The cross-price elasticity of demand between good X and good Y is 5. Given this
information, which of the following statements is true?
A) The demand for goods X and Y is inelastic.
B) Goods X and Y are substitutes.
C) Goods X and Y are complements.
D) The demand for goods X and Y is income inelastic.
The price of a good will be ________ determined if the ________ of the good is
perfectly inelastic.
A) demand; demand
B) supply; supply
C) supply; supply or demand
D) demand; supply
Tom borrowed $40,000 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 $10,000. His variable costs equal $25,000. He sold 40,000 dozen donuts during
the year at a price of $2.00 per dozen.
Tom’s profit is
A) $0.
B) $26,000.
C) $30,000.
D) $43,000.
A measure that can change from time to time is known as a(n)
A) empirical measure.
B) causality.
C) variable.
D) model.
The marginal products of the first, second, and third workers are 50, 34, and 22,
respectively. If four workers can produce 116 units of output, then the marginal product
of the fourth worker is ________.
A) 10
B) 12
C) 22
D) 116
Figure 8.6
Refer to Figure 8.6. Curve 1 is Outdoor Equipment’s
A) marginal cost curve.
B) average variable cost curve.
C) average total cost curve.
D) average fixed cost curve.
Figure 12.4
Refer to Figure 12.4. A firm produces hula hoops in a perfectly competitive market and
currently produces and sells 100 per week. Which of the following is true?
A) Since price is greater than marginal cost at the current production level, the firm
should produce more hula hoops and make society better off.
B) Because the firm’s profits would increase if it reduced production, society would be
better off if the firm produced fewer hula hoops
C) The firm is producing the efficient quantity of hula hoops because it is minimizing
ATC.
D) The firm should devote fewer resources to hula hoop production because ATC is less
than price.
The version of the law of diminishing returns that applies to production
A) implies that as we add more workers our output decreases.
B) applies only in the short run.
C) is true only when all inputs are variable.
D) applies in the short and long run.
Explain why it is more likely that the opportunity cost of attending a 7:00 a.m. class is
forgone sleep but that this is not reasonably likely to be the case for a class that meets at
12:00 noon.
Table 3.1
Refer to Table 3.1. This market will be in equilibrium if the price per pizza is
A) $6.
B) $9.
C) $12.
D) $15.
Figure 6.2
Refer to Figure 6.2. Assume Mr. Lingle’s budget is AC. At which point does Mr. Lingle
spend exactly his income?
A) A.
B) D.
C) E.
D) The answer cannot be determined with the given information.
Figure 6.4
Refer to Figure 6.4. Bill’s budget constraint is AC. His budget constraint would shift to
AD if the price of
A) black beans increased.
B) black beans decreased.
C) bell peppers increased.
D) bell peppers decreased.
In 2012 about 18% of personal income in the United States came from
A) wages and salaries.
B) property income.
C) transfer payments.
D) profits.
Consumption + the change in net worth =
A) saving.
B) economic income.
C) total assets.
D) depreciation.
If the MRP of land is less than its price, a firm should
A) use more land.
B) use less land.
C) try to decrease the productivity of land.
D) increase the price it is willing to pay for land.
In the Cournot model the final level of output falls between the output that would
prevail if the market were ________ and the output that would be set by a ________.
A) competitive; monopoly
B) oligopolistic; monopoly
C) monopolistic; cartel
D) monopolistically competitive; cartel
Which of the following characteristics is generally representative of developing
counties relative to developed countries?
A) a higher level of per-capita GNI
B) a larger percentage of the labor force in urban areas
C) a lower infant mortality rate
D) lower productivity in the agricultural sector
Figure 19.1
Refer to Figure 19.1. Initially after the payroll tax is imposed, there will be
A) an equilibrium in the labor market.
B) an excess demand for labor of 100 units.
C) an excess supply of labor of 150 units.
D) an excess supply of labor or 100 units.
In making labor supply decisions, ________ weigh the market wage against the value
of leisure and time spent in unpaid household production.
A) businesses
B) financial markets
C) households
D) None of the above is correct.
If ATC < P, then a profit-maximizing, monopolistically competitive firms earns
________ economic profits.
A) positive
B) negative
C) zero
D) either positive or negative
China and India both have rapidly developing economies. Which of the following
characteristics is shared by India and China?
A) Both have embraced free-market economies.
B) Property rights are well established in both countries.
C) Both are democratic countries.
D) Both have high literacy rates.
Table 20.1
Refer to Table 20.1. Chile should specialize in and export ________, and Germany
should specialize in and export ________.
A) beer; beer
B) wine; wine
C) wine; beer
D) beer; wine
Tacit collusion
A) is legal under the U.S. antitrust laws.
B) occurs when firms engage in formal agreements to reduce output and increase prices
in their industry.
C) is more likely to be successful in increasing industry profits when there are a few,
similar firms in the industry.
D) is more likely to effectively raise prices in the industry when demand is elastic.
Twenty-five students in a class take a test for which the average grade is 75. Then a
twenty-sixth student enters the class, takes the same test, and scores 70. The test
average grade calculated with 26 students will
A) rise above 75.
B) fall below 75.
C) change from 75 but the direction is unclear.
D) still equal 75.
The opportunity cost of investment in capital is forgone present consumption when
A) resources are scarce.
B) resources are unlimited.
C) capital is in greater supply than labor.
D) the public chooses consumption over investment.
Figure 15.2
Refer to Figure 15.2. If We Do Hair is maximizing profit as a monopolistically
competitive firm, its total revenue equals
A) $1,280.
B) $1,320.
C) $1,200.
D) $600.
Redistribution of income from the rich to the poor is achieved from a tax system that
requires taxes to rise with income. Which of the following criteria best explains the goal
of this tax system?
A) efficiency
B) equity
C) growth
D) stability
If a society is producing at a point along its production possibility frontier, then the
society
A) is fully employing its resources so it must be allocatively efficient.
B) is fully employing its resources, but not necessarily being allocatively efficient.
C) is underallocating resources so it must be inefficient.
D) is overallocating resources so efficiency is indeterminate.
If labor is a variable input in production, the law of diminishing marginal returns
implies that in the short run,
A) labor’s marginal product is constant.
B) labor’s marginal product decreases after a certain point.
C) total product is negative.
D) total product is negative after a certain point has been reached.
________ major distinguishing characteristic is that firms are interdependent.
A) Monopolistic Competition’s
B) Perfect competition’s
C) Monopoly’s
D) Oligopoly’s
We can call a profit-maximizing strategy a loss-minimizing strategy when a perfectly
competitive firm produces where
A) AVC < P < ATC.
B) P > ATC.
C) P = ATC.
D) MR = MC < P.
Evidence suggests that in the last several decades, technology has played a role in
driving inequality. Thus, greater access to education may be key to ________ in the
future.
A) reducing inequality
B) increasing inequality
C) reducing equality
D) eliminating equality
Upon graduating with an accounting degree, you open your own accounting firm of
which you and your assistant are the only employees. To start the firm you passed on a
job offer with a large accounting firm that offered you a salary of $50,000 annually.
Last year you earned a total revenue of $120,000. Rent and supplies last year were
$50,000. Your assistant’s salary is $30,000 annually.
Your annual economic costs are
A) $50,000.
B) $80,000.
C) $100,000.
D) $130,000.
Figure 7.4
Refer to Figure 7.4. The marginal product of the sixth worker is
A) -50.
B) -5.
C) 5.
D) 33.