possible cost.
In what way does long-run equilibrium under monopolistic competition differ from
long-run equilibrium under perfect competition?
A) Firms in perfect competition achieve productive and allocative efficiency while
firms in monopolistic competition achieve neither allocative nor productive efficiency.
B) The only difference is that in a monopolistically competitive market there are many
brands to choose from while in a perfectly competitive market there is one standard
product.
C) Firms in perfect competition achieve productive efficiency while firms in
monopolistic competition achieve allocative efficiency.
D) Firms in perfect competition achieve allocative efficiency while firms in
monopolistic competition achieve brand efficiency.
Assume the cage-free eggs is perfectly competitive. All else equal, as more farmers
choose to produce and sell cage-free eggs, what is likely to happen to the equilibrium
price of the eggs and profits of these farmers in the long run?
A) The equilibrium price is likely to increase and profits are likely to remain
unchanged.
B) The equilibrium price is likely to remain unchanged and profits are likely to
increase.
C) The equilibrium price is likely to decrease and profits are likely to decrease.
D) The equilibrium price is likely to increase and profits are likely to increase.
If, as a person consumes more and more of a good, each additional unit adds less
satisfaction than the previous unit consumed, we are seeing the workings of
A) the law of demand.
B) the law of supply.
C) the law of increasing marginal opportunity cost.
D) the law of diminishing marginal utility.
If the demand curve for a firm is downward-sloping, its marginal revenue curve
A) will lie above the demand curve.
B) will lie below the demand curve.
C) is the same as the demand curve.
D) is horizontal.
In order to derive an individual’s demand curve for salmon, we would observe what
happens to the utility-maximizing bundle when we change
A) income and hold everything else constant.
B) tastes and preferences and hold everything else constant.
C) the price of the product and hold everything else constant.
D) the price of a close substitute and hold everything else constant.
Figure 2-8
Figure 2-8 above shows the production possibilities frontier for Vidalia, a nation that
produces two goods, roses and orchids.
Refer to Figure 2-8. What is the opportunity cost of 80 dozen orchids?
A) 0 roses
B) 5 dozen roses
C) 40 dozen roses
D) 200 dozen roses
Society faces a trade-off in all of the following situations except
A) when deciding who will receive the goods and services produced.
B) when deciding what goods and services will be produced.
C) when deciding how goods and services will be produced.
D) when some previously unemployed workers find jobs.
If 50 units are sold at a price of $20 and 80 units are sold at a price of $15, what is the
absolute value of the price elasticity of demand? Use the midpoint formula.
A) 17
B) 62
C) 62
D) 5
If in the market for peaches the supply curve has shifted to the left,
A) the supply of peaches has increased.
B) the supply of peaches has decreased.
C) the quantity of peaches supplied has increased.
D) the quantity of peaches supplied has decreased.
Table 2-12
Refer to Table 2-12. This table shows the number of labor hours required to produce a
digital camera and a bushel of wheat in China and South Korea.
a. Which country has an absolute advantage in the production of digital cameras?
b. Which country has an absolute advantage in the production of wheat?
c. What is China’s opportunity cost of producing one digital camera?
d. What is South Korea’s opportunity cost of producing one digital camera?
e. What is China’s opportunity cost of producing one bushel of wheat?
f. What is South Korea’s opportunity cost of producing one pound of wheat?
g. If each country specializes in the production of the product in which it has a
comparative advantage, who should produce digital cameras?
h. If each country specializes in the production of the product in which it has a
comparative advantage, who should produce wheat?
The profit-maximizing rule for a monopolistically competitive firm is to select the
quantity at which
A) marginal revenue equals marginal cost.
B) average revenue exceeds marginal cost by the greatest amount.
C) price equals marginal cost.
D) average revenue equals average total cost.
If demand is perfectly inelastic, the absolute value of the price elasticity of demand is
A) zero.
B) less than one.
C) more than one.
D) equal to the absolute value of the slope of the demand curve.
In October 2005, the U.S. Fish and Wildlife Service banned the importation of beluga
caviar, the most prized of caviars, from the Caspian Sea. What happened in the market
for caviar in the United States?
A) The supply curve shifted to the left.
B) The supply curve shifted to the right.
C) The demand curve shifted to the right.
D) The demand curve shifted to the left.
Figure 5-10
Chicken pox vaccinations for toddlers benefit society by protecting young children and
by preventing an epidemic of the disease. Thus, the social benefits of chicken pox
vaccinations exceed the private benefit for any quantity of vaccinations as illustrated in
Figure 5-10.
Refer to Figure 5-10. One way to obtain the economically efficient amount of chicken
pox vaccinations is for governments to subsidize these vaccinations. What is the size of
the per-vaccination Pigovian subsidy that the government must provide to internalize
the external benefits?
A) PE
B) (PE– PG)
C) (PE– PF)
D) (PF– PG)
Assume you set up a sole proprietorship and your lawyer tells you that as the owner you
will face unlimited liability. What does that mean?
A) You are liable for organizing the business.
B) You could stand to lose your personal wealth if the business goes bankrupt.
C) There is no legal responsibility of the business in case a customer sues, as the
business is legally untouchable.
D) None of these explain what unlimited liability means.
In economics, the term ________ means “additional” or “extra.”
A) allocative
B) marginal
C) equity
D) optimal
The most profitable price for a monopolist is
A) the highest price a consumer is willing to pay for the monopolist’s product.
B) the price at which demand is unit elastic.
C) a price that maximizes the quantity sold.
D) the price for which marginal revenue equals marginal cost.
Major League Baseball teams are similar to other firms in that they use factors of
production to produce a product (baseball games). An example of capital used by teams
to produce their products is
A) the money teams earn from television contracts and ticket sales.
B) the land on which baseball games are played.
C) the labor of baseball players.
D) the ballparks where the games are played.
What is meant by the “law of one price”?
A) Identical products should sell for the same price everywhere.
B) A law was passed in 1913 that made it illegal to sell the same good or service to
different people for different prices.
C) This is a section of the Sherman Act that forced trusts (for example, the Standard Oil
Company) to charge the same price for the same good or service in different states.
D) Foreign companies should not be allowed to sell a product in the United States for
prices different from prices these companies charge in other countries.
Congress has divided the authority to police mergers between the Antitrust Division of
the U.S. Department of Justice (AD) and the Federal Trade Commission (FTC). How is
this authority divided?
A) The AD decides whether proposed horizontal mergers will be challenged; the FTC
decides whether proposed vertical mergers will be challenged.
B) Both the AD and the FTC are responsible for merger policy.
C) The AD always renders its opinion on any proposed merger first. If the AD approves
the merger, the case then goes to the FTC for final approval. If the AD disallows the
merger, the decision stands and the FTC does not become involved.
D) The AD establishes the guidelines that are used to evaluate proposed mergers; the
FTC uses these guidelines to decide whether a proposed merger will be allowed to take
place.
Cost-plus pricing is a reasonable way to determine the optimal price when
A) marginal cost and average cost are roughly equal.
B) fixed cost and variable costs are roughly equal.
C) fixed costs vary.
D) fixed costs are high.
Figure 13-17
Refer to Figure 13-17. In the long run, why will the firm produce Qf units and not
Qgunits, which has a lower its average cost of production?
A) Although its average cost of production is lower when the firm produces Qg units, to
be able to sell its output the firm will have to charge a price below average cost,
resulting in a loss.
B) At Qg, average cost exceeds marginal cost so the firm will actually make a loss.
C) At Qg, marginal revenue is less than average revenue which will result in a loss for
the firm.
D) The firm’s goal is to charge a high price and make a small profit rather than a low
price and no profit.