An indifference map states:
a. indifference curves farther from the origin yield higher levels of total utility.
b. that the consumer’s income varies with the level of the indifference curve.
c. indifference curves closer to the origin yield higher levels of total utility.
d. that the points on either parts of indifference curves are preferred to the midpoint.
Exhibit 3-13 Supply and demand curves
Which of the graphs in Exhibit 3-13 illustrates a surplus exists at the indicated market
price?
a. Diagram A. c. Diagram C.
b. Diagram B. d. Diagrams A and C.
A model is defined as a:
a. description of all variables affecting a situation.
b. positive analysis of all variables affecting an event.
c. simplified description of reality to understand and predict an economic event.
d. prediction based on historical evidence.
Implicit costs are:
a. the opportunity costs of using resources owned by the entrepreneur in his/her own
business.
b. payments the business owner must make on borrowed funds.
c. costs which vary as the level of output varies.
d. those payments the business owner makes in cash.
e. the payments the business owner makes for public relations, such as donations to
charity.
A(n) ____ can be used to demonstrate why a competitive oligopoly tends to result in a
low-price strategy that does not maximize mutual profits.
a. interdependence index c. herfindahl index
b. gini coefficient d. payoff matrix
If a monopolist finds that at the present level of output marginal revenue exceeds
marginal cost, the firm should:
a. shut down.
b. expand output.
c. maintain the current output.
d. reduce output (but still produce).
e. raise prices.
Assume that an individual consumes only coffee and bagels and that the last cup of
coffee yields 12 utils and the last bagel 6 utils. If the price of a cup of coffee is $1 and
the price of the bagel is $.50, we can conclude that the:
a. consumer should consume more coffee and fewer bagels.
b. price of coffee is too high relative to bagels.
c. consumer should consume less coffee and more bagels.
d. consumer is in equilibrium.
Lorna’s Lumberyard is a monopsony. Lorna estimates that at a wage of $10, 100
workers would be willing to work for her. Similarly, at a wage of $12, 200 workers
would be willing to work. Her marginal factor cost is:
a. $10.
b. $14.
c. $120.
d. $140.
e. $240.
Which of the following is a game theory strategy for oligopolists to avoid a low-price
outcome?
a. Tit-for-tat c. Cartel
b. Price leadership d. All of these
If the price elasticity is supply coefficient is greater than one, then supply is:
a. elastic. c. perfectly elastic.
b. inelastic. d. perfectly inelastic.
Exhibit 15-6 Dollars per British pound
In Exhibit 15-6, when the exchange rate is 1 dollar per pound,
a. the market is in equilibrium.
b. there is a surplus of 30 pounds.
c. there is a surplus of 60 pounds.
d. there is a shortage of 30 pounds.
e. there is a shortage of 60 pounds.
Suppose Good Food’s supermarket raises the price of its steak and finds its total
revenue from steak sales does not change. This is evidence that price elasticity of
demand for steak is:
a. perfectly elastic.
b. perfectly inelastic.
c. unitary elastic.
d. inelastic.
e. elastic.
Exhibit 11-12 A monopsonist
In Exhibit 11-12, a profit-maximizing firm faced with this labor market will hire ____
workers and pay a wage of ____.
a. 60; $35
b. 60; $25
c. 60; $27
d. 70; $30
e. 70; $25
The first federal antitrust law was the:
a. Clayton Act. c. Sherman Antitrust Act.
b. Federal Trade Commission Act. d. Interstate Commerce Act.
If the exchange rate between the yen and the dollar changes from 110 yen = $1 to 100
yen = $1, then:
a. the dollar has depreciated in value.
b. U.S.-made goods will become more expensive to Japanese citizens.
c. the dollar has appreciated in value.
d. Japanese-made goods will become less expensive to U.S. citizens.
e. there will be a decrease in the demand for dollars in the foreign exchange market.
In which of the following market structures must the price and output decisions of an
individual firm include the possible price and output reactions of the firm’s rivals?
a. Monopoly. c. Perfect competition.
b. Oligopoly. d. Cartel.
The opportunity cost of an action is:
a. the monetary payment the action required.
b. the total time spent by all parties in carrying out the action.
c. the value of the best opportunity that must be sacrificed in order to take the action.
d. the cost of all alternative actions that could have been taken, added together.
The term “balance of trade” refers to the:
a. importing and exporting of goods.
b. importing and exporting of goods and services.
c. current account trade balance.
d. capital outflows minus inflows.
The price elasticity of demand coefficient for a good will be lower:
a. if there are few substitutes for the good.
b. if expenditure on it is a small part of one’s budget.
c. both a and b are true.
d. neither a nor b are true.
Consumer surplus measures the value between the price consumers are willing to pay
and the:
a. producer surplus price. c. actual price paid.
b. deadweight gain price. d. preference price.
Dina is driving to work on an interstate highway at 90 MPH, well in excess of the legal
speed of 65 MPH. Sandy is also driving to work at the same time, going 85 MPH. A
state trooper pulls Dina over and gives her a speeding ticket. Sandy continues driving,
but if Dina had not been speeding, the trooper would have ticketed Sandy instead. In
terms of externalities, this story shows that:
a. Sandy’s actions gave Dina a positive externality.
b. Dina’s actions gave Sandy a positive externality.
c. Sandy’s actions gave Dina a negative externality.
d. Dina’s actions gave Sandy a negative externality.
e. Dina’s and Sandy’s actions did not create any externalities.
A supply curve:
a. has a negative slope.
b. is based on the assumption of a stable demand curve.
c. illustrates the negative relationship between price and quantity supplied.
d. illustrates the positive relationship between price and quantity supplied.
e. shifts about in random fashion.
In a market without government interference, the price is free to move the equilibrium.
Most less-developed countries have sufficient infrastructure in place to become a
developed country.
A straight line or curve can shift when a factor not included on the vertical axis or
horizontal axis changes.
Interlocking directorates are illegal under the Clayton Act.
What are the seven short run cost calculations? How are they related?