Table 2-9
Table 2-9 shows the number of labor hours required to produce a canoe and a sailboat in
Guatemala and Honduras.
Refer to Table 2-9. Does either Guatemala or Honduras have an absolute advantage and
if so, in what product?
A) Guatemala only has an absolute advantage in producing canoes.
B) Honduras only has an absolute advantage in producing canoes.
C) Guatemala has an absolute advantage in producing both products.
D) Honduras only has an absolute advantage in producing sailboats.
In a report made to the U.S. Congress in 2001, the National Academy of Sciences
cautioned that if fuel economy encourages the production of smaller and lighter cars,
“Some additional traffic fatalities would be expected.” This statement suggests that
A) U.S. auto manufacturers are more concerned about producing fuel efficient cars to
compete with their Japanese and South Korean rivals than about consumer safety.
B) there is a tradeoff between safety and fuel economy.
C) society should value safety more highly than fuel economy.
D) society should value fuel economy more highly than consumer safety because of the
long-term environmental benefits generated by less gasoline use.
Table 17-1
Refer to Table 17-1. The marginal product of the fourth unit of labor is
A)
B)
C)
D)
Figure 15-12
Figure 15-12 shows the cost and demand curves for a monopolist.
Refer to Figure 15-12. If this industry was organized as a perfectly competitive
industry, the market output and market price would be
A) output = 62; price = $24.
B) output = 83; price = $22.
C) output = 62; price = $18.
D) output = 104; price = $20.80.
Which of the following is not part of an oligopolist’s business strategy?
A) deciding on how to manage relations with suppliers
B) choosing what new technologies to adopt
C) selecting which new markets to enter
D) independently setting a product’s price without consideration of its rivals’ pricing
policies
As more output is produced, the marginal product of labor declines
A) because of the law of diminishing returns.
B) if firms reduce the wage paid to labor.
C) if the firm’s output supply curve is inelastic.
D) because the firm’s marginal revenue declines.
A product is considered to be nonexcludable if
A) you can keep those who did not pay for the item from enjoying its benefits.
B) you cannot keep those who did not pay for the item from enjoying its benefits.
C) your consumption of the product reduces the quantity available for others to
consume.
D) it is jointly owned by all members of a community.
Figure 12-9
Figure 12-9 shows cost and demand curves facing a profit-maximizing, perfectly
competitive firm.
Refer to Figure 12-9. At price P1, the firm would
A) lose an amount equal to its fixed cost.
B) lose an amount more than fixed cost.
C) lose an amount less than fixed cost.
D) break even.
Consider the following types of demand curves:
a. a vertical demand curve
b. a horizontal demand curve
c. a linear downward-sloping demand curve
Which of the demand curves listed exhibits a price elasticity of demand coefficient that
remains constant along the demand curve?
A) a only
B) b only
C) a and b only
D) a, b, and c
Table 4-3
Refer to Table 4-3. The table above lists the marginal cost of cowboy hats by The Waco
Kid, a firm that specializes in producing western wear. If the market price of cowboy
hats is $50, how many hats will be produced?
A) 0
B) 1
C) 2
D) 4
A service station owner in Staten Island, New York, was worried that raising the price
of gasoline would cause the quantity demanded to fall by so much that he would be in a
worse situation than if he did not raise the price. If raising the price of gasoline would
cause the owner to receive less total revenue from the sale of gasoline, the demand for
gasoline is
A) elastic.
B) inelastic.
C) unit elastic.
D) perfectly inelastic.
If a firm has excess capacity, it means
A) that the firm expends too much of its resources on advertising its product without
seeing an appreciable increase in sales.
B) that the firm is not producing its minimum efficient scale of output.
C) that the firm’s long-run average cost of producing a given quantity exceeds its
short-run cost of producing that same quantity.
D) that the firm’s quantity supplied exceeds its quantity demanded.
Marginal revenue product of labor for a competitive seller is
A) the change in total product from hiring one more worker.
B) equal to the marginal product of labor multiplied by the output price.
C) the output price multiplied by the quantity sold.
D) the marginal revenue of the product multiplied by the output price.
Figure 6-4
Refer to Figure 6-4. Which of the following statements about price elasticity of
demand is true?
A) The elasticity coefficient is constant along the demand curve.
B) The elastic portion of a straight-line, downward-sloping demand curve corresponds
to the segment above the midpoint.
C) The inelastic portion of the demand curve corresponds to the segment above the
midpoint.
D) At the midpoint of the demand curve, the elasticity coefficient is zero.
In order to be binding, a price ceiling
A) must lie above the free market equilibrium price.
B) must lie below the free market equilibrium price.
C) must coincide with the free market equilibrium price.
D) must be high enough for firms to earn a profit.
If a producer is not able to expand its plant capacity immediately, it is
A) bankrupt.
B) operating in the long run.
C) operating in the short run.
D) losing money.
Figure 16-3
Chantal owns a hairdressing salon which caters to two main groups of customers:
residents of “The Chateau,” a retirement community, and other residents in the
neighborhood. Figure 16-3 shows the demand curves for the residents of the retirement
community, labeled Market A, and other residents in the neighborhood, labeled Market
B. The demand curves are not identical.
Refer to Figure 16-3. Which group of customers is likely to have a more elastic
demand curve (more sensitive to price)?
A) the other residents of the neighborhood – market B
B) There is no difference in the elasticity of demand between the two groups.
