Joe runs a business and needs to decide how many hours to stay open. Figure 2.4
illustrates his marginal benefit of staying open for each additional hour. Suppose that
Joe’s marginal cost of staying open per hour is $40. How many hours should Joe stay
open?
Figure 2.4
A) 3 hours
B) 4 hours
C) 5 hours
D) 6 hours
Recall the application about the marginal cost and marginal benefit of reducing methane
emissions. What does the optimal level of methane abatement depend on?
A) the level at which the polluting firms are able to maximize their profits
B) the total cost of abatement
C) the marginal benefit of abatement
D) It is not possible to determine an optimal level of methane.
Suppose the nation of Arcadia produces only two goods, teapots and surfboards. If
Arcadia produces only teapots, it can make 40 per day. If Arcadia produces only
surfboards, it can make 60 per day. What is the opportunity cost of 1 teapot in Arcadia?
A) 2/3 of a surfboard
B) 1.5 surfboards
C) 40 surfboards
D) 60 surfboards
An arrangement under which a number of firms acts as a single firm and coordinate
their pricing decisions is:
A) a monopoly.
B) monopolistic competition.
C) price fixing.
D) perfect competition.
Which of the following is NOT an original member of the European Union?
A) The United Kingdom
B) Belgium
C) Germany
D) France
Consider two individuals, Nigel and Mia, who produce hair pins and bandanas. Nigel’s
and Mia’s hourly productivity are shown in Table 3.3.
Table 3.3
Mia’s opportunity cost of producing one bandana is:
A) 1/3 of a hair pin.
B) 2.5 hair pins.
C) 3 hair pins.
D) 9 hair pins.
Mark quit his job as a salesman where he made $43,000 per year to start his own t-shirt
making business. His business expenses are $6,000 per year on rent, $12,000 per year
on supplies, and $4,000 per year on part-time help. As for his personal expenses, his
apartment costs him $4,800 per year and his personal bills are an extra $1,200 per year.
What is Mark’s opportunity cost of running the business?
A) $65,000
B) $57,000
C) $71,000
D) $43,000
Consider a labor market in equilibrium. If the demand curve shifts to the right while the
supply curve shifts to the left, then the wage rate in the market will ________.
A) increase
B) decrease
C) remain unchanged
D) either increase or decrease or remain unchanged
If a pollution tax is imposed on automobiles, we could expect which of the following to
occur?
A) less maintenance of emissions equipment
B) more use of alternative transportation
C) more miles being driven
D) all of these
Suppose there are only 2 nations A and B, and only two goods, x and y. If nation A
produces only x, it can make 20x per day. If nation A produces only y, it can make 15y
per day. If nation B produces only x, it can make 15x per day. If nation B produces only
y, it can make 15y per day. After trade begins nation ________ will specialize in the
production of x and nation ________ will specialize in the production of y.
A) A; A
B) A; B
C) B; B
D) B; A
Refer to Figure 4.1 that shows Mary and Tom’s individual demand curves for meals per
week at Fratelli’s Italian Restaurant. Assuming Mary and Tom are the only consumers in
the market, if the market quantity demanded is 9 the price must be:
Figure 4.1
A) $5.
B) $10.
C) $15.
D) $20.
Recall the application about a town building a clock tower and only putting clock faces
on three sides of the tower. If a citizen of this town did not contribute toward the clock’s
construction but used it each day, he/she would be considered a:
A) prompt person.
B) good citizen.
C) public-choice economist.
D) free rider.
From 2002-2004, the earned income tax credit ________ the poverty rate among
participants.
A) slightly increased
B) decreased
C) had little to no effect on
D) more than doubled
If an economy is represented by a point inside its production possibilities curve:
A) it can produce more of one product even if it does not produce less of another
product.
B) it can produce more of one product only if it produces less of another product.
C) it cannot produce more of one product unless it stops producing the other product
entirely.
D) it cannot possibly produce more of one product, even if it produces less of another
product.
Figure 6.5 illustrates the market for sugar. If sugar imports were banned, producer
surplus in the market would be shown as area:
A) ABC.
B) AEF.
C) CBD.
D) FEG.
