A soybean farmer sells soybeans in a perfectly competitive market and hires labor in a
perfectly competitive market. The market price of soybeans is $10 a bushel, the wage
rate is $15, the farmer employs eleven workers and the marginal product of the eleventh
worker is 18. What would you advise this farmer to do?
A) Do nothing because the wage rate and the marginal product of the last worker hired
are equal.
B) Reduce employment because the wage paid is greater than the marginal revenue
product.
C) Increase employment because the wage paid is less than the marginal revenue
product.
D) Reduce the product price so that the wage and marginal revenue product will be
equal.
Figure 1.4
Refer to Figure 1.4. Panel C shows a curve which has a slope that is
A) first positive and then negative.
B) first negative and then positive.
C) infinite throughout.
D) zero throughout.
All of the following statements about variable costs are true EXCEPT
A) they are equal to total costs in the long run.
B) they are zero if output is zero.
C) they are equal to the product of average variable cost and the output level.
D) they are constant as output increases.
Figure 16.1
Refer to Figure 16.1. ________, 60 bags of fertilizer will be produced.
A) With a price ceiling
B) With government intervention
C) Absent government intervention
D) To avoid shutting down
A monopolist sets both price and quantity simultaneously, and the amount of output that
it supplies depends
A) only on the marginal cost curve.
B) only on the demand curve.
C) on both its marginal cost curve and the demand curve that it faces.
D) on both its average cost curve and the demand curve that it faces.
For a monopolistically competitive firm in long-run equilibrium at the
profit-maximizing quantity, the demand curve must be ________ the average total cost
curve.
A) above
B) below
C) twice the value of
D) tangent to
If land becomes more valuable in residential use than in commercial use,
A) the supply of land available for commercial use should decrease and the supply of
land for residential use should increase.
B) there can be no change in the allocation of land because land is fixed in supply.
C) there will be no change in the allocation of land, as there is no responsiveness to
price changes by suppliers of land.
D) the supply of land for commercial use will become perfectly elastic, and the supply
of land for residential use will become perfectly inelastic.
The marginal benefit for a particular food is described by MB = 60 – q, where q refers to
the quantity of the food. The marginal cost of producing the food is described by MC =
3q. There is a negative externality associated with food production and the marginal
social cost of food production is MSC = 5q.
The marginal damage cost is ________.
A) MDC = 2q
B) MDC = 3q
C) MDC = 8q
D) indeterminate from the given information.
A cost or benefit resulting from some activity that is imposed or bestowed on third
parties is
A) a market failure.
B) an externality.
C) a public good.
D) logrolling.
A lender faces a(n) ________ problem if borrowers with a greater chance of defaulting
on their loans get loans from the lender.
A) adverse selection
B) moral hazard
C) external cost
D) freerider
If information is more costly and less easily available, then usually this
A) makes markets more efficient.
B) makes markets less efficient.
C) decreases profit opportunities.
D) decreases the opportunity cost of acquiring more information.
Figure 6.2
Refer to Figure 6.2. The slope of budget constraint AC is
A) -1/2.
B) -1.
C) -2.
D) indeterminate from this information because prices are not given.
Table 10.1
Refer to Table 10.1. The marginal revenue product of the ________ worker is $150.
A) second
B) third
C) fourth
D) fifth
Figure 7.5
Refer to Figure 7.5. Increasing returns continue until the ________ worker is hired.
A) first
B) fifth
C) eighth
D) sixteenth
A firm in a perfectly competitive industry produces its profit-maximizing quantity, 40
units. Industry price is $3, total fixed costs are $45, and total variable costs are $60. The
firm’s economic profit is
A) $15.
B) $30.
C) $35.
D) $60.
The utility possibilities frontier is a graphic representation of a two-person world that
shows all points at which A’s utility can be ________.
A) increased only if B’s utility is increased
B) decreased only if B’s utility is decreased
C) increased only if B’s utility is decreased
D) held constant as B’s utility is either increased or decreased
A change in economic output is potentially efficient
A) if the value of the resulting gains exceeds the value of the resulting losses.
