(Table: Total Cost and Output) Look at the table Total Cost and Output, which describes
Sergei’s total costs for his perfectly competitive all-natural ice cream firm. If the market
price of a tub of ice cream is $35, how much is Sergei’s profit at the optimal short-run
output?
A) “$5
B) $110
C) $180
D) $330
Suppose the input costs associated with manufacturing hair replacement treatments
decrease over time. This would lead to:
A) an increase in the supply of such treatments, lower prices, and an increase in the
equilibrium quantity.
B) a decrease in quantity supplied and lower prices.
C) an increase in demand and higher prices.
D) a decrease in the supply of such treatments, higher prices, and a decrease in the
equilibrium quantity.
The cost of leaving the skating championship before it ends is _____, while the cost of
staying for the entire match is _____.
A) the opportunity cost of not seeing the perfect 10 performance; zerothe ticket to the
championship is already paid, so there is no cost
B) the opportunity cost of not seeing the perfect 10 performance; the opportunity cost
of whatever else you could have done during that time
C) zeroyou don’t have to pay to leave; zerothe ticket to the match is already paid so
there is no cost
D) the cost of the ticket; the cost of the ticket
(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. If
Pat purchases two mixers and bakes 400 cakes per day, what is her average total cost?
A) $0.02
B) $10.75
C) $500
D) $1,507
Figure: A Market with a Tax
(Figure: A Market with a Tax) Look at the figure A Market with a Tax. Before the tax is
imposed, consumer surplus is equal to the areas:
A) A + B + C + D + E.
B) A + B + C.
C) A + B + C + D + E + F.
D) D + E + F.
When marginal cost is ABOVE average variable cost, average variable cost must be:
A) at its minimum.
B) at its maximum.
C) falling.
D) rising.
(Table: Spring Water) The table Spring Water shows the demand and cost data for a
firm in a monopolistically competitive industry producing drinking water from
underground springs. The profit-maximizing output is _____ cases.
A) 5
B) 6
C) 7
D) 8
Stephanie stops at a gas station to fill up the tank of her car. The unleaded gasoline in
her tank is best described as a(n):
A) private good.
B) public good.
C) artificially scarce good.
D) common resource.
Assume an economy is operating on its production possibility frontier, which shows the
production of military and civilian goods. If the output of military goods is increased,
the output of civilian goods:
A) will increase, too.
B) will not change.
C) must decrease.
D) may increase or decrease.
You own a small deli that sells sandwiches, salads, and soup. Which of the following is
an implicit cost of the business?
A) wages paid to part-time employees
B) the job offer you did not accept at a local catering service
C) bread, meat, and vegetables used to produce the items on your menu
D) your monthly utility bill
Suppose the price elasticity of demand for coffee at the CoffeeBarn equals 1.71 for
women and 0.55 for men. A successful price discrimination strategy would lead to
_____ prices for men and _____ prices for women _____.
A) lower; lower; in any circumstances
B) lower; higher; in any circumstances
C) lower; higher; as long as men can’t resell drinks to women
D) higher; lower; as long as women can’t resell drinks to men
Taxation according to the benefits-received principle is best illustrated by the _____
tax.
A) income
B) sales
C) gift
D) gasoline
To engage in price discrimination a firm must be:
A) a price taker.
B) a price setter.
C) able to identify consumers whose elasticities differ.
D) a price setter, and it must be able to identify consumers whose elasticities differ.
An industry with a few interdependent firms is best described as an example of:
A) perfect competition.
B) monopolistic competition.
C) oligopoly.
D) monopoly.
(Table: Firm’s Willingness) The table Firm’s Willingness explains the relation between
the number of reports a firm is willing to produce and the lowest price it is willing to
accept to prepare those reports. If the price of a report is $12, what is the value of
producer surplus for the firm?
A) $27
B) $21
C) $16
D) $42
A beneficial technological change is developed in the production of cranberries. At the
same time, scientists discover that cranberries have significant health benefits. This will
result in:
A) an increase in both the equilibrium price and quantity in the cranberry market.
