A production possibilities frontier separates an attainable region from an unattainable
region.
a. True
b. False
Economic profit is the difference between total revenue and implicit costs.
a. True
b. False
Exhibit 28-10
If the firm in the exhibit is a monopsony, then the difference between its marginal factor
cost and the wage rate it pays is equal to
a. W4 – W2.
b. W3 – W2.
c. W4 – W1.
d. W3 – W1.
e. There is no difference between the marginal factor cost and the wage rate a
monopsony pays.
During much of the 20th century, agricultural product prices
a. rose relative to other prices.
b. fell relative to other prices.
c. neither rose nor fell relative to other prices.
d. rose as agricultural productivity increased.
Suppose you are eating buffalo wings at a local happy hour. The total utils from doing
so after the fourth, fifth, sixth, and seventh wings are 80, 116, 136, 146, respectively.
The marginal utility of the seventh wing is __________ utils.
a. 14
b. 146
c. 10
d. 20.9
The branch of economics that studies the decisions made by individuals and firms is
called macroeconomics.
a. True
b. False
When the owners of a professional sports team pay an athlete a very high salary, it must
be true that
a. the nonpecuniary aspects of the job are very low.
b. the owners expect the MRP of that athlete to be greater than the amount the player is
paid.
c. the owners expect the MFC of that athlete to be greater than the amount the player is
paid.
d. b and c
e. all of the above
The demand curve for good X is generally highly inelastic at and around the current
price. If we assume that the supply curve is neither perfectly elastic nor perfectly
inelastic, then who will pay the greater share of a tax placed on the production of good
X?
a. The buyers will pay the greater share.
b. The sellers will pay the greater share.
c. The buyers and the sellers will pay equal shares.
d. There is not enough information to answer the question.
An economy can produce either of these two combinations of goods X and Y: 1,000X
and 0Y or 400Y and 0X. Furthermore, the opportunity cost between the two goods is
always constant. Which of the following combinations of the two goods, X and Y, is it
possible for the economy to produce?
a. 700 units of X and 280 units of Y
b. 600 units of X and 250 units of Y
c. 400 units of X and 150 units of Y
d. 100 units of X and 600 units of Y
e. 300 units of X and 280 units of Y
If a perfectly competitive firm and a monopolistic competitor in long run equilibrium
face the same demand and cost curves, then the competitive firm will produce a
a. greater output and charge a lower price than the monopolistic competitor.
b. greater output, but charge the same price as the monopolistic competitor.
c. greater output and charge a higher price than the monopolistic competitor.
d. smaller output and charge a lower price than the monopolistic competitor.
e. smaller output and charge a higher price than the monopolistic competitor.
Studies shows that income elasticity of demand for food is
a. less than 1, but greater than 0.
b. more than 1, but less than 2.
c. less than 0.
d. more than 2.
Which is the following is most likely to be a derived demand?
a. the demand for new clothes to wear to a party
b. the demand for a house to live in
c. the demand for oranges that will be used to produce and sell orange juice
d. the demand for oranges to eat
You and your roommate are eating pizza and have already consumed all but the last
slice. Your roommate claims that he is hungrier than you and therefore should get the
last slice of pizza. Your roommate has made
a. a diamond-water paradox.
b. an interpersonal utility comparison.
c. an elasticity comparison.
d. a marginal error.
The economy was at point A producing 100X and 200Y. It moved to point B where it
produces 200X and 300Y. It follows that
a. point A may have been a point below the economy’s PPF, while point B may lie on
the PPF.
b. the economy’s PPF could have shifted outward and point A was a point on the
economy’s old PPF.
c. the economy has moved from one point on its PPF to another point on the same PPF.
d. a or b
e. a or c
Situation 22-2
Alejandro is one of the leading widget producers in the country. At his current level of
production, his total costs amount to $5,000, total fixed costs are $2,000, and average
total costs are $250.
What are Alejandro’s average variable costs at the present level of production?
a. $60
b. $150
c. $100
d. $200
e. There is not enough information to answer the question.
The relationship between a monopolistic competitive firm’s marginal revenue curve and
its demand curve is that the
a. two curves coincide and are horizontal at the market price.
b. marginal revenue curve lies above the demand curve and the demand curve is
horizontal at the market price.
c. marginal revenue curve lies below the demand curve and both are downward sloping.
d. two curves coincide and are downward sloping to the right.
e. marginal revenue curve lies above the demand curve and both are downward sloping.
Which of the following statements is true?
a. If a good is nonrivalrous in consumption then it is nonexcludable, too.
b. A good can be rivalrous in consumption but not nonexcludable, too.
c. An apple is nonrivalrous in consumption.
d. Many economists maintain that the market fails to produce nonexcludable private
goods.
e. none of the above
Refer to Exhibit 28-8. In the absence of collective bargaining, what quantity of labor
would the profit-maximizing monoposonist hire?
a. Q1
b. Q2
c. Q3
d. Q4
e. Q5