Figure 5.1
Refer to Figure 6.1. Assume Tom is on budget constraint AC and the price of a
hamburger is $5.00. Tom’s monthly income is
A) $4.
B) $60.
C) $80.
D) $100.
Figure 3.19
Refer to Figure 3.19. When the economy moves from Point C to Point B, there has been
A) an increase in demand and an increase in supply.
B) a decrease in demand and a decrease in supply.
C) an increase in demand and a decrease in supply.
D) an increase in quantity demanded and an increase in quantity supplied.
The number of seats available in a stadium is fixed at 80,000. The equilibrium price for
a ticket to a football game at the stadium is $30. The equilibrium price for a ticket to a
baseball game at the stadium is $20. Which of the following is true?
A) Football games must be more expensive to produce than baseball games.
B) The demand for baseball games must be more elastic than the demand for football
games.
C) The supply of baseball games must be less elastic than the supply of football games.
D) The demand for each baseball game must be lower than the demand for each
football game.
Figure 12
Refer to Figure 7.12. If the isocost line given represents the firm’s level of total cost, the
________ point represents the firm’s optimal combination of capital and labor.
A) A
B) B
C) C
D) 50 units of capital and 50 of labor
A firm will ________ in the short run if variable costs exceed revenues.
A) earn a profit
B) produce at a loss
C) break even
D) shut down
When a monopolist is maximizing profits, it has
A) maximized its total revenue.
B) set price equal to its average cost.
C) maximized the difference between marginal revenue and marginal cost.
D) equated marginal revenue and marginal cost.
Marginal revenue (MR) is
A) TR/q
B) ΔTR/Δq.
C) P xq
D) P/q
Related to the Economics in Practice on page 82: If a hurricane results in the supply of
hotel rooms decreasing and the demand for hotel rooms increases, the equilibrium price
for hotel rooms ________ and the equilibrium quantity of hotel rooms ________.
A) will increase; will decrease
B) will increase; may increase, decrease, or stay the same
C) may increase, decrease, or stay the same; will decrease
D) may increase, decrease, or stay the same; may increase, decrease, or stay the same
Figure 6.2
Refer to Figure 6.2. Mr. Lingle’s budget constraint is AC. His choice set is all points
A) in the area bounded by OAC.
B) to the right of budget constraint AC.
C) along budget constraint AC.
D) along the vertical and horizontal axes.
Table 8.2
Refer to Table 8.2. If Sherry produces two pairs of earrings, her marginal cost is
A) $40.
B) $45.
C) $72.50.
D) $122.50.
Economists measure ________ by an individual’s utility.
A) an individual’s wealth
B) an individual’s income
C) equity
D) individual well-being
Which of the following is NOT a characteristic that is associated with developed
countries?
A) a high per capita GNI
B) low infant mortality rates
C) high life expectancy
D) an income distribution that is very close to being equal
Figure 6.15
Refer to Figure 6.15. If the price of an ice cream cone is $3, Jason’s income is
A) $50.
B) $375.
C) $450.
D) indeterminate because the price of ice cream sandwiches is not given.
Advocates of a gradualism transition approach from socialism to a market economy
recommend
A) moderate changes starting with the development of market institutions, the gradual
decontrol of prices, and the privatization of only the cost efficient firms.
B) continued government controls over wages forever.
C) an immediate and total change in all economic conditions.
D) continued government controls over prices forever.
Your employer pays for the maintenance on your car. The monetary value of this car
maintenance is
A) included in your economic income, but not your money income.
B) not included in your economic income, but included in your money income.
C) not included in either economic income or money income.
D) included in both economic and money income.
Figure 4
Refer to Figure 8.4. After point A, ________ costs are ________.
A) average total; increasing
B) marginal; decreasing
C) average variable; decreasing
D) average variable; increasing
If ATC > P, then a profit maximizing, monopolistically competitive firms earns
________ economic profits.
A) positive
B) negative
C) zero
D) either positive or negative
Figure 2.6
Refer to Figure 2.6. An increase in the economy’s capital stock is represented by a
A) shift from ppf2 to ppf1.
B) shift from ppf1 to ppf2.
C) movement along ppf1.
D) movement along ppf2.
A Gini coefficient of ________ means that one family has all the income and everyone
else has nothing.
A) 0
B) 1
C) 100
D) infinity
If one person’s enjoyment of the benefits of a good does not interfere with another’s
consumption of it, the good is
A) excludable.
B) nonexcludable.
C) rival in consumption.
D) nonrival in consumption.
Marginal revenue is the
A) ratio of total revenue to quantity.
B) difference between total revenue and total costs.
C) added revenue that a firm takes in when it increases output by one additional unit.
D) additional profit the firm earns when it sells an additional unit of output.
If the production of a good generates external benefits, the government could increase
efficiency by ________ production of the good to ________.
A) taxing; reduce the amount produced
B) subsidizing; increase the amount produced
C) regulating; reduce the amount produced
D) requiring; be licensed
Figure 6.8
Refer to Figure 6.8. The ________ movie rental has a marginal utility of fifteen.
