If the market for buffalo meat is in equilibrium, the price of buffalo meat will probably
_____ in the near future.
A) increase
B) not change
C) decrease
D) increase considerably
Tankao makes Bluetooth sets for mobile devices. When 50 Bluetooth sets are produced
in the short run, the average variable cost is $30. Tankao’s average _____ cost is _____.
A) total; $30.
B) total; greater than $30.
C) total; less than $30.
D) fixed; $30.
As the premium for an insurance policy rises, there is a(n) _____ in the _____
insurance.
A) decrease; demand for
B) increase; supply of
C) decrease; quantity demanded of
D) decrease; supply of
Microsoft sets prices for its new line of computers, and Dell and HP follow. This
practice is known as:
A) antitrust pricing.
B) price extortion.
C) price leadership.
D) kinked demand behavior.
The price elasticity of demand for cabbage has been estimated to be 0.25. If an insect
infestation destroys 20% of the nation’s cabbage crop (and thus reduces supply), how
will that affect total expenditures on cabbage, all other things equal?
A) Total expenditures will rise.
B) Total expenditures will fall.
C) Total expenditures will remain unchanged.
D) The information is insufficient to answer the question.
Suppose people expect the price of MP3 players to rise next year. As a result of this
expectation, people will most likely:
A) purchase fewer MP3 players this year.
B) observe higher prices for MP3 players this year.
C) purchase the same amount of MP3 players, since this expectation will have no effect
on consumers this year.
D) decide to wait and purchase the MP3 players next year.
Adam has a monthly income of $20 that can be spent on books (B) and pencils (P). The
price of a book is $5 and the price of a pencil is $0.50. Which of the following bundles
of books and pencils is affordable but does not use all of Adam’s income?
A) 1 book and 30 pencils
B) no books and 40 pencils
C) 2 books and 20 pencils
D) 1 book and 10 pencils
Jie consumes three heads of broccoli and six bowls of rice each week. The price of a
head of broccoli is $2 and the price of rice is $4 per bowl. Jie’s marginal utility from the
last head of broccoli consumed is 4 utils and her marginal utility from her last bowl of
rice is 8 utils. If Jie wants to maximize her utility, she should:
A) increase her broccoli consumption and decrease her rice consumption.
B) increase her rice consumption and decrease her broccoli consumption.
C) not change her consumption of either broccoli or rice.
D) stop consuming both goods.
Higher indifference curves represent:
A) less utility than lower indifference curves.
B) more utility than lower indifference curves.
C) the same level of utility as lower indifference curves.
D) unknown levels of utility compared to lower indifference curves.
Barcelona and Los Angeles are similar, except Barcelona has a good public
transportation system and Los Angeles does not. Auto insurance will probably be more
expensive in _____, since the _____ for insurance is _____.
A) Barcelona; demand; higher than in Los Angeles
B) Barcelona; supply; lower than in Los Angeles
C) Los Angeles; demand; higher than in Barcelona
D) Los Angeles; supply; lower than in Barcelona
The _____ curve shows the quantities of output that can be obtained from different
quantities of a variable input, assuming other inputs are fixed.
A) total input
B) marginal input
C) total product
D) average total quantity
Katherine has a physics exam tomorrow. However, a free lecture by one of her favorite
authors is taking place this evening. Katherine decides to attend the lecture instead of
studying for her exam. Katherine’s opportunity cost is:
A) the time spent listening to the lecture.
B) not relevant, since no money is involved.
C) the cost of getting to the lecture itself plus the reduction in her physics exam grade
as a result of not studying tonight.
D) the time spent getting to the lecture.
Suppose the price of Vanilla Coke increases by 9% and quantity demanded falls by 13%
overall but only by 4% for loyal Coca-Cola customers. This means that for the general
public there are _____ for Vanilla Coke, but for loyal Coca-Cola customers, Vanilla
Coke is more of a _____ item. This means that Coca-Cola will enjoy an increase in total
revenue only from _____.
A) several substitutes; necessity; loyal Coca-Cola customers
B) few substitutes; luxury; the general public
C) no substitutes; necessity; the general public
D) several substitutes; necessity; the general public
A dominant strategy equilibrium exists in a game when:
A) no player has a choice.
B) every player has a clear best action that does not depend on the action of the other
players.
C) each player’s choices are dependent on the actions of other players.
D) no player is able to dictate or predict the actions of any other player.
The land you own has the only known source of aloe needed to make anti-itch lotion. In
this case, your monopoly results from:
A) government restrictions.
B) location.
C) sunk costs.
D) ownership of scarce inputs.
To ensure that low and middle income families have health insurance, the Affordable
Care Act of 2010 _____ low- and middle-income families _____.
A) provides government subsidies to; to make insurance more affordable
B) requires that all; be covered by Medicare
C) requires that all; be covered by Medicaid
D) forces; to find employers that provide health insurance
Many countries engage in trade protection by imposing import tariffs or quotas for at
least some goods. This is because:
A) economists have established that such restrictions are welfare-improving for certain
categories of goods (such as raw materials).
