Producer surplus is
A) the difference between the maximum a person is willing to pay and current market
price.
B) the difference between current market price and full costs of production for the firm.
C) the difference between willingness to sell and full costs of productions for the firm.
D) current market price.
A player chooses a ________ strategy to maximize the minimum gain the player can
earn.
A) maximin
B) prisoners’ dilemma
C) tit-for-tat
D) Cournot
An efficient market is characterized by the fact that profit opportunities are
A) guaranteed to everyone.
B) eliminated almost instantaneously.
C) only provided to government-subsidized producers.
D) available only to the most efficient producers.
Investors put up $104,000 to construct a building and purchase all equipment for a new
restaurant. The investors expect to earn a minimum return of 10 percent on their
investment. The restaurant is open 52 weeks per year and serves 900 meals per week.
The fixed costs are spread over the 52 weeks (i.e. prorated weekly). Included in the
fixed costs is the 10% return to the investors and $2,000 in other fixed costs. Variable
costs include $2,000 in weekly wages, and $600 per week in materials, electricity, etc.
The restaurant charges $6 on average per meal.
The economic profit is
A) -$3,600.
B) -$1,200.
C) $0.
D) $5,400.
Twentyfive students in a class take a test for which the average grade is 75. Then a
twentysixth student enters the class, takes the test, and scores 80. The test average
calculated with 26 students will ________.
A) rise above 75
B) fall below 75
C) change from 75 but the direction is unclear
D) still equal 75
A(n) ________ industry does NOT have price as a decision variable.
A) perfectly competitively
B) monopolistic
C) monopolistically competitive
D) oligopolistic
The Internet has had a significant influence on advertising in all of the following ways
EXCEPT:
A) the Internet allows firms to actively interact with customers.
B) the Internet has improved firms’ ability to target specific markets.
C) the Internet has reduced the level and transparency of informational advertising.
D) the Internet has reduced spending on advertising.
Related to the Economics in Practice on page 72: Assuming the demand for Baltimore
newspapers ________ while the supply of Baltimore newspapers ________, the
equilibrium price will definitely increase.
A) increases; increases
B) decreases; increases
C) increases; decreases
D) decreases; decreases
Marginal cost is ________ average variable cost when ________.
A) equal to; average total cost is minimized
B) less than; total cost is maximized
C) greater than; average fixed cost is minimized
D) equal to; average variable cost is minimized.
Figure 3.14
Refer to Figure 3.14. A movement from Point A to Point B on supply curve S2 would be
caused by a(n)
A) increase in the price of pizza.
B) decrease in the demand for pizza.
C) increase in the price of pizza dough.
D) increase in the price of hamburgers, assuming hamburgers are a substitute for pizza.
Vaccinating your children is an example of
A) a positive externality.
B) a negative externality.
C) a public good.
D) logrolling.
Assume the current interest rate is 20%. The present value of $500 in one year would be
A) $180.
B) $417.
C) $750.
D) $1,083.
Figure 8.5
Refer to Figure 8.5. The marginal cost is equal to average variable cost when ________
ovens are produced.
A) two
B) three
C) six
D) indeterminate from this information
Liu’s Potato Chips is a perfectly competitive firm currently employing 30 workers. The
marginal revenue product of the 30th worker is $7.00 per hour. The wage rate is $8.00
per hour. To increase profits, this firm should
A) decrease employment until the MRP of labor equals $8.00.
B) increase employment until the MRP of labor equals $8.00.
C) continue hiring 30 workers because the firm earns a surplus of $1.00 on each worker
hired.
D) increase the price of potato chips so that the marginal revenue product increases to
$8.00 per hour.
If you can download 10 ring tones for your cell phone for $10 or you could download
11 ring tones for your cell phone for $10.50, then the marginal cost of the eleventh ring
tone is
A) $0.50.
B) $10.00.
C) $10.50.
D) $20.50.
Table 2.1
Refer to Table 2.1. To maximize total production
A) Molly should specialize in avatar design, and Pete should specialize in tattoo design.
B) Pete should specialize in avatar design, and Molly should specialize in tattoo design.
