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Pierre can produce either a combination of 20 bow ties and 30 neckties or a
combination of 35 bow ties and 15 neckties. If he now produces 35 bow ties and 15
neckties, what is the opportunity cost of producing an additional 15 neckties?
A) 2 bow ties
B) 15 bow ties
C) 20 bow ties
D) 35 bow ties
An explicit cost is defined as
A) a cost that does not change as output changes.
B) a nonmonetary opportunity cost.
C) a cost that involves spending money.
D) a nonmonetary accounting cost.
Studies by the U.S. Census Bureau have shown that
A) families remain below the poverty line for an average of five years.
B) there is significant income mobility in the U.S. over time.
C) income mobility in the U.S. is minimal.
D) over half the people below the poverty line never move out of poverty.
Figure 3-8
Refer to Figure 3-8. The graph in this figure illustrates an initial competitive
equilibrium in the market for apples at the intersection of D2 and S2 (point E). Which of
the following changes would cause the equilibrium to change to point A?
A) A positive change in the technology used to produce apples and decrease in the price
of oranges, a substitute for apples.
B) An increase in the wages of apple workers and a decrease in the price of oranges, a
substitute for apples.
C) An increase in the number of apple producers and a decrease in the number of apple
trees as a result of disease.
D) A decrease in the wages of apple workers and an increase in the price of oranges, a
substitute for apples.
The median voter theorem will be an accurate predicator of the outcomes of elections
A) only when voter turnout is very high.
B) when a majority of voters have preferences very similar to those of the median voter.
C) when a majority of voters have preferences different from those of the median voter.
D) regardless of whether preferences among voters are similar or different from those
of the median voter.
Which of the following is a positive economic statement?
A) People should not buy SUVs.
B) The government should mandate electric automobiles.
C) Scarcity necessitates that people make trade-offs.
D) Foreign workers should not be allowed to work for lower wages than the citizens of
a country.
A sunk cost is
A) another term that means opportunity cost.
B) a term used to describe the cost of capital that the owners of a firm sink into their
business.
C) the highest valued alternative that must be given up to engage in an activity.
D) a cost that has already been paid and cannot be recovered.
Maurice Allais, Reinhard Selten, and Vernon Smith all were awarded the Nobel Prize in
Economics in part because
A) of their work with experimental economics.
B) they discovered the first example of a Giffen good.
C) of their work on the substitution and income effects of price changes.
D) they proved that external economies would lead to market failure.
Marginal revenue product can be calculated using the formula marginal product ×
output price
A) only if output price is constant.
B) only if the marginal product of labor is constant.
C) only if the both marginal product of labor and the output price are constant.
D) only if the firm has market power in the labor market.
Figure 16-6
Watanabe Sensei operates the only martial arts school in Hartfield. For simplicity,
assume that consumers have identical demand curves and that Sensei knows what this
demand curve is. Figure 16-6 shows this demand curve.
Refer to Figure 16-6. If Sensei charges the competitive price for his classes, what is the
maximum amount of admission fee that he can collect from his customers?
A) the area A + B
B) the area A + B + C + D
C) the area A + B + C + D + E
D) the area A + C + D + G + H
Consider a good whose consumption takes place publicly. Your decision to buy that
good depends
A) both on the characteristics of the product and on how many other people are buying
the good.
B) only on the characteristics of the good.
C) only on how many other people buy the good.
D) only on the price of the good.
Figure 10-5
Refer to Figure 10-5. The consumer can afford consumption bundles
A) r, s, t, and u.
B) r, s, v, and u.
C) s, v, and u only.
D) s, v, t, and u.
Figure 3-1
Refer to Figure 3-1. A decrease in the price of a substitute good would be represented
by a movement from
A) A to B.
B) B to A.
C) D1 to D2.
D) D2 to D1.
One reason why, in the last four decades, the number of new auto makers in the world
has been very small compared to the past is that
A) the automobile cannot be improved upon in any way by new producers.
B) new auto makers cannot obtain necessary inputs to produce new cars.
C) governments restrict who can produce automobiles.
D) new producers cannot match the economies of scale of existing auto makers.
Table 9-6
Production and
Consumption Production
Without Trade With Trade
Denmark and Belize can produce both clocks and hats. Table 9-6 shows the production
and consumption quantities without trade, and the production numbers with trade.
Refer to Table 9-6. Which country has an absolute advantage in producing hats?
A) Denmark
B) Belize
C) both countries
D) neither country
Figure 12-10
Refer to Figure 12-10. The total cost at the profit-maximizing output level equals
A) $4,800.
B) $3,300.
C) $2,500.
D) $1,800.
If a firm knew every consumer's willingness to pay and could prevent arbitrage it could
charge every consumer a different price. This practice is known as
A) first-degree exploitation, or perfect price discrimination.
B) maximization of producer surplus, or perfect price discrimination.
C) first-degree price discrimination, or perfect price discrimination.
D) first-degree transfer of consumer surplus, or perfect price discrimination.
Phil Harrison is a welder who works on skyscrapers and extension bridges. Phil's
brother William is also a welder but he works in a manufacturing plant where he does
all of his welding on ground level. Which of the following would not explain why Phil
earns a higher wage than his brother?
A) cognitive dissonance
B) Phil has greater experience as a welder than his brother has.
C) Phil's marginal revenue product is greater than William's marginal revenue product.
D) Phil's job is more hazardous than William's job.
