Which of the following is most likely to be observed when firms engage mainly in
nonprice competition?
A) actively encouraging the sale of generic as opposed to brand-name products
B) advertising and product differentiation
C) discounts offered through coupons
D) low interest rates for financing the purchase of big-ticket items
_____ is (are) a strategy(ies) for dealing with adverse selection in the labor market.
A) Careful screening of an applicant
B) Examination of signals from an applicant
C) Obtaining reference letters from an applicant’s previous place of employment
D) Careful screening of an applicant, examination of signals from an applicant, and
obtaining reference letters from an applicant’s previous place of employment
If demand is inelastic, then deadweight loss will:
A) be minimized if supply is also inelastic.
B) be maximized if supply is also inelastic.
C) decrease if demand becomes more elastic.
D) increase if supply becomes more inelastic.
Scenario: Monopolistically Competitive Firm
For a monopolistically competitive firm, Q = 160 ” P; MC = 20 + 2Q; and TC = 20Q +
Q2 + 20.
(Scenario: Monopolistically Competitive Firm) Given the information in the scenario
Monopolistically Competitive Firm, what is the profit-maximizing price for this firm in
the short run?
A) $160
B) $125
C) $40
D) $180
A tax of $20 on an income of $200, $40 on an income of $400, and $50 on an income
of $500 is:
A) regressive.
B) proportional.
C) progressive.
D) inverse.
Variable cost divided by the quantity of output produced is _____ cost.
A) marginal
B) average total
C) average fixed
D) average variable
(Table: Variable Costs for Lawns) Look at the table Variable Costs for Lawns. During
the summer, Alex runs a lawn-mowing service, and lawn-mowing is a perfectly
competitive industry. Assume that costs are constant in each interval; that is, the
variable cost of mowing 1 through 10 lawns is $100. His only fixed cost is $1,000 for
the mower. His variable costs include fuel, his time, and mower parts. If the price for
mowing a lawn is $60, how much is Alex’s total revenue at the profit-maximizing
output?
A) $60
B) $1,100
C) $2,400
D) $2,100
(Table: Production Possibilities Schedule II) Look at the table Production Possibilities
Schedule II. If an economy is producing at X, the opportunity cost to it of producing at
Y is _____ units of consumer goods per period.
A) 2
B) 1
C) 6
D) 18
Over the past two decades, the share of income going to the richest Americans has
_____ than the share going to the poorest Americans.
A) risen faster
B) risen more slowly
C) fallen faster
D) fallen more slowly
Japan’s comparative advantage in automobiles can be attributed to:
A) climate.
B) factor endowments.
C) technology.
D) exchange rates.
The circular-flow diagram shows how:
A) banks receive deposits and create money.
B) money, goods and services, and factors of production flow through the economy.
C) the various levels of government allocate tax revenues to meet the needs of society.
D) the work force is educated and trained to increase labor productivity.
An agricultural market price support policy establishes a binding price floor, which:
A) decreases the price paid by consumers.
B) does not change the price paid by consumers.
C) increases the price received by farmers.
D) decreases the price received by farmers.
Consider the labor market for accountants. As more people earn accounting degrees, we
should expect to see:
A) a shift to the right of the labor supply curve.
B) a shift to the right of the labor demand curve.
C) an increase in labor along a stable labor supply curve.
D) an increase in labor along a stable labor demand curve.
(Table: Two Rival Gas Stations) Look at the table Two Rival Gas Stations, which shows
a payoff matrix for two gas stations in a small town. Each firm can set either a high
price or a low price, and customers view these two firms as nearly perfect substitutes.
Profits in each cell of the payoff matrix are given as (Swifty, Speedy). If each firm sets
the price independently, the Nash equilibrium outcome will be:
A) $100, $100.
B) $150, $25.
C) $25, $150.
D) $50, $50.
Figure: Efficiency and Pollution
(Figure: Efficiency and Pollution) Look at the figure Efficiency and Pollution. A
Pigouvian tax of $10 will result in a quantity of pollution for which the:
A) marginal social benefit is less than the marginal social cost.
B) marginal social benefit exceeds the marginal social cost.
C) marginal social benefit equals the marginal social cost.
D) resources are allocated efficiently.
Figure: The Demand and Supply of Wheat
(Figure: The Demand and Supply of Wheat) Look at the figure The Demand and
Supply of Wheat. A temporary price of $4 in this market would result in a _____ of
_____ bushels.
A) surplus; 4,000
B) shortage; 2,000
C) shortage; 4,000
D) surplus; 2,000
The total producer surplus in the Wisconsin milk market is:
A) the sum of the individual producer surpluses in this market.
B) the sum of all prices paid multiplied by the number of gallons of milk sold.
C) the total revenue of the milk producers in Wisconsin.
D) the total cost of selling milk in Wisconsin.
