Consider the market for pilots. What is likely to happen to the equilibrium wage and
quantity of pilots if the government enforces a lower mandatory retirement age, say
from age 65 to age 62?
A) The equilibrium wage and the equilibrium quantity of pilots rise.
B) The equilibrium wage and the equilibrium quantity of pilots fall.
C) The equilibrium wage falls and the equilibrium quantity of pilots rises.
D) The equilibrium wage rises and the equilibrium quantity of pilots falls.
Which of the following is an example of positive technological change?
A) A firm offers workers a higher wage to work on weekends and at night. As a result,
the firm is able to increase its weekly production of surf boards.
B) A firm buys an additional machine that it uses to make surf boards. As a result, the
firm is able to increase its weekly production of surf boards.
C) A firm conducts a new advertising campaign. As a result, the demand for the firm’s
surf boards increases.
D) A firm’s workers participate in a training program designed to increase the number
of surf boards they can produce per day.
Consumers who ________ will be more likely to buy goods in outlet malls at a lower
price, while consumers who are ________ will be more willing to pay full price in
regular stores.
A) are less price-sensitive; are more price-sensitive
B) are more status-conscious; are less status-conscious
C) have high levels of wealth; low levels of wealth
D) are more price-sensitive; are less price-sensitive
A firm would decide to shut down if its production resulted in
A) MR < ATC.
B) ATC > AVC.
C) AFC > AVC.
D) MR < AVC.
In 1935, the U.S. Patent and Trademark Office issued Parker Brothers a trademark on
the
use of the name Monopoly for a board game. Hasbro bought Parker Brothers in 1991.
Which of the following statements is true regarding the trademark on the name
Monopoly for a board game?
A) The original trademark expired well before Hasbro bought Parker Brothers, so they
never had a trademark on Monopoly.
B) Trademarks never expire, so Hasbro continues to have a trademark on the name
Monopoly.
C) The trademark expired in 2011, 20 years after Hasbro’s purchase of Parker Brothers.
D) The trademark expired in 1955, 20 years after the trademark was issued to Parker
Brothers.
What is the difference between “diminishing marginal returns” and “diseconomies of
scale”?
A) Both concepts explain why marginal cost increases after some point but diminishing
marginal returns applies only in the short run when there is at least one fixed factor,
while diseconomies of scale applies in the long run when all factors are variable.
B) Both concepts explain why average total cost increases after some point but
diminishing marginal returns applies only in the short run when there is at least one
fixed factor, while diseconomies of scale applies in the long run when all factors are
variable.
C) Diminishing marginal returns, which applies only in the short run when at least one
factor is fixed, explains why marginal cost increases, while diseconomies of scale,
which applies in the long run when all factors are variable, explains why average cost
increases.
D) Diminishing marginal returns, which applies only in the long run when all factors
are variable, explains why average variable cost increases, while diseconomies of scale,
which applies in the short run when at least one factor is fixed, explains why average
total cost increases.
Figure 5-13
Figure 5-13 illustrates the market for gasoline before and after the government imposes
a tax to bring about the efficient level of gasoline production.
Refer to Figure 5-13. The gasoline tax raises the price paid by consumers by ________
per gallon.
A) $0.75
B) $1.25
C) $1.75
D) $2.00
Marsha Murphy complained, “Many jobs that are filled mostly by men offer higher
wages than most jobs that are typically filled by women. In many cases, the jobs men
have require the same education and skills as the jobs women have. This is clearly
unfair. Women should be paid the same wages as men are paid for jobs that are
equivalent in terms of their qualifications.” Which of the following statements describes
Marsha’s position?
A) Marsha believes that women’s wages should include a compensating differential.
B) Marsha believes employers assume that men and women have different job
preferences.
C) Marsha believes that employers are reluctant to hire women for certain jobs because
of cognitive dissonance.
D) Marsha endorses a concept called comparable worth.
Which of the following statements is true about monopolistically competitive firms?
A) Unlike perfectly competitive firms, monopolistically competitive firms are able to
raise their prices without losing all of their customers.
