83) If you pay $35 for a sticker that entitles you to park on campus for 35 weeks of the academic
year, the marginal dollar cost to you of parking your car on campus on any given weekday will
be
A) $35.
B) $1.
C) $.20.
D) zero.
E) negative.
84) The marginal cost to the phone company of handling a long distance call is likely to be
A) higher the fewer such calls people make.
B) higher the more the phone company has invested in equipment.
C) substantially less than the price charged for the call.
D) substantially more than the price charged for the call.
85) A business firm should refuse to sell any item for which it cannot obtain a price at least as
large as what
A) it cost the firm to produce the particular item.
B) it costs the firm on average to produce the item.
C) it would cost the firm to produce another item identical to the item being sold.
D) the item will be worth to the firm if not sold.
86) Are the wages of the pilots marginal costs or sunk costs to an airline trying to decide whether
to add a late-night flight from Seattle to San Francisco? They are
A) marginal costs because pilots are indispensable to the flight.
B) sunk costs if the pilots will receive no additional compensation for the flight.
C) marginal costs because they will be paid after the flight rather than before.
D) sunk costs because pilots’ wage rates are determined by a contract already existing.
87) How can you calculate the cost per mile of owning a car?
A) Divide total costs per year of owning the car by the number of miles driven in a year.
B) Divide total costs per year of owning and operating the car by the number of miles driven in a
year.
C) Divide total costs per year of operating the car by the number of miles driven in a year and
add the result to the cost of owning the car.
D) You cannot do so in any defensible way because cars are owned per unit of time period, not
per unit of distance.
88) It is a mistake to calculate the cost per mile of owning a car because doing so implies
A) additional driving will lower the cost of owning a car.
B) future fuel and maintenance costs cannot be predicted.
C) marginal costs are the only relevant costs.
D) opportunities will not arise to sell the car.
89) How long is it worthwhile to continue searching for a $20 bill that you lost if you value your
time at $5 an hour?
A) About 2 hours if there is a fifty percent chance of finding it.
B) About 4 hours, regardless of the probability of finding it.
C) Only so long as you expect to find it within the next four hours, which could mean far more
than four hours of searching.
D) You cannot make a rational decision without first knowing whether you will find it.
E) You should not search at all because the lost bill is a sunk cost.
90) A property tax payment made by the owner of an apartment building is a
A) cost irrelevant to rent-setting decisions because it is not affected by supply and demand.
B) marginal cost of continuing to own the building.
C) marginal cost of supplying rental space.
D) marginal overhead cost and will therefore affect rental rates.
E) sunk cost and therefore cannot affect rents even in the long run.
91) The monthly mortgage payments made by a homeowner are
A) always sunk costs because the costs of constructing the house lie entirely in the past.
B) marginal costs if the house is new but sunk costs if it was purchased from a previous owner.
C) marginal costs of continuing to own and occupy the house.
D) not marginal costs because the house will continue to exist whether or not the payments are
made.
E) sunk costs only if all the bills for earlier construction work have been fully paid.
92) A homeowner making a mortgage payment is paying
A) a sunk cost which is consequently not a genuine cost at all.
B) the cost of borrowing to purchase the house.
C) the cost of constructing the house.
D) the cost of purchasing the house.
E) the cost of retaining ownership of the house.
93) Which of the following statements is not compatible with the opportunity cost theory?
A) Demand plays a role in the determination of costs.
B) Labor costs depend upon the demand for labor.
C) Relative prices reflect the relative amount of human labor required to produce goods.
D) Supply as well as demand depends upon subjective preferences.
94) The price paid to purchase land
A) has no relation to cost because it did not cost anything to produce the land.
B) rarely has any relation to cost because it has usually been determined by competitive bidding.
C) usually depends on the cost to the seller of letting the purchaser have the land.
D) would more accurately reflect the social value of the land if the price were zero.
95) The fee schedule capable of contributing the most net revenue to a museum’s budget depends
on
A) the cost of constructing the museum.
B) the cost of heating and lighting the museum.
C) the cost of purchasing and maintaining the museum exhibits.
D) the demand to view the museum’s collection.
E) whether the museum is publicly or privately owned.
96) If rising costs have compelled an increase in the price of football tickets for next season, you
could safely assume the college athletic director
A) doesn’t know the difference between sunk costs and marginal costs.
B) doesn’t want fans to become angry or resentful about the price increase.
C) isn’t setting prices to maximize net revenue.
D) really has not raised prices.
E) would prefer not to raise prices but has no choice in the matter.
97) The marginal cost to a student of missing a class meeting in Introductory Economics
increases when
A) textbook prices increase.
