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The point at which the axes of a graph intersect is called the:
A) slope.
B) origin.
C) graph.
D) intercept.
(Table: Cakes) Look at the table Cakes. Pat is opening a bakery to make and sell special
birthday cakes. She is trying to decide how many mixers to purchase. Her estimated
fixed and average variable costs if she purchases one, two, or three mixers are shown in
the table. Assume that average variable costs do not vary with the quantity of output. If
Pat purchases three mixers and bakes 100 cakes per day, what is her average total cost?
A) $4
B) $25
C) $29
D) $625
Figure: The Optimal Consumption Bundle
(Figure: The Optimal Consumption Bundle) Look at the figure The Optimal
Consumption Bundle. Which of the following could lead to an optimal consumption
bundle on indifference curve I3?
A) an increase in income
B) an increase in the price of restaurant meals
C) an increase in the price of rooms
D) a decrease in income
(Table: Marginal Utility per Dollar of M&Ms) Look at the table Marginal Utility per
Dollar of M&Ms. The price of M&Ms is $2 per bag. The marginal utility per dollar of
the second bag of M&Ms is:
A) 16.
B) 10.
C) 5.
D) 2.
(Table: Externalities from Parks) The table Externalities from Parks shows the marginal
social benefit and the marginal social cost of preserving various amounts of land in a
city for a public park. If the government wants to achieve the optimum amount of land
for the park, it could use a Pigouvian _____ of _____.
A) tax; $300
B) tax; $150
C) subsidy; $150
D) subsidy; $450
Figure: Labor Force Participation Rate
(Figure: Labor Force
Participation Rate) Look at the figure Labor Force Participation Rate. During
1970"1985, the labor force participation rate was _____ for women and _____ for men.
A) increasing; decreasing
B) increasing; increasing
C) decreasing; increasing
D) decreasing; decreasing
Figure: Efficiency and Pollution
(Figure: Efficiency and Pollution) Look at the figure Efficiency and Pollution. In the
absence of government intervention, the marginal social cost of pollution will equal
_____ and the marginal social benefit of pollution will equal _____.
A) $25; $5
B) $5; $25
C) $15; $15
D) $25; $0
A consumer's willingness to pay depends on:
A) the cost of producing the good or service.
B) the expected additional benefit of consuming the good or service.
C) the size of the shortage of the good or service.
D) the size of the surplus of the good or service.
(Table: Total Cost Data) Look at the table Total Cost Data. What is the total fixed cost
for this bicycle firm?
A) $40
B) $50
C) $100
D) $70
Table: Prices, Quantity Demanded, and Income for Jeremy Year Good Price
Quantity Demanded Income 2008 Coffee $4 12
2008 Doughnuts 2 20
2008
$100 2009 Coffee $4 13
2009 Doughnuts 2 18
2009
150
(Table: Prices, Quantity Demanded, and Income for Jeremy) Look at the table Prices,
Quantity Demanded, and Income for Jeremy. Between the two years listed, by the
midpoint method, Jeremy's income elasticity of demand for coffee equals _____ and
doughnuts are a(n) _____ good.
Year Good Price Quantity Demanded Income
2008 Coffee $4 12
2008 Doughnuts 2 20
2008
$100
2009 Coffee $4 13
2009 Doughnuts 2 18
2009
150
A) 0.20; inferior
B) 2; normal
C) 2; inferior
D) 0.20; normal
If an economy has to sacrifice only one unit of good X for each unit of good Y produced
throughout the relevant range, then its production possibility frontier has:
A) a zero slope.
B) a constant negative slope.
C) an increasing negative slope.
D) a decreasing negative slope.
When an increase in the firm's output reduces its long-run average total cost, it achieves
_____ scale.
A) economies of
B) diseconomies of
C) constant returns to
D) variable returns to
The market for beef is in long-run equilibrium at $3.25 per pound. The announcement
that mad cow disease has been discovered in the United States reduces the demand for
beef sharply, and the price falls to $2.00 per pound. If the long-run supply curve is
horizontal, when the long-run equilibrium is reestablished, the price will be:
A) $3.25 per pound.
B) $2.00 per pound.
C) greater than $2.00 per pound but less than $3.25 per pound.
D) More information is needed to answer this question.
Table: Lindsay's Farm
(Table: Bonnie's Production Function for Good Z) Look at the table Bonnie's
Production Function for Good Z. The marginal product of labor of the second worker is
_____ units of good Z.
A) 150
B) 225
C) 75
D) 250
Figure: The Perfectly Competitive Firm
(Figure: The Perfectly Competitive Firm) Look at the figure The Perfectly Competitive
Firm. The firm faces demand curve d and maximizes profit. In a long-run equilibrium,
this firm will produce _____ units of output and sell its output for _____.
A) 100; $1.00
B) 250; $1.90
C) 300; $2.00
D) 400; $3.00
In central Florida, the demand for real estate has been increasing rapidly for years.
Therefore, the _____ cost of capital is _____ in central Florida's orange groves.
A) explicit; decreasing
B) implicit; increasing
C) implicit; decreasing
D) explicit; increasing
Tacit collusion is difficult if:
A) there are many firms in the industry.
B) the firms in the industry are producing differentiated products.
C) firms have common interests.
D) the oligopolists are selling to many small firms.
