Suppose that the demand for good Y and the supply of good Y both increase.
(a.) Is it possible to predict whether the equilibrium quantity of good Y will increase,
decrease, or remain the same as a result of these changes? Why or why not?
(b.) Is it possible to predict whether the equilibrium price of good Y increase, decrease,
or remain the same as a result of these changes? Why or why not?
If a tax is imposed on externality-producing activities by perfectly competitive firms so
that the market is producing the efficient level of output, then
A) P = MSC and MDC = 0.
B) P = MSC and MDC > 0.
C) P = MC and MDC = 0.
D) P = MC and MDC > 0.
Which of the following statements is true?
A) If the United States imposes a tariff on German car imports, the price of cars in the
United States is likely to increase.
B) If the United States imposes a quota on German car imports, the price of cars in the
United States is likely to increase.
C) If Germany imposes a “voluntary export restraint” on car exports to the United
States, the price of cars in the United States is likely to increase.
D) all of the above
An alternative to ________ experiments is to rely on natural experiments to mimic the
controlled experiment.
A) random
B) mirror
C) manipulated
D) predetermined
When two people trade,
A) both of them expect to be made worse off by the exchange.
B) they are trying to help out each other.
C) they know one of them will get the better of the other.
D) they both expect to be made better off by the exchange.
In theory, if a profit maximizing firm in a perfectly competitive labor market found it
advantageous to hire one less worker, the firm should pay a
A) lower wage rate but only to the most recently hired workers.
B) higher wage rate but only to the most recently hired workers.
C) lower wage rate to all previous workers hired.
D) higher wage rate to all previous workers hired.
The contestable market model is the oligopoly model which results in
A) the greatest efficiency.
B) the greatest inefficiency.
C) the highest profits.
D) the greatest deadweight loss.
________ is available only to low-income families with children.
A) The Food Stamp program
B) The Earned Income Tax Credit
C) Medicaid
D) The supplemental Security Income program
Income ________ along the demand curve.
A) increases
B) decreases
C) is held constant
D) either increases or decreases
Profit-maximizing firms want to maximize the difference between
A) total revenue and marginal cost.
B) total revenue and total cost.
C) marginal revenue and marginal cost.
D) marginal revenue and average cost.
At the Larson Bakery the marginal products of the first, second, and third sales clerks
are 20, 17, and 11 customers served, respectively. The total product (number of
customers served) of the three sales clerks is
A)
B)
C)
D)
Markets ________ to produce an efficient allocation of resources, but governments
________ because the measurement of social damages and benefits is difficult and
imprecise.
A) succeed; also succeed
B) succeed; fail
C) fail; succeed
D) fail; also fail
Table 10.2
Refer to Table 10.2. Marginal revenue product of the ________ worker is $250.
A) second
B) third
C) fourth
D) fifth
If a profit maximizing firm is currently producing output where ________, it should not
change output because it is already maximizing profit.
A) TR = TC
B) MR > MC
C) MR = MC
D) MR < MC
Figure 6.1
Refer to Figure 6.1. Tom’s budget constraint is AC. His choice set includes all points
A) to the right of budget constraint AC.
B) bounded by the area OAC.
C) along budget constraint AC.
D) along the vertical and horizontal axes.
In a laissez-faire economy, what provides individuals the information needed to make
decisions?
A) insurance
B) prices
C) patents
D) government
When there is overproduction in a market,
A) market price is too low.
B) there is excess quantity demanded.
C) the total of consumer and producer surplus is maximized.
D) there is a deadweight loss.
Figure 4.1
Refer to Figure 4.1. Assume that initially there is free trade. The quantity demanded of
apples will be reduced by 2 million per day if the United States imposes a tax of
________ per apple.
A) 10 cents
B) 20 cents
C) 30 cents
D) 40 cents
Assume Gloria is initially in equilibrium and that X and Y are normal goods for her.
Then the price of X falls. For Gloria to move to a new equilibrium point, her
consumption of
A) X must remain constant, but her consumption of Y must decrease.
B) X must decrease.
C) X must increase.
D) both X and Y must decrease.
Figure 5.2
Refer to Figure 5.2. If the price of a hamburger is increased from $8 to $10, the price
elasticity of demand equals ________. Use the midpoint formula.
A) -0.33
B) -3.0
C) -30.
D) -300
The marginal revenue product of labor curve will always shift to the right if
A) the wage rate rises.
B) product demand decreases and product price decreases.
C) product demand increases and product price increases.
D) the price of capital rises.
Suppose that Japan and India are both engaged in the production of radios and rice, and
that Japan has an absolute advantage in the production of both goods. If India has a
lower opportunity cost for producing rice, then
A) India has a comparative advantage in rice production, but there will be no gains
from specialization and trade.
B) Japan has a comparative advantage in the production of both goods.
C) India has a comparative advantage in the production of rice, but it is outweighed by
Japan’s absolute advantage in rice production.
D) India has a comparative advantage in the production of rice, and specialization and
trade between the two countries can be mutually beneficial.
Figure 3.15
Refer to Figure 3.15. A decrease in the wage rate of gardenburger makers will cause a
movement from Point B on supply curve S2 to
A) Point A on supply curve S2.
B) Point C on supply curve S2.
C) supply curveS3.
D) supply curve S1.
If the cross-price elasticity of demand between fish and chicken is 2, then a 2% increase
in the price of fish will result in a ________ in the quantity of chicken demanded.
A) 1% increase
B) 4% increase
C) 10% increase
D) 20% decrease
An example of an investment is
A) the purchase of an iPhone by a company for one of its salesmen.
B) the purchase of a share of Berkshire Hathaway stock.
C) the purchase of a government Treasury bill.
D) all of the above
Your favorite holiday is Halloween and each year you decorate your yard with
pumpkins, skeletons, and tombstones, and you install a noise machine which blasts
haunting sounds 24 hours a day. It is such a spectacle that hundreds of people drive by
your house each day to gawk at the display. The noise and traffic disturb your neighbors
who sue you and you are required to take down your display permanently. This is an
example of
A) the Coase theorem.
B) a liability rule.
C) an injunction.
D) the free-rider problem.
You are unable to study at night because so much noise comes from the dorm room next
door. We would classify this situation as an
A) internal cost.
B) internal benefit.
C) external cost.
D) external benefit.
Table 6.2
Refer to Table 6.2. The marginal utility of the second donut per day is
A) 20.
B) 30.
C) 70.
D) 110.
Figure 12
Refer to Figure 7.12. At point C, the slope of the q2 = 200 isoquant is
A) -2.
B) -1/2.
C) -1.
D) indeterminate from this information.
The table below shows the supply and demand for T-shirts:
(a.) If the price in the market is currently $11.00, is the market in equilibrium? Explain.
(b.) If the price in the market is currently $8.00 and the supply and demand for T-shirts
are stable, will the price remain $8.00? Why or why not?