XYZ Computer Company has a monopoly on the sale of a specialized color printer. If it
sells two of these printers, its total revenue is $1,000, and if it sells three, its total
revenue is $1,300. The marginal revenue of the third color printer sold is
A) $100.
B) $150.
C) $300.
D) $1,300.
Which of the following is an act of economic “investment”?
A) The state legislature authorizes the sale of a state park.
B) An entrepreneur buys 5000 shares of stock at $5 a share and then sells the stock at a
profit for $60 a share.
C) A brewer purchases a new fermentation system for his beer.
D) A teacher deposits $500 in a retirement account.
Related to the Economics in Practice on page 72: Assuming the demand for Baltimore
newspapers increases while the supply of Baltimore newspapers decreases, the
equilibrium ________ will definitely ________.
A) price; increase
B) price; decrease
C) quantity; increase
D) quantity; decrease
Because of a patent, Alcoa is the only manufacturer of soda cans with a stay-put tab.
Alcoa can earn a profit on the sale of soda cans with stay-put tabs
A) in the short run but not in the long run because new firms will enter the industry in
the long run.
B) only in the long run because government regulations prevent monopolists from
earning profits in the short run.
C) in the long run but not the short run because the monopolist will face competition in
the short run.
D) in the long run because entry into the industry by new firms is blocked until the
patent expires.
The tragedy of commons relates to the idea that
A) central planning sets all production targets.
B) all wages, prices, and interest rates are controlled by government.
C) common owned resources tend to be overused.
D) central planning sets all distribution targets.
The quantity and quality of ________, and ________ of a country are its factor
endowments.
A) imports; exports
B) deficits; surpluses
C) labor and land; natural resources
D) commodity money; fiat money
In the labor market changes in technology affect the marginal ________ of a unit of
labor input. In the product market, changes in technology affect the marginal ________
of a unit of output.
A) cost; cost
B) revenue; revenue
C) revenue product; cost
D) cost; revenue product
Assume the wool industry is perfectly competitive. Why is it difficult for a wool
producer to make excess profits in the long run?
A) the fact that wool producers are price takersʺ ʺ
B) the assumption that wool producers in the industry do not differentiate their ʺ ʺ
products
C) the fact that the demand curve facing each wool producer is perfectly elastic
D) There is free entry into the wool industry.
Table 11.2
Refer to Table 11.2. If the interest rate is 13%, then the farmer will engage in
investment of
A) $500,000.
B) $600,000.
C) $700,000.
D) $1,100,000.
Pookie’s Pool Cleaning Service uses only one variable input, chlorine. Pookie’s demand
curve for chlorine in the short run is the input’s
A) total product curve.
B) marginal product curve.
C) marginal revenue product curve.
D) total cost curve.
Price and total revenue are inversely related when demand is
A) price elastic.
B) price inelastic.
C) unit price elastic.
D) perfectly price inelastic.
Table 14.3
B’s Strategy
Refer to Table 14.3. What is the Nash equilibrium in the game?
A) (Advertise, Advertise)
B) (Don’t Advertise, Don’t Advertise)
C) (Don’t Advertise, Advertise)
D) (Advertise, Don’t Advertise)
Which of the following characteristics is generally representative of developing
countries relative to developed countries?
A) a smaller percentage of the labor force in urban areas
B) a lower infant mortality rate
C) a greater percentage of consumption of the world’s output
D) a lower rate of illiteracy
In 2006, per capita income was roughly ________ times lower in low-income countries
than in high-income countries.
A) 12
B) 31
C) 56
D) 181
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 2 million apples per day.
B) the quantity of apples supplied by U.S. firms will increase by 2 million apples per
day.
C) the price of apples in the United States will increase to 40 cents per apple.
D) all of the above
Assume Cathy’s Cupcake Company operates in a perfectly competitive market
producing 10,000 cupcakes per day. At this output level, marginal cost exceeds this
firm’s price. Assuming price exceeds average variable cost, to maximize profits Cathy’s
should
A) make no adjustments as they are already maximizing their profits.
B) increase their output.
C) decrease their output.
D) stop producing since it is earning a loss.
Table 14.3
B’s Strategy
Refer to Table 14.3. The result of this game is known as a ________.
A) prisoners’ dilemma
B) collusive outcome
C) repeated strategy
D) tit-for-tat outcome
During an economic downturn when consumer income falls, the demand for tacos
increases and the demand for sushi decreases. This implies that tacos
A) and sushi are complements.
B) are a normal good and sushi is an inferior good.
C) are an inferior good and sushi is a normal good.
D) are an economic bad and sushi is an economic good.
Table 3.1
Refer to Table 3.1. If the price per pizza is $15, there is a(n)
A) market equilibrium.
B) excess demand of 400 units.
C) excess demand of 900 units.
D) excess supply of 600 units.
Firms that offer to pay for college tuition for their employees are investing in ________
capital.
A) tangible
B) productive
C) social
D) human
Which of the following is a characteristic of monopolistically competitive industries?
