According to the Application, a recent study of search behavior for liquid detergent
showed that a doubling of income ________ the cost of search and ________ the
amount of searching by about 14 percent.
A) increased; increased
B) increased; decreased
C) decreased; increased
D) decreased; decreased
Suppose the price of a scientific calculator is $80. If Juan is willing to pay $100 for that
scientific calculator, his consumer surplus is:
A) $0.
B) $10.
C) $20.
D) $30.
If you get a flu shot and pay $10 for it, the flu shot is:
A) a private good with external benefits.
B) a private good with external costs.
C) a public good with external benefits.
D) a public good with external costs.
A firm will not shut down in the short run as long as at the point where MR = MC:
A) P > AVC.
B) P > ATC.
C) P > MC.
D) P > AFC.
An appeal to peoples’ sense of civic or moral responsibility will ________ the free-rider
problem and lead to a ________ level of contribution to the public good.
A) increase; smaller
B) increase; larger
C) reduce; smaller
D) reduce; larger
In the long run:
A) firms have the ability to enter or exit the industry.
B) firms are able to alter some, but not all, of their resources.
C) firms are unable to adjust their output choices.
D) None of the above are correct.
Suppose that the maximum price for rent in New York City is set above the equilibrium
price. Which of the following statements is INCORRECT?
A) It reduces the quantity supplied.
B) It increases the quantity demanded.
C) Consumers want to buy more than producers want to sell.
D) All of the above are incorrect.
Tower Communications Inc. has a monopoly over local cellphone service. If Tower
Communications Inc. is producing where marginal revenue is greater than marginal
cost, the firm:
A) could increase profits by reducing output.
B) could increase profits by increasing output.
C) is maximizing profits.
D) must be earning a zero profit.
In the U.S. automobile pollution is regulated by:
A) command and control.
B) an optimal pollution tax.
C) marketable pollution permits.
D) a subsidy for cars.
A network externality occurs when:
A) a firm has a patent.
B) the value of a product to a consumer increase with the number of other consumers
who use it.
C) a firm has large economies of scale.
D) the value of a product to a consumer requires another product.
Recall the Application about the policies used by the European Union to support
the agricultural sectors of is member countries to answer the following question(s).
According to this Application, the policies used by the European Union to support the
agricultural sectors of its member countries created excess supply. This would occur if
these policies set a ________ price which was ________ the market equilibrium price.
A) maximum; above
B) maximum; below
C) minimum; above
D) minimum; below
Some employers allow new employees to delay their investment in a retirement account
for a year or two. This approach puts the cost of saving for retirement in the ________
and the benefit of saving in the ________.
A) present; present
B) present; future
C) future; present
D) future; future
Relative to the federal government, state and local governments spend a larger share of
their funds on:
A) education.
B) health.
C) defense.
D) interest payments.
Figure 6.9 depicts a hypothetical fish market with a horizontal supply curve. Suppose
the government imposes a tax of $2 per pound of fish, and the tax is paid in legal terms
by producers. If the supply curve were positively sloped:
A) producers would bear the full cost of the tax.
B) consumers would bear the full cost of the tax.
C) both producers and consumers share the tax.
D) There is not sufficient information.
What is the characteristic of a perfectly competitive firm that causes it to be a price
taker?
A) many buyers and sellers
B) homogeneous product
C) free entry and exit
D) A and B are correct.
Figure 18.3
Refer to Figure 18.3. With an import ban, the equilibrium quantity is:
A) 80.
B) 100.
C) 60.
D) 40.
Consider the data in Table 16.2. If each firm is currently generating 100 gallons of
wastewater per day, Firm B would be willing to pay up to ________ to Firm A to be
able to generate 200 gallons of wastewater per day.
Table 16.2
A) $10
B) $12
C) $28
D) $200
A(n) ________ is a trade policy by which a nation agrees to limit its exports of a good
in order to avoid more restrictive trade policies.
A) tariff
B) voluntary export restraint
C) import quota
D) import ban
According to the Application about setting the price of tickets for Major League
Baseball games, due to the marginal revenue from ticket sales for a typical Major
League Baseball team, the team could increase total revenue from ticket sales by:
A) increasing the price of tickets and increasing the quantity of tickets sold.
