Table: Crop Income) Look at the table Crop Income. Brent is a farmer, and his income
depends on the weather. A) Calculate Brent’s expected income. B) Calculate Brent’s
expected utility.
If Japan levies tariffs on U.S. goods entering Japan, this will tend to:
A) benefit both Japanese and U.S. producers.
B) damage U.S. producers and benefit Japanese producers.
C) benefit U.S. producers and damage Japanese producers.
D) damage both Japanese and U.S. producers.
When marginal cost is BELOW average variable cost, average variable cost must be:
A) at its minimum.
B) at its maximum.
C) falling.
D) rising.
Beyond some point, a higher wage may induce an individual to work _____, and the
labor supply curve may then _____.
A) more; bend backward
B) less; bend backward
C) more; slope downward
D) harder; become vertical
(Table: The Utility of Macaroni and Cheese) Look at the table The Utility of Macaroni
and Cheese. Carmen loves macaroni and cheese for Thanksgiving. Carmen’s marginal
utility from eating macaroni and cheese is zero for the _____ serving.
A) first
B) second
C) third
D) fifth
An industry with a single firm producing a product for which there are no close
substitutes and which is protected by barriers to entry is an example of:
A) perfect competition.
B) monopolistic competition.
C) oligopoly.
D) monopoly.
(Table: Prices and Demand) Look at the table Prices and Demand. The New Orleans
Saints have a monopoly on Saints logo hats. The marginal cost of producing a hat is
$18. If the Saints were a perfectly competitive firm in a perfectly competitive industry,
at their profit-maximizing price and output producer surplus would be:
A) $0.
B) $12.
C) $18.
D) $24.
Figure: Water Works
(Figure: Water Works) Look at the figure Water Works, which describes a small town’s
water works, a natural monopoly. If regulators require the water works to charge the
price that just covers average total cost, the water works will:
A) earn profits.
B) break even.
C) incur losses.
D) have a large producer surplus.
Suppose a firm sells a good for a perfectly competitive price of $5. The equilibrium
wage rate is $10. The first worker it hires produces five units. Two workers produce a
total of nine units. If it hires two workers, the value of marginal product for the second
worker is:
A) $5.
B) $45.
C) $20.
D) $10.
If a supply curve is represented by the equation Q = 10 + 2P, what is its slope?
A) 1/2
B) 1
C) 2
D) 5
Figure: An Individual’s Marginal Benefit from a Public Good
(Figure: An Individual’s Marginal Benefit from a Public Good) Look at the figure An
Individual’s Marginal Benefit from a Public Good. Assume that two individuals will
share consumption of a public good; each individual has the marginal benefit curve
shown in the figure. If the marginal cost of the good is $24, what is the total benefit of
the level of the public good that maximizes society’s welfare?
A) $0
B) $24
C) $124
D) $256
A total product curve indicates the relationship between _____ when all other inputs are
fixed.
A) a variable input and price
B) a variable input and variable cost
C) a variable input and output
D) output and price
The Atlanta Symphony wants to make sure that its concerts are affordable for all
residents of Atlanta and therefore prices all of its tickets at $25. However, outside
Symphony Hall, people can sell the same tickets for $75 or more. The true cost to the
concertgoer of a ticket to the symphony is at least:
A) $25.
B) $50.
C) $75.
D) $100.
Scott’s wage is $25 per hour and he works 50 hours a week, which is his optimal labor
supply. His marginal utility of one hour of leisure is equal to:
A) the marginal utility he gets from $25 worth of goods.
B) the marginal utility he gets from more than $25 worth of goods.
C) the marginal utility he gets from less than $25 worth of goods.
D) the substitution effect.
The practice of selling the same product at different prices to different consumers,
without corresponding differences in costs, is:
A) price discrimination.
B) privatizing.
C) monopolizing.
D) output prioritizing.
Tim works 51 hours per week, and his wage is $35 per hour. If his wage increases to
$70 per hour:
A) the substitution effect implies that he will work less.
B) if leisure is a normal good, the income effect implies that he will work more.