B) Like perfectly competitive firms, monopolistically competitive firms are not able to
raise prices without losing all of their customers because they face competition from
firms selling similar products.
C) Like perfectly competitive firms, monopolistically competitive firms maximize their
profits by setting price equal to marginal cost.
D) Unlike perfectly competitive firms, monopolistically competitive face perfectly
inelastic demand curves.
Figure 5-2
Figure 5-2 shows a market with a negative externality.
Refer to Figure 5-2. The true marginal cost of the last unit produced is represented by
the price
A) Pa.
B) Pb.
C) Pc.
D) Pf.
Table 4-4
Table 4-4 shows the demand and supply schedules for the labor market in the city of
Pixley.
Refer to Table 4-4. If a minimum wage of $12.50 is mandated there will be a
A) shortage of 40,000 units of labor.
B) surplus of 40,000 units of labor.
C) shortage of 80,000 units of labor.
D) surplus of 80,000 units of labor.
Table 15-4
Shakti Inc. has been granted a patent for its Arnica toothache balm. Table 15-4 shows
the demand and the total cost schedule for the firm.
Refer to Table 15-4. What is the amount of Shakti’s profit?
A) $68
B) $72
C) $124
D) $192
A dominant strategy is
A) an equilibrium where each firm chooses the best strategy, given the strategies of
other firms.
B) a strategy chosen by two firms that decide to charge the same price or otherwise not
to compete.
C) a strategy that is obviously the best for each firm that is a party to a business
decision.
D) a strategy that is the best for a firm no matter what strategies other firms use.
Suppose that some investors have decided that economic and financial uncertainty have
made the prospect of investing in domestic stock markets more risky than investing in
foreign stock markets, and therefore choose to invest in foreign markets. By using all
available information as they act to achieve their goals, these investors are exemplifying
the economic idea that
A) people are rational.
B) people respond to economic incentives.
C) optimal decisions are made at the margin.
D) equity is more important than efficiency.
Which of the following statements is true?
A) The average product of labor is at its maximum when the average product of labor
equals the marginal product of labor.
B) The average product of labor is at its minimum when the average product of labor
equals the marginal product of labor.
C) The average product of labor tells us how much output changes as the quantity of
workers hired changes.
D) Whenever the marginal product of labor is greater than the average product of labor
the average product of labor must be decreasing.
Figure 3-4
Refer to Figure 3-4. If the price is $10,
A) there would be a surplus of 600 units.
B) there would be a shortage of 600 units.
C) there would be a surplus of 200 units.
D) there would be a shortage of 200 units.
Figure 5-16
Amit and Bree are the only two homeowners on an isolated private road. Both agree
that installing street lights along the road would be beneficial and want to do so. Figure
5-16 shows their willingness to pay for different quantities of street lights, the market
demand for street lights, and the marginal cost of installing the street lights.
Refer to Figure 5-16. How much is Bree willing to pay to have 4 street lights installed?
A) $1,500
B) $1,800
C) $2,700
D) $7,200
If the demand for cell phone service is inelastic, then
A) the percentage change in quantity demanded is greater than the percentage change in
price (in absolute value).
B) the percentage change in quantity demanded is equal to the percentage change in
price.
C) the quantity demanded does not change in response to changes in price.
D) the percentage change in quantity demanded is less than the percentage change in
price (in absolute value).
Economists are reluctant to state that price controls are desirable or undesirable because
A) it is impossible to evaluate the impact on quantity demanded and quantity supplied
as a result of price controls.
B) whether the gains from the winners exceed the losses from the losers is not strictly
an economic question.
C) sometimes price controls result in increases in economic efficiency and sometimes
they result in decreases in economic efficiency.
D) economists are reluctant to conduct positive analysis of price controls.
If a monopolist’s marginal revenue is $35 per unit and its marginal cost is $25, then
A) to maximize profit the firm should increase output.
B) to maximize profit the firm should decrease output.
C) to maximize profit the firm should continue to produce the output it is producing.
