Both monopolists and monopolistic competitors:
A) make positive economic profits in the long run.
B) have high barriers to entry.
C) charge a price that is greater than the marginal cost of production.
D) produce a product for which there are no substitutes.
Figure: Demand for DVDs
(Figure: Demand for DVDs) Look at the figure Demand for DVDs. A decrease in the
price of DVD players (a complement) would result in a change illustrated by the move
from:
A) f to g in panel A.
B) h to i in panel B.
C) j to k in panel C.
D) l to m in panel D.
Table: Price Elasticity
(Table: Price Elasticity) Look at the table Price Elasticity. What is the price elasticity of
demand between $2.00 and $1.75?
A) 2.33
B) 3.00
C) 4.00
D) 0.125
Bob owns a trout farm with monopoly power in North Carolina. Bob’s optimal output
occurs where marginal revenue _____. Because of monopoly power, Bob’s supply curve
_____.
A) equals marginal cost; does not exist
B) exceeds marginal cost; does not exist
C) equals marginal cost; is upward-sloping
D) exceeds marginal cost; is perfectly inelastic
The substitution effect always entails a change in consumption in the _____ direction as
(of) the change in _____.
A) same; marginal utility
B) same; price
C) opposite; price
D) opposite; the budget
The law of demand states that other things equal, as the price:
A) increases, the quantity demanded will increase.
B) decreases, the demand curve will shift to the right.
C) increases, demand will decrease.
D) increases, the quantity demanded will decrease.
Figure: Bicycles and Radishes II
(Figure: Bicycles and Radishes II) Look at the
figure Bicycles and Radishes II. The country depicted in this figure is operating at point
M. It could achieve production at point I only if it:
A) used its resources more efficiently.
B) devoted more resources to radish production.
C) devoted more resources to bicycle production.
D) increased the quantities of capital, natural resources, or labor available or improved
its technology.
(Table: Production
Possibilities Schedule II) Look at the table Production Possibilities Schedule II. The
production of 14 units of consumer goods and 1 unit of capital goods per period would
result in:
A) full employment.
B) no unused resources.
C) some unused or inefficiently used resources.
D) an increase in economic growth.
Figure: The Supply of DVD Rentals
(Figure: The Supply of DVD Rentals) Look at the figure The Supply of DVD Rentals.
A decrease in the price of DVDs sold by movie producers to rental stores would result
in a change illustrated by the move from:
A) n to o in panel A.
B) p to q in panel B.
C) s to t in panel C.
D) u to v in panel D.
Alison has a linear production possibility frontier in bracelets and necklaces. In one
hour, she can produce 5 bracelets or 10 necklaces. What is the opportunity cost to make
1 necklace?
A) 5 bracelets
B) 10 necklaces
C) 0.5 bracelet
D) 2 necklaces
You notice that the price of Blu-ray players falls and the quantity of Blu-ray players
sold increases. You suspect that _____ Blu-ray players shifts to the _____.
A) demand for; right.
B) demand for; left.
C) supply of; right.
D) supply of; left.
The curve that shows the additional cost of each additional unit of output is called the
_____ curve.
A) average cost
B) total cost
C) marginal product
D) marginal cost
(Table: Production Possibilities for the United States and Canada) Look at the table
Production Possibilities for the United States and Canada. Both nations can produce
cars and lumber. If these nations were to specialize and trade, the United States would
export 1 million cars to Canada in exchange for _____ million board feet of lumber.
A) 2
B) 0.5
C) 8
D) 1
Some of the major causes of poverty are lack of education, bad luck, lack of proficiency
in English, and:
A) racial and gender discrimination.
B) geographic region.
C) differences in religious preference.
D) government restrictions.
Economic profits in a perfectly competitive industry encourage firms to _____ the
industry, and losses encourage firms to _____ the industry.
A) exit; enter
B) enter; enter
C) enter; exit
D) exit; exit
Figure: Firms in Monopolistic Competition
(Figure: Firms in Monopolistic Competition) In panel (B) of the figure Firms in
Monopolistic Competition, the profit-maximizing quantity of output is determined by
the intersection at point:
A) Q.
