Figure 4-3 Figure 4-3 shows Kendra’s
demand curve for ice-cream cones.
If the market price is $3.00, what is Kendra’s consumer surplus?
A) $6.50
B) $5.50
C) $2.50
D) $0.50
Sefronia and Bella share an apartment and they are deciding whether or not to purchase
a weekly housecleaning service. The value of the service to each of them is $50 and it
costs $80 to hire a housecleaner. Suppose Bella is lazy and a spendthrift and Sefronia
suspects that Bella will be willing to pay $80. What is Sefronia likely to do, given that
she is as rational as any other person?
A) She will correctly rationalize that Bella’s laziness and spendthrift ways are irrelevant
to the decision at hand.
B) She might claim that she is not willing to pay for a housecleaner, hoping that Bella
would pay the entire $80.
C) She might offer to do Bella’s housecleaning chores if Bella would pay her $50.
D) She will come clean and tell Bella that since Bella is lazy and a spendthrift she
should pay a bigger share of the $80.
Holding everything else constant, a decrease in the price of bicycles will result in
A) a decrease in the quantity of bicycles demanded.
B) an increase in the demand for bicycles.
C) a decrease in the supply of bicycles.
D) an increase in the quantity of bicycles demanded.
Barbara, the consummate hostess, proudly announced as she served dessert, “A port is
often the perfect end to a meal, sipped with a piece of my scrumptious chocolate cake.”
Evidently, Barbara views
A) port and chocolate cake as luxury items.
B) port and chocolate cake as necessities.
C) port and chocolate cake as complementary goods.
D) port and chocolate cake as substitutes to other desserts.
For each bottle of wine that Italy produces, it gives up the opportunity to make 10
pounds of cheese. France can produce 1 bottle of wine for every 25 pounds of cheese it
produces. Which of the following is true about the comparative advantage between the
two countries?
A) Italy has the comparative advantage in cheese.
B) Italy has the comparative advantage in wine.
C) France has the comparative advantage in wine and cheese.
D) France has the comparative advantage in wine.
The marginal propensity to save is defined as
A) saving divided by disposable income.
B) disposable income divided by saving.
C) the change in saving divided by the change in disposable income.
D) the change in disposable income divided by the change in saving.
To reassure investors who were unwilling to buy mortgages in the secondary market,
the U.S. Congress used two government sponsored enterprises, Fannie Mae and Freddie
Mac, to stand between investors and banks that grant mortgages. Fannie Mae and
Freddie Mac
A) sell mortgages to investors and use the funds to purchase bonds from banks.
B) sell bonds to investors and use the funds to purchase mortgages from banks.
C) sell bonds to banks and use the funds to purchase mortgages from investors.
D) sell mortgages to banks and use the funds to purchase bonds from investors.
Which of the following pricing strategies allows a firm to earn economic profit?
A) price discrimination
B) charging a price equal to marginal cost
C) charging a price equal to the average total cost of production
D) charging a price equal to the average variable cost of production
If the quantity of goods and services produced in the economy decreases,
A) it may be possible for real GDP to increase.
B) real GDP would certainly increase.
C) it may be possible for nominal GDP to increase.
D) nominal GDP would certainly increase.
Since 1950,
A) economic expansions in the United States have been so short that expansions barely
exist.
B) the average length of expansions in the United States have become shorter as
compared to before 1950.
C) the average length of expansions in the United States have become longer as
compared to before 1950.
D) the average length of expansions in the United States are about the same length as
compared to before 1950.
Table 4-8
Table 4-8 shows the demand and supply schedules for the low-skilled labor market in
the city of Westover.
If a minimum wage of $9.50 an hour is mandated, what is the quantity of labor
supplied?
A) 390,000
B) 380,000
C) 370,000
D) 340,000
Unlike firms that sell stock in financial markets, which are known as ________ firms,
companies which do not sell stock in financial markets are known as ________ firms.
A) public; private
B) open; closed
C) corporate; proprietary
D) stock market; bond market
Which of the following statements regarding a firm’s long-run average total cost
(LRATC) curve and its short-run average total cost (SRATC) curve is true?
A) The shape of the LRATC is affected by the law of diminishing returns.
B) The SRATC, but not the LRATC, can be used by a firm’s managers for planning.
C) The LRATC shows the lowest cost at which a firm is able to produce a given level of
output when no inputs are fixed.
D) The contribution of average fixed cost to LRATC is greater than its contribution to
SRATC.
Which of the following would be directly counted in GDP in 2014?
A) kitchen cabinets purchased from Home Depot in 2014 to be installed in a house built
in 1997
B) kitchen cabinets built in 1887, extracted from the 1887 home, and installed in a
brand new country-style home
C) kitchen cabinets built in 1887, extracted from the 1887 home, and installed in a farm
house built in 1950
D) none of the above
The labor supply for an industry would decrease if
A) the wage rate falls.
B) the percentage of the population from age 16 to 65 decreases.
C) the government welcomes foreign workers into the country.
D) a greater percentage of women want to work outside the home.
When every good or service is produced up to the point where the last unit provides
________, allocative efficiency occurs.
A) a marginal benefit to society equal to the marginal cost of producing it
B) a marginal benefit to society greater than the marginal cost of producing it
C) a marginal benefit to society less than the marginal cost of producing it
D) a marginal benefit to society equal to zero