D) Not enough information is given to say what the firm should do to maximize profit.
Table 2-17
Refer to Table 2-17. This table shows the number of labor hours required to produce a
motorcycle and a guitar in Ireland and Scotland.
a. Assume each country has a total of 2,700 labor hours to devote to the production of
the two goods and draw the production possibilities frontier for each country. Put
“Motorcycle” on the horizontal axis and “Guitar” on the vertical axis. Be sure to
identify the intercept values on your graphs.
b. Suppose each country allocates 55% of its labor hours to guitar production and 45%
to the production of motorcycles. Complete Table 2-18 below to show each country’s
output of the two products.
Table 2-18: Production and Consumption with no Trade
c. If the two countries do not trade and consume whatever they produce, identify the
current production and consumption point for each country on their respective
production possibilities frontiers. Label Ireland’s consumption point “I” and Scotland’s
consumption point “S”.
d. Suppose the two countries specialize and trade. Which country should produce
motorcycles and which should produce guitars? Explain your answer.
e. Complete Table 2-19 below to show each country’s output with specialization.
Table 2-19: Output with Specialization
f. Did specialization increase the combined output for the two countries without any
increase in resources? If so, by how much?
g. Suppose Ireland and Scotland agree to trade so that in exchange for 600 guitars, the
exporter of guitars receives 140 motorcycles. Complete Table 2-20 below to show each
country’s consumption bundle after trade.
Table 2-20: Consumption with Trade
h. Show the consumption points after trade on each country’s production possibilities
frontier. Label these points “X” for Ireland and “Y” for Scotland.
i. Has trade made the two countries better off? Explain your answer.
The demand curve for a Giffen good is
A) non-linear but downward sloping.
B) vertical.
C) upward sloping.
D) non-existent.
Which of the following statements is false?
A) An explicit cost is a nonmonetary opportunity cost.
B) In the short run: total cost = fixed cost + variable cost.
C) Variable costs are costs that change as output changes.
D) In the long run there are no fixed costs.
Which of the following is not an example of a derived demand?
A) Several of the animated films released between 1999 and 2001 failed to earn a
profit, which caused some companies to stop making these films, thereby decreasing
the demand for animators.
B) Seth Bullock, a personal-injury attorney, complains that he is earning far less now
than a few years ago largely because personal injury cases have been undercut by state
laws limiting class-action suits and payouts on damages.
C) Millicent Manning, the owner of a furniture store, is concerned that her sales have
fallen for the past six months. She attributes this to the downturn in the real estate
market.
D) As advancements in medical technology increase the safety and success of laser eye
surgery, the demand for opticians has decreased.
Figure 17-3
Refer to Figure 17-3. Panel D is appropriate when used to represent
A) the quantity of labor demanded by an input price taker.
B) the labor supply curve facing an input price taker.
C) the quantity of labor supplied by someone working a fixed number of hours.
D) the highly-skilled labor market supply curve.
The music streaming industry, where a firm’s profitability depends on its interactions
with other firms, is an example of
A) perfect competition.
B) monopolistic competition.
C) oligopoly.
D) monopoly.
Table 3-2
Refer to Table 3-2. The table above shows the demand schedules for caviar of two
individuals (Ari and Sonia) and the rest of the market. If the price of caviar falls from
$45 to $35, the market quantity demanded would
A) decrease by 50 oz.
B) increase by 70 oz.
C) increase by 50 oz.
D) decrease by 70 oz.
The federal corporate income tax is
A) regressive.
B) proportional.
C) progressive.
D) unfair.
To calculate the price elasticity of demand we divide
A) the percentage change in quantity demanded by the percentage change in price.
B) the percentage change in price by the percentage change in quantity demanded.
C) rise by the run.
D) the average price by the average quantity demanded.
Who hires the managers of a corporation?
A) the board of directors
B) stockholders
C) managers
D) employees
A tragedy of the commons occurs when a resource is
A) rival and excludable.
B) rival and non-excludable.
C) non-rival and non-excludable.
D) non-rival and excludable.