C) if leisure is a normal good, the income effect will reinforce the substitution effect
and he will work more.
D) the substitution effect implies that he will work more.
Figure: Comparative Advantage Eastland and Westland produce only two goods,
boxes of peaches and boxes of oranges, and this figure shows each nation’s production
possibility frontier for the two goods.
(Figure: Comparative Advantage) Look at the figure Comparative Advantage. The
opportunity cost of producing 1 box of peaches for Westland is _____ box(es) of
oranges.
A) 1
B) 0.25
C) 4
D) 10
Figure: The Demand for Shirts
(Figure: The Demand for Shirts) Look at the figure The Demand for Shirts. At a price of
$30, total revenue is _____, and at a price of $10, total revenue is _____.
A) $9,000; $12,000
B) $3,000; $5,000
C) $9,000; $5,000
D) $5,000; $9,000
Suppose a perfectly competitive firm can increase its profits by increasing its output.
Then it must be true that the firm’s _____ exceeds its _____.
A) marginal revenue; marginal cost
B) price; average total cost but is less than marginal cost
C) marginal cost; marginal revenue
D) price; marginal revenue
In monopolistic competition, each firm:
A) is a price taker.
B) has some ability to set the price of its differentiated good.
C) will set price equal to marginal cost.
D) has marginal revenue that is greater than price.
_____ occurs if Coke hires Michael Jordan to make a commercial and Pepsi follows by
hiring Peyton Manning for its commercial.
A) Tacit collusion
B) Nonprice competition
C) Antitrust policy
D) Price leadership
(Table: Income and Utility for Tyler) The table Income and Utility for Tyler shows the
utility Tyler receives at various income levels, but she does not know what her income
will be next year. There is a 40% chance her income will be $20,000, a 40% chance her
income will be $30,000, and a 20% chance her income will be $40,000. What is her
expected income?
A) $28,000
B) $29,000
C) $30,000
D) $31,000
(Table: Comparative Advantage I) Look at the table Comparative Advantage I. The
opportunity cost of producing 1 box of cell phones for Sweden is _____ box(es) of
herring.
A) 10
B) 0.2
C) 5
D) 0.1
Scenario: Private and External Benefits
A small community finds that tidy lawns and neighborhoods provide both private and
external benefits. They determine that the marginal private benefit (MPB) of lawns can
be represented by the equation MPB = 50 ” 0.5Q, where Q is the number of hours spent
on keeping lawns tidy. The marginal private cost (MPC) of such lawn upkeep is
represented by the equation MPC = 0.5Q, where Q is again the number of hours
engaged in lawn upkeep.
(Scenario: Private and External Benefits) Look at the scenario Private and External
Benefits. The community decides that given all the benefits of lawn upkeep, it is
important to maintain the socially optimal number of lawn upkeep hours. To achieve
this, the community will:
A) require community lawn service of 45 hours.
B) subsidize everyone who contributes to lawn upkeep with a payment of $15.
C) implement a Pigouvian lawn tax of $65.
D) provide no additional funds to lawn upkeep.
Figure: Consumer Equilibrium II
(Figure: Consumer Equilibrium II) Look at the figure Consumer Equilibrium II. Which
of the following statements is TRUE?
A) Point I is the point of utility maximization.
B) At the point of utility maximization, the rate at which Ashyra is willing to exchange
one good for another is less than the rate at which the goods can be exchanged in the
market.
C) At point I, Py = Px.
D) At point I, Ashyra has some income left for saving.
With use of _____ to reduce emissions, the marginal benefit of an additional unit of
pollution is the same for all polluters.
A) an environmental standard
B) an emissions tax
C) a tradable emissions permit
D) an emissions tax or a tradable emissions permit
Figure: The Perfectly Competitive Firm
(Figure: Perfectly Competitive Firm) Look at the figure The Perfectly Competitive
Firm. The figure shows a perfectly competitive firm that faces demand curve d and
maximizes profit. If the firm faces a market price of $3, its total profit per day is:
A) $0.
B) $250.
C) $275.
D) $300.