Figure: Short-Run Costs
(Figure: Short-Run Costs) Look at the figure Short-Run Costs. A is the _____ cost
curve.
A) average total
B) average variable
C) marginal
D) total
Which of the following statements is FALSE?
A) The income effect of normal goods counters the substitution effect, so the demand
curve slopes upward.
B) The income effect and the substitution effect reinforce each other when the price of a
normal good changes.
C) The income effect represents the decrease in quantity demanded caused by the
implicit change in income due to a fall in the price of an inferior good but not of a
normal good.
D) The substitution effect reflects the change in quantity demanded solely because of a
change in the relative price of a good.
The U.S. production possibility frontier would _____ if all computers using Microsoft
operating systems contracted a virus that deleted all information on those computers.
A) shift in
B) shift out
C) not change
D) The answer cannot be determined from the information provided.
The horizontal sum of individual firms’ MC curves is the:
A) short-run industry demand curve.
B) short-run industry supply curve.
C) long-run fixed cost curve.
D) long-run average variable cost curve.
(Table: Alaina’s Utility from Consuming Cups of Coffee) Look at the table Alaina’s
Utility from Consuming Cups of Coffee. Alaina’s marginal utility from consuming her
sixth cup of coffee is _____ utils.
A) 43
B) 82
C) 4
D) no
(Table: Production Possibilities for the United States and Canada) Look at the table
Production Possibilities for the United States and Canada. _____ has (have) an absolute
advantage in producing cars.
A) Both the United States and Canada
B) Neither the United States nor Canada
C) The United States
D) Canada
The welfare state can:
A) take up a large share of government spending in wealthy countries.
B) be referred to as Social Security.
C) take up only a small share of government spending in wealthy countries.
D) affect only low-income households.
(Table: Employment and Output) In the table Employment and Output, if the price of a
bushel of wheat is $5 and the price of labor (wage) is $40, then the profit-maximizing
quantity of labor is:
A) one.
B) three.
C) six.
D) eight.
Women, regardless of ethnicity, earn:
A) the same as White men.
B) about twice as much as White men.
C) about 70% of the earnings for White men.
D) about 25% of the earnings for White men.
A firm operating in a monopolistically competitive market is producing a quantity at
which MC = MR. Profit:
A) can be increased by increasing production.
B) is maximized.
C) can be increased by decreasing the price.
D) is maximized only if MC = P.
When the price of an inferior good falls, the substitution effect contributes to _____ in
the quantity demanded, and the income effect _____ the substitution effect.
A) a decrease; reinforces
B) an increase; reinforces
C) an increase; opposes
D) a decrease; opposes
If a country imposes a tariff on imported shoes, we expect the domestic price of shoes
to _____ and the quantity of shoes consumed in the domestic market to _____ .
A) fall; fall
B) fall; rise
C) rise; fall
D) rise; rise
Figure: Davina’s Labor Supply Choice
(Figure: Davina’s Labor Supply Choice) The figure Davina’s Labor Supply Choice
shows Davina’s time allocation budget line when her hourly wage is $10 or $15 and she
has 80 hours to allocate between labor and leisure; it also shows two of her indifference
curves for income and leisure. When Davina earns $15 per hour, she works _____ hours
and enjoys _____ hours of leisure.
A) 20; 60
B) 30; 50
C) 40; 40
D) 50; 30
(Table: Demand Schedule for Gadgets) Look at the table Demand Schedule for
Gadgets. The market for gadgets consists of two producers, Margaret and Ray. Each
firm can produce gadgets at a marginal cost of $2 and no fixed cost. If industry output is
300 gadgets produced by Margaret and 200 gadgets produced by Ray and if Ray
decides to increase output by 100, industry price will be:
A) $4.
B) $3.
C) $2.
D) $1.
You manage a nightclub, and lately revenues have been disappointing. Your bouncer
suggests that raising drink prices will increase revenues, but your bartender suggests
that decreasing drink prices will increase revenues. You aren’t sure who is right, but you
do know that your bouncer thinks the demand for drinks is _____ and your bartender
thinks the demand for drinks is _____.
A) elastic; inelastic
B) inelastic; elastic
C) elastic; elastic
D) inelastic; inelastic
Figure: Short-Run Costs II
(Figure: Short-Run Costs II) Look at the figure Short-Run Costs II. Curve 1 crosses the
average variable cost curve at:
A) 3 units of output.
