Table 11-3
Refer to Table 11-3. The table above refers to the relationship between the quantity of
workers employed and the number of cardboard boxes produced per day by Manny’s
House of Boxes. The capital used to produce the boxes is fixed. The average product of
labor will equal 66 boxes when Manny hires
A) the second worker.
B) the third worker.
C) the fourth worker.
D) the fifth worker.
When the price of a good falls, consumers buy a larger quantity because of the
________ effect and the ________ effect.
A) substitution; income
B) normal; inferior
C) substitute; complement;
D) supply; demand
Table 18-5
Table 18-5 shows the amount of taxes paid on various levels of income.
Refer to Table 18-5. The tax system is
A) progressive throughout all levels of income.
B) proportional throughout all levels of income.
C) regressive throughout all levels of income.
D) regressive between $20,000 and $25,000 of income and progressive between
$32,000 and $42,000.
Prices of microbrewery beer (assume that this is a normal good) have risen steadily in
recent years. Over this same period, prices for fermenting vats used in beer making
have also risen and consumer incomes have fallen. Which of the following best explains
the rising prices of microbrewery beer?
A) The supply curve for microbrewery beer has shifted to the left while the demand
curve for microbrewery beer has shifted to the right.
B) The demand curve for microbrewery beer has shifted to the left more than the supply
curve has shifted to the left.
C) The demand curve and the supply curve for microbrewery beer have both shifted to
the right.
D) The supply curve for microbrewery beer has shifted to the left more than the demand
curve has shifted to the left.
The endowment effect suggests that that people
A) have a strong attachment to their entitlement, regardless of whether they paid to
acquire it.
B) have a strong sense of fairness.
C) are concerned about the welfare of others.
D) act in ways to distort market prices.
Economists assume that rational people do all of the following except
A) use all available information as they act to achieve their goals.
B) undertake activities that benefit others and hurt themselves.
C) weigh the benefits and costs of all possible alternative actions.
D) respond to economic incentives.
Hewlett-Packard will not raise the prices of its personal computers without first
considering how Dell might respond. This is evidence of
A) interdependence.
B) collusion.
C) cutthroat competition.
D) price fixing.
The Buda Agri Corporation is the sole employer in rural Hungary. In the labor market,
Buda Agri is a
A) monopolistic competitor.
B) monopsony.
C) monopoly.
D) perfect competitor.
Figure 15-9
Figure 15-9 shows the demand and cost curves for a monopolist.
Refer to Figure 15-9. What is the difference between the monopoly’s price and
perfectly competitive industry’s price?
A) The monopoly’s price is higher by $9.50.
B) The monopoly’s price is higher by $13.
C) The monopoly’s price is higher by $3.50.
D) The monopoly’s price is higher by $21.
The income elasticity of demand measures
A) the responsiveness of quantity demanded to changes in income.
B) how a consumer’s purchasing power is affected by a change in the price of a product.
C) the percentage change in the price of a product divided by the percentage change in
consumer income.
D) the income effect of a change in price.
If an industry is made up of five identical firms, the four-firm concentration ratio is
A) 5%.
B) 20%.
C) 80%.
D) 100%.
The substitution effect of a decrease in the price of movie tickets results in
A) an increase in the quantity of movie tickets demanded.
B) a decrease in the quantity of movie tickets demanded.
C) an increase in the demand for movie tickets.
D) a decrease in the demand for movie tickets.
Figure 10-9
Refer to Figure 10-9. The change in the budget constraint from BC1 to BC2 implies
A) the prices of DVDs and CDs have increased.
B) income and the prices of DVDs and CDs have increased.
C) the price of DVDs has increased and the price of CDs has decreased.
D) the price of DVDs has decreased and the price of CDs has increased.
Facing stiff competition, Hendrix College, a small liberal arts institution in Conway,
Ark., decided two years ago to bolster its academic offerings, promising students at
least three hands-on experiences outside the classroom, including research, internships
and service projects. Although it raised tuition and fees by 29 percent, enrollment in the
freshman class rose by 37 percent.
Source: Jonathan D. Glater and Alan Finder, “In New Twist on Tuition Game,
Popularity Rises With the Price,” New York Times, December 12, 2006
Based on the information above, the demand for Hendrix College education is
A) unit elastic.
B) perfectly elastic.
C) relatively inelastic.
D) More information is needed to answer the question.
Article Summary
Monthly marijuana sales in Colorado topped $100 million for the first time in August,
2015, with $59.2 million in recreational sales and $41.4 million in medical sales.
Colorado has levied three types of state taxes on recreational-use marijuana: a 2.9%
standard sales tax, a 10% special marijuana sales tax, and a 15% excise tax on
wholesale marijuana transfers. The 15% excise tax is earmarked for school construction
projects. In August, recreational-use taxes and fees totaled $11.2 million and medical
taxes and fees were $2 million, bringing total revenue-to-date for the year to over $86
million.
Source: Elizabeth Hernandez, “Colorado monthly marijuana sales eclipse $100 million
mark,” Denver Post, October 9, 2015.
Refer to the Article Summary above. Colorado taxes marijuana with a 9% sales tax on
buyers and a 15% wholesale excise tax on producers, which equates to 46 percent of the
total taxes paid by retail buyers and 54 percent paid by producers. Does this necessarily
mean that buyers will bear 46 percent of the burden of the tax and producers will bear
56 percent of the burden?
A) Yes, the percentage of taxes paid by each group represents the burden of the tax.
B) No, because consumers and producers always bear equal burdens of a tax.
C) No, the burden of a tax is always 100 percent on the consumer.
D) No, the burden of the tax will depend on the elasticity of demand and supply.
What is the most common type of business?