B) if the value of the resulting gains exactly equals the value of the resulting losses.
C) only if no one is made worse off.
D) if the value of the resulting gains is less than the value of the resulting losses.
Figure 3.12
Refer to Figure 3.12. The market is initially in equilibrium at Point B. If demand shifts
from D2 toD1 and there is an excess supply of 200 million pounds of burritos, the price
of burritos would be
A) $1.50.
B) $3.00.
C) $4.00.
D) $6.00.
An equitable distribution of income means that ________.
A) income is equally distributed
B) income is fairly distributed
C) income is efficiently distributed
D) there is a long-run equilibrium distribution
Table 19.1
Relating to the Economics in Practice on page 392: Refer to Table 19.1. The tax rate
structure in this example is
A) proportional.
B) progressive.
C) regressive.
D) marginal.
Marginalism is
A) the best alternative that we forego when making a decision.
B) the study of how societies choose to use scarce resources.
C) a market situation in which profit opportunities are eliminated almost
instantaneously.
D) the process of analyzing the additional costs or benefits arising from a decision.
Jane has $500 a week to spend on clothing (c) and food (f). The price of clothing is $25
and the price of food is $10. What is the equation for Jane’s budget constraint?
A) ($25 × Clothing) × ($10 × Food) < $500
B) $25 × Clothing + $10 × Food ≥ $500
C) ($25 × Clothing) / ($10 × Food) = $500
D) $25 × Clothing + $10 × Food = $500
Figure 1
Refer to Figure 18.1. Point B is
A) inefficient because both people could be made better off simultaneously.
B) inefficient because it is only possible to make one person better off by making
someone else worse off.
C) efficient because both people could be made better off simultaneously.
D) efficient because to make one person better off the other person must be made worse
off.
The first minimum wage law was adopted
A) in the United States in 1938.
B) in New Zealand in 1894.
C) in England in 1876.
D) in Germany in 1922.
A two firm oligopoly is known as a ________.
A) duopoly
B) cartel
C) monopoly
D) contestable market
The burden of a progressive tax ________ as a percentage of income as income
________.
A) rises; falls
B) falls; rises
C) falls; falls
D) does not change; rises or falls
A market demand curve is ________.
A) downward sloping
B) upward sloping
C) perfectly elastic
D) perfectly inelastic
The demand facing a monopolistically competitive firm is ________ a monopolistic
firm and ________ a perfectly competitive firm.
A) as elastic as; less elastic than
B) less elastic than; more elastic than
C) more elastic than; less elastic than
D) more elastic than; as elastic as
Figure 3.11
Refer to Figure 3.11. Assume hamburgers and hot dogs are substitutes. A decrease in the
price of hot dogs will cause a movement from
A) Point A to Point B.
B) Point F to Point G.
C) D2 to D1.
D) D1 to D2.
At the Pampered Pet Salon the marginal products of the first, second, and third workers
are 20, 16, and 10 dogs washed, respectively. The total product (number of dogs
washed) of the first two workers is
A)16
B)20
C)36
D)46
Table 3.1
Refer to Table 3.1. If the price per pizza is $12, there is an excess
A) demand of 400 pizzas.
B) demand of 600 pizzas.
C) supply of 300 pizzas.
D) supply of 900 pizzas.
Assume Cathy’s Cupcake Company operates in a perfectly competitive market
producing 10,000 cupcakes per day. At this output level, price exceeds the firm’s
marginal and average variable costs. It follows that producing one more cupcake will
cause this firm’s
A) total cost to decrease.
B) profits to increase.
C) profits to decrease.
D) profits to remain unchanged.
Figure 3.4
Refer to Figure 3.4. If consumer income falls, the demand for tuna fish sandwiches
shifts from D0 to D1. This implies that tuna fish sandwiches are a(n)
A) normal good.
B) inferior good.
C) substitute good.
D) complementary good.