Refer to Exhibit 3-8. A shortage exists at any price below
Exhibit 3-8
a. $5.00.
b. $4.50.
c. $4.00.
d. $3.50.
e. $3.00.
To minimize cost, a firm should hire two factors, X and Y, until
a. MPPX/PX = MPPY/PY.
b. MPPX = MPPY.
c. MPPX x PX = MPPY x PY.
d. MRPX/PX = MRPY/PY.
e. MRPX x PX = MRPY x PY.
Which of the following is an example of an externality that has been internalized?
a. Acid rain, originating in the United States, destroys Canadian forests.
b. Robert Frost breathes the air that has been polluted by the emissions of a nearby steel
plant.
c. Erica Evans, a beekeeper, decides to keep more bees because her neighbor, an
orchard owner, has agreed to compensate her for the bees’ pollination of the orchard.
d. Miguel Sanchez, a concert pianist, rehearses Beethoven’s “Moonlight Sonata” and his
neighbors enjoy the “free concert.”
e. all of the above
If the owner of a firm earns zero economic profit, he or she has earned total revenue
equal to his or her
a. implicit costs.
b. explicit costs.
c. accounting profit.
d. implicit costs plus explicit costs.
e. none of the above
In which of the following situations would a negative externality most likely be
involved?
a. It is night and Kenneth is sitting in his easy chair reading a novel by John Grisham.
The lamp he is reading by has only a 40-watt light bulb. He is having a hard time
reading.
b. Alyson lives near an airport. At five o’clock in the morning every day she can hear
the airplanes taking off and it awakens her.
c. Lucy went to a fancy restaurant last night and ordered the most expensive meal on
the menu. She hated it.
d. Richard is taking an economics class from Professor Franklin. Professor Franklin
often says things that confuse Richard.
Refer to Exhibit 23-4. Where can you find the lowest price that will motivate the firm to
produce Q1 in the short run?
Exhibit 23-4
a. at the horizontal line running to “ATC”
b. at the horizontal line running to “AVC”
c. P1
d. $0
In which of the following settings is an interpersonal utility comparison being made?
a. Brandon says to Jack, “I get a lot more satisfaction out of eating pizza than you do.”
b. Stephanie says, “I don’t know what Taylor is feeling or thinking; I can’t read a
person’s heart or mind.”
c. David says to Maria, “I know you like this course a lot more than I do.”
d. a and c
e. a, b, and c
A fixed input is an input whose quantity
a. can be changed as output changes in the short run.
b. cannot be changed as output changes in the short run.
c. cannot be changed as output changes in the long run.
d. a and c
e. b and c
A monopolist can sell 8,000 units at a price of $10 per unit. Lowering price to all buyers
by $1 raises the quantity demanded by 500 units. What is the change in total revenue
resulting from this price change?
a. $3,500
b. -$12,500
c. -$3,500
d. -$18,000
e. There is not enough information provided to answer the question.
The latest Taylor Swift album is available to be downloaded for $18.99. Is this price a
rationing device?
a. No, the album will be sold to anyone having the required number of dollars.
b. Yes, because the album will only be purchased by people who are willing and able to
pay $18.99.
c. No, for price to be a rationing device, it must be so high that only one unit of the item
is sold.
d. Yes, since that is a reasonable price.
A shortage in the bread market can cause the price of bread to rise.
a. True
b. False
Which of the following is a microeconomics topic?
a. the study of how prices are determined in the computer industry
b. the study of unemployment in the economy
c. the study of how changes in the nation’s money supply affect the nation’s output
d. a and c
e. b and c
Refer to Exhibit 5-1, which shows supply and demand for freeway space at both 8 a.m.
and 11 p.m. Suppose that the government decides to set the money price of driving on
the freeway at zero, but builds more freeways to eliminate the shortage of freeway
space at 8 a.m.Graphically, the result of the increase in freeway space would be shown
by
Exhibit 5-1
a. shifting the supply of freeway space
curve rightward.
b. shifting the demand for freeway space curve leftward from D8a.m. to D11p.m.
c. a movement up along D8a.m. to the point where D8a.m. intersects the supply curve.
d. shifting the supply of freeway space curve leftward.
If the return on capital is 12 percent and the price for loanable funds is 14 percent, then
a. currently businesses will not borrow loanable funds to invest in capital goods.
b. eventually the return on capital will decrease to the point where businesses will find
it profitable to borrow loanable funds.
c. the return on capital will fall as the supply of capital decreases over time, and
simultaneously, the price for loanable funds will increase as savers make even more
savings available.
d. a and b
Refer to Exhibit 26-1. What price is charged if marginal-cost price regulation is
imposed on the natural monopoly firm?
Exhibit 26-1
a. P1
b. P2
c. P3
d. a price below P2 and above P1
Jackson says that his fifth game of chess gave him greater utility than his first, and
therefore the law of diminishing marginal utility does not hold. An economist who
believes that marginal utility definitely and always declines with the consumption of
equal successive units of a good will likely say
a. the fifth game of chess is a different good than the first game of chess.
b. there are exceptions to the law of diminishing marginal utility.
c. the law of diminishing marginal utility does not apply to board games.
d. a or b
e. a or c
The beginnings of the New York Stock Exchange can be traced back to a small group of
men who bought and sold stock in New York in
a. 1792.
b. 1866.
c. 1892.
d. 1929.
Most economists believe that the market __________ produce nonexcludable public
goods because of __________.
a. will; the monetary incentive they have to produce them
b. will not; the externality problem
c. will not; the free rider problem
d. will; the market shortage that often accompanies the production of public goods.
e. none of the above
It is possible for total utility to rise as marginal utility falls.
a. True
b. False
Suppose a consumer is purchasing Coke (c) and pretzels (p) in quantities such that he is
achieving consumer equilibrium. Then the price of Coke increases. Which of the
following will be true?
a. MUC/PC = MUP/PP
b. MUC/PC > MUP/PP
c. MUC/PC < MUP/PP
d. We cannot say for certain what will happen to the MUC/PC relative to the MUP/PP.
Which of the following is consistent with the law of demand?
a. People substitute higher-priced goods for higher-quality goods.
b. People substitute some higher-priced goods for other higher-priced goods.
c. People substitute lower-priced goods for higher-priced goods.
d. People substitute some lower-priced goods for other lower-priced goods.
Refer to Exhibit 20-3. If price decreases from $1.50 to $0.50, total revenue along the
demand curve
Exhibit 20-3
a. increases to $67.50.
b. increases to $87.50.
c. remains at $87.50.
d. decreases to $67.50.
e. decreases to $27.50.