A) first
B) second
C) third
D) fourth
Table 3.1
Refer to Table 3.1. If the price per pizza is $3, the price will
A) remain constant because the market is in equilibrium.
B) increase because there is an excess demand in the market.
C) increase because there is an excess supply in the market.
D) decrease because there is an excess supply in the market.
All of the following are factors that limit a poor nation’s economic growth EXCEPT
A) insufficient capital formation.
B) lack of human capital.
C) lack of entrepreneurial ability.
D) increased urbanization.
The Five Forces Model helps illustrate the five competitive forces that determine the
________ in an industry.
A) price and quality of output
B) level of R&D and price of output
C) level of competition and profitability
D) profitability and degree of product differentiation
Figure 6.9
Refer to Figure 6.9. The marginal utility of the first video game rental is
A) 8.
B) 10.
C) 25.
D) 40.
Figure 10
In the Rollerblade market, which is not government controlled, you accurately predict
that price will
A) increase, the quantity demanded will fall, and the quantity supplied will rise.
B) increase, the quantity demanded will rise, and the quantity supplied will fall.
C) decrease, the quantity demanded will fall, and the quantity supplied will fall.
D) decrease, the quantity demanded will rise, and the quantity supplied will fall.
Figure 4.1
Refer to Figure 4.1. If the United States levies no taxes on apples, the price of apples in
the United States would fall to ________, and the United States would import
________.
A) 20 cents per apple; 10 million apples per day
B) 30 cents per apple; 6 million apples per day
C) 40 cents per apple; 2 million apples per day
D) The price of apples in the United States after the U.S. government eliminated all
taxes on imported apples cannot be determined from this information.
Figure 16.2
Refer to Figure 16.2. To force this firm to produce the efficient level of output, the
government should impose a tax of
A) $5.00 per car.
B) $10.00 per car.
C) $15.00 per car.
D) an amount that is indeterminate from this information.
To determine the optimal method of production for a good or service, a perfectly
competitive firm needs to know all of the following EXCEPT
A) the market price of output.
B) the technologies of production that are available to the firm.
C) the prices of inputs.
D) the prices charged by its rivals.
Table 10.1
Refer to Table 10.1. The marginal revenue product of the ________ worker is $100.
A) second
B) third
C) fourth
D) fifth
Assume that firms in an oligopoly are currently colluding to set price and output to
maximize total industry profit. If the government forces the oligopolists to stop
colluding, the price charged by the oligopolies will ________ and the total output
produced will ________.
A) increase; increase
B) increase; decrease
C) decrease; increase
D) decrease; decrease
The practice of tenure at American universities is quite common. When a junior
professor is approved for tenure he or she is promoted to associate or full professor and
enjoys for all intents and purposes lifetime employment and protection against firing in
the event that he or she’s views are at odds with the university administration. While
this policy has been in place for many decades across the country why is it that
universities are hesitant to grant and do so only after careful evaluation of the
candidate’s work even though the salary they may have to contract is lower than what
one might receive in the private sector.
Suppose a monopoly utility company has a marginal cost curve that is everywhere
below its average total cost curve. Furthermore, assume that the public utility
commission that overseas this firm forces it to charge a price equal to its marginal cost.
Why would this be a problem for the firm and what would the government be forced to
do to correct it?
SCENARIO 1: Consider the following data for the harvest of crabs versus the harvest
of fish off the coast of Virginia in answering the following questions.
Refer to Scenario 1. Explain how this economy might be able to produce 45 fish and 45
crabs?
Some baseball parks have a “7th Inning Stretch” where beer, hotdogs and other food
items are offered for sale at a lower price. What economic concept is being used by the
baseball park to justify this practice? If it is successful at selling more food and
drink with this practice why don”t they lower prices at the beginning of the game?
Explain what should happen to the demand curve of monopolistically competitive firms
as consumers increasingly perceive their products to be more like commodities. What
industrial structure does this lead to?
Explain how rapid population growth can hinder labor productivity.
On the figure below, indicate the level of labor where diminishing returns set in.
Explain what the Five Forces Model is useful for and identify each of them.
Referring to Situation #1 suppose that for the time being you can only afford to hire the
first executive. What is the opportunity cost of the first executive’s work from the
viewpoint of the company? Explain.
Suppose the CEO of a major corporation has five subsidiary companies. Only one of
these companies is making better than the return on similar investments that the
company could be making if it invested its financial capital outside the company. The
CEO tells each of these subsidiary companies that the rate of return that they are
earning is not acceptable and must rise to the level of these identified companies. He
tells them if they can”t come up with a plan in twelve months that their companies will
be sold. If each of these companies was actually making money can you come up with
an economic argument for why it is still rational for this CEO to sell them if they don”t
abide by his directive.
Explain how to calculate the slope of a line. What does the slope measure?
Explain why a price discriminating monopolist would not necessarily want to price all
along the entire demand curve.
What is the main difference between monopolistic competition and monopolies?
What does the investment demand curve show?