Table 17-2
Refer to Table 17-2. The marginal profit from hiring the second unit of labor is
A) $4,200.
B) $1,960.
C) $1,800.
D) $1,450.
The value you give today to money you will receive in the future is called the future
payment’s
A) time-sensitive value.
B) future value.
C) present value.
D) historical value.
Lou buys a Star Wars: The Force Awakens poster from Evan for $30 and resells it on
eBay for $60. Which of the following statements is false?
A) Lou has earned some arbitrage profits, assuming that transactions costs are
negligible.
B) The transaction has made Evan worse off because he undersold the poster.
C) Lou has probably incurred some costs in connection with this sale.
D) It is possible that Evan has earned some producer surplus from this transaction.
Letters are used to represent the terms used to answer this question: price (P), quantity
of output (Q), total cost (TC) and average total cost (ATC). Which of the following
equations is equal to a firm’s profit?
A) P – ATC
B) (P × Q) – TC
C) (P × Q) – (P × ATC)
D) P – TC
A characteristic found only in oligopolies is
A) break-even level of profits.
B) interdependence of firms.
C) independence of firms.
D) products that are slightly different.
Figure 5-4
Suppose there are several paper mills producing paper for a market. These mills,
located upstream from a fishing village, discharge a large amount of wastewater into the
river. The waste material affects the number of fish in the river and the use of the river
for recreation and as a public water supply source. Figure 5-4 shows the paper market.
Use this Figure to answer the following question(s).
Refer to Figure 5-4. What does S1 represent?
A) the market supply curve that reflects social cost
B) the market supply curve that reflects only external cost
C) the market supply curve that reflects only private benefit
D) the market supply curve that reflects private cost
The total amount of producer surplus in a market is equal to
A) the difference between quantity supplied and quantity demanded.
B) the area above the market supply curve and below the market price.
C) the area above the market supply curve.
D) the area between the demand curve and the supply curve below the market price.
________ is a problem that occurs when one concludes that a change in variable X
caused a change in variable Y when in actual fact, it is a change in variable Y that
caused a change in variable X.
A) The omitted variable
B) The positive-to-negative relationship
C) Reverse causality
D) Nonlinear slope
Holding everything else constant, a decrease in the price of bicycles will result in
A) a decrease in the quantity of bicycles demanded.
B) an increase in the demand for bicycles.
C) a decrease in the supply of bicycles.
D) an increase in the quantity of bicycles demanded.
In the United States, over the past 40 years federal revenues as a share of gross
domestic product have
A) risen steadily and now are about 40 percent.
B) ranged between 17 and 19 percent.
C) fallen below 10 because of rapid economic growth.
D) been limited by law to no more than 20 percent.
In the late 1970s, ________ of all firms were less than a year old. In recent years,
________ were.
A) almost half; less than one-quarter
B) less than 5 percent; more than 40 percent
C) more than 15 percent; only about 8 percent
D) about 40 percent; about 20 percent
Suppose we want to use game theory to analyze how an oligopolist selects its optimal
price. The cells of the payoff matrix show
A) the profit that each producer can expect to earn by pursuing a single strategy.
B) the profit that each producer can expect to earn from every combination of strategies
by the firms in the market.
C) the strategy that a firm must pursue to earn various levels of profit.
D) the expected profits of rival firms.
According to the ability-to-pay principle of taxation
A) individuals who receive the benefit of a good or service should bear a greater share
of the tax burden.
B) it is fair to expect a greater share of the tax burden to be borne by people who have a
greater ability to pay.
C) people in the same economic situation should bear an equal share of the tax burden.
D) individuals who are willing to bear a greater share of the tax burden should be
compensated with non-monetary benefits.
Firms use information on labor’s marginal revenue product to determine
A) how much to produce at each output price.
B) how many workers to hire at each wage rate.
C) how much marginal product to produce at each wage rate.
D) how much labor services to supply at each wage rate.
Table 4-4
Table 4-4 shows the demand and supply schedules for the labor market in the city of
Pixley.
Refer to Table 4-4. If a minimum wage of $12.50 an hour is mandated, what is the
quantity of labor demanded?
A) 80,000
B) 550,000
C) 630,000
D) 1,180,000
In 2015, full-time workers aged 25 and over with a college degree earned ________
school dropouts.
A) roughly the same amount as
B) 5 times as much as high
C) 5 times as much as
D) 20 times as much as
A firm chooses its profit-maximizing quantity of capital by
A) comparing the marginal revenue product of capital with the rental price of capital.
B) comparing the price of capital with the price of labor.
C) examining the total cost of capital equipment.
D) determining the rate at which the firm can borrow funds to purchase plant and
equipment.
Free trade ________ living standards by ________ economic efficiency.
A) raises; increasing
B) lowers; decreasing
C) raises; equalizing
D) lowers; eliminating
If a dollar a year from now will likely have less purchasing power because of inflation,
then a dollar today ________ a dollar a year from now.
A) is more valuable than
B) is less valuable than
C) has the same value as
D) may be more valuable or less valuable than
What happens to the equilibrium wage and quantity of labor if output price rises?
A) The equilibrium wage and the equilibrium quantity of labor rise.
B) The equilibrium wage and the equilibrium quantity of labor fall.
