Tim Tupper contracts with two other students to help him provide a term paper-typing
service. In the last two weeks of the semester, he sees a tremendous increase in demand.
His profit-maximizing response would be represented by
a. a rightward shift of the supply curve because it is possible to earn economic profits
b. a rightward shift of the supply curve because the increase in demand is probably only
temporary
c. a reduction in supply to take full advantage of the increase in demand
d. a movement up to the right along the supply curve because the increase in demand is
probably only temporary
e. an upward movement in horizontal demand curve he faces because now he can
charge a lower price
The golden rule of profit maximization states that firms maximize profit by producing
at the rate of output at which price equals average total cost.
a. True
b. False
The objective of the household is to
a. maximize household wealth
b. own as much land as possible
c. save as much money as possible
d. acquire as many goods as possible
e. maximize utility
Exhibit 9-3
At the profit-maximizing output for the firm in Exhibit 9-3, the single price monopolist
will charge _____ per unit of output.
a. $30
b. $24
c. $22
d. $20
e. $10
A fallacy of composition is to assume that
a. you can determine the composition of a complex product just by examining its
exterior properties
b. consumer durable goods today do not last as long as they did a generation ago
c. any mistakes made in producing a product using an assembly line technique will lead
to a compounding of errors as the product moves down the line
d. what is true for any individual component in a group is true for the group as a whole
e. when I was young I liked cotton candy, but now that I’m older I no longer like it
As output increases, diseconomies of scale
a. lead to rising long-run average costs
b. lead to declining long-run average costs
c. lead to rising short-run average total costs
d. lead to declining short-run total cost
e. means the law of diminishing marginal returns is affecting production
Exhibit 9-12
The total cost for the nondiscriminating monopolist in Exhibit 9-12, that maximizes
profit while charging all customers the same price, is
a. $0d x 0f
b. $0e x 0f
c. $0b x 0f
d. $0a x 0f
e. $0c x0g
The market demand curve is
a. any individual’s demand curve multiplied by the number of consumers in the market
b. the relationship between income and quantity demanded
c. the horizontal sum of the individual demand curves for all consumers in the market
d. the vertical summation of all individual demand curves
e. the sum of prices paid at each quantity demanded
In the following situation the tax system is
a. progressive
b. proportional
c. regressive
d. based on the benefits received
e. there is insufficient information to answer the question
The supply of loanable funds comes, in part, from
a. consumer saving
b. business investment
c. the federal government
d. current consumption
e. future consumption
The demand for Olin skis is likely to be
a. less elastic than the demand for skis in general
b. more elastic than the demand for skis in general
c. unit elastic relative to the demand for skis in general
d. as elastic as the demand for skis in general
e. greater than the demand for skis in general
If income rises and the demand for a product remains unchanged, the income elasticity
of demand for that product is unit elastic.
a. True
b. False
Behavioral assumptions
a. make economic models more complex than if these assumptions were removed
b. pertain only to consumers
c. hold all other things constant
d. are ways to test a hypothesis
e. describe how individuals are expected to behave
For a monopolist, there is no supply curve because
a. the supply curve is the same as the marginal cost curve
b. the monopolist does not maximize profit
c. the quantity supplied is independent of marginal cost
d. the quantity supplied is independent of demand
e. there is no unique relationship between price and quantity supplied
If firms accused of antitrust violations sign a consent decree, they have
a. admitted guilt and accept the lawful penalties
b. admitted guilt, but are relieved of any penalties by agreeing to cease the violations
c. agreed to cease the alleged wrongdoing, without admitting guilt
d. denied the accusation and requested a formal hearing or trial
e. denied the accusation and given proof that it is untrue
If a firm is currently minimizing per-unit costs of producing 1,000 units of output, a
movement along the current isocost line will
a. increase total cost
b. reduce total cost
c. increase output
d. reduce output
e. keep output constant
Which of the following could notbar entry into an industry?
a. economies of scale
b. diseconomies of scale
c. patents
d. licenses
e. one firm’s control of essential resources
Basil is maximizing his utility from consuming tea and crumpets. If the marginal utility
of the last crumpet was 32 units of utility and the prices of tea and crumpets are $4 and
$8, respectively, what was the marginal utility of the last cup of tea Basil consumed?
a. 2 units of utility
b. 12 units of utility
c. $6
d. 128 units of utility
e. 16 units of utility
Which of the following represents the best example of proprietor’s income?
a. the paycheck that Freeda brings home from her job as a computer programer
b. the interest that Hans earns from the savings account he has with USA Bank
c. the revenue that Janet has left over after she pays all the expenses associated with
running her software development business
d. the check that Hunter receives each month for leasing his land to the natural gas
company that is drilling on his land
e. the check that Trisha gets each month from the Social Security Administration
The gold standard
a. has been in operation since the establishment of the Federal Reserve Board
b. has been in operation since shortly after World War I
c. has been in operation since the Bretton Woods agreement was signed
d. was in operation for about 50 years before World War I
e. was in operation from the date of the Bretton Woods agreement until the devaluation
of the U.S. dollar in 1971
A candy bar sells for 50 cents, video games are 25 cents each, the horizontal (candy)
intercept of Ann’s budget line is 12, and the vertical (video game) intercept of Ann’s
budget line is 24. If Ann’s income increased to $20, the horizontal intercept would be
a. $4
b. $2
c. 20
d. 40
e. 80
Marginal social cost includes both the marginal private cost and the marginal external
cost that production imposes on society
a. True
b. False
Collusion and cartels are frequently legal in Europe.
a. True
b. False
Exhibit 11-5
In Exhibit 11-5, opportunity cost in equilibrium equals
a. $0
b. $120
c. $1,000
d. $300
e. $1,300
Exhibit 2-12 Maria and Hans Production Possibilities for Laundry and Typing
According to Exhibit 2-12, if Maria types one fewer page, how many loads of laundry
can she do in the time saved on typing?
a. 4 loads
b. 6 loads
c. 2/3 of a load
d. 3/2 of a load
e. it cannot be determined
Exhibit 7-11
Movement from point a to point b in Exhibit 7-11 indicates that the firm is experiencing
a. economies of scale
b. increasing average cost
c. economies of cost
d. a decrease in average plant size
e. diseconomies of scale
Because market price remains constant as a perfectly competitive firm expands output,
each firm faces
a. a downward-sloping demand curve
b. a horizontal demand curve
c. constant returns to scale
d. constant costs
e. diminishing marginal revenue
Marginal revenue product is
a. the additional cost of hiring one more unit of a resource
b. the additional units of output generated by hiring one more unit of a resource
c. calculated by multiplying marginal revenue by the price of a resource
d. the expected additional revenue generated by hiring one more unit of a resource
e. calculated by multiplying marginal revenue by the marginal resource cost of a
resource
If a perfectly competitive firm is operating in long-run equilibrium and market demand
suddenly falls, the short-runresult will be
a. greater economic profit
b. a normal profit
c. lower average total cost
d. lower average variable cost
e. an economic loss
Which of the following is not correct concerning quotas?
a. The enactment of quotas rewards domestic producers with higher prices.
b. The enactment of quotas creates opportunities for lobbyists to seek the perpetuation
of quotas.
c. Quotas on steel, textiles and apparel, and sugar have been in effect for several
decades.
d. Lobbying efforts by domestic producers and foreign exporters are vigorously fought
by domestic consumers.
e. The auctioning of quotas would reduce their attractiveness to foreign exporters.