B) approximately 5.3 units of output.
C) the minimum value of curve 2.
D) the level of output at which diminishing marginal returns begin.
Figure: Payoff Matrix for Gehrig and Gabriel
(Figure: Payoff Matrix for Gehrig and Gabriel) The figure Payoff Matrix for Gehrig and
Gabriel describes two people who sell handmade Davy Crockett figurines in San
Antonio. Both Gehrig and Gabriel have two strategies available to them: to produce
5,000 figurines each month or to produce 7,000 figurines each month. The combined
profits of the two are maximized if Gehrig produces _____ figurines and Gabriel
produces _____ figurines.
A) 5,000; 5,000
B) 7,000; 7,000
C) 7,000; 5,000
D) 5,000; 7,000
The consumption bundles that Mei CAN afford but that do not use up her entire income
lie _____ the budget line.
A) within
B) beyond
C) on
D) at the corner of
If goods A and B are substitutes, a decrease in the price of good B will:
A) increase the demand for good A.
B) increase the demand for good B.
C) decrease the demand for good A.
D) increase the demand for good B and decrease the demand for good A.
Suppose the price elasticity of demand for fishing lures equals 1.5 in South Carolina
and 0.63 in Alabama. To increase revenue, fishing lure manufacturers should:
A) lower prices in each state.
B) raise prices in each state.
C) lower prices in South Carolina and raise prices in Alabama.
D) leave prices unchanged in South Carolina and raise prices in Alabama.
The models that economists construct:
A) usually make simplifying assumptions.
B) often rely on physical constructs, such as those used by architects.
C) rarely use mathematical equations or graphs.
D) attempt to replicate the real world.
Figure: The Demand for e-Books
(Figure: The Demand for e-Books) Look at the figure The Demand for e-Books. What
is the price elasticity of demand (by the midpoint method) when the price decreases
from $6 to $4?
A) 0.55
B) 0.5
C) 1
D) 0.67
Figure: Market Failure
(Figure: Market Failure) Look at the figure Market Failure. Suppose the supply curve
represents the marginal cost of providing streetlights in a neighborhood that is
composed of two people, Ann and Joe. The demand curve represents the marginal
benefit that Ann receives from the streetlights. Suppose that Joe’s marginal benefit from
the streetlights is a constant amount equal to AC. How much is Ann willing to pay for E
streetlights?
A) 0
B) A
C) B
D) C
Figure: Budget Lines for Tea and Scones
(Figure: Budget Lines for Tea and Scones) Look at the figure Budget Lines for Tea and
Scones. For months now, Agnes has had $20 per month to spend on tea and scones. The
price of each cup of tea and each scone has been $1. Which of the charts shows what
will happen to her budget line if the price of both a cup of tea and a scone increase to
$2?
A) A
B) B
C) C
D) D
Figure: Costs and Profits for Tomato Producers
(Figure: Costs and Profits for Tomato Producers) Look at the figure Costs and Profits
for Tomato Producers. The market for tomatoes is perfectly competitive. The market
price of a bushel of tomatoes is $18. If the market price increases to $20, the farmer’s
marginal revenue _____ and the profit-maximizing output _____.
A) increases; increases
B) increases; decreases
C) decreases; increases
D) decreases; decreases
A consumer maximizes utility, given her income, when she chooses a consumption
bundle whose:
A) marginal utility of each good is equal.
B) highest indifference curve is tangent to the budget line.
C) marginal rate of substitution is highest.
D) marginal utility of each good is highest.
Scenario: E-Books and Sports Tickets
Phillip has an income of $300 per month, which he uses to purchase two goods, e-books
and sports tickets. Each e-book costs $10, and each ticket costs $15.
(Scenario: E-Books and Sports Tickets) Read the scenario E-Books and Sports Tickets.
Measure e-books on the horizontal axis and sports tickets on the vertical axis. Suppose
the price of e-books decreases. Holding everything else constant, Phillip’s budget line
has become _____, and his optimal consumption bundle will be on a _____ indifference
curve.
A) flatter; higher
B) steeper; lower
C) flatter; lower
D) steeper; higher
