Exhibit 9-17
In Exhibit 9-17, which area represents the amount of consumer surplus received by
consumers under perfect price discrimination?
a. area a
b. area b
c. area a + b + c
d. area b + e
e. there is no consumer surplus
Which of the following represents the best example of wages and salaries?
a. the paycheck that Freeda brings home from her job as a computer programer
b. the interest that Hans earns from the savings account he has with USA Bank
c. the revenue that Janet has left over after she pays all the expenses associated with
running her software development business
d. the check that Hunter receives each month for leasing his land to the natural gas
company that is drilling on his land
e. the check that Trisha gets each month from the Social Security Administration
If a price reduction leads to larger total revenue, demand is
a. perfectly inelastic
b. inelastic
c. unit elastic
d. elastic
e. perfectly elastic
Which of the following is true of the MC curve?
a. It intersects the ATC curve at its minimum, but it does not intersect the AVC curve at
its minimum.
b. It intersects the AVC curve at its minimum, but it does not intersect the ATC curve at
its minimum.
c. It intersects both the ATC and the AVC curves at their minimums.
d. It intersects both the ATC and the AFC curves at their minimums.
e. It intersects both the AVC and the AFC curves at their minimums.
A constant-cost industry is distinguished by the fact that
a. firms’ long-run average cost curves are horizontal
b. firms’ short-run marginal cost curves are horizontal
c. firms’ short-run average total costs are horizontal
d. the short-run industry supply curve is perfectly elastic
e. the long-run industry supply curve is perfectly elastic
The horizontal (labor) intercept of Manny Motors’ isocost line is 3 million, and the
vertical (robot) intercept is 5 million. Which of the following best describes what would
happen to the isocost line if Manny Motors’ operating budget increased?
a. It would shift rightward to a parallel position.
b. It would shift rightward to a nonparallel position.
c. It would shift leftward to a parallel position.
d. It would shift leftward to a nonparallel position.
e. Nothing.
Manny Motors, Inc., can hire auto workers for $20 per hour, whereas robot arms cost
$12 per hour to operate. The horizontal (labor) intercept of the isocost line is 3 million,
and the vertical (robot) intercept is 5 million. Which of the following best describes
what would happen to the isocost line if the price of robot hours decreased?
a. It would shift to the right.
b. It would rotate outward along the horizontal axis.
c. It would rotate inward along the horizontal axis.
d. It would rotate outward along the vertical axis.
e. It would rotate inward along the vertical axis.
Markets reduce transactions costs
a. by decreasing the time spent searching for information about goods and services
b. only when they have a highly structured set of rules like the New York Stock
Exchange
c. because each market uses the same set of rules for buying and selling goods and
services
d. only when the government can coordinate the plans of many buyers and sellers
e. when prices are set by the sellers and are not determined by negotiation between the
buyers and the sellers
Which of the following would most likely reach the long run most rapidly?
a. a nuclear power plant
b. a college
c. a lumber mill
d. a shopping mall
e. a hot dog stand
Exhibit 5-11
Refer to Exhibit 5-11. What can be said of the price elasticity of demand for this good?
a. Demand is inelastic.
b. Demand is unit elastic.
c. Demand is elastic.
d. Demand is perfectly elastic.
e. Not enough information is given to determine elasticity.
The total welfare cost of a monopoly that engages in rent-seeking activities
a. equals only the portion of lost consumer surplus that is not transferred to the
monopolist
b. includes the use of resources devoted to rent seeking
c. equals the total reduction in consumer surplus
d. equals the total economic profit earned by the monopolist
e. excludes the use of resources devoted to rent seeking
In one week, Mohammed can knit 5 sweaters or bake 240 cookies. In one week, Tetah
can knit 15 sweaters or bake 480 cookies. Mohammed and Tetah would produce the
maximum quantities of cookies and sweaters if
a. Mohammed knitted and baked and Tetah did nothing
b. Tetah knitted and baked and Mohammed did nothing
c. Mohammed knitted and Tetah baked
d. Tetah knitted and Mohammed baked
e. Mohammed knitted and baked and Tetah just knitted
Exhibit 1-1
In Exhibit 1-1 the movement from point a to point c represents
a. an increase in x of 30 units and an increase in y of 10 units
b. an increase in x of 10 units and an increase in y of 30 units
c. an increase in x of 60 units and a decrease in y of 20 units
d. an increase in x of 20 units and a decrease in y of 60 units
e. an increase in x of 20 units and a decrease in y of 30 units
The largest U.S. welfare program is
a. Aid to Families with Dependent Children
b. Medicaid
c. Social Security
d. unemployment compensation
e. food stamps
If price-taking firms are required to install wet scrubbers on their chimneys to meet EPA
regulations and their costs increase as a result, we would expect
a. demand for the product to fall
b. the market supply curve to shift to the left
c. the long-run economic profit of individual firms in the industry to fall
d. the short-run economic profit of individual firms in the industry to remain unchanged
e. short-run profits to rise as the industry raises price more than the cost of pollution
A monopolistically competitive firm is producing an output level at which marginal
