(Table: Production of Bagels) Look at the table Production of Bagels. Diminishing
marginal returns begin with the addition of the _____ worker.
A) third
B) fourth
C) fifth
D) sixth
Which of the following is most likely to have a vertical supply curve?
A) salt
B) oil
C) insulin
D) paintings by Van Gogh
If the executives of the U.S. silicon chip industry lobby Congress for protection from
imports on the grounds that theirs is a new industry that needs time to develop
technological efficiency, they are using the _____ argument.
A) environmental standards
B) infant industry
C) cheap foreign labor
D) national security
Figure: The Market for Economics Textbooks
(Figure: The Market for Economics Textbooks) Look at the figure The Market for
Economics Textbooks. Suppose the government believes textbooks are too expensive
and it wants to make sure textbooks are affordable to more students. This type of price
control is called a price _____, and one possible binding price control would be _____.
A) floor; $100
B) floor; $40
C) ceiling; $40
D) ceiling; $100
Table: Lindsay’s Farm
(Table: Bonnie’s Production Function for Good Z) Look at the table Bonnie’s
Production Function for Good Z. Diminishing returns to labor occurs when Bonnie
hires the _____ worker.
A) second
B) third
C) fourth
D) fifth
Average variable cost is:
A) variable cost per unit multiplied by output.
B) total variable cost divided by output.
C) the difference between average total cost and total variable cost.
D) the difference between total cost and total variable cost.
Thinking in economic terms, when Mary Sweet-Tooth is deciding whether to eat
another brownie, she:
A) considers only the price of the brownie.
B) considers only how much additional exercise she will need to do to work off the
calories associated with eating another brownie.
C) compares all of the benefits and costs of eating another brownie.
D) considers whether she can do so without anyone else noticing.
(Table: Cakes) Look at the table Cakes. Pat is opening a bakery to make and sell special
birthday cakes. She is trying to decide how many mixers to purchase. Her estimated
fixed and average variable costs if she purchases one, two, or three mixers are shown in
the table. Assume that average variable costs do not vary with the quantity of output.
How many mixers should Pat buy to get the lowest average total cost if she plans to
make 100 cakes?
A) one
B) two
C) three
D) Can’t be determined without more information
If the marginal social benefit received from a good is equal to the marginal social cost
of production:
A) an increase in production will improve society’s well-being.
B) a decrease in production will improve society’s well-being.
C) no change in production can improve society’s well-being.
D) the market is producing too much of the good.
Table: Pumpkin Market
(Table: Pumpkin Market) There are two consumers, Andy and Ben, in the market for
pumpkins. Their willingness to pay for each pumpkin is shown in the table Pumpkin
Market. There are two producers of pumpkins, Cindy and Diane, and their costs are also
shown. The equilibrium price for pumpkins is $8 and the equilibrium quantity is 5. At
the equilibrium price and quantity, total producer surplus is:
A) $0.
B) $8.
C) $11.
D) $14.
(Table: Production Possibilities Schedule II) Look at the table Production Possibilities
Schedule II. The production of eight units of consumer goods and two units of capital
goods per period would result in:
A) full employment.
B) no unused resources.
C) some unused or inefficiently used resources.
D) increased economic growth.
(Table: Marginal Utility per Dollar) Look at the table Marginal Utility per Dollar. If
Damian has $9 to spend on potatoes and clams, then the utility-maximizing
combination is _____ pounds of clams and _____ pounds of potatoes.
A) no; 9
B) 2; 2
C) 1; 6
D) 2; 3
Figure: Four Markets for DVDs
(Figure: Four Markets for DVDs) Look at the figure Four Markets for DVDs. If D1 or
S1 is the original curve and D2 or S2 is the new curve, which of the graphs illustrates
what may happen in the market for DVDs if there is an increase in the cost of a movie
ticket at the local theater?
A) A
B) B
C) C
D) D
Food stamps, Medicaid, and housing subsidies are all:
A) negative income taxes.
B) unemployment benefits.
C) in-kind transfers.
D) part of the Temporary Assistance for Needy Families program.
The marginal social benefit received from pollution is equal to its marginal social cost
in the market for highly polished glass. In this situation:
A) society’s well-being can be improved if the quantity of pollution decreases.
