The optimal level of provision of public goods is where society’s total willingness to
pay per unit is equal to the ________ cost of producing the good.
A) total
B) average
C) variable
D) marginal
Table 10.1
Refer to Table 10.1. The maximum payment to labor per day that this profit-maximizing
T-shirt manufacturer would be willing to pay to hire five workers per day is
A) $15.
B) $75.
C) $125.
D) $200.
If the quantity of peanut butter demanded decreases by 14% when the price of jelly
increases by 7%, the cross-price elasticity of demand between peanut butter and jelly is
A) -14.
B) -2.
C) -0.5.
D) 7.
Figure 7.12
Refer to Figure 7.12. The slope of the isocost line is
A) -2.
B) -1/2.
C) 1/2.
D)2
MSC – MC reflects
A) an internal cost.
B) an external cost.
C) average marginal cost.
D) marginal benefit.
Figure 3.13
Refer to Figure 3.13. The market is initially in equilibrium at Point A. If supply shifts
from S1 to S2 and there is an excess demand of 6 cheeseburgers, the price of
cheeseburgers will have
A) moved from $5.00 to $7.00.
B) moved from $7.00 to $5.00.
C) remained constant at $5.00.
D) remained constant at $7.00.
In order to have an efficient distribution of final products to households,
A) free and open markets are essential.
B) households must maximize their income.
C) the equity criterion must be satisfied.
D) there can be no unemployment.
A duopoly is
A) a two-firm oligopoly.
B) a two-firm monopoly.
C) an identical pair of perfectly competitive industries.
D) an illegal, price-fixing cartel.
Figure 6.1
Refer to Figure 6.1. The slope of budget constraint AC is
A) -5.0.
B) -2.0.
C) -0.5.
D) indeterminate from this information because prices are not given.
There are 25,000 families in a small community that are affected by air pollution from a
local factory. The air pollution could be reduced if the company spent $10,000 on
upgraded ventilators. The company agrees to install the ventilators if the families in the
community contribute the $10,000. Since there are so many families, they fail to come
to a resolution to which they will all agree. This outcome is an example of the
A) free rider problem.
B) drop-in-the-bucket problem.
C) Coase theorem.
D) collective action problem (that arises when there are too many parties involved).
Figure 16.2
Refer to Figure 16.2. The unregulated (market) amount of cars is
A)25
B)35
C) zero because any production results in an external cost.
D) indeterminate from the information given.
Suppose that a national election occurs that generates a feeling of certainty in the
market. It is likely that this incident will ________ the level of investment spending.
A) decrease
B) increase
C) neutralize
D) not affect
Country A would have an absolute advantage compared to Country B in the production
of corn if
A) corn can be produced at lower cost in terms of other goods than it could be in
Country B.
B) Country A uses fewer resources to produce corn than Country B does.
C) the demand for corn is higher in Country A than in Country B.
D) corn sells for a higher price in Country A than in Country B.
You are the owner and only employee of a company that sets odds for sporting events.
Last year you earned a total revenue of $100,000. Your costs for rent and supplies were
$50,000. To start this business you invested an amount of your own capital that could
pay you a return of $20,000 a year.
During the year your economic costs were
A) $70,000.
B) $60,000.
C) $50,000.
D) $20,000.
Boeing decides to build a new plant using retained earnings; then
A) Boeing’s tangible capital will increase as a result.
B) Boeing is engaging in saving on behalf of its shareholders.
C) Boeing’s capital stock increases as a result of this investment.
D) All of the above are correct.
Table 11.1
Refer to Table 11.1. If the interest rate is 20%, Nashbar Bicycle’s total investment
would be
A) $0.
B) $100,000.
C) $500,000.
D) $700,000.
When Burger Barn hires one worker, 20 customers can be served in an hour. When
Burger Barn hires two workers, 50 customers can be served in an hour. The marginal
product of the second worker is ________ customers served per hour.
A) 15
B) 30
C) 40
D) 5
Most of Karl Marx’s writings are about ________.
A) communism
B) socialism
C) capitalism
D) efficiency
________ is a good measure of what society gives up by using resources to produce
more of a good or service.
A) Marginal revenue
B) Marginal revenue product
C) Marginal cost
D) Total cost of production
The field of environmental economics is concerned with ________.
A) externalities
B) public goods
C) government inefficiency
D) economies of scale
Figure 8.4
Refer to Figure 8.4. If three microwave ovens are produced, average variable costs are
A) $166.67.
B) $333.33.
C) $500.
D) $1,500.
If capital and labor are complementary inputs and the firm increases the amount of
capital employed in production, the marginal revenue product of labor will
A) decrease.
B) increase.
C) remain constant because the amount of labor was not changed.
D) either increase, decrease or remain constant depending on how complementary labor
and capital are in production.
Strategic behavior characterizes a(n) ________ industry.
A) perfectly competitive
B) monopolistic
C) monopolistically competitive
D) oligopolistic
Figure 13.1
Refer to Figure 13.1. Of the following choices, Panel C best represents the demand
curve for
A) an individual producer of soybeans.
B) a utility company.
C) insulin.
D) the Apple iPhone
Figure 3.11
Refer to Figure 3.11. An increase in the number of cattle ranchers will cause a
movement from
A) Point B to Point A.
B) Point G to Point F.
C) D2 to D1.
D) S2 toS1.
Product differentiation that makes the product ________ is horizontal differentiation.
A) more similar to the rival’s product
B) better than a rival’s product from everyone’s perspective
C) better for some consumers and worse for others
D) less expensive to produce than the rival’s product
Mark has two job offers when he graduates from college. Mark views the offers as
identical, except for the salary terms. The first offer is at a fixed annual salary of
$40,000. The second offer is at a fixed salary of $20,000 plus a possible bonus of
$40,000. Mark believes that he has a 50-50 chance of earning the bonus. If Mark takes
the offer that maximizes his expected utility and is risk loving, which job offer will he
choose?
A) Mark will take the first offer.
B) Mark will take the second offer.
C) Mark is indifferent between the offersboth yield the same expected utility.
D) Indeterminate from the given information.
Assume that price underestimates the value that society places on the flu vaccine. If
firms produce where P = MC, firms will be producing
A) the socially efficient amount of flu vaccine.
B) more than the socially efficient amount of flu vaccine
C) less than the socially efficient amount of flu vaccine.
D) so that consumer surplus is zero.
At a price of $4, quantity supplied is 100; and at a price of $6, quantity supplied is 120.
Using the midpoint formula, the price elasticity of supply is ________ and supply is
________.
A) 1; inelastic
B) 45; inelastic
C) 2; elastic
D) 10; elastic
The idea that the demand for auto workers stems from the demand for automobiles is
A) the value of the marginal product of auto workers.
B) derived demand.
C) indirect demand.
D) output demand.
Figure 5.2
Refer to Figure 5.2. If the price of a hamburger decreases from $10 to $8, the price
elasticity of demand equals ________. Use the midpoint formula.
A) -0.33
B) -3.0
C) -30.
D) -300
Assuming there are no externalities, if a firm is producing at an output level where the
benefits to consumers exceed the cost to the suppliers to produce it, then price
A) equals marginal cost.
B) is greater than marginal cost.
C) is less than marginal cost.
D) is less than marginal revenue.