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Which of the following is studied in macroeconomics?
A) the change in automobile sales due to a change in the price of automobiles
B) the effect of a tax reduction on the profits of an individual business
C) recessions
D) the unemployment of workers displaced by technological change in the typesetting
industry
A minimum price set above the equilibrium price is a:
A) demand price.
B) supply price.
C) price floor.
D) price ceiling.
(Table: Marginal Utility per Dollar III) Look at the table Marginal Utility per Dollar III.
If Liyun has $20 to spend on potatoes and clams, then the utility-maximizing
combination is _____ pounds of clams and _____ pounds of potatoes.
A) 2; 6
B) 3; 4
C) 1; 8
D) 3; 9
Perfectly competitive firms will:
A) maximize total revenue by using the marginal decision rule.
B) increase output up to the point that the marginal benefit of an additional unit of
output is greater than the marginal cost.
C) increase output up to the point that the marginal benefit of an additional unit of
output is equal to the marginal cost.
D) always attempt to minimize average variable cost.
The demand for strawberry ice cream tends to be relatively price-elastic because:
A) for most people there are many close substitutes for strawberry ice cream.
B) it costs so little.
C) it has to be consumed very quickly.
D) for most people there are many close substitutes for strawberry ice cream and it
costs so little.
Maximization of joint profits is most likely when firms are:
A) perfect competitors.
B) monopolistic competitors.
C) duopolists who collude.
D) natural monopolists.
Figure: Shifts in Demand and Supply II
(Figure: Shifts in Demand and Supply II) Look at the figure Shifts in Demand and
Supply II. The graph shows how supply and demand might shift in response to specific
events. Suppose a fall frost destroys one-third of the nation's grapefruit crop. Which
panel BEST describes how this will affect the market for vitamin B12 tablets, which are
a substitute in consumption for grapefruit?
A) panel A
B) panel B
C) panel C
D) panel D
Figure: Pricing Strategy in Cable TV Market II
(Figure: Pricing Strategy in Cable TV Market II) Look at the figure Pricing Strategy in
Cable TV Market II. If CableNorth followed a high-price strategy one month just to
find it only earned $80,000 because CableSouth followed a low-price strategy, and
CableNorth decided to lower prices for the next month, we would say that CableNorth
is following:
A) a kinked demand model.
B) a dominant strategy.
C) a tit-for-tat strategy.
D) a collusive strategy.
Mario sees popcorn and pretzels as perfect substitutes. He is always willing to
substitute 3 cups of popcorn for 1 cup of pretzels. If the price of a cup of popcorn
equals the price of a cup of pretzels, Mario will eat:
A) only pretzels.
B) only popcorn.
C) mostly pretzels.
D) The answer is impossible to determine.
A price ceiling is likely to result in a persistent _____, a transfer of surplus from _____,
and _____ deadweight loss.
A) surplus; producers to consumers; some
B) shortage; producers to consumers; some
C) shortage; consumers to producers; no
D) surplus; consumers to producers; some
(Table: Production Possibilities) Look at the table Production Possibilities. The
opportunity cost of 1 computer for _____ is _____ box(es) of roses.
A) the United States; 2
B) Colombia; 2
C) Colombia; 0.5
D) the United States; 1
If Benjamin considers sushi to be a normal good and if his income increases by 20
percent, his purchases of sushi will:
A) decrease by 20 percent.
B) increase.
C) decrease.
D) not change.
Scenario: Alexander and Vanessa
Alexander and Vanessa benefit from scientific research. Alexander's marginal private
benefit from such research is given by the equation P = 200 " Q, where Q refers to the
amount of research undertaken and P is the price Alexander is willing to pay for such
research. Vanessa's marginal private benefit from such research is given by the equation
P = 100 " Q. The marginal social cost of engaging in such research is constant at $100.
(Scenario: Alexander and Vanessa) Refer to the scenario Alexander and Vanessa. If
Alexander and Vanessa are the only two individuals in a society, which of the following
equations correctly represents the marginal social benefit (MSB) of scientific research?
A) MSB = 300 " 2Q.
B) MSB = 100 " Q.
C) MSB = 200 " Q.
D) MSB = 100.
