Many public utilities burn oil to generate electricity. If the price of oil increases, we
expect a shift to the _____ in the _____ curve for _____ and a _____ price for
electricity
A) right; supply; electricity; lower
B) left; supply; electricity; higher
C) right; demand; oil; higher
D) left; demand; oil; lower
Suppose peanut butter is an inferior good for Ilya and the price of peanut butter rises.
What will happen to Ilya’s consumption of peanut butter?
A) The substitution effect will cause an increase in the consumption of peanut butter.
B) The substitution effect will cause a decrease in the consumption of peanut butter and
the income effect will cause an increase in the consumption of peanut butter.
C) The substitution effect will cause a decrease in the consumption of peanut butter.
D) The income effect will cause an increase in the consumption of peanut butter.
The category compensation of employees doesn’t capture the full income of labor
because:
A) it doesn’t include the earnings of proprietors.
B) it doesn’t include benefits such as health insurance.
C) a sizable fraction of it can be attributed to the return on human capital.
D) it excludes payments in kind that are common in rural areas.
(Table: The Utility of Macaroni and Cheese) Look at the table The Utility of Macaroni
and Cheese. Carmen loves macaroni and cheese for Thanksgiving. Carmen’s total utility
is maximized when she eats the _____ serving.
A) first
B) second
C) fifth
D) sixth
Figure: A Firm’s Cost Curves
(Figure: A Firm’s Cost Curves) Look at the figure A Firm’s Cost Curves. The curve X
represents the firm’s _____ cost curve.
A) marginal
B) average total
C) average fixed
D) average variable
Figure: The Market for Music Downloads
(Figure: The Market for Music Downloads) Look at the graph The Market for Music
Downloads. If the government imposes a tax of $3 in this market, the deadweight loss
will equal:
A) $0.
B) $22.50.
C) $26.25.
D) $52.50.
All children have to be immunized against polio, measles, mumps, and other diseases.
If you don’t have enough money to pay for the immunizations, they will be provided
free at the county health clinic. This statement best represents this economic concept:
A) People usually exploit opportunities to make themselves better off.
B) Resources should be used as efficiently as possible to achieve society’s goals.
C) When markets don’t achieve efficiency, government intervention can improve
society’s welfare.
D) Government policies can change spending.
Some baseball fans leave the game in the seventh or eighth inning to avoid the
postgame traffic. The fans are:
A) not considering that they have already paid for their tickets.
B) making a marginal decision by comparing the cost of leaving early to the benefit of
leaving early.
C) thinking only about the benefits of avoiding traffic.
D) underestimating the value of staying for the rest of the game.
Table: Pumpkin Market
(Table: Pumpkin Market) There are two consumers, Andy and Ben, in the market for
pumpkins. Their willingness to pay for each pumpkin is shown in the table Pumpkin
Market. There are two producers of pumpkins, Cindy and Diane, and their costs are also
shown. The equilibrium price for pumpkins is $8 and the equilibrium quantity is 5. If
Andy buys one more pumpkin and Cindy sells one fewer pumpkin than in equilibrium,
total surplus will _____ by _____.
A) increase; $16
B) increase; $14
C) decrease; $4
D) decrease; $2
(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 $11, what is the value of
producer surplus for this firm?
A) $11
B) $17
C) $27
D) $40
Figure: Tax Incidence
(Figure: Tax Incidence) Look at the figure Tax Incidence. All other things unchanged,
the effect of an excise tax on gasoline in the long run is most likely illustrated by panel
_____, and the greater share of the burden of the excise tax (shown by the tax wedge in
each panel) is borne by _____.
A) A; buyers
B) B; sellers
C) B; buyers
D) A; sellers
The idea that even in the presence of externalities an economy can reach an efficient
solution as long as transaction costs of making a deal are low and property rights are
well-defined is known as:
A) a Pigouvian tax.
B) a network externality.
C) a technology spillover.
D) the Coase theorem.
Suppose that the cross-price elasticity of demand for Mountain Dew with respect to the
price of Coke is 0.7. This implies that the two goods are:
A) substitutes.
B) complements.
C) inferior.
D) normal.
Market structures are categorized by:
A) the number and size of the firms.
B) whether products are differentiated and the extent of advertising.
C) the number of firms and whether products are differentiated.