B) decreasing the price of tickets and increasing the quantity of tickets sold.
C) increasing the price of tickets and decreasing the quantity of tickets sold.
D) decreasing the price of tickets and decreasing the quantity of tickets sold.
Kaitlyn and Larissa have formed a dog bathing and grooming business business. The
number of dogs they can bathe or groom in any given day is depicted in Table 2.1.
Table 2.1
The opportunity cost of grooming the first dog in a day is bathing ________ dog(s).
A) 1
B) 2
C) 24
D) 25
In a monopolistically competitive market, product differentiation ensures that in the
long run:
A) price will equal marginal cost.
B) marginal revenue will exceed marginal cost.
C) marginal revenue will equal average total cost.
D) price will exceed marginal revenue.
When a second firm enters a monopolist’s market:
A) market price will rise.
B) the quantity produced by the first firm will increase.
C) the first firm’s profits will decrease.
D) All of the above will occur.
The diagram shown in Table 12.2 describes a game in which:
Table 12.2
A) firms make their decisions simultaneously.
B) Firm 1 always decides first, and Firm 2 always decides last.
C) the firms take turns moving first.
D) firms must communicate with each other before making a decision.
The knowledge and skills acquired by a worker through education and experience is a
description of which factor of production?
A) physical capital
B) human capital
C) labor
D) entrepreneurship
Do most infant industries become as efficient as their international competition?
A) No. This rarely happens.
B) yes, but only if they get very large protection
C) Yes, it always happens.
D) yes, but only after decades of protection
Weighing the benefits and costs of the different speeds at which to sail an ocean cargo
ship addresses the economic concept known as:
A) the principle of opportunity cost.
B) the marginal principle.
C) the principle of voluntary exchange.
D) the principle of diminishing returns.
The input-substitution effect of an increase in the wage comes about because higher
wages:
A) increase production costs, and final good prices will rise, reducing the quantity
demanded of the product.
B) increase production costs, and final good prices will rise, increasing the quantity
demanded of the product.
C) make labor less expensive as an input, leading firms to switch to labor as an input.
D) make labor more expensive as an input, leading firms to switch to other inputs.
Trade results from:
A) comparative advantage.
B) absolute advantage.
C) self-sufficiency.
D) diminishing returns.
Sheila sells corn in a perfectly competitive market. This month Sheila receives a lower
price for a bushel of corn than she did last month. This might have happened because:
A) the market demand increased for corn.
B) the market demand decreased for corn.
C) firms exited the market.
D) Sheila’s costs have increased.
When a demand curve is drawn, which of the following is NOT held constant?
A) people’s income
B) people’s preferences
C) prices of related goods
D) the price of the good
Recall the Application. From a pricing standpoint, low-price guarantees seem to benefit:
A) the buyer.
B) the seller.
C) both the buyer and the seller.
D) neither the buyer nor the seller.
In the case of rent-seeking behavior in a monopoly market:
A) the net loss to society is greater than it would have been in the absence of
rent-seeking behavior.
B) the net loss to society is less than it would have been in the absence of rent-seeking
behavior.
C) the net loss to society is the same as it would have been in the absence of
rent-seeking behavior.
D) monopoly profit is higher than if the monopolist did not engage in rent-seeking
behavior, but the net loss to society is lower.
Which of the following mergers was successfully blocked by the United States
government?
A) Interstate Bakeries and Continental Bakery
B) Microsoft and Intuit
C) Standard Oil and Mobil
D) American Tobacco Company and Reynolds
If the government attempts to control pollution with a command-and-control policy:
A) the government will command each firm to produce no more than a certain level of
pollution.
B) the government will control the firm’s entire production process.
C) the government will force the firm to use particular pollution-control technologies.
D) all of the above
When demand increases and the demand curve shifts to the right, equilibrium price
________ and equilibrium quantity ________.
A) increases; increases
B) increases; decreases
C) decreases; increases
D) decreases; decreases