If the United States can produce 30 computers for every car it produces and Japan can
produce 15 computers for every car it produces, _____ has the _____ advantage in car
production.
A) the United States; comparative
B) Japan; comparative
C) the United States; absolute
D) Japan; absolute
The slope of the total cost curve is:
A) marginal cost.
B) marginal revenue.
C) constant under perfect competition.
D) always negative.
If the demand for good X is perfectly inelastic and a tax is levied on the producers of
each unit:
A) consumers pay the entire tax, and deadweight loss will occur because the
equilibrium quantity of good X falls.
B) consumers pay the entire tax, and there is no deadweight loss because the
equilibrium quantity of good X remains constant.
C) consumers and producers share the burden of the tax, and there is no deadweight
loss because the equilibrium quantity of good X remains constant.
D) producers pay the entire tax, and deadweight loss will occur because the equilibrium
quantity of good X falls.
In the long run, if a monopolistically competitive firm produces the optimal level of
output:
A) P = ATC = MR = MC.
B) P > ATC > MR = MC.
C) P = ATC > MR > MC.
D) P = ATC > MR = MC.
Figure: The Total Product
(Figure: The Total Product) Look at the figure The Total Product. For hiring labor
between zero and L1:
A) the marginal product of labor is increasing.
B) the marginal product of labor is decreasing.
C) the total product is increasing at a diminishing rate.
D) the total product is decreasing.
When the price goes down, the quantity demanded goes up. The price elasticity of
demand measures:
A) how much the price goes down.
B) how much the equilibrium price goes up.
C) the responsiveness of the price change to an income change.
D) the responsiveness of the quantity change to the price change.
An industry that is dominated by a few firms, each of which recognizes that its own
choices can affect the choices of its rivals and vice versa, is:
A) a monopoly.
B) an oligopoly.
C) characterized by monopolistic competition.
D) characterized by perfect competition.
Assume the same upward supply curve for each of the following goods. Considering
demand only, a tax on _____ would result in the largest deadweight loss.
A) gasoline
B) medicine
C) restaurant meals
D) tobacco
An economy is said to have a comparative advantage in the production of one good if
it:
A) can produce more of all goods than another economy.
B) can produce less of all goods than another economy.
C) has the highest opportunity cost of producing a particular good.
D) has the lowest opportunity cost of producing a particular good.
Figure: Demand, Revenue, and Cost Curves
(Figure: Demand, Revenue, and Cost Curves) Look at the figure Demand, Revenue,
and Cost Curves. Figglenuts-R-Us is a monopolist in the figglenut market. If the
government wanted to regulate Figglenuts-R-Us such that the entire deadweight loss
would be eliminated in the short run, it would impose a price ceiling of:
A) $40.
B) $46.
C) $50.
D) $65.
The demand curve facing a monopolist is:
A) horizontal, the same as that facing a perfectly competitive firm.
B) downward-sloping, the same as that facing a perfectly competitive firm.
C) upward-sloping, the same as that facing a perfectly competitive firm.
D) downward-sloping, unlike the horizontal demand curve facing a perfectly
competitive firm.
Scenario: Tom's Budget Constraint
Tom is trying to decide how to allocate his $50 budget for music downloads and online
movie streaming when the price of a music download is $1 and the price of a movie is
$5.
(Scenario: Tom's Budget Constraint) Read the scenario Tom's Budget Constraint. If we
measure music downloads on the horizontal axis and movies on the vertical axis, the
vertical intercept of Tom's budget line is:
A) 10.
B) 5.
C) 2.
D) 1/2.
Collusive agreements are typically difficult for cartels to maintain because each firm
can increase profits by:
A) producing more than the quantity that maximizes joint profits.
B) producing less than the quantity that maximizes joint profits.
C) charging more than the price that maximizes joint cartel profits.
D) advertising less than will maximize joint cartel profits.
(Table: Choice with Uncertainty) Look at the table Choice with Uncertainty. Suppose
the probability that the sitcom does not make it to television is 30%, that it makes it to
television but is not the most viewed show in its time slot is 50%, and that it makes it to
television and is the most viewed show in its time slot is 20%. Given this information,
Norman, as a utility maximizer:
A) should keep his teaching job.
B) should quit his teaching job and go to Hollywood.
C) will be indifferent between leaving and staying, because his expected income is the
same whether he stays a teacher or moves to Hollywood.
D) will be indifferent between leaving and staying, because his expected total utility is
the same whether he stays a teacher or moves to Hollywood.
Figure: Pollution and Efficiency
(Figure: Pollution and Efficiency) Look at the figure Pollution and Efficiency. If this
market, whose sulfur emissions are a result of production, produced _____ units of
emissions, then _____.
A) 40; MSB = MSC
B) 30; MSB < MSC
C) 40; MSB < MSC
D) 30; MSC < MSB
(Figure and Table: Variable, Fixed, and Total Costs) Look at the figure and table
Variable, Fixed, and Total Costs. The marginal cost of increasing production from 84 to
91 bushels of wheat is:
A) $13.00.
B) $19.78.
C) $22.22.
D) $28.57.
When labor is hired in a competitive market, the value of the marginal product of labor
is computed by:
A) multiplying the price of the output by the marginal product of labor.
B) multiplying the price of the output by the wage paid to labor.
C) multiplying the wage paid to labor by the marginal product of labor.
D) dividing the marginal product of labor by the price of the output.