Assume the market for cage-free eggs is perfectly competitive. All else equal, as
farmers find it less profitable to produce and sell cage-free eggs in this market
A) the demand curve will shift to the left and the equilibrium price will decrease.
B) the supply curve will shift to the left and the equilibrium price will increase.
C) the supply curve will shift to the right, the demand curve will shift to the left, and the
equilibrium price will decrease.
D) the supply curve will shift to the left, the demand curve will shift to the left, and the
equilibrium price will increase.
Figure 12-6
Figure 12-6 shows the demand, marginal cost (MC) and average total cost (ATC) curves
for Jason's House of Apples.
Refer to Figure 12-6. Jason is currently producing 20 thousand pounds of apples. To
maximize his profit Jason should
A) keep production at 20 thousand pounds.
B) increase production to the output rate indicated by point d.
C) increase production to the output rate indicated by point e.
D) decrease production to the output rate indicated by point a.
Figure 5-4
Suppose there are several paper mills producing paper for a market. These mills,
located upstream from a fishing village, discharge a large amount of wastewater into the
river. The waste material affects the number of fish in the river and the use of the river
for recreation and as a public water supply source. Figure 5-4 shows the paper market.
Use this Figure to answer the following question(s).
Refer to Figure 5-4. What is the deadweight loss from producing at the market
equilibrium?
A) area C
B) area E
C) area D
D) area F
The machines workers have to work with are considered
A) human capital.
B) physical capital.
C) entrepreneurship.
D) financial capital.
Figure 5-9
Companies producing toilet paper bleach the paper to make it white. The bleach is
discharged into rivers and lakes and causes substantial environmental damage. Figure
5-9 illustrates the situation in the toilet paper market.
Refer to Figure 5-9. Let's suppose the government imposes a tax of $50 per unit of
toilet paper to bring about the efficient level of production. What happens to the market
price of toilet paper?
A) It rises by $50 per unit.
B) It rises by more than $50 per unit.
C) It rises by less than $50 per unit.
D) It remains the same because the tax is imposed on producers who create the
externality.
All of the following contributed to the downfall of the Soviet Union in 1991 except
A) public dissatisfaction with low living standards and political repression.
B) an inability to produce low-cost consumer goods that households wanted.
C) lack of high-quality goods and services.
D) lack of a strong dictator who could coordinate economic activities.
Oligopolies are difficult to analyze because
A) the firms are so large.
B) demand and cost curves do not exist for these types of industries.
C) how firms respond to a price change by a rival is uncertain.
D) oligopolies are a recent development so economists have not had time to develop
models.
Common resources differ from public goods in that
A) common resources are non-excludable while public goods are excludable to those
who do not pay for the good.
B) unlike public goods, common resources are rivalrous in consumption.
C) common resources are collectively owned by a group of people while public goods
are government owned.
D) common resources are resources that cannot be renewed but the production of public
goods can be increased any time.
Figure 13-14
Figure 13-14 illustrates a monopolistically competitive firm.
Refer to Figure 13-14. Which of the following statements describes the firm depicted
in the diagram?
A) The firm is making no economic profit and will exit the industry.
B) The firm is suffering an economic loss by producing at Q0 but will break even if it
increases its output to Q1.
C) The firm achieves productive efficiency by producing at Q0.
D) The firm is in long-run equilibrium and is breaking even.
A firm could continue to operate for years without ever earning a profit as long as it is
producing an output where
A) MR < ATC.
B) ATC > AVC.
C) MR > AVC.
D) AFC < AVC.
Table 2-8
Table 2-8 shows the number of labor hours required to produce a digital camera and a
pound of wheat in China and South Korea.
Refer to Table 2-8. What is China's opportunity cost of producing one pound of wheat?
A) 04 units of a digital camera
B) 4 digital cameras
C) 25 digital cameras
D) 40 digital cameras
Network externalities
A) can only exist when there are economies of scale.
B) prevent the dominance of a market by one firm.
C) exist when the usefulness of a product increases with the number of consumers who
use it.
D) are created when celebrity endorsements of products lead to a surge in the demand
for those products.
Figure 16-5
Refer to Figure 16-5. Suppose the firm represented in the diagram decides to act as a
monopolist and charge a single price. What is the profit maximizing quantity produced
and what is the price charged?
A) Q = 240 units; P = $28
B) Q = 320 units; P = $24
C) Q = 480 units; P = $16
D) Q = 560 units; P = $12
Holding all other personal characteristics-such as age, gender, and income-constant,
economists would expect that
A) people with health insurance are less likely to be overweight than people without
health insurance.
B) people with health insurance are more likely to be overweight than people without
health insurance.
C) people with health insurance are equally likely to be overweight as people without
health insurance.
D) there is no correlation between having health insurance and being overweight.
Which two factors make regulating mergers complicated?
A) First, firms may lobby government officials to influence their decision to approve
the merger. Second, by the time the government officials reach a decision regarding the
merger, the firms often decide not to merge.
B) First, the time it takes to reach a decision to approve a merger is so long that the
firms often have new owners and mangers. Second, by law, government officials are not
allowed to consider the impact of foreign trade (exports and imports) on the degree of
competition in the markets of the merged firms.
C) First, the Federal Trade Commission and the Antitrust Division of the U.S.
Department of Justice must both approve mergers. Second, the concentration ratios that
are used to evaluate the degree of competition the merged firms face are flawed.
D) First, it is not always clear what market firms are in. Second, the newly merged firm
might be more efficient than the merging firms were individually.
