Redistribution programs are means-tested. To qualify for such a program, a person must
demonstrate that:
A) his or her family is larger than the mean family size for the country as a whole.
B) his or her average (or mean) family income has fallen (or not gone up) during the
past three years.
C) though unemployed, he or she is making serious efforts to get a job.
D) his or her income (or means) is below a certain specified level.
Which of the following is TRUE?
A) There is no role for advertising in perfect competition.
B) Firms in monopolistic competition and oligopoly use advertising in expectation of
increasing profit.
C) Advertising has costs but few if any benefits.
D) There is no role for advertising in perfect competition, and firms in monopolistic
competition and oligopoly use advertising in expectation of increasing profit.
Suppose that an individual is risk-averse. If this individual’s utility function is depicted
in a graph, with income measured on the horizontal axis and utils on the vertical axis,
the graph will be an upward-sloping:
A) straight line through the origin.
B) straight line with a positive vertical intercept.
C) curve with a steadily increasing slope (i.e., a curve that is convex from below).
D) curve with a steadily decreasing slope (i.e., a curve that is concave from below).
Which of the following demonstrates one of the three principles of economy-wide
interactions?
A) A student chooses to rent a movie with friends rather than study for an economics
quiz.
B) Your roommate offers to pay for the movie tickets if you drive to the theater.
C) A city builds a new public park on the grounds of an abandoned warehouse.
D) In 2008, fearing a recession, Congress approved a White House proposal to rebate
some taxes for 2007.
Firms will continue to produce if:
A) the marginal benefits of producing an additional unit are greater than the marginal
costs of producing that unit.
B) the marginal benefits of producing an additional unit are less than the marginal costs
of producing that unit.
C) the marginal benefit of producing an additional unit is equal to the marginal cost of
producing that unit.
D) the costs of producing the unit stay constant.
A perfectly competitive firm’s short-run supply curve is its _____ cost curve above its
_____ cost curve.
A) average variable; marginal
B) marginal; average fixed
C) marginal; average total
D) marginal; average variable
The price elasticity of demand is measured by _____ the percentage change in _____
the percentage change in _____.
A) dividing; price by; quantity demanded
B) dividing; quantity demanded by; price
C) subtracting; price from; quantity demanded
D) adding; price to; quantity demanded
Alice goes to the local supermarket to purchase one package of her favorite taco shells.
She often pays $1.50 for a package, but she finds they are on sale for $1 each.
According to the law of demand, one can expect Alice to:
A) purchase an alternative good.
B) purchase more than one package of taco shells.
C) decide not to purchase taco shells on this visit.
D) buy only one package of taco shells.
The supply curve found by taking the horizontal summation of the short-run supply
curves of all of the firms in a perfectly competitive industry is called the _____ curve.
A) marginal cost
B) short-run market supply
C) interim market supply
D) competitive
An increase in supply is caused by:
A) an increase in input prices.
B) a decrease in the number of sellers in the market.
C) suppliers’ expectations of higher prices in the future.
D) an advancement in the technology for producing the good.
Figure: Risk Aversion
(Figure: Risk Aversion) Look at the figure Risk Aversion. Bob and Nancy have the
same income and the same total utility. Nancy is _____ risk-averse than Bob because
her marginal utility curve is _____ than Bob’s.
A) more; flatter
B) more; steeper
C) less; flatter
D) less; steeper
(Figure and Table: Variable, Fixed, and Total Costs) Look at the figure and table
Variable, Fixed, and Total Costs. When 51 bushels of wheat is produced, the average
fixed cost is _____, average variable cost is _____, and average total cost is _____.
A) $7.84; $11.76; $19.60
B) $133.33; $200.00; $333.33
C) $400.00; $600.00; $1,000.00
D) $5.33; $13.33; $18.67
Figure: Consumer Equilibrium IV
(Figure: Consumer Equilibrium IV) Look at the figure Consumer Equilibrium IV.
Assume that you are consuming the combination of goods at point K. Given the budget
constraint FL, utility can be increased by moving to point:
A) F.
B) G.
C) H.
D) I.
Diana’s labor supply curve changes slope and begins to bend backward at a wage of
$44. Thus, for a wage _____ $44, the substitution effect of a wage increase will _____.
A) above; cause Diana to work fewer hours
B) below; cause Diana to work fewer hours
C) below; dominate the income effect
D) above; cause Diana to work more hours
During the summer, Alex runs a mowing service, and lawn mowing is a perfectly
competitive industry. In the short run, Alex will shut down if:
A) the total revenues can’t cover fixed costs.
B) the total revenues can’t cover variable costs.
C) the total revenues can’t cover total costs.
D) the price exceeds the average total cost.
The marginal social benefit of pollution:
A) is zero, since pollution is not beneficial.
B) can be measured as the additional gain to society from one additional unit of
pollution.
C) is easy to estimate, since polluters are required to file this information in their tax
returns.
D) is equal to the marginal social cost of pollution, since benefits to producers are equal
to costs to consumers.
A major application of the Sherman Antitrust Act was in _____ against _____.
A) 1880; the Ford Motor Company
B) 1889; Bell
C) 1911; Standard Oil
D) 1889; Bell and Standard Oil
Risk-averse individuals are willing to pay a premium that is _____ their expected
claims.
A) less than
B) greater than or equal to
C) equal to
D) dependent on something other than
Figure: The Profit-Maximizing Output and Price
(Figure: The Profit-Maximizing Output and Price) Look at the figure The
Profit-Maximizing Output and Price. Assume that there are no fixed costs and AC =
MC = $200. At the profit-maximizing output and price for a perfectly competitive
industry, total surplus is:
A) $200.
B) $1,600.
C) $3,200.
D) $6,400.
(Figure: Wine and Wheat) Look at the
figure Wine and Wheat. If this economy is producing at point A, we know the economy
is:
A) using its resources efficiently.
B) using its resources inefficiently.
C) producing at an unattainable point.
D) trading with another country.
(Table: Total Cost and Output) Look at the table Total Cost and Output, which describes
Sergei’s total costs for his perfectly competitive all natural ice cream firm. If there are
100 firms in the all-natural ice cream industry, which of the following is a point on the
industry short-run supply curve?
A) P = $10; Q = 0
B) P = $20; Q = 200
C) P = $110; Q = 3
D) P = $75; Q = 500
An upper limit on the quantity of a good that can be bought and sold is a:
A) quota limit.
B) price ceiling.
C) price floor.
D) tariff.
Health care expenditures in the United States are _____ than in other countries such as
Canada and France, and the government share of health care in the United States is
_____ than in those countries.
A) higher; higher
B) higher; lower
C) lower; lower
D) lower; higher
(Table: Droids and Moisture Output) Look at the table Droids and Moisture Output.
Luke Skywalker uses droids to operate a moisture farm in a perfectly competitive
market on the planet Tatooine. A barrel of moisture sells for 50 republic credits. A droid
costs 675 republic credits per month to rent. How many droids should Luke rent?
A) one
B) two
C) three
D) four
(Table: Soybean Cost) Look at the table Soybean Cost. If the market price of a bushel
of soybeans is $15, how many bushels will the farmer produce to maximize short-run
profit?
A) 2
B) 5
C) 3
D) 7
Figure: Cold Drinks Sold and Temperature
(Figure: Cold Drinks Sold and Temperature)
Look at the figure Cold Drinks Sold and Temperature. If we move from point C to point
D in the figure, the outside temperature has ______ degrees and the number of cold
drinks sold has ______.
A) decreased by 30; decreased by 30
B) increased by 20; increased by 20
C) increased by 30; increased by 30
D) increased by 40; increased by 40