B) tuition rates increase.
C) valuable information is communicated in the class meetings.
D) any of the above occurs.
98) Someone who says he loves his mother far more than he loves football but nonetheless
attends a football game when he could be visiting his mother
A) displays weakness of will.
B) is a hypocrite.
C) is behaving inconsistently with his own stated values.
D) places a lower marginal value on visiting his mother than on attending the football game.
E) shows that the marginal value of visiting his mother is less for him than the marginal cost of
attending the football game.
99) The market value of downtown real estate is most basically determined by the
A) assessment of the taxing authorities.
B) market value of the building already on a particular plot of land.
C) use to which it is currently being put.
D) uses to which people would like to put it if given a chance.
E) whatever it costs to convert the land to its next best use.
100) Large and long-continued increases in the demand for electricity will tend to result in
A) a higher cost of generating electricity.
B) a higher price for electricity but no increase in the cost of generating it.
C) a reduction in the quantity of electricity demanded as a consequence of higher prices.
D) an increase in the quantity of electricity demanded and hence a decrease in its price.
101) An increased demand for the services of tax accountants
A) may raise their fees but cannot affect their costs.
B) may raise their fees by making it more costly for them to provide services to any client.
C) will lead to fewer people using the services of tax accountants because higher prices mean a
smaller quantity demanded.
D) will lower their fees in the long run by producing more tax accountants.
102) What effect does the televising of the Super Bowl have on the cost to the National Football
League of giving someone a ticket to the game?
A) It has no effect because all the costs of playing the game are sunk costs.
B) It has no effect on the cost because the demand doesn’t affect cost.
C) It lowers the cost because fewer people will want to buy tickets.
D) It raises the cost because fewer people will want to buy tickets.
103) What would be the most likely effect on the price of tickets for the Rose Bowl football
game if a wealthy alumnus agreed to pay all the travel and lodging expenses of the visiting
players?
A) No effect.
B) The price would fall.
C) The price would rise.
D) We have no basis for predicting because college football is a non-profit enterprise.
104) What is most likely to happen to the cost of owning and operating a golf course in a large
city when the population grows?
A) The cost will decline because the course will be used closer to its capacity.
B) The cost will not change as long as no attempt is made to enlarge the course.
C) The cost will rise because the land will become more valuable for other purposes.
D) The cost will rise if the course is privately owned but will be unchanged if the course is
municipally owned.
E) The cost will vary depending on the amount of competition from other courses.
105) People in the U.S. will rarely pay a great deal per gallon to obtain water because
A) there are so many excellent substitutes for water.
B) there is no relationship between objective price and subjective value.
C) they are usually creatures of habit.
D) they think water, as a basic necessity, ought to be supplied at a very low price.
E) they place a very low marginal value on water.
106) Since most people would be willing to pay far more for a cup of diamonds than for a cup of
water,
A) diamonds provide more satisfaction to most people than water provides.
B) most people are irrational when it comes to prestige or status goods.
C) most people wrongly think they value diamonds more highly than water.
D) people’s choices and preferences are often inconsistent.
E) very few people are ever in danger of dying of thirst.
107) If you decide to go to a movie on a Friday night rather than write a letter to your
grandmother, you
A) are willing to deprive your grandmother of a letter simply in order to enjoy a movie.
B) place more value on the movie than on your grandmother.
C) would rather have fun than fulfill your responsibilities to your relatives.
D) none of the above.
108) Someone who turns down an opportunity to purchase a Bible for $5 and then immediately
pays $5 to attend a movie thereby expects to obtain more satisfaction from seeing the movie than
from
A) cultivating the spiritual life.
B) deepening his religious faith.
C) owning the Bible just offered to him.
D) reading the Bible.
109) Which sum of money most adequately represents the value someone places on the works of
Shakespeare? The sum they would be willing to pay to
A) purchase a set of Shakespeare’s complete works.
B) purchase a set of Shakespeare’s complete works if they did not already own a set.
C) purchase a set of Shakespeare’s complete works if they did not have ready access to a set.
D) purchase a set of Shakespeare’s complete works if they had no other way to obtain access to
the complete works.
E) purchase a set of Shakespeare’s complete works if they had no other way to obtain copies of
any of them to read.
110) If it costs you $60 to produce 3 widgets and $64 to produce 4 widgets, the marginal cost to
you of producing a 4th widget is
A) $62.
B) $20.
C) $18.
D) $6.
E) $4.
111) You want to purchase two umbrellas. The price is $40 per umbrella, 2 for $60, 3 for $75.
What will be the marginal cost to you of buying a third umbrella?