B) such restrictions tend to benefit consumers without harming producers.
C) while such restrictions harm consumers, they benefit producers, who are usually a
more cohesive and politically influential group.
D) while such restrictions harm consumers and benefit producers, the losses to
consumers are outweighed by the gains to producers.
Figure: Producer Surplus III
(Figure: Producer Surplus III) Look at the figure Producer Surplus III. If the price of the
good increases from $3 to $4, producer surplus will increase by:
A) $5.
B) $15.
C) $25.
D) $35.
Economists identify the satisfaction a person derives from the consumption of goods
and services as:
A) happiness.
B) usefulness.
C) utility.
D) pleasure.
(Table: Cakes) Look at the table Cakes. Pat is opening a bakery to make and sell special
birthday cakes. She is trying to decide how many mixers to purchase. Her estimated
fixed and average variable costs if she purchases one, two, or three mixers are shown in
the table. Assume that average variable costs do not vary with the quantity of output. If
Pat purchases two mixers and bakes 100 cakes per day, what is her average total cost?
A) $8
B) $10
C) $15
D) $22
The _____ tax rate on income represents the additional tax an individual pays if his or
her income goes up by $1. This rate has _____ since 2000.
A) average; increased
B) marginal; decreased
C) marginal; increased
D) average; decreased
The price of microchips used to produce computers falls. As a result, the equilibrium
price of computers _____ and the equilibrium quantity _____.
A) rises; increases
B) rises; decreases
C) falls; decreases
D) falls; increases
Figure: The Demand and Supply of Wheat
(Figure: The Demand and Supply of Wheat) Look at the figure The Demand and
Supply of Wheat. A temporary price of $2 in this market would result in a _____ of
_____ bushels.
A) surplus; 4,000
B) shortage; 8,000
C) shortage; 10,000
D) surplus; 10,000
When an individual’s consumption of an additional unit of a good generates a smaller
increase in total utility than the previous unit consumed, then this person’s indifference
curve will be:
A) a straight line.
B) convex, or bowed toward the origin.
C) concave, or bowed away from the origin.
D) a right angle.
Figure: The Time Allocation Budget Line
(Figure: The Time Allocation Budget Line) Look at the figure The Time Allocation
Budget Line. If the wage rate rises, then the time allocation budget line will rotate
_____ along the _____ axis.
A) left; leisure
B) up; income
C) right; leisure
D) down; income
(Table: Quantity Supplied and Quantity Demanded) Look at the table Quantity Supplied
and Quantity Demanded. The government institutes a price floor, and as a result too
many resources are allocated for the production of a good. The price floor in this market
must be equal to:
A) $5.
B) $10.
C) $15.
D) $20.
Figure and Table: The Budget Line
(Figure and Table: The Budget Line) Look at the figure and table The Budget Line. A
decrease in income would:
A) rotate the budget line along the horizontal axis.
B) shift the budget line to the left.
C) rotate the budget line along the vertical axis.
D) shift the budget line to the right.
Goods that are nonrival in consumption and nonexcludable are _____ goods.
A) common resource
B) private
C) public
D) normal
By offering a menu of policies with different premiums and deductibles, insurance
companies can _____ their customers; for example, a low-risk customer will often buy
insurance with a lower _____ but a higher _____ than a high-risk customer.
A) signal; deductible; premium
B) signal; premium; deductible
C) screen; deductible; premium
D) screen; premium; deductible
Critics of traditional welfare programs often cite a disincentive to work as a flaw in the
policy. Why would these critics be in favor of the Earned Income Tax Credit (EITC)?
And why is the EITC described as a negative income tax?
A small private college increases tuition while a large public university in the same state
does not. What will happen to the demand (enrollment) for both schools?
Suppose the price elasticity of demand for electricity is equal to 0.15 in the short run
but is equal to 0.5 in the long run. What explains this difference, and what does this
imply about the demand curve for electricity in the short run versus the long run?
Two large electronic retailers, Biggest Buy and Connection City, are considering
entering a small town. Each firm can either enter the market or not. The table shows the
payoff matrix. Profits in each cell of the payoff matrix are given as (Biggest Buy,
Connection City). Are there any dominant strategies in the game? If this game is played
only once and each firm makes the entry decision independently, what is the Nash
equilibrium of this game? Explain your conclusions.
While reading the local newspaper, you notice an article about a man who won a sizable
prize in the state lottery. This prize amounts to monthly payments for the rest of the
man’s life. The man is quoted as saying, “As soon as I receive that first lottery payment,
I will only work when I want to, rather than because I have to.” How would an
economist explain what has happened to this man’s labor supply curve?
(Table: Marginal Utility from Coffee and Comic Books) Look at the table Marginal
Utility from Coffee and Comic Books. Your eccentric professor has a daily budget of
$40, and he spends it entirely on coffee and comic books. The table shows the marginal
utility he receives from consuming different quantities of coffee and comic books. Each
comic book is priced at $8, and each cup of coffee is priced at $4. To maximize his total
utility, how many cups of coffee should he buy, and how many comic books should he
buy? How many utils of total utility will he enjoy?