The government might impose a price ceiling if _____ can make a strong moral or
political argument for _____ prices.
A) demanders; lower
B) suppliers; lower
C) demanders; higher
D) suppliers; higher
Total revenue will decrease if the price goes _____ and demand is _____.
A) up; perfectly price-inelastic
B) up; price-inelastic
C) down; price-elastic
D) up; price-elastic
Private health insurance is funded by:
A) the government.
B) tax contributions to Medicare.
C) extremely ill people, who pay very high premiums.
D) members of a large pool of individuals, each paying a fixed premium to a private
company that agrees to pay some portion of the medical expenses of the members.
According to the _____, workers may earn a wage rate higher than the value of their
marginal product because it provides an incentive to perform efficiently.
A) marginal productivity of income distribution theory
B) efficiency-wage model
C) diminishing-returns theory
D) increasing-returns model
(Table: Consumer Surplus) Look at the table Consumer Surplus. Assume that each
student wants to buy one ticket. If the price of a ticket to see The Nutty Nutcracker is
$50, Narum’s consumer surplus is:
A) $60.
B) $50.
C) $15.
D) $240.
Figure: The Production Possibilities for Two Countries
(Figure: The Production Possibilities for Two Countries) Look at the figure The
Production Possibilities for Two Countries. Indonesia has a comparative advantage in
producing _____, while Malaysia has a comparative advantage in producing _____.
A) both radios and tires; neither good
B) neither good; both radios and tires
C) radios; tires
D) tires; radios
The amount by which total utility _____ when an additional unit of a good is consumed
is _____.
A) changes; average utility
B) increases; the income effect.
C) decreases; maximum utility
D) changes; marginal utility
If government decided to increase taxes or decrease its spending, most likely this was to
correct:
A) a recession.
B) inflation.
C) high unemployment.
D) equilibrium.
The economy with the lowest opportunity cost of producing a particular good is said to
have:
A) a technological advantage.
B) a comparative advantage.
C) a production possibility frontier.
D) an increasing opportunity cost.
(Table: Demand and Total Cost) Look at the table Demand and Total Cost. Lenoia runs
a natural monopoly producing electricity for a small mountain village. The table shows
Lenoia’s demand and total cost of producing electricity. The marginal revenue of the
fourth unit of production is:
A) $200.
B) $250.
C) $450.
D) $500.
Assume that as your income increases, your consumption of burgers increases. We can
assume that you consider burgers a(n) _____ good.
A) negative
B) positive
C) inferior
D) normal
Assume a monopoly is currently earning economic profits. If a change in fixed cost
raises average total cost above the demand curve:
A) price and output will remain unchanged.
B) more monopolies will enter.
C) the monopoly will go out of business.
D) marginal cost will be greater than marginal revenue.
Janet’s poodle grooming salon has a total cost curve expressed by the equation TC =
100 + 3Q2, where Q is the quantity of dogs groomed. Given this expression, if Janet
grooms five dogs, her total costs will be:
A) $100.
B) $175.
C) $225.
D) $75.
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, profit is:
A) $0.
B) $200.
C) $1,600.
D) $3,200.
The fact that two variables always move together over time:
A) does not prove that one of the variables is dependent on the other.
B) proves that one of the variables is dependent on the other.
C) proves that changes in one variable cause changes in the other.
D) is often illustrated or depicted using either a pie chart or a bar chart.
The downward-sloping demand curve for a monopolistically competitive firm:
A) reflects product differentiation.
B) eventually will become perfectly elastic as more firms enter.
C) indicates collusion among firms in the industry.
D) ensures that the firm will produce at minimum average cost in the long run.
Which of the following is an example of a black market transaction?
A) a tenant in a rent-controlled apartment subletting at a higher rent
B) the purchase of an inferior radio at a department store
C) waiting in line during the gasoline shortages of the 1970s
D) the oil market
The total surplus in a market is:
A) the excess supply due to a price above the equilibrium price.
B) the surplus that accrues when a good is not scarce, defined as the total amount (if
any) by which quantity supplied exceeds quantity demanded at a zero price.
