The cross-price elasticity of demand between bananas and apples is most likely:
A) positive.
B) negative.
C) zero.
D) More information is needed to determine.
In a thin market:
A) only high-quality goods are sold.
B) some high-quality goods are sold but fewer than would be sold in a market with
perfect information.
C) some low-quality goods are sold but fewer than would be sold in a market with
perfect information.
D) no high-quality goods are sold.
If the price elasticity of demand is 2, this means that a ________ increase in price
causes a ________ decrease in quantity demanded.
A) 15%; 100%
B) 15%; 10%
C) 20%; 40%
D) 30%; 20%
Refer to Figure 8.9. Which point of the LAC represents economies of scale?
A) a
B) b
C) c
D) e
Which of the following is NOT a macroeconomic question?
A) Should we have a constitutional amendment requiring the federal government to
balance the budget each year?
B) Should restaurants be required to list the number of calories for each product on their
menus?
C) How does a fiscal stimulus package affect gross domestic product?
D) Should Congress enact tougher immigration laws to reduce unemployment?
At a price of $1000, Dell Computer Co. is willing to sell 20 laptops and Compaq is
willing to sell 40 laptops. IBM will only sell laptops if the price is $1300 or higher.
From the point of view of IBM, $1300 is the:
A) minimum supply price.
B) minimum cost.
C) the equilibrium price.
D) minimum loss price.
Consider Figure 12.5. Confessing is a dominant strategy for:
A) player A but not player B.
B) player B but not player A.
C) both players.
D) neither player.
If the government imposes a price floor that is above the equilibrium price, then the
market will experience:
A) an equilibrium.
B) a shortage.
C) an excess supply.
D) an increase in demand.
Figure 6.5 illustrates the market for sugar. With free trade, producer surplus in the
market would be shown as area:
A) ABC.
B) AEF.
C) GEQ1.
D) FEG.
Recall the application about taxing different groups of drivers a different tax rate based
on ages. The goal of taxing drivers for each mile they drive is to:
A) keep insurance rates high.
B) generate tax revenue to repair roads.
C) internalize the external costs from collisions.
D) get elderly drivers off the highways.
The application about the impact inflation has on your potential future salary and the
repayment of student loans, if you earn a salary of $80,000 in the first year and all
prices decrease by half in the next 5 years, what will your nominal annual salary be in 5
years?
A) $8,000
B) $10,000
C) $20,000
D) $40,000
The factors of production include:
A) natural resources.
B) labor.
C) entrepreneurship.
D) all of the above.
Given the data in Table 16.2, if Firm A were to reduce pollution from 100 gallons of
wastewater per day to 0 gallons per day, production costs:
Table 16.2
A) would increase by $7.
B) would decrease by $7.
C) would not change.
D) cannot be calculated from the information above.
Assume that when a lamp manufacturer decreases its price its total revenue does not
change. What do we know?
A) Demand is price inelastic.
B) Demand is price elastic.
C) Demand is unitary elastic.
D) Demand is perfectly price elastic.
In the long run, a perfectly competitive firm facing the same costs as in Figure 11.3
would earn $________ of economic profit.
A) 20
B) 33
C) 42
D) 0
If a consumer can buy four pizzas for $24 and five pizzas for $25, then the marginal
cost of the fifth pizza is:
A) $25.
B) $5.
C) $6.
D) $1.
All else equal, if supply is relatively elastic and demand is relatively inelastic, a tax on a
product will cause:
A) buyers to bear a larger portion of the tax burden.
B) sellers to bear a larger portion of the tax burden.
C) buyers and sellers to share the tax burden equally.
D) It is impossible to tell from this information who will bear the greater tax burden.
Producers will take external costs into account when:
A) they actually have to pay those costs.
B) environmental groups apply sufficient pressure and generate negative press
coverage.
C) those costs are less than the benefits.
D) those costs are less than the private costs.
A tax levied on coal-fired plants that is based on the amount of carbon released in the
atmosphere is considered by the firm as a:
A) variable cost.
B) fixed cost.
C) source of revenue.
D) sunk cost.
If you work 4 extra hours, and the slope of the curve showing the relationship between
your income and work hours is 8, your income will increase by:
A) $2.
B) $4.
C) $12.
D) $32.
Recall the Application. In most cases where satellite TV service is introduced in an area
with cable TV service, if the quality of cable TV service increases, then consumer
surplus:
A) increases.
B) decreases.
C) drops to zero.
D) becomes negative.
A perfectly competitive firm is producing 75 units of output. The market price is $7 and
the firm’s marginal cost is $8. The firm should:
A) lower its price.
B) raise its price.
C) increase production.
D) decrease production.
In the long run, diminishing returns would:
A) not exist because no input is held constant.
B) not exist because all inputs are held constant.
C) still exist at a lesser degree because inputs are allowed to vary.
D) exist at a greater degree, because all inputs are allowed to vary.
The decrease in the scarcity of a product usually results in:
A) an increased number of sizes.
B) more colors being available.
C) lower prices.
D) more stores selling the product.
Recall the Application about the demand and price for margarine to answer the
following question(s).
Recall the Application. Between 2000 and 2009, total U.S. consumption of margarine
________ and the price, in real terms, ________.
A) doubled; doubled
B) decreased by roughly half; decreased by roughly half
C) decreased by roughly half; stayed roughly the same
D) doubled; stayed roughly the same
A group of people has formed a house cleaning and yard maintenance business. The
number of houses or yards that they can clean or maintain in any given day is depicted
in Table 2.1. The opportunity cost of cleaning the first house in a day is:
Table 2.1
A) 0 yards maintained.
B) 1 yard maintained.
C) 2 yards maintained.
D) 20 yards maintained.
Where it wants to produce the firm in Figure 13.3 would be:
A) making a zero economic profit.
B) losing money.
C) making a positive economic profit.
D) breaking even.
Figure 2.2 presents a production possibilities curve for a country that can either produce
highways or provide people with medical care in a given year. The figure shows that the
production possibilities curve is:
Figure 2.2
A) bowed inward.
B) bowed outward.
C) a straight line.
D) bowed inward and then outward.
Which of the following is a characteristic of a perfectly competitive market?
A) a large number of firms in a market
B) selling a standardized product
C) no barriers to entry
D) all of the above
Daily Output of Japan and U.S.
Table 18.2
Refer to Table 18.2. The U.S. has a comparative advantage in the production of:
A) stereos.
B) tractors.
C) both stereos and tractors.
D) neither stereos nor tractors.