B) an increase in the equilibrium quantity and an uncertain effect on the equilibrium
price of cranberries.
C) a decrease in both the equilibrium price and quantity in the cranberry market.
D) a decrease in the equilibrium price and an uncertain effect on the equilibrium
quantity of cranberries.
An efficiency wage is:
A) above the equilibrium wage and is paid to provide workers with an incentive
increase productivity.
B) efficient because it is exactly equal to the wage rate implied by the marginal
productivity theory.
C) determined by collective bargaining between unions and management.
D) equal to the value of the marginal product of laboradjusted so as to make the
structure of compensation more equitable.
Figure: Consumer Equilibrium IV
(Figure: Consumer Equilibrium IV) Look at the figure Consumer Equilibrium IV.
Assume that you are consuming the combination of goods at point K. Given the budget
constraint FL, utility:
A) can be increased by consuming more nights in a hotel room and fewer train tickets.
B) can be increased by consuming fewer nights in a hotel room and more train tickets.
C) can be increased by consuming more of both goods.
D) cannot be increased.
The total amount of funds that potentially could be paid out by an insurance company
is:
A) the sum of all premiums collected.
B) the sum of all deductibles received from claims.
C) the capital at risk.
D) the company’s liabilities.
Figure: The Profit-Maximizing Firm in the Short Run
(Figure: The Profit-Maximizing Firm in the Short Run) Look at the figure The
Profit-Maximizing Firm in the Short Run. N is the _____ curve.
A) ATC
B) MR
C) MC
D) AVC
Figure: Sugar and Freight Trains
(Figure: Sugar and Freight Trains) Look at the figure Sugar and Freight Trains. Suppose
the economy is operating at point C. The opportunity cost of producing the fourth
freight train would be:
A) 19 tons of sugar.
B) 45 tons of sugar.
C) 80 tons of sugar.
D) 3 freight trains.
Figure: Comparative Advantage Eastland and Westland produce only two goods,
boxes of peaches and boxes of oranges, and this figure shows each nation’s production
possibility frontier for the two goods.
(Figure: Comparative Advantage) Look at the figure Comparative Advantage. Eastland
has a comparative advantage in producing:
A) oranges only.
B) peaches only.
C) both oranges and peaches.
D) neither oranges nor peaches.
Figure: Rent Controls
(Figure: Rent Controls) Look at the figure Rent Controls. Without rent controls, the
equilibrium rent is:
A) Rent4.
B) Rent1.
C) Rent2.
D) Rent3.
In the short run, a monopoly will stop producing if:
A) P < ATC.
B) P < AVC.
C) P > MR.
D) P > ATC.
If the main purpose of a tax is to decrease the amount of a harmful activity, such as
underage drinking, the government should impose it on harmful activities whose supply
is _____ and demand is _____.
A) elastic; elastic
B) inelastic; inelastic
C) elastic; inelastic
D) inelastic; elastic
Figure: The Demand Curve
(Figure: The Demand Curve) Look at the figure The Demand Curve. By the midpoint
method, the price elasticity of demand between $1 and $2 is approximately:
A) 0.16.
B) 0.56.
C) 1.80.
D) 5.67.
If marginal cost is GREATER THAN average total cost:
A) average total cost is increasing.
B) average total cost is decreasing.
C) average total cost is unchanged.
D) marginal cost is decreasing.
Figure: The Demand Curve
(Figure: The Demand Curve) Look at the figure The Demand Curve. By the midpoint
method, the price elasticity of demand between $8 and $9 is approximately:
A) 0.18.
B) 0.56.
C) 1.80.
D) 5.67.
Scenario: The Decision to Hire Labor
Assume that both the product market and the labor market are perfectly competitive.
The price of this firm’s product is $5. The firm’s total product with respect to labor is
given in the table that follows.
(Scenario: The Decision to Hire Labor) Look at the scenario The Decision to Hire
Labor. This firm experiences diminishing marginal product after it hires the _____
worker.
A) first
B) second
C) third
D) fourth