Figure 7.4
Refer to Figure 7.4. The marginal product of the third worker is
A) 10.
B) 28.67.
C) 32.
D) 42.
An example of an ineffective price ceiling would be the government setting the price of
wheat at ________ per bushel when the market price is at $5.00 per bushel.
A) $2.25
B) $3.00
C) $4.75
D) $6.00
Due to a firm generating external costs, the government decides to ________ the firm.
When this happens, the firm will produce ________ units of output than before the tax
was imposed in order to continue maximizing profits.
A) subsidize; fewer
B) subsidize; more
C) tax; fewer
D) tax; more
The expected cost of an investment
A) is zero if a firm uses its own funds.
B) equals the market rate of interest plus the normal rate of return on an investment.
C) depends on the market interest rate.
D) equals the market rate of interest plus the inflation rate.
Table 7.2
Inputs Required to Produce a Product Using Alternative Technologies
Refer to Table 7.2. If the hourly price of capital is $30 and the hourly wage rate is $5,
which production technology should be selected?
A) A
B) B
C) C
D) D
A scientist wants to understand the relationship between automobile emissions and the
level of global warming. The scientist collects data on the volume of automobile
emissions and the levels of global warming over time. The scientist concludes that a 1%
increase in automobile emissions causes a 0.0003% increase in average global
temperatures. From this information he concludes that the automobile emissions are
harmful to the environment and should be reduced to stop the increase in global
temperatures.
The statement that an increase in automobile emissions causes an increase in global
warming is an example of
A) an economic theory.
B) a fallacy.
C) deductive reasoning.
D) normative economics.
A market is defined as contestable if entry to it
A) is easy, but exit from it is difficult.
B) is difficult, but exit from it is easy.
C) and exit from it are both difficult.
D) and exit from it are both easy.
Rent control laws are imposed when city officials believe landlords have been
exploiting tenants. Which of the following criteria are they using to guide their actions?
A) efficiency
B) equity
C) growth
D) stability
Below are cost curves for Dom’s Barber Shop, a monopolistically competitive firm.
Figure 15.1
Refer to Figure 15.1. The profit-maximizing number of haircuts for Dom’s Barber Shop
is
A) 20.
B) 23.
C) 25.
D) 30.
Which of the following would constitute depreciation, as economists use the term?
A) using some of your savings to buy a car
B) a GM shareholder selling some of her stock
C) inventories of firms decreasing due to an increase in sales
D) All new software requires Windows 8, and not Windows 7, as an operating system.
You and your sister are splitting a pizza. You cut it in half and your sister selects her
half first. Thus, you cut it into two equally sized pieces. This is an example of
A) utilitarian justice.
B) Rawlsian justice.
C) communism.
D) a public good.
Table 6.1
Refer to Table 6.1. If the price of a beer is $4, the price of a dozen oysters is $12, and
Tyler has $28 of income, Tyler’s utility maximizing combination of beers and oysters
per day is
A) 1 beer and 2 dozen oysters.
B) 4 beers and 1 dozen oysters.
C) 3 beers and 1.5 dozen oysters.
D) indeterminate from this information.
The Oh So Humble Bakery sells 300 muffins at a price of $1 per muffin. Its explicit
costs for producing 300 muffins are $250. The Oh So Humble Bakery’s economic
profits are
A) $35.
B) $50.
C) $250.
D) indeterminate from this information.
Figure 9.7
Refer to Figure 9.7. If demand for wheat is D1, then in the long run
A) the firm will increase its price and output.
B) the firm will exit the industry.
C) new firms will enter the industry, and the current firms will expand production.
D) firms will increase their output so that their average fixed cost per unit falls.
Which of the following is NOT a relevant question with respect to government?
A) How much government involvement?
B) What kind of government involvement?
C) Should there be government?
D) How can government efficiency be improved?
Rented DVDs and movies shown in theaters are substitutes. Rented DVDs and plasma
TVs are complements. Plasma TVs and movies shown in theaters are normal goods.
In response to complaints from movie theater owners, the government removes an
entertainment tax on movie tickets, but there are no additional taxes levied on rented
DVDs. This would lead to
A) a decrease in the price of movie tickets, but no change in the rental price of DVDs.
B) a decrease in the price of a movie ticket and an increase in the rental price of DVDs.
C) a decrease in the price of movie tickets and the rental price of DVDs.
D) no change in the price of a movie ticket and a decrease in the rental price of DVDs.