The price elasticity of demand for tomatoes, is 1.2 during the summer. If a drought
causes the price of tomatoes to increase 15%, farmers can expect quantity demanded to:
A) decrease by 18%.
B) increase by 18%.
C) decrease by 12.5%.
D) increase by 12.5%.
What is the nominal value of money?
A) what can be purchased with the money
B) discounts taken by multiple purchases
C) savings by shopping on specific days of the week
D) its actual face value
What proof does the application use to illustrate that tariffs hurt the poor more than the
rich?
A) The proportion of tariffs paid relative to expenditures is higher on the poor than the
rich.
B) The proportion of tariffs paid relative to expenditures is lower on the poor than the
rich.
C) The total amount of dollars paid by the poor in the form of import tariffs is larger
than the rich.
D) The amount of dollars paid by the poor in the form of income taxes is higher with
poor individuals than rich individuals.
Refer to Figure 9.5. For this farmer to maximize profits he should produce ________
bushels of wheat.
A) 6
B) 9
C) 12
D) 16
When the price of pens went from $1 to $1.50, the quantity demanded of pencils
changed from 50 to 75 a day. The cross-price elasticity of demand for pens (using the
initial value formula) is:
A) 0.8.
B) 0.4.
C) 0.2.
D) Cannot be determined from the information provided.
The best example of a perfectly competitive industry is:
A) music stores.
B) beer.
C) cigarettes.
D) corn.
Suppose there are only 2 nations A and B, and only two goods, x and y. If nation A
produces only x, it can make 12x per day. If nation A produces only y, it can make 36y
per day. If nation B produces only x, it can make 4x per day. If nation B produces only
y, it can make 12y per day. After trade begins, nation ________ will specialize in the
production of x and nation ________ will specialize in the production of y.
A) A; B
B) B; B
C) B; A
D) No trade will occur.
The Robinson-Patman Act:
A) made tie-in sales contracts illegal.
B) was the first antitrust legislation passed by Congress.
C) created the Federal Trade Commission.
D) made predatory pricing illegal.
Given their skills, a college graduate may be perceived as a good manager of time and
the better fit for a managerial job than a high school graduate. This is an example of:
A) the learning effect of a college education.
B) the signaling effect of a college education.
C) the discriminatory effect of a college education.
D) all of the above
Limit pricing occurs when a firm sets price:
A) equal to marginal cost.
B) equal to average cost.
C) at different amounts for different groups of consumers.
D) so low that other firms are prevented from entering the market.
According to the application, why is a government’s efficiency improved with stronger
civil liberties?
A) Stronger civil liberties encourage corruption.
B) Stronger civil liberties force the government to hand out more subsidies.
C) Stronger civil liberties encourage citizen participation and government
accountability.
D) All of the above are correct.
There is a positive relationship between two variables if:
A) they move in opposite directions.
B) they move in the same direction.
C) one variable changes and the other does not.
D) neither variable moves.
Recall the Application. Suppose a low demander is willing to pay $8 for a movie, while
a high demander is willing to pay $12 for a movie and popcorn. If the theater charged
$2 for admission and $10 for popcorn, ________ would be willing to go to the movie.
A) only the low demander
B) only the high demander
C) both the low demander and the high demander
D) neither the low demander nor the high demander
Suppose that a house painter can earn $200 per day painting houses while Jasper Johns
earns $5,000 per day painting art. According to the application, Jasper Johns should:
A) paint his house if he can paint his house at least 25 times faster than a house painter.
B) never hire a house painter.
C) never paint his house.
D) paint his house if he can paint it in less than 25 days.
The price of an hour of leisure time for a successful lawyer is ________ the price of an
hour of leisure for an unemployed high school drop-out.
A) greater than
B) the same as
C) less than
D) impossible to compare to
Which of the following best characterizes the tradeoff faced by a monopolist when
deciding what quantity to produce?
A) The firm can increase its output, but needs to lower its price for only the marginal
unit of output.
B) The firm can increase its output, but to do so it must charge a higher price to all
customers.
C) The firm gets more revenue from new customers by increasing output, but gets less
revenue from existing customers given that it lowered its price.
D) The firm gets less revenue from new customers by increasing output, but gets more
revenue from existing customers given that it lowered its price.