D) the size of the firms and the extent of advertising.
(Table: The Demand for Chocolate-Covered Peanuts) Look at the table The Demand for
Chocolate-Covered Peanuts. If George, Barbara, and Dan are the only three buyers in
the market and the price of a bag of chocolate-covered peanuts is $0.50, the total market
quantity demanded is _____ bags per month.
A) 80
B) 105
C) 210
D) 280
(Table: Market for Pizza) Look at the table Market for Pizza and use the midpoint
method. The price elasticity of demand for pizza between $14 and $12 per pizza when
income is $1,000 per month is:
A) 0.6.
B) 1.
C) 1.6.
D) 2.
If there are two gas stations in a very small town, then the gas station business there is
probably best characterized as:
A) perfectly competitive.
B) monopolistically competitive.
C) monopolistic.
D) oligopolistic.
An example of a tariff is a:
A) limit on the total number of Honda automobiles imported from Japan.
B) regulation specifying that each imported Honda automobile must meet certain
emission exhaust guidelines.
C) tax of $500 on each Honda automobile produced in the United States.
D) tax of 10% of the value of each Honda automobile imported from Japan.
A decrease in supply with no change in demand will lead to _____ in equilibrium
quantity and _____ in equilibrium price.
A) an increase; an increase
B) an increase; a decrease
C) a decrease; an increase
D) a decrease; a decrease
In oligopoly, a firm must realize that:
A) what it does has no effect on the other firms in the industry.
B) its behavior will be ignored by other firms in the industry.
C) another major firm may dominate choices in the industry, and it will have to behave
accordingly.
D) collusion was made legal in 2004.
Figure: Water Works
(Figure: Water Works) Look at the figure Water Works, which describes a small town’s
water works, a natural monopoly. If regulators want to maximize efficiency, the
monopolist will be allowed to charge a price of:
A) $5.
B) $6.
C) $13.
D) $21.
The premium on insurance is often _____ to the deductible, allowing insurance
companies to _____ their customers.
A) equal; pool
B) directly related; signal
C) equal; offer a fair premium to
D) inversely related; screen
The slope of a long-run average total cost curve exhibiting decreasing returns to scale
is:
A) zero.
B) infinite.
C) positive.
D) negative.
An increase in the price and an ambiguous change in quantity is most likely caused by:
A) a shift to the left in demand and no shift in supply.
B) a shift to the left in supply and no shift in demand.
C) a shift to the right in supply and a shift to the left in demand.
D) a shift to the left in supply and a shift to the right in demand.
(Table: Total Product and Marginal Product) Look at the table Total Product and
Marginal Product. The marginal product of the fourth worker is _____ units.
A) 20
B) 22.5
C) 50
D) 90
Figure: An Excise Tax
(Figure: An Excise Tax) Look at the figure An Excise Tax. If an excise tax equal to
$1.10 is imposed on this good, then the price paid by consumers will:
A) rise by $1.10.
B) rise by $1.33.
C) not rise.
D) rise by $0.50.
Suppose at $10 the quantity demanded is 100. When the price falls to $8, the quantity
demanded increases to 130. The price elasticity of demand between $10 and $8, by the
midpoint method, is approximately:
A) 1.17.
B) 1.50.
C) 0.85.
D) 1.00.
When Caroline’s dress factory hires two workers, the total product is 50 dresses. When
she hires three workers, total product is 60, and when she hires four workers, total
product is 65. The slope of the marginal product curve when two to four workers are
hired is:
A) upward.
B) horizontal.
C) vertical.
D) downward.
Figure: Harold’s Indifference Curves The figure shows three of Harold’s indifference
curves for bread and cheese.
(Figure: Harold’s Indifference Curves) Look at the figure Harold’s Indifference Curves.
Given that the price of bread is $1 per loaf and the price of cheese is $2 per pound, as
Harold’s income increases from $10 to $14, we can determine that bread is a(n) _____
good and cheese is a(n) _____ good.
A) inferior; inferior
B) normal; inferior
C) inferior; normal
D) normal; normal
Figure: Short-Run Costs
(Figure: Short-Run Costs) Look at the figure Short-Run Costs. At 7 units of output,
average fixed cost is approximately _____, and average variable cost is approximately
_____.
A) $100; $100
B) $10; $135
C) $40; $100
D) $140; $140