Table 10.2
Refer to Table 10.2. Marginal revenue product of the ________ worker is $1,000.
A) second
B) third
C) fourth
D) fifth
Figure 5.6
Refer to Figure 5.6. The market is initially in equilibrium at Point A and supply shifts
from S1 to S2. Which of the following statements is true?
A) Price will still serve as a rationing device causing quantity supplied to exceed 12
pizzas.
B) There is no need for price to serve as a rationing device in this case because the new
equilibrium quantity exceeds the original equilibrium quantity.
C) Price will still serve as a rationing device causing quantity demanded to fall from 12
to 10 pizzas.
D) The market cannot move to a new equilibrium until there is also a change in supply.
Investors put up $1,040,000 to construct a building and purchase all equipment for a
new restaurant. The investors expect to earn a minimum return of 10 per cent on their
investment. The restaurant is open 52 weeks per year and serves 900 meals per week.
The fixed costs are spread over the 52 weeks (i.e. prorated weekly). Included in the
fixed costs is the 10% return to the investors and $2,000 in other fixed costs. Variable
costs include $2,000 in weekly wages, and $600 per week in materials, electricity, etc.
The restaurant charges $8 on average per meal.
If the restaurant were to shut down, losses per week would be
A) $2,000.
B) $3,600.
C) $4,000.
D) $7,200.
Any society bound by a contract calling for an income distribution that would maximize
the well-being of the worst-off member of society would allow for inequality if that
inequality
A) was justified by differences in individuals’ productivity.
B) had the effect of improving the lot of the very poor.
C) could not be reduced without making someone worse off.
D) was justified by the needs of individuals.
Table 20.2
Refer to Table 20.2. In China, the opportunity cost of
A) a tractor is 1 motorcycle.
B) a motorcycle is 10 tractors.
C) a tractor is 10 motorcycles.
D) a motorcycle is 1/30 of a tractor.
The more time that elapses, the
A) less price elastic is the demand for the product.
B) more price elastic is the demand for the product.
C) greater the income elasticity of demand for a product.
D) smaller the income elasticity of demand for the product.
Figure 8.6
Refer to Figure 8.6. Outdoor Equipment’s average variable costs are minimized at the
output level
A) where Curves 1 and 2 intersect.
B) where Curves 1 and 3 intersect.
C) between the intersections of Curves 1 and 2 and Curves 1 and 3.
D) indeterminate with the given information.
An efficient market is a market
A) that deals in unlimited resources.
B) in which long-term profits are guaranteed.
C) in which profit opportunities are eliminated almost instantaneously.
D) in which there are no opportunity costs.
In oligopoly, firms
A) are able to influence price only if the oligopolist’s products are standardized.
B) are able to influence price only if the oligopolist’s products are differentiated.
C) by virtue of their size, are able to influence price regardless of whether or not the
product is differentiated or standardized.
D) have no influence over price regardless of whether or not the product is
differentiated or standardized.
According to the law of demand, quantity demanded increases as ________, ceteris
paribus.
A) prices rise
B) prices fall
C) demand increases
D) demand decreases
Which of the following is the best example of an oligopolistic industry?
A) convenience stores
B) passenger airline service
C) public utilities
D) clothing manufacturing
Equilibrium in this market occurs at the intersection of curves S and D.
Figure 4.6
In figure 4.6, the deadweight loss due to under production is area [C + F] if price is
A) P1.
B) P2.
C) P3.
D) > P3.
Figure 18.3
Refer to Figure 18.3. If society is at point B, the distribution is
A) inefficient because Todd’s utility is zero.
B) inefficient because both Todd and Tony can be made better off.
C) efficient because it is impossible to make Todd better off without making Tony
worse off.
D) efficient because the distribution of income is equitable.
Tom borrowed $80,000 from his parents to open a donut stand. He agrees to pay his
parents a 5% yearly return on the money they lent him. His other yearly fixed costs
equal $16,000. His variable costs equal $60,000. He sold 50,000 dozen donuts during
the year at a price of $3.00 per dozen.
Tom’s total revenue was
A) $60,000.
B) $80,000.
C) $100,000.
D) $150,000.
Figure 7.6
Refer to Figure 7.6. The shoe manufacturer currently produces 50 units of output. If this
shoe manufacturer increases labor from 15 to 20, the marginal product of the 20th
worker
A) is zero, as the total number of shoes produced remains at 50.
B) is 8.5, as capital can be reduced by 8.5 units when the 20th worker is hired.
C) cannot be determined because output remains constant.
D) cannot be determined because both capital and labor have been increased.
Because resources are scarce, the opportunity cost of investment in capital is
A) zero.
B) forgone future consumption.
C) forgone present consumption.
D) infinite.
Figure 15.5
Refer to Figure 15.5. Assume The Custom Sweater Shop has fixed costs of $500 and is
a monopolistically competitive firm. At the profit-maximizing output in the short run,
the firm ________ of $46.
A) has an average total cost
B) earns a profit
C) should set a price
D) has an average variable cost
Figure 9.1
Refer to Figure 9.1. This farmer would be breaking even if price was
A) $7.