(Table: Marginal Benefit, Cost, and Consumer Surplus) The table Marginal Benefit,
Cost, and Consumer Surplus shows six consumers’ willingness to pay for one iTunes
download. If the marginal social cost is constant at _____, then _____ consumers will
purchase this good and consumer surplus is _____.
A) $5; three; $15
B) $5; three; $30
C) $5; two; $15
D) $4; four; $34
Table: Utility from Oranges and Star Fruit Pounds of Oranges Total Utility from
Oranges Pounds of Star Fruit Total Utility 0 0 0 0 1 24 1 70 2 44 2 130 3 60 3 180 4
72 4 220 5 80 5 250 6 84 6 270 7 84 7 280
(Table: Utility from Oranges and Star Fruit) Look at the table Utility from Oranges and
Star Fruit. Oranges cost $2 per pound and star fruit costs $5 per pound. Calvin has $26
to spend. If Calvin spends all of his money on star fruit and if he can buy only whole
pounds of it, how many pounds of star fruit can he buy?
Pounds of Oranges Total Utility from Oranges Pounds of Star Fruit Total Utility
0 0 0 0
1 24 1 70
2 44 2 130
3 60 3 180
4 72 4 220
5 80 5 250
6 84 6 270
7 84 7 280
A) 7
B) 6
C) 5
D) 4
_____ almost always take the market price as giventhat is, are considered _____but this
is often not true of _____.
A) Consumers; quantity minimizers; producers
B) Producers; quantity takers; consumers
C) Consumers and producers; price takers; firms that produce a differentiated product
D) Producers; price searchers; consumers
Among the drawbacks of brand names is the fact that:
A) they may encourage the consumption of expensive substitutes for generic items.
B) they provide some assurance of consistency of quality.
C) they convey information about the nature of the product.
D) they indicate that the seller is engaged in repeated interaction with its customers.
Xavier notices that the marginal utility of working with a tutor seems to fall with each
hour the tutor helps him study. If Xavier keeps the tutor until his grade actually begins
to fall, his marginal utility for the last hour of tutoring will be:
A) negative.
B) positive, but rising more slowly.
C) zero.
D) immeasurable.
(Table: The Market for Fried Twinkies) Look at the table The Market for Fried
Twinkies. As a result of the $0.30 tax per fried Twinkie, the government will receive
total tax revenue of:
A) $500.
B) $1,000.
C) $1,500.
D) The total is impossible to calculate.
(Table: The Production Possibilities for Tractors and Crude Oil) Look at the table The
Production Possibilities for Tractors and Crude Oil. _____ has (have) an absolute
advantage in producing crude oil.
A) The United States
B) Mexico
C) Both the United States and Mexico
D) Neither the United States nor Mexico
When Joe watched a television movie, his viewing was _____ in consumption because
other people _____ able to view the movie at the same time Joe did.
A) nonrival; were
B) rival; were
C) rival; were not
D) nonrival; were not
How much _____ Susan obtains from eating green beans is a measure of the utility of
green beans for her.
A) efficiency
B) usefulness
C) cost
D) satisfaction
Equilibrium quantity will always increase if:
A) supply and demand both increase.
B) supply increases and demand decreases.
C) supply and demand both decrease.
D) supply decreases and demand remains unchanged.
(Table: Total Utility of Income After College Expenses) Look at the table Total Utility
of Income After College Expenses. The Smith family’s expected income after tuition is:
A) $32,500.
B) $38,000.
C) $40,000.
D) $45,000.
If all firms in an industry are price takers:
A) each firm can sell at the price it wants to charge, provided it is not too different from
the prices other firms are charging.
B) each firm takes the market price as given for its output level, recognizing that the
price will change if it alters its output significantly.
C) an individual firm cannot alter the market price even if it doubles its output.
D) the market sets the price, and each firm can take it or leave it by setting a different
price.
The decision to tip a server is:
A) a rational decision if the person leaving the tip is concerned about fairness.
B) an irrational economic decision because it reduces the economic payoff of the tipper.
C) an example of decision making using bounded rationality.
D) an example of behavior based on risk aversion.
By law, FICA (the Federal Insurance Contributions Act), a payroll tax, is collected
equally from employers and employees. In reality:
A) the law worksthe employers and the employees each bear half of the burden of the
tax.
B) the employees bear almost all of the burden of the tax.
C) the employers bear almost all of the burden of the tax.
D) it’s impossible to determine who bears the burden of the tax.
Figure: Supply of Coconuts
(Figure: Supply of Coconuts) Look at the figure Supply of Coconuts. If the prices of
inputs (e.g., labor, fertilizer, and fuel) used to produce and transport coconuts increased,
it would be represented in the figure as a movement from:
A) A to B.
B) B to A.
C) C to A.
D) E to B.