C) the net benefit to consumers, defined as the excess of consumer surplus over
producer surplus.
D) the sum of consumer surplus and producer surplus.
Figure: Sugar and Freight Trains
(Figure: Sugar and Freight Trains) Look at the figure Sugar and Freight Trains. Suppose
the economy is operating at point B. The opportunity cost of producing the third freight
train would be _____ tons of sugar.
A) 6
B) 19
C) 45
D) 80
Over the past few years, the technology associated with producing flat-panel televisions
has improved. This has led to a(n) _____ in the _____ flat-panel televisions.
A) increase; supply of
B) decrease; demand for
C) decrease; supply of
D) decrease; quantity supplied of
A _____ is an organization that produces goods or services for sale.
A) production function
B) firm
C) variable input
D) fixed input
Firms in monopolistic competition can acquire some market power by:
A) using price competition.
B) engaging in tacit collusion.
C) differentiating the product.
D) increasing their output to the perfectly competitive level.
(Table: Framing Shop Employment and Production) Shaheer runs a custom
picture-framing shop. The table Framing Shop Production Function shows his daily
production function. He can hire a worker at a daily competitive wage of $70, and he
sells a custom frame at a competitive price of $10. A) How many workers should
Shaheer hire to maximize his profit? B) Suppose Shaheer is able to employ more
sophisticated tools, which allow his workers to be twice as productive. How many
workers will he employ?
If at the quantity determined by private costs and benefits, the marginal social benefit of
a public good is greater than the marginal social cost of providing the good:
A) the private market will best determine how much of the good will be provided and to
whom.
B) a community will best provide the good.
C) the community will not provide the good.
D) free riding will not occur, so the private market will provide the socially optimal
amount.
When a market is in equilibrium and there is no outside intervention to change the
equilibrium price:
A) total surplus is minimized.
B) inefficiency is maximized.
C) no mutually beneficial trades are missed.
D) some mutually beneficial trades may be missed.
Figure: Consumer Equilibrium I The figure shows three of Owen’s indifference
curves for pizza and soda per week. Owen has $180 per month to spend on the two
goods. The price of a pizza is $20, and the price of a soda is $1.50.
(Figure: Consumer Equilibrium I) Look at the figure Consumer Equilibrium I. If Owen
consumes 1.5 pizzas and 100 sodas, he:
A) is maximizing his total utility.
B) should consume more pizza and less soda to maximize his total utility.
C) should consume less pizza and more soda to maximize his total utility.
D) should consume more pizza and more soda to maximize his total utility.
The model of monopolistic competition characterizes the market for plumbing services
in a city. This market is initially in long-run equilibrium, but then there is an increase in
market demand for plumbing services. We expect that in the long run:
A) firms will leave the plumbing market.
B) there will be a short-run increase in the number of firms, but then the number will
return to the original level.
C) new firms will enter the plumbing market.
D) firms will shut down, but they will not leave the industry.
(Table: Prices and Demand) Look at the table Prices and Demand. The New Orleans
Saints have a monopoly on Saints logo baseball hats. The Saints sell at most one hat to
each customer, and the table shows each customer’s willingness to pay. The marginal
cost of producing a hat is $18, and there are no fixed costs. How much is the Saints’
profit at the profit-maximizing output?
A) $24
B) $18
C) $12
D) $30
Suppose government officials have set an emissions tax to reduce pollution. Assume the
optimal tax would be $1,500 but government officials have set the tax at $500. At the
equilibrium with the $500 tax:
A) there will be too much pollution.
B) the marginal social cost of pollution will be less than $500.
C) the marginal social benefit of pollution will be less than $500.
D) the marginal social benefit of pollution will be more than $500.
When the imposition of an excise tax causes the quantity demanded and quantity
supplied to decrease relative to the no-tax equilibrium, this will result in:
A) deadweight loss.
B) increases in producer surplus.
C) increases in consumer surplus.
D) increases in both consumer and producer surplus.