revenue is greater than marginal cost. This firm should __________ quantity and
__________ price to increase profit or reduce losses.
a. increase, increase
b. increase; decrease
c. decrease; increase
d. decrease; decrease
e. increase; not change
If the U.S. dollar appreciates, it becomes cheaper for Australians to visit their relatives
in the United States.
a. True
b. False
Which of the following is the best example of a vertically integrated firm?
a. General Electric, which produces light bulbs, jet engines, washing machines, and so
on
b. Kinko’s, which has a photocopy store near many colleges and universities
c. Americam Apparel, which from a single building in downtowm LA, controls the
dyeing, finishing, designing, sewing, cutting, marketing and distribution of the
company’s product.
d. Intel, which makes computer chips for most of the computer manufacturers
e. Century 21, which has real estate offices that help people sell a house in one city and
buy another house in another city
In the short run, a monopolist will always shut down when
a. total cost is greater than total revenue at all output levels
b. total variable cost is greater than fixed cost
c. total revenue is greater than total variable cost at all output levels
d. fixed cost is greater than total revenue at all output levels
e. total variable cost is greater than total revenue at all output levels
If I trade a ginger snap for a chocolate chip cookie, I am engaging in
a. barter
b. comparative advantage
c. absolute advantage
d. privatization
e. division of labor
All combinations of inputs along an isocost line represent the same total output.
Exchange rates
a. are always fixed
b. fluctuate to equate the quantity of foreign exchange demanded with the quantity
supplied
c. fluctuate to equate imports and exports
d. fluctuate to equate interest rates in various countries
e. fluctuate according to agreements between the governments of various countries
Exhibit 9-21
In Exhibit 9-21, D = AR represents the market demand curve for bicycles, MRm
represents the marginal revenue curve for a monopolist producer of bicycles and Sc =
MC = AC represents the marginal cost curve for a monopolist producer of bicycles and
the market supply curve when the market is perfectly competitive. The output for a
monopolist would be
a. 2 bicycles
b. 3 bicycles
c. 4 bicycles
d. 5 bicycles
e. 6 bicycles
An example of screening job applicants is
a. listing years of education on rsums
b. providing college transcripts
c. sending in letters of recommendation
d. dressing in a suit for interviews
e. checking rsums for spelling and typographical errors
Exhibit 5-20
Consider Exhibit 5-20. Between the prices of $5 and $6, which supply curve is most
elastic and which is least elastic?
a. S1 is most elastic; S2 is least elastic.
b. S1 is most elastic; S3 is least elastic.
c. S3 is most elastic; S1 is least elastic.
d. S3 is most elastic; S2 is least elastic.
e. S2 is most elastic; S3 is least elastic.
Suppose the marginal product of the second worker hired by a firm is 3, and the price of
the last unit produced is $7. Which of the following is true of the marginal revenue
product of the second worker?
a. It must equal $21.
b. It must be less than or equal to $21.
c. It must be greater than or equal to $21.
d. It equals $21 only if the firm is a price searcher (e.g., monopoly).
e. We can conclude nothing about marginal revenue product.
Historically salt has been one of the most commonly taxed items. Which of the
following do you think best explains this fact?
a. Since salt is a necessity, levying a tax on it imposed a hardship on no one
b. The burden of the tax will be shared by everyone since everyone uses salt
c. Because salt is used more by those with higher incomes, a tax will decrease their
consumption
d. The demand for salt is inelastic
e. The demand for salt is elastic
Exhibit 13-2
The marginal product of the third copy machine listed in Exhibit 13-2 is
a. 4 copies
b. 6 copies
c. 24 copies
d. 28 copies
e. 52 copies
Exhibit 11-8
Exhibit 11-8 shows data on the production of chocolate candy. If the firm sells
chocolate for $3 a pound regardless of the quantity sold, the marginal revenue product
of the third worker is
a. $0.60
b. $6
c. $0.30
d. $3
e. $90
Exhibit 12-2
In Exhibit 12-2, which of the following is true if the wage rate decreases from $14 to $6
per hour?
a. The income effect dominates the substitution effect.
b. The substitution effect dominates the income effect.
c. No labor is supplied.
d. The income effect equals the substitution effect.
e. The supply curve is horizontal.