B) $9.
C) $10.
D) $11.
Which of the following characteristics is shared by India and China?
A) Both have embraced free-market economies.
B) Both have low literacy rates.
C) Both are politically authoritarian.
D) Both have low life-expectancy rates.
If Bubba’s Bait and Tackle is producing where MR = MC, Bubba’s Bait and Tackle must
be
A) earning a zero economic profit.
B) incurring a loss.
C) maximizing profits.
D) maximizing revenue but not maximizing profits.
Figure 3.17
Refer to Figure 3.17. At a price of $90, there is an excess
A) demand of 150 sunglasses.
B) supply of 450 sunglasses.
C) demand of 600 sunglasses.
D) supply of 600 sunglasses.
A decrease in the wage rate will change
A) only the amount of labor hired.
B) the amount of labor employed, and it may also change the amount of other inputs
employed.
C) the price the firm charges for the product, but it will not affect the demand for any of
the inputs.
D) the firm’s profit-maximizing level output, but not its usage of inputs.
Which of the following statements is false?
A) In a free market system, the basic economic questions are answered without the help
of a central government plan or directive.
B) Individuals guided by their own self-interest will produce products and services that
other people want.
C) The basic coordinating mechanism in a free market system is quantity adjustments
toward equilibrium.
D) In a free market system, competition forces firms to adopt efficient production
techniques.
The tax rate structure is the ________.
A) measure or value upon which a tax is levied
B) measure of who pays the tax
C) study of how taxes change over time
D) percentage of a tax base that must be paid in taxes
An assumption underlying indifference curve analysis is that MUx/MUy ________ as
less of X and more of Y is consumed.
A) increases
B) decreases
C) remains constant
D) always equals one
Monopolies, oligopolies, and monopolistic competitive industries all
A) earn positive profits in the long run.
B) have market power.
C) are completely unconstrained in their pricing.
D) raise price and quantity over what would occur in perfect competition in order to
maximize their profits.
Figure 12.1
Refer to Figure 12.1. This competitive firm is currently producing an output where ATC
is at point B. The firm’s move toward an output where ATC will be at point A will make
the economy
A) more fair and the distribution of outcome more equitable.
B) more stable.
C) less efficient.
D) less stable.
The formula for the marginal product of labor is
A) L/q.
B) (ΔL)(Δq).
C) q/L.
D) Δq/ΔL.
In 2003, the ________ ruled that U.S. tariffs on steel imported from the EU were unfair
and allowed the EU to issue retaliatory tariffs on U.S. products.
A) World Trade Organization
B) United Nations
C) European Central Bank
D) International Human Rights Commission
Figure 3
The average product of the second worker is ________ yards raked.
A) 4
B) 5
C) 14
D) 27
Figure 4.4
Refer to Figure 4.4. The United States will import 2 million barrels of oil per day if a
________ per barrel tax is levied on imported oil.
A) $25
B) $50
C) $100
D) $150
Why does the opportunity cost of producing a good rise as more resources are devoted
to producing that good?
Many people buy fire insurance when they are not required to do so. What does this tell
you about their risk preferences?
If you discovered that a country had an income tax system whereby the marginal and
average tax rates were the same for all income levels what might you conclude is true
about the structure of this income tax system. How is it possible in other words for the
marginal and average tax rate to be the same?
How does an individual know whether or not an investment in education is worthwhile?
Would the housing industry be characterized as an increasing, decreasing or a
constant-cost industry? Explain your position.
An essential assumption of the Cournot model is that each firm aims to maximize
profits, based on the expectation that its own output decision will not have an effect on
the decisions of its rivals. Critically evaluate this assumption.
If the price elasticity of demand for chocolate is -2.0 what should we expect would
happen to consumption of chocolate if the price falls by 10%? What about a 50%
decrease?
Define trade surplus and trade deficit.
Sometimes you will hear economists argue that the infant industry argument against
free trade is a weak one because these industries never seem to “grow up.” What is
meant by this argument?
What factors determine the differences in salaries, wages, and income that we observe?
Assume a candidate for president makes the argument that the United States should not
trade with countries that have lower wages than we do because by doing so it will result
in an export of American jobs abroad. Critically evaluate this claim.
What is the Tiebout hypothesis?
Explain how the price system eliminates a surplus.
Comment on the following statement: “Isoquants must be downward sloping.”
Evaluate the following statement. “If marginal product is falling it will bring down the
average product.”
When the price of corn rises from $8.00 per bushel to $10.00 per bushel, the quantity of
corn supplied rises from 20,000 to 24,000 bushels per year. Use the midpoint formula to
calculate the price elasticity of supply. Is it elastic, inelastic, or unit elastic?
In choosing the optimal output, the monopolist had only to consider its own costs and
the demand curve that it faced. How do things change under duopoly and what does the
Cournot model argue about how firms will behave?
What is capital income?
Table 8.4
Refer to Table 8.4. If Scott produces four pairs of shorts, what are his average fixed
costs?