A) $75
B) $25
C) $20
D) $15
E) $10
112) Suppose it costs a farmer $1.00 to produce 1 unit of corn, $2.10 to produce 2 units of corn,
and $3.30 to produce 3 units of corn. What’s the average cost of producing 2 units of corn?
A) $1.00
B) $1.05
C) $1.10
D) $2.00
E) $2.10
113) Suppose it costs a farmer $1.00 to produce 1 unit of corn, $2.10 to produce 2 units of corn,
and $3.30 to produce 3 units of corn. What’s the average cost of producing 3 units of corn?
A) $1.00
B) $1.10
C) $2.10
D) $3.30
114) Suppose it costs a farmer $1.00 to produce 1 unit of corn, $2.10 to produce 2 units of corn,
and $3.30 to produce 3 units of corn. What’s the marginal cost of producing 2 units of corn?
A) 0
B) 10 cents
C) $1.10
D) $2.00
E) $2.10
115) Suppose it costs a farmer $1.00 to produce 1 unit of corn, $2.10 to produce 2 units of corn,
and $3.30 to produce 3 units of corn. What’s the marginal cost of producing 3 units of corn?
A) 0
B) 30 cents
C) $1.10
D) $1.20
E) $3.30
116) Fill in the blank: Producers will compare ________ benefits to ________ costs when
considering how much output to produce.
A) average; additional
B) additional; additional
C) additional; average
D) average; average
117) Fill in the blank: Producers will compare ________ benefits to ________ costs when
considering how much output to produce.
A) marginal; sunk
B) sunk; marginal
C) marginal; marginal
D) sunk; sunk
118) The slope of a producer’s production possibilities frontier represents the producer’s
A) sunk costs of production.
B) average costs of production.
C) marginal costs of production.
D) total costs of production.
119) Producers typically face increasing marginal costs of production. Thus, their production
possibilities frontier would
A) slope upward.
B) bend inward.
C) bend outward.
D) appear as a straight line.
120) Relative prices are an effective way of informing producers of
A) their marginal benefits of production.
B) their marginal costs of production.
C) both A and B.
D) none of the above.
121) Which explains why supply curves slope upward to the right?
A) Sunk costs
B) Decreasing average costs
C) Increasing marginal costs
D) Multiple per-unit costs
122) Supply curves slope upward to the right because
A) high enough prices make sunk costs irrelevant.
B) higher prices attract resources from other uses.
C) marginal cost is less than elasticity of demand.
D) otherwise they would not intersect demand curves.
123) Supply curves slope upward to the right because
A) higher prices compensate producers for their higher marginal costs of production.
B) producers are in business only for the money.
C) producers can consistently pass on their higher costs of production to consumers in the form
of higher prices.
D) producers ignore costs and focus primarily on benefits to themselves.
124) Other things constant, a higher price for corn tends to increase
A) the supply of corn.
B) the quantity supplied of corn.
C) the demand for corn.
D) the quantity demanded for corn.
125) Suppose people had been paying $10 for a pizza at Little Weezer’s. If their demand
increases to the point where they will now pay $15 for the same pizza, then
A) the marginal cost of making pizzas would tend to increase.
B) the quantity supplied of pizzas would tend to increase.
C) both A and B are true.
D) none of the above are true.
126) Economists believe a volunteer military is likely to
A) cost more than a conscripted military.
B) cost taxpayers more than a conscripted military would.
C) impose higher costs on military personnel than does a conscripted military.
D) increase the percentage of incompetent people in the armed forces.
127) Is the cost of an all-volunteer army in the United States higher or lower than the cost of a
conscripted (drafted) army?
A) Higher, unless the citizens are exceptionally patriotic
B) Lower, unless the army is inefficiently managed
C) Higher to taxpayers but lower to military personnel
D) The same because the wage will move to the market-clearing level
E) We cannot say without knowing the supply of and demand for military personnel.
128) If the Department of Defense hires only volunteers, the armed forces will be staffed
predominantly by people who
A) are incompetent.
B) are patriotic.
C) care principally about money.
D) see the armed forces as their best opportunity.
E) want to serve more than they want to make money.
129) If the government drafts people into the armed forces rather than persuading them to
volunteer
A) it conceals in part the cost to its citizens of obtaining military personnel.
B) it employs a nondiscriminatory system because everyone drafted incurs the same cost and can
be paid the same wage.
C) it must pay higher wages since many people resent the draft.
D) it reduces the cost to the nation as a whole of obtaining military personnel.
E) it tends to obtain people with the lowest opportunity costs.