C) the customers from “The Chateau” – market A
D) There is insufficient information to answer this question.
Figure 15-10
Refer to Figure 15-10. What is the area that represents consumer surplus under a
monopoly?
A) the triangle P0P1F
B) the triangle P0P2E
C) the trapezium P1P2EF
D) the rectangle P1P3HF
Which one of the following is not a possible barrier to entry high enough to keep
competing firms out of a monopoly industry?
A) The monopoly firm has control of a key resource necessary to produce a good.
B) There are important network externalities in supplying a good or service.
C) large economies of scale that result in a natural monopoly
D) a high concentration ratio
Exports are domestically produced goods and services
A) sold to other countries.
B) sold to the government.
C) sold at home.
D) which are used to produce other goods and services.
Which of the following economists is best known for exploring the application of
economic analysis to human resources issues?
A) Edward Lazear
B) Claudia Goldin
C) David Hammermesh
D) Alan Krueger
Table 4-6
Refer to Table 4-6. The equations above describe the demand and supply for Chef
Ernie’s Sushi-on-a-Stick. The equilibrium price and quantity for Chef Ernie’s sushi are
$60 and 20 thousand units. What is the value of consumer surplus?
A) $100 thousand
B) $200 thousand
C) $600 thousand
D) $800 thousand
If economies of scale are relatively unimportant in an industry, the typical firm’s
long-run average total cost curve will reach a minimum at a level of output that is a
________ fraction of total industry sales. The industry will be ________.
A) large; competitive
B) large; an oligopoly
C) small; competitive
D) small; an oligopoly
For years, economists believed that market structure explained the ability of some firms
to earn economic profits. For example, firms in industries with little competition and
high barriers to entry would earn higher profits than firms in competitive industries with
low entry barriers. Which of the following has caused economists to question this
explanation and seek other explanations for why firms are profitable?
A) Studies have shown that, on average, firms in competitive industries earn higher
profit rates than firms in industries with little competition.
B) In recent years, new technologies have increased the potential entry of new firms in
industries with high entry barriers.
C) Studies have shown that firms in industries that have little competition and high
entry barriers are not very profitable. Economists conclude from this that some
competition is necessary in order to force firms to lower their costs and develop
products that satisfy new consumer demands.
D) The market structure explanation fails to explain how firms in the same industry can
have very different levels of profit.
Figure 4-1
Figure 4-1 shows Arnold’s demand curve for burritos.
Refer to Figure 4-1. If the market price is $1.00, what is Arnold’s consumer surplus?
A) $1.00
B) $2.00
C) $4.00
D) $7.00
How does the increasing use of MP3 players affect the market for compact discs?
A) The demand curve for compact discs shifts to the right.
B) The supply curve for compact discs shifts to the left.
C) The supply curve for compact discs shifts to the right.
D) The demand curve for compact discs shifts to the left.
Which of the following statements is false?
A) An inverse relationship has a negative slope value.
B) A direct relationship has a positive slope value.
C) A curved line has slope values that change at every point.
D) A straight line has a slope of zero.
When an investor buys a corporate bond, the ________ the bond is a loan to the
corporation.
A) interest on
B) face value of
C) coupon payment on
D) dividend payment on
Which of the following is the best example of a quota?
A) a limit imposed on the number of sport utility vehicles that the United States can
import from Japan
B) a subsidy granted by the U.S. government to domestic sport utility vehicle
manufacturers so they can compete more effectively with foreign sport utility vehicle
manufacturers
C) a tax placed on all sport utility vehicles sold in the domestic market
D) a $5,000 per-car fee imposed on all sport utility vehicles imported into the United
States
Carrie Bradshaw claims that when it comes to buying shoes, “price is no object.” If this
is true, then her demand for shoes is
A) perfectly elastic.
B) perfectly inelastic.
C) unit elastic.
D) horizontal.
Table 2-9
Table 2-9 shows the number of labor hours required to produce a canoe and a sailboat in
Guatemala and Honduras.
Refer to Table 2-9. What is Honduras’s opportunity cost of producing one sailboat?
A) 1/5 of a canoe
B) 5 canoes
C) 4 canoes
D) 5 canoes
A curve that shows combinations of consumption bundles that give a consumer the
same utility is called
A) a utility curve.
B) an indifference curve.
C) a preference curve.
D) a demand curve.
Figure 15-17
Your college decides to offer a psychology course as a MOOC that can be taken by
students anywhere in the world, whether they are actually enrolled in your college or
not. The demand and cost situation for the MOOC is shown in the figure.
Refer to Figure 15-17. You are a member of a student government and are asked to
recommend a price for the course and you argue: “I think the college should charge a
price so that it just breaks even on the course.” How much profit (or loss) will the
college make on the course if it charges this price?
A) -$2,592,000
B) -$1,080,000
C) $0
D) $450,000
Table 4.7
Refer to Table 4-7. The equations above describe the demand and supply for Bubba’s
Fried Jellybeans. The equilibrium price and quantity for Bubba’s Fried Jellybeans are
$40 and 5 thousand units. What is the value of economic surplus in this market?
A) $5 thousand
B) $12.5 thousand
C) $25 thousand
D) $37.5 thousand
Who receives the most of what is produced in a market economy?
A) lawmakers and other politically favored groups
B) those who are willing and able to buy them
C) everyone receives an equal amount
D) people who earn the highest incomes