A) corporation
B) partnership
C) sole proprietorship
D) They are equally represented because of federal laws.
The cost of producing cigarettes in the United States has increased and at the same
time, more and more Americans are choosing to not smoke cigarettes. Which of the
following best explains the effect of these events in the cigarette market?
A) The supply curve has shifted to the right and the demand curve has shifted to the
left. As a result there has been an increase in the equilibrium quantity and an uncertain
effect on the equilibrium price.
B) Both the supply and demand curves have shifted to the right. As a result, there has
been an increase in the equilibrium quantity and an uncertain effect on the equilibrium
price.
C) Both the supply and demand curves have shifted to the left. As a result, there has
been a decrease in the equilibrium quantity and an uncertain effect on the equilibrium
price.
D) The supply curve has shifted to the right and the demand curve has shifted to the
left. As a result, there has been an increase in the equilibrium price and an uncertain
effect on the equilibrium quantity.
The amount of income a consumer has to spend on goods and services is known as
A) purchasing power.
B) effective demand.
C) a budget constraint.
D) wealth.
Figure 4-4
Refer to Figure 4-4. The figure above represents the market for pecans. Assume that
this is a competitive market. If 4,000 pounds of pecans are sold
A) the deadweight loss is equal to $12,000.
B) consumer surplus equals zero.
C) the marginal benefit of each of the 4,000 pounds of pecans equals $3.
D) marginal benefit is equal to marginal cost.
Figure 12-5
Figure 12-5 shows cost and demand curves facing a typical firm in a constant-cost,
perfectly competitive industry.
Refer to Figure 12-5. The firm’s manager suggests that the firm’s goal should be to
maximize average profit. If the firm does this, what is the amount of profit that it will
earn?
A) $6,600
B) $6,750
C) $12,150
D) $36,000
The cross-price elasticity of demand between an unlimited texting option and an
unlimited call minutes option offered from a cell phone provider would be
A) positive if subscribers consider the services substitutes for each other.
B) positive if subscribers consider the services complements to each other.
C) negative if subscribers consider the services substitutes for each other.
D) negative no matter if subscribers consider the services substitutes or complements
for each other.
Figure 3-1
Refer to Figure 3-1. An increase in the expected future price of the product would be
represented by a movement from
A) A to B.
B) B to A.
C) D1 to D2.
D) D2 to D1.
Which of the following firms is most likely to use cost-plus pricing?
A) A firm that makes one product.
B) A firm that sells one product and has a sizable research and development budget.
C) A firm that makes several products and has a sizable research and development
budget, the cost of which cannot be easily assigned to each product.
D) A firm that makes many products but has a small research and development budget,
the cost of which can be easily assigned to the different product lines.
Which of the following is a reason why airline yield management is an effective method
to increase revenue?
A) because airlines have invested heavily in developing computer models that identify
optimal pricing strategies in the various market segments
B) because airlines have successfully induced customers to reveal their resources and
preferences by offering them different versions of the product such as business class
and coach plane tickets
C) because a ticket is a contract to transport a specific person, and is not transferable
D) because airlines have a monopoly in long-distance carriage
Figure 9-2
Suppose the U.S. government imposes a $0.40 per pound tariff on rice imports. Figure
9-2 shows the impact of this tariff.
Refer to Figure 9-2. With the tariff in place, the United States consumes
A) 9 million pounds of rice.
B) 15 million pounds of rice.
C) 31 million pounds of rice.
D) 42 million pounds of rice.
Table 6-6
Refer to Table 6-6. Based on the data in the table, between a price of $9.99 and $14.99,
the demand for books is
A) elastic.
B) unit elastic.
C) inelastic.
D) perfectly inelastic.
The first important law regulating monopolies in the United States was
A) the Grant Act, which was passed in 1890.
B) the Clayton Act, which was passed in 1890.
C) the Sherman Act, which was passed in 1890.
D) the Federal Trade Commission Act, which was passed in 1914.
Table 17-4
Table 17-4 lists data for the production of Apple iPods. Apple is assumed to be a price
maker, so to increase its sales of iPods the firm must lower its price. MPL and MRPL
refer to the marginal product of labor and the marginal revenue product of labor,
respectively.
Refer to Table 17-4. What are the price and quantity of workers that result in the
maximum amount of profit Apple would earn from selling iPods?
A) $140; 2
B) $160; 2
C) $140; 3
D) $180; 1
Consider the following hypothetical scenarios:
Scenario A: You are about to purchase a pair of 7 for All Mankind jeans for $175 and a
t-shirt for $45. The sales attendant at the store tells you that the pair of jeans you wish
to buy is on sale for $160 at another store, located about a 20-minute drive away.
Scenario B: You are about to purchase a pair of 7 for All Mankind jeans for $175 and a
t-shirt for $45. The sales attendant at the store tells you that the t-shirt you wish to buy
is on sale for $30 at another store, located about a 20-minute drive away.
Based on standard economic theory, under which scenario would you make the
20-minute trip to the other store?
A) Scenario A because the pair of jeans is a very expensive item and $15 saving is quite
substantial
B) Scenario B because a $15 saving amounts to a substantial discount (about 33
percent)
C) in either scenario if I think a $15 savings is worth the 20-minute trip
D) in none of these scenarios if I think the $15 saving is not worth the 20-minute trip
E) C and D are correct answers.
Some factors that allow firms to make economic profits are beyond its control. All but
one of the following is an uncontrollable factor. Which factor is controllable?
A) input prices
B) consumer tastes
C) chance events
D) product differentiation
Figure 15-9
Figure 15-9 shows the demand and cost curves for a monopolist.
Refer to Figure 15-9. What is the economically efficient output level?
A) 600 units
B) 800 units
C) 940 units
D) 1160 units