C) Molly and Pete should both split their time between designing avatars and tattoos.
D) Molly should design avatars and tattoos, but Pete should only design avatars.
In the market for used motorcycles there are high-quality motorcycles and low-quality
motorcycles. Potential buyers cannot determine prior to purchase whether the
motorcycle is high quality or low quality. Which of the following statements best
describes what is likely to happen in this market?
A) The price of a used motorcycle will be very close to the value of a high-quality
motorcycle, which will encourage people to sell high-quality motorcycles.
B) The price of a used motorcycle will be between the value of a high-quality and
low-quality motorcycle. This will encourage people to withdraw high-quality
motorcycles from the market.
C) This is an example of adverse selection, as the buyer will have more information
about the quality of the used motorcycle than the seller will.
D) Over time the price of a used motorcycle will increase in this market, as there is
more of an incentive for owners of high-quality motorcycles to sell than owners of
low-quality motorcycles.
Figure 6.8
Refer to Figure 6.8. The total utility of four movie is ________ and the fourth movie’s
marginal utility is ________.
A) 15; 0
B) 25; 10
C) 28; 3
D) 28; 0
Wages and salaries (including wage supplements) accounted for ________ of personal
income in the United States in 2012.
A) 37%
B) 50%
C) 64%
D) 90%
Figure 4.4
Refer to Figure 4.4. At the world price of ________ per barrel of oil, the United States
imports 6 million barrels of oil per day.
A) $100
B) $125
C) $150
D) >$150
Related to the Economics in Practice on page 10: Prior to joining a sorority, Anjelica
spent most of her free time studying in the library. Once she joined the sorority,
Anjelica spent her free time going to social gatherings. This change in behavior is best
described by
A) the fallacy of composition.
B) the post hoc ergo prompter hoc fallacy.
C) the problem of causality.
D) the ceteris paribus error.
Investors put up $104,000 to construct a building and purchase all equipment for a new
restaurant. The investors expect to earn a minimum return of 10 percent on their
investment. The restaurant is open 52 weeks per year and serves 900 meals per week.
The fixed costs are spread over the 52 weeks (i.e. prorated weekly). Included in the
fixed costs is the 10% return to the investors and $2,000 in other fixed costs. Variable
costs include $2,000 in weekly wages, and $600 per week in materials, electricity, etc.
The restaurant charges $6 on average per meal.
In the short run, if the restaurant shuts down, it will ________ variable costs and
________ revenue.
A) have; receive
B) have; receive no
C) have no; receive
D) have no; receive no
Related to the Economics in Practice on page 88: The true cost of the Shakespeare in
the Park tickets is
A) zero.
B) $0 plus the opportunity cost of the time spent in line.
C) the cost to put on the performance.
D) the additional cost to the city of extra security.
Figure 8.6
Refer to Figure 8.6. Outdoor Equipment’s ________ are minimized at the output level
where curves 1 and 3 intersect.
A) average variable costs
B) average total costs
C) average fixed costs
D) marginal costs
A tax whose burden, expressed as a percentage of income, falls as income increases is a
A) regressive tax.
B) progressive tax.
C) proportional tax.
D) benefits-received tax.
In monopolistic competition, firms can have some market power
A) by virtue of size alone.
B) by producing differentiated products.
C) because of barriers to entry into the industry.
D) because of barriers to exit from the industry.
New investors are not attracted to an industry and current ones are not exiting the
industry if firms in the industry are
A) breaking even.
B) earning an economic profit.
C) suffering an economic loss.
D) earning an accounting profit.
In the short run marginal cost is positive and decreasing at output levels where total
variable cost is ________ at a(n) ________ rate.
A) increasing; increasing
B) increasing; decreasing
C) decreasing; increasing
D) decreasing; decreasing
________ occurs when a large, powerful firm drives smaller firms out of the market by
temporarily selling at an artificially low price.
A) A dominant strategy
B) A prisoner’s dilemma
C) A maximin strategy
D) Predatory pricing
Figure 6.15
Refer to Figure 6.15. Jason maximizes utility at point
A) A.
B) B.
C) C.
D) D.