You own a deli. Which of the following is a decision most likely to be made in the
LONG run at your deli?
A) You order more breadsticks.
B) You order more soft drinks for next week.
C) You renovate the second floor of your building to increase the size of the dining
room.
D) You advertise for part-time workers.
The price of popcorn is $0.50 per box and the price of peanuts is $0.25 per bag. You
have $10 to spend. You decide to purchase 20 bags of peanuts. The maximum number
of boxes of popcorn that you can purchase is:
A) 8.
B) 10.
C) 12.
D) 16.
Suppose that the market for haircuts in a community is a perfectly competitive
constant-cost industry and that the market is initially in long-run equilibrium.
Subsequently, an increase in population increases the demand for haircuts. In the long
run, firms will _____ the market, driving the price of haircuts _____ and the profits of
individual firms _____.
A) enter; up; back to zero
B) enter; down; back to zero
C) leave; up; up
D) leave; up; back to zero
Scenario: Diversification
Morris is considering investing $10,000 in a sunglass company or a rain poncho
company. If it is a rainy year and he invests only in the sunglass company, he will lose
$5,000. However, if it is a rainy year and he invests only in the rain poncho company,
he will earn $10,000. If it is a sunny year and he invests only in the sunglass company,
he will earn $10,000; if he invests only in the rain poncho company, he will lose $5,000
in a sunny year. There is a 50% chance of a sunny year and a 50% chance of a rainy
year.
(Scenario: Diversification) Look at the scenario Diversification. If Morris invests all of
his money in the sunglass company, what is his expected gain or loss?
A) a loss of $2,500
B) to break even
C) a gain of $2,500
D) a gain of $10,000
Figure: The Optimal Consumption Bundle
(Figure: The Optimal Consumption Bundle) Look at the figure The Optimal
Consumption Bundle. Which of the following could lead to an optimal consumption
bundle on indifference curve I3?
A) a decrease in income
B) an increase in the price of restaurant meals
C) a decrease in the price of rooms
D) an increase in the price of rooms
In the simplest circular-flow model, households supply _____ and demand _____.
A) capital; barter
B) wages and income; capital markets
C) factors of production; goods and services
D) firms; markets
If a market begins to engage in international trade, we can assume that:
A) producers in the exporting industry may be worse off.
B) consumers of the imported good may be worse off.
C) consumers of the exported good may be better off.
D) producers in the importing industry may be worse off.
If you are willing to give up 10 shirts (on the vertical axis) for 5 pairs of pants (on the
horizontal axis), and your level of satisfaction is unchanged, the marginal rate of
substitution of pants for shirts is:
A) 0.5.
B) 2.
C) 5.
D) 10.
In an oligopoly market, collusion between firms usually leads to higher profits than
noncooperative behavior. However, formal, overt collusion doesn't usually occur in the
United States because: I. it is illegal. II. there is an incentive for each firm to cheat on a
collusive agreement. III. an oligopolistic firm will typically prefer lower profits if the
only way to make higher profits is to improve the profit position of its rivals.
A) I only.
B) II only.
C) I and II.
D) II and III.
Whether or not they pay for them, people cannot be excluded from receiving the
benefits of:
A) private goods.
B) public goods.
C) common resources.
D) either public goods or common resources.
After eating three slices of pizza, you decide to eat one more piece. Your decision is an
example of the economic principle called:
A) opportunity-cost decision.
B) people responding to incentives.
C) equity decision.
D) marginal decision making.
Figure: A Rock Climbing Shoe Monopoly
(Figure: A Rock Climbing Shoe Monopoly) Look at the figure A Rock Climbing Shoe
Monopoly. If the firm is regulated such that it earns zero economic profit, the firm will
sell _____ pairs of shoes at a price of _____ per pair.
A) Q1; P1
B) Q2; P1
C) Q4; P3
D) Q3; P2
Figure: Consumer and Producer Surplus
(Figure: Consumer and Producer Surplus) Look at the figure Consumer and Producer
Surplus. If the price is held below equilibrium, producer surplus _____ and total surplus
_____.
A) decreases; decreases
B) increases; stays the same
C) decreases; stays the same
D) increases; decreases