130) The army is more likely than a business firm to assign a highly-skilled person to a job
requiring little skill because the people who assign military personnel
A) are generally guided by the public interest rather than private interest.
B) incur little cost from misallocating personnel.
C) must consider the welfare of the whole rather than the profitability of the enterprise.
D) work for the government, where there is less demand for skilled personnel.
131) A draft system, whether in professional sports or the military, enables the people who are
hiring to avoid paying their employees
A) a living wage.
B) the true value of their labor.
C) what others are willing to pay them.
D) what they want to be paid.
132) With price on the vertical axis and quantity on the horizontal axis, economists would draw a
fall in supply as
A) a leftward shift in the supply curve.
B) a rightward shift in the supply curve.
C) a vertical supply curve.
D) any which way we like.
133) With price on the vertical axis and quantity on the horizontal axis, economists would draw
an increase in supply as
A) a leftward shift in the supply curve.
B) a rightward shift in the supply curve.
C) a vertical supply curve.
D) any which way we like.
134) When the price of a good decreases,
A) supply increases.
B) supply decreases.
C) quantity supplied increases.
D) quantity supplied decreases.
135) Which of the following would not shift the supply curve?
A) A rise in the expected future price of the good
B) A fall in the costs of production of the good
C) A fall in the price of the good
D) A negative supply shock that destroys a portion of output
136) When the price of a good changes, other things constant, what occurs?
A) The supply curve shifts to the right.
B) The supply curve shifts to the left.
C) The supply curve becomes flatter.
D) The supply curve becomes steeper.
E) Only quantity supplied changes.
137) Which of the following would not shift the supply curve?
A) A rise in the price of the good
B) A fall in the expected future price of the good
C) A rise in the costs of production of the good
D) A negative supply shock that destroys a portion of output
138) Which of the following would shift the supply curve to the left?
A) A fall in the expected future price of the good
B) A rise in the expected future price of the good
C) A rise in technology that lowers the cost of producing the good
D) A positive supply shock that brings more output onto the market
139) Which of the following would shift the supply curve to the right?
A) A rise in the expected future price of the good
B) A rise in the costs of producing the good
C) Fewer producers in the industry
D) All of the above.
E) None of the above.
140) When the price of a good increases,
A) supply increases.
B) quantity supplied increases.
C) supply decreases.
D) quantity supplied decreases.
141) What explains the increase in supply and fall in price of HDTVs during from 2010 to 2015?
A) Technological innovations that reduced the cost of production
B) Fewer producers in the industry
C) A fall in demand for HDTVs as more people turned toward superior substitutes
D) None of the above.
142) When technology advances, supply
A) increases, which is represented by a leftward shift in the supply curve.
B) increases, which is represented by a rightward shift in the supply curve.
C) decreases, which is represented by a rightward shift in the supply curve.
D) decreases, which is represented by a leftward shift in the supply curve.
E) remains the same; only quantity supplied changes.
143) When auto workers go on strike at many of the “Big 3” plants around the United States, the
supply of American automobiles
A) increases, which is represented by a leftward shift in the supply curve.
B) increases, which is represented by a rightward shift in the supply curve.
C) decreases, which is represented by a rightward shift in the supply curve.
D) decreases, which is represented by a leftward shift in the supply curve.
E) remains the same; only quantity supplied changes.
144) Which of the following would lead to an increase in the supply of ethnic restaurants in a
college town?
A) An increase in the wages paid to restaurant workers
B) An increase in the price of American chain restaurants, and consumers regard American chain
restaurants and ethnic restaurants as substitutes
C) An increase in the demand for ethnic restaurants
D) All of the above.
E) None of the above.
145) Which of the following would lead to a decrease in the supply of crude oil?
A) Favorable tax breaks for oil companies
B) An increase in the demand for crude oil
C) An increase in the price of gasoline
D) Both A and C.
E) None of the above.
146) When federal regulations protect birds, such as the spotted owl, lumber prices rise because
A) there is less supply of available timber.
B) there is less demand for available timber.
C) there is more supply of available timber.
D) there is more demand for available timber.
147) Security personnel are an important input into the production of major concerts, such as
Lady Gaga, and Jay Z & Kanye West. If wages for security personnel rise, then we would expect
A) the supply of major concerts to be unaffected.
B) the supply of major concerts to decrease.
C) the supply of major concerts to increase.
D) the demand for major concerts to increase.
148) Suppose the federal government makes it mandatory for employers to provide health
insurance to all employees. Assuming the new mandate applies to homebuilders, the
A) demand for construction workers is likely to increase.
B) supply of new homes is likely to increase.
C) supply of new homes is likely to decrease.