You love Christmas and elaborately decorate your home and yard. It is such a spectacle
that hundreds of people drive by your house each day to enjoy 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.
Average variable cost and average total costs get closer together as output increases
because
A) diminishing returns set in.
B) average fixed costs decrease as output increases.
C) marginal costs decrease as output increases.
D) economies of scale become apparent.
China has invested heavily in turbine manufacturing and in 2009 had become the
world’s largest wind power market. Capital that provides services to the public, like
energy derived from wind power, is known as
A) intangible capital.
B) human capital.
C) tangible capital.
D) social capital.
In ________ monopolistic competitive equilibrium, there will be neither economic
profits nor losses.
A) short-run
B) long-run
C) both short-run and long-run
D) neither short-run nor long-run
Suppose that you purchased a ticket to the symphony for $40 from an online ticket
broker. Once you arrived at the symphony, you discovered that parking costs you an
additional $10. In this situation, the additional $10 you pay for parking is an example of
A) an inefficient cost.
B) marginal cost.
C) opportunity cost.
D) an economic loss.
A monopolist is currently maximizing profits. In addition, if P > ATC > MC, then the
monopolist
A) just breaks even.
B) earns positive economic profits.
C) is covering total variable costs but not total fixed costs.
D) is covering total fixed costs but not total variable costs.
Table 2.1
Refer to Table 2.1. For Mark, the opportunity cost of writing one TV commercial is
A) 1/3 of a poem.
B) 2 poems.
C) 3 poems.
D) 8 poems.
Suppose that Argentina and Chile are both engaged in the production of copper and
wheat, and that Argentina has an absolute advantage in the production of both goods. If
Chile has a comparative advantage in the production of copper, then Chile
A) has a lower opportunity cost for copper, which means that it should specialize in
production of copper and engage in trade.
B) has a lower opportunity cost for producing copper, but specialization is not feasible
because Argentina has a lower monetary cost of copper production.
C) has a higher opportunity cost for copper, which means it should specialize in the
production of wheat and engage in trade.
D) should continue to produce copper, but only for domestic consumption, because
trade is not a viable option.
The formula for the marginal product of labor is
A) L/q.
B) (ΔL)(Δq).
C) q/L.
D) Δq/ΔL.
Related to the Economics in Practice on page 109: Frank runs a corner delicatessen and
one day decides to raise his prices by 10 percent. Total revenue is likely to ________ at
the end of the first month of the higher prices since demand is relatively elastic in the
________ term.
A) rise; short
B) fall; short
C) rise; long
D) fall; long
Figure 7.4
Refer to Figure 7.4. Diminishing marginal returns begin when the ________ worker is
hired.
A) first
B) second
C) third
D) fifth
Labor and capital are substitutes in production. If labor becomes more educated, then,
ceteris paribus,
A) capital is substituted for labor.
B) labor is substituted for capital.
C) output decreases as does the rental rate.
D) output increases as does the price of the output.
Table 11.1
Refer to Table 11.1. If the interest rate is 20%, Nashbar Bicycle should
A) fund only the purchase of new notebook computers for its sales staff.
B) fund all of the projects except for the purchase of new notebook computers for its
sales staff.
C) fund all of the projects.
D) not fund any of the projects.
Statistics show that the less developed a country is
A) the larger is the share of industrial output in its total output.
B) the larger is the share of agricultural output in its total output.
C) the larger is the per capita income.
D) the larger is the GDP.
Figure 5
Refer to Figure 15.5. If the Custom Sweater Shop is monopolistically competitive, what
is the minimum level of fixed cost that would lead to the firm continuing to operate in
the short run?
A) $400
B) $4600
C) $5000
D) The firm would continue to operate regardless of the level of fixed costs.
As a holder of a share of common stock, you are
A) entitled to a portion of the firm’s revenues.
B) entitled to a portion of the firm’s profits.
C) entitled to a standard percentage return on your investment.
D) responsible for the liabilities of the corporation.
Figure 4.1
Refer to Figure 4.1. Assume that initially there is free trade. If the United States then
imposes a 10-cent tax per apple,
A) the quantity of apples demanded will be reduced by 4 million apples per day.
B) the quantity of apples supplied by U.S. firms will increase by 6 million apples per
day.
C) the price of apples in the United States will increase to 40 cents per apple.
D) U.S. imports of apples will increase by 6 million per day.