B) firms in the market produce too much pollution.
C) firms in the market produce too little pollution.
D) firms in the market produce the socially optimal level of pollution.
(Table: Willingness to Pay for Peanuts) Using the table Willingness to Pay for Peanuts,
if the price of a bag of peanuts is $6, what is the total value of consumer surplus?
A) $4
B) $3
C) $6
D) $10
Figure: The Market for Roses
(Figure: The Market for Roses) Look at the figure The Market for Roses. Assume that
PA is the autarky price and PW is the world price. Producer surplus without international
trade would be area:
A) X + Y + Z.
B) W + X + Y.
C) X + Y.
D) Y.
If the price elasticity of supply is greater than 1:
A) supply is price-elastic.
B) supply is price-inelastic.
C) supply is price unit-elastic.
D) the quantity supplied is relatively unresponsive to price changes.
(Table: Costs of Birthday Cakes) Look at the table Costs of Birthday Cakes. Assume
that fixed costs are $10. The point of diminishing returns occurs at output of:
A) 2.
B) 3.
C) 4.
D) 5.
Tori devotes all of her income to the consumption of peanut butter and jelly. She has
just discovered that at her current level of consumption the marginal utility of a jar of
peanut butter is 5 and the marginal utility of a jar of jelly is 7. Which of the following
statements is TRUE?
A) To maximize her total utility, Tori should consume more of both goods.
B) To maximize her total utility, Tori should consume less of both goods.
C) To maximize her total utility, Tori should consume more peanut butter and less jelly.
D) There is not enough information provided to justify a change in Tori’s level of
consumption.
In the factor market for land, equilibrium rental prices will be _____ the value of
marginal product of land.
A) less than
B) equal to
C) greater than
D) unrelated to
If the supply curve of ice cream is upward-sloping and demand for it decreases, there
will be _____ in producer surplus.
A) an increase
B) a decrease
C) no change
D) It’s impossible to tell what will happen to producer surplus.
Much of the rise in income inequality in the past 20 years in the United States comes
from:
A) a rising gap among the incomes of highly educated workers.
B) the use of median income levels instead of mean income levels.
C) a predictable rising gap between the incomes of highly educated and less well
educated workers.
D) declining government controls on wage supports.
(Table: Choice with Uncertainty) Look at the table Choice with Uncertainty. Suppose
the probability that the sitcom does not make it to television is 30%, that it makes it to
television but is not the most viewed show in its time slot is 50%, and that it makes it to
television and is the most viewed show in its time slot is 20%. Given this information,
Norman’s expected total utility is _____ utils.
A) 2,000
B) 2,150
C) 2,350
D) 2,650
As a New York business owner who does a lot of flying, you are keenly aware of even
small changes in airfare from New York to Chicago. You have flown this route long
enough to know that each airline is essentially a perfect substitute for the others. You
notice that every time the largest airline changes the price, smaller airlines follow, but
the smaller airlines are always priced slightly below the fare of the largest airline. This
industry could best be described as one with:
A) price wars.
B) nonprice competition.
C) cartel behavior.
D) price leadership.
Figure: Consumer Equilibrium I The figure shows three of Owen’s indifference
curves for pizza and soda per week. Owen has $180 per month to spend on the two
goods. The price of a pizza is $20, and the price of a soda is $1.50.
(Figure: Consumer Equilibrium I) Look at the figure Consumer Equilibrium I. What is
Owen’s marginal rate of substitution of pizza for soda when he is consuming his
optimal consumption bundle?
A) 0.75
B) 1.5
C) 13.3
D) 20
In monopolistic competition:
A) firms earn zero economic profits in the long run.
B) each firm produces a product identical to that of every other firm in the industry.
C) firms are aware of their strategic interdependence.
D) firms earn large economic profits in the long run.
(Table: Demand Schedule for Gadgets) Look at the table Demand Schedule for
Gadgets. The market for gadgets consists of two producers, Margaret and Ray. Each
firm can produce gadgets with no marginal cost or fixed cost. If industry output is 700,
each firm’s profits will be _____ than they would be at the output of 500, which
maximizes industry profit.
A) $150 less
B) $150 more
C) $200 more
D) $200 less