D) supply of new homes will remain the same; businesses will simply “pass” the higher costs on
to consumers.
149) If gold miners expect the price of gold to be 100% higher one year from now, they will
probably
A) decrease the supply of gold they bring to market now.
B) increase the supply of gold they bring to market now.
C) increase the quantity supplied of gold, but supply will remain unchanged.
D) do none of the above.
150) If ranchers in Texas fear a sharp drop in cattle prices next year, they will probably
A) bring less cattle to market this year.
B) bring more cattle to market this year.
C) keep supply unchanged now and bring more cattle to market next year.
D) keep supply unchanged now and bring less cattle to market next year.
E) do none of the above.
151) Fill in the Blanks: When a hard frost hits orange groves in Florida, the supply of orange
juice ________ and price ________.
A) increases; increases
B) increases; decreases
C) decreases; increases
D) decreases; decreases
152) When summer hurricanes pass through the Gulf of Mexico and force oil drillers to evacuate
their rigs,
A) the supply of oil increases, which therefore increases price.
B) the supply of oil increases, which therefore decreases price.
C) the supply of oil decreases, which therefore increases price.
D) the supply of oil decreases, which therefore decreases price.
153) An increase in the supply (curve) of a good implies a larger quantity of the good will now
be supplied
A) at the same price.
B) even if the price falls substantially.
C) only if the price rises.
D) whenever the demand decreases.
154) Fill in the blanks: ________ marginal costs of production would tend to ________ a good’s
________.
A) Higher; increase; supply curve
B) Lower; increase; supply curve
C) Lower; decrease; supply curve
D) lower; increase; demand curve
155) If the demand for a good is extremely inelastic, a large increase in the cost of supplying it
will
A) raise its price substantially and increase the total dollars spent to purchase it.
B) raise its price substantially but decrease the total dollars spent to purchase it.
C) raise its price very little and decrease the total dollars spent to purchase it.
D) raise its price very little but increase the total dollars spent to purchase it.
156) Larger volume is more likely to be associated with lower prices if the larger volume results
from
A) increased demand.
B) inelastic demand.
C) increased supply.
D) elastic supply.
E) inelastic supply.
157) Price elasticity of supply is defined as
A) the quantity supplied divided by the quantity demanded.
B) the change in the quantity supplied divided by the change in the quantity demanded.
C) the percentage change in the quantity supplied divided by the percentage change in price.
D) the percentage change in the quantity supplied divided by the percentage change in the
quantity demanded.
158) The supply curve of a good is highly elastic when
A) additional resources can be attracted into its production by the prospect of a slightly higher
reward.
B) its marginal supply cost is highly sensitive to changes in demand.
C) marginal cost is very low.
D) marginal cost rises steeply as the quantity supplied increases.
E) the demand for the good is greater than the supply.
159) The supply of a good will tend to be highly elastic if
A) additional resources to produce the good can be obtained quickly and with no increase in cost.
B) its price rises quickly and sharply when the demand increases.
C) the good has few close substitutes.
D) the good is generally classified as a luxury.
E) the good is generally classified as a necessity.
160) The supply of any good is likely to be inelastic when
A) consumers have few good substitutes for it.
B) it is a manufactured good rather than an agricultural good.
C) it can be produced at low cost.
D) there are very many producers of the good.
E) very little time elapses between the change in price and the change in quantity supplied.
161) Competitive offers to buy and sell resources establish money prices, which reflect relative
scarcities
A) in all economic systems.
B) in any economic system where efficiency is important.
C) only when there are no sunk costs to be recovered.
D) when resources are privately owned.
162) California voters and legislators frequently debate about the true cost of water in the course
of trying to establish state policy to govern the use of water. The issue is confusing because
A) all water is ultimately a free gift of nature.
B) the cost of water is infinite.
C) water in itself, considered simply as a chemical compound, cannot be assigned any specific
cost.
D) we cannot settle a question that is entirely a matter of opinion.
163) It is useful to distinguish between the cost of obtaining and the cost of providing goods
because
A) costs always pertain to specific actions.
B) obtaining is more costly than providing.
C) providing is more costly than obtaining.
D) supply must equal demand.
164) In trying to determine the “true cost” of some debated proposal,
A) actions have no true cost, only benefits.
B) actions will entail different costs for different people.
C) the costs of actions must ultimately be the same for everyone.
D) there is no difference between costs and benefits.
165) How does increasing wealth raise the cost of doing everything? By
A) bidding up the prices of labor-saving devices.
B) increasing the time required to earn and manage the wealth.
C) increasing the value of available alternatives.
D) raising the cost of hiring servants.
E) raising the rate of inflation.