C) The equilibrium wage falls and the equilibrium quantity of labor rises.
D) The equilibrium wage rises and the equilibrium quantity of labor falls.
Table 17-1
Refer to Table 17-1. Suppose the output price is $3. If the firm represented in the table
is maximizing its profit by hiring six workers, what is the wage rate?
A) $120
B) $65
C) $40
D) There is insufficient information to answer the question.
Publishers practice price discrimination when they sell books at high prices to
A) early adopters.
B) local bookstores.
C) large chain bookstores.
D) online book sellers.
Laura’s Pizza Place incurs $800,000 per year in explicit costs and $100,000 in implicit
costs. The restaurant earns $1.3 million in revenues. Based on this information, what is
accounting profit for Laura’s Pizza Place?
A) $200,000
B) $400,000
C) $500,000
D) $900,000
An example of a monopoly based on control of a key resource is
A) Major League Baseball.
B) NASA.
C) Microsoft’s Windows operating system.
D) the U.S. Food and Drug Administration.
Long-run equilibrium under monopolistic competition and perfect competition is
similar in that
A) firms produce at the minimum point of their average cost curves.
B) price equals marginal cost.
C) firms break even.
D) price equals marginal revenue.
Consider three pricing strategies that the firm can pursue:
a. optimal two-part tariff pricing
b. perfect price discrimination
c. single-price monopoly pricing
Of these three strategies, which is most beneficial to society as a whole?
A) Both perfect price discrimination and a two-part tariff pricing are equally beneficial
in that the marginal benefit of the last unit sold equals the marginal cost of producing
that unit.
B) only perfect price discrimination because this pricing method eliminates deadweight
loss
C) single-price monopoly pricing because consumers enjoy at least some consumer
surplus
D) only two-part tariff pricing because the per-unit portion of the price is set equal to
marginal cost
Arlene quits her $125,000-a-year job to take care of her ailing parents. What is the
opportunity cost of her decision?
A) zero, since she will no longer be earning a salary
B) It depends on the “going rate” for home-care providers.
C) at least $125,000
D) the value she attributes to the satisfaction she receives from taking care of her
parents
Figure 15-12
Figure 15-12 shows the cost and demand curves for a monopolist.
Refer to Figure 15-12. What is the amount of consumer surplus if, instead of
monopoly, the industry was organized as a perfectly competitive industry?
A) $21
B) $124
C) $186
D) $332
A firm increased its production and sales because the firm’s manager rearranged the
layout of his factory floor. This is an example of
A) investment in human capital.
B) economies of scale.
C) positive technological change.
D) inspired management.
Economists Robert Jensen and Nolan Miller reasoned that to be a Giffen good, with an
income effect larger than its substitution effect, a good must be ________ and make up
a ________ portion of a consumer’s budget.
A) a normal good; very small
B) an inferior good; very small
C) a normal good; very large
D) an inferior good; very large
Figure 9-2
Suppose the U.S. government imposes a $0.40 per pound tariff on rice imports. Figure
9-2 shows the impact of this tariff.
Refer to Figure 9-2. Without the tariff in place, the United States consumes
A) 9 million pounds of rice.
B) 15 million pounds of rice.
C) 31 million pounds of rice.
D) 42 million pounds of rice.
Scenario 1-1
Suppose a cell phone manufacturer currently sells 20,000 cell phones per week and
makes a profit of $5,000 per week. A manager at the plant observes, “Although the last
3,000 cell phones we produced and sold increased our revenue by $6,000 and our costs
by $6,700, we are still making an overall profit of $5,000 per week so I think we’re on
the right track. We are producing the optimal number of cell phones.”
Refer to Scenario 1-1. Had the firm not produced and sold the last 3,000 cell phones,
would its profit be higher or lower, and by how much?
A) Its profit will be $6,700 higher.
B) Its profit will be $700 higher.
C) Its profit will be $700 lower.
D) Its profit will be $6,000 lower.
Figure 13-8
Figure 13-8 shows cost and demand curves for a monopolistically competitive producer
of iced tea.
Refer to Figure 13-8. At the profit-maximizing output level the firm will
A) earn a profit of $176.
B) break even.
C) earn a profit of $88.
D) earn a profit of $60.
Table 14-9
Refer to Table 14-9. Saudi Arabia and Yemen must decide how much oil to produce.
Since the demand for oil is inelastic, relatively low production rates drive up prices and
profits. Saudi Arabia, the world’s largest and lowest-cost producer, is able to influence
market price; it has an incentive to keep output low. Yemen, on the other hand, is a
relatively high-cost producer with much smaller reserves. Use the payoff matrix in
Table 14-9 to answer the following questions.
a. What is the dominant strategy for Saudi Arabia?
b. What is the dominant strategy for Yemen?
c. What is the Nash equilibrium?
Assume that you had a ticket for a basketball playoff game that you bought for $50, the
maximum price you were willing to pay. If a friend of yours offers to buy the ticket for
$100 but you decide not to sell it, how can your decision be explained?
A) You expect to receive greater utility from attending the playoff game than you
received from buying the ticket.
B) by the endowment effect
C) by the law of diminishing marginal utility
D) The income effect from the increase in the price of the ticket from $50 to $100 was
greater than the substitution effect.