A) significant barriers to entry
B) strategic behavior
C) product differentiation
D) a small number of firms
________ analysis refers to separately examining the equilibrium conditions of
individual markets and for households and firms.
A) Partial equilibrium
B) General equilibrium
C) Comparative static
D) Efficiency
Most authorities agree that the transition to a market economy can be achieved
A) without external financial and technical assistance.
B) only with forceful central planning by the government.
C) only with external financial and technical assistance.
D) only with government controls on wages and prices.
Table 19.2
Refer to Table 19.2. The tax rate structure in this example is
A) proportional.
B) progressive.
C) regressive.
D) marginal.
The government imposes a luxury tax on automobiles that cost more than $40,000. As a
result, fewer individuals purchase cars that cost more than $40,000. This is an example
of
A) tax equity.
B) tax shifting.
C) tax evasion.
D) tax incidence.
Figure 15.4
Refer to Figure 15.4. Assume the No-Sweat Sweatshirt Manufacturing Company has
fixed costs of $150 and is a monopolistically competitive firm. To maximize profits, the
firm ________ of $23.
A) has an average total cost
B) earns a per-unit profit
C) should set a price
D) has an average fixed cost
Table 9.1
Refer to Table 9.1. If the market price is $84, then this firm will maximize profits by
producing ________ units of output and its profits will be ________.
A) five; $140
B) six; $140
C) six; $240
D) seven; $116
It costs a television manufacturer $1,000 to produce a plasma television. This
manufacturer sells these televisions abroad for $750. This is an example of
A) an export subsidy.
B) dumping.
C) a negative tariff.
D) a trade-related economy of scale.
Figure 6.2
Refer to Figure 6.2. Along budget constraint AC, the opportunity cost of one beer is
A) 1/4 of a gardenburger.
B) 1 gardenburger.
C) 2 gardenburgers.
D) changing as Mr. Lingle moves down his budget constraint.
Figure 8.5
Refer to Figure 8.5. The marginal cost of the sixth oven is
A) $50.00.
B) $66.67.
C) $108.33.
D) indeterminate from this information.
Figure 8.4
Refer to Figure 8.4. Average total costs are minimized at an output level of
A) 2.
B) 3.
C) 6.
D) an indeterminate number based on the available information.
Refer to the graph above. In what way could point A be considered more efficient than
point B?
Explain the characteristics of monopolistic competition. Explain how price and output
are determined in monopolistic competition. Illustrate your answer with a graph.
Why might stockholders be upset to find out that their company’s profits that otherwise
would have been distributed as dividends are instead invested in U.S. Treasury bonds?
In facilitating the transition from a centrally planned to a market-oriented economy,
explain the difference between the ‘shock therapy” versus “gradualism” approach.
Maxine’s Cookie Shop sells chocolate chip cookies in a perfectly competitive market
for $2 per dozen. Maxine currently produces 200 dozen cookies per day and average
total cost at this level of production is $1.75. What level of profit is this firm earning?
Explain.
When the price of a Sony portable CD player rises from $125 to $150, quantity
demanded falls from 750 per week to 600. Calculate total revenue both before and after
the price change. What can we tell about the price elasticity of demand for Sony
portable CD players?
Suppose a long lost relative died and left you a trust fund worth $1 million that you
will receive ten years from now. What effect, if any, will this have on your demand for
airline travel? (Assume that airline travel is a normal good.)
Illustrate with a diagram a consumer in equilibrium with indifference curves and a
budget constraint. Measure units of X on the horizontal axis and units of Y on the
vertical axis. Provide intuitive and mathematical explanations for what must be true in
equilibrium.
Table 1
Use Table 10.1 to answer the following question. Construct a marginal product table
from the information listed in the table and explain where diminishing marginal
productivity sets in.
The manager of a company has been told by his engineers and cost accountants that the
marginal cost of producing additional electronic wafers is likely to remain constant at a
$.50 each for the hundred thousand in production. Explain what the marginal cost
function would look like and why. What is the slope of this cost function?
Suppose you came across the following headline in a story of a daily newspaper:
“Automobile prices are so high right now that there must be a shortage. As a
consequence not everyone who needs an automobile will be able to buy one.” Is this
statement necessarily correct?
Why is a government franchise likely to serve as a stronger barrier to entry than
possessing technology than competitors don”t currently posses?
The market for ping-pong balls is perfectly competitive and can be represented by the
following market demand and supply curves:
Draw the marginal revenue curve for a firm in this industry.
Explain the shape of this curve.
The PPB Corporation sells ping pong balls in a perfectly competitive market at a price
of $1 each. The firm’s marginal cost, average total cost, and average variable cost curve
can be represented by the following:
Should the firm continue to operate in the short run? Explain.
How is the official poverty line determined in the United States? What alternative
method of measuring poverty has been suggested? Explain.
Graphically illustrate each of the following effects on the market for home fitness
equipment with supply and demand curves. State the effects on price and quantity.
Consider each effect separately.
Assume that the price of dues in local health clubs
decreases.