B) R.
C) S.
D) T.
Figure: Consumer Equilibrium II
(Figure: Consumer Equilibrium II) Look at the figure Consumer Equilibrium II. The
LOWEST level of total utility shown in the figure is associated with point _____ on
curve _____.
A) H; A
B) I; B
C) G; C
D) J; A
The decision to give a birthday present to a friend is:
A) decision making using bounded rationality.
B) behavior based on risk aversion.
C) a rational decision if the person giving the gift is concerned about the recipient’s
welfare.
D) an irrational economic decision because it reduces the economic payoff of the
person giving the gift.
The existence of government intervention often suggests that:
A) markets may not be able to provide for efficient results all of the time.
B) individual actions have no side effects.
C) equilibrium will be achieved through this intervention.
D) markets can efficiently manage the allocation of goods.
The absolute value of the slope of the production possibility frontier at any point:
A) gives the autarky price of the good on the vertical axis.
B) is found by dividing the horizontal change by a vertical change.
C) gives the quantity of the good on the vertical axis that must be given up to produce
an additional unit of the good on the horizontal axis.
D) gives the autarky price of the good on the horizontal axis relative to the autarky
price of the good on the vertical axis.
Figure: A Perfectly Competitive Firm in the Short Run
(Figure: A Perfectly Competitive Firm in the Short Run) Look at the figure A Perfectly
Competitive Firm in the Short Run. If the market price is G, the firm’s total economic
profit at its most profitable level of output is:
A) 0GHB.
B) EFJS.
C) EGHS.
D) FGLK.
OPEC is:
A) the Organization of Petroleum Exporting Countries.
B) an international cartel made up of oil-producing countries.
C) the cartel that was responsible for the large increases in crude oil prices in the 1970s.
D) described by all of these answer choices.
Figure: Demand and Supply of Gasoline
(Figure: Demand and Supply of Gasoline) Look at the figure Demand and Supply of
Gasoline. Given the initial equilibrium of S1 and D, any price lower than _____ will
exert pressure for the price to _____.
A) $2.00; fall
B) $2.50; rise
C) $3.00; rise
D) $2.50; fall
Figure: Game-Day Shirts
(Figure: Game-Day Shirts) Rick is one of 10 vendors who sell game-day T-shirts at
football games in a perfectly competitive market. His costs are identical to the costs of
the other 9 vendors. If the price of a shirt is $14, in the long run:
A) firms will enter the industry.
B) firms will exit the industry.
C) the industry is in equilibrium.
D) the industry has minimized average total cost.
If total surplus falls, there may have been a(n) _____ in demand or a(n) _____ in
supply.
A) increase; decrease
B) increase; increase
C) decrease; decrease
D) decrease; increase
In the United Kingdom, most public television programming is paid for by a yearly
license fee assessed on every household. Television detection vans go through
neighborhoods to detect unlicensed households and keep them from viewing without
paying. This is a good example of the _____ provision of _____.
A) public; private goods
B) public; goods that are made artificially excludable in consumption
C) public; common resources
D) private; artificially scarce goods
(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 one mixer and bakes 400 cakes per day, what is her average total cost?
A) $2.50
B) $10
C) $12.50
D) $1,010
(Table: Cherry Farm) Look at the table Cherry Farm. Which of the following is a point
on the industry short-run supply curve?
A) $2; 300 pounds
B) $11; 200 pounds
C) $3; 500 pounds
D) $8; 600 pounds
Figure: Budget Lines for Tea and Scones
(Figure: Budget Lines for Tea and Scones) Look at the figure Budget Lines for Tea and
Scones. For months now, Agnes has had $20 per month to spend on tea and scones. The
price of each cup of tea and each scone is $1. Which of the charts shows what will
happen to her budget line if her income increases to $25?
A) A
B) B
C) C
D) D
A major state university in the South recently raised tuition by 12%. An economics
professor at this university asked his students, “How many of you will transfer to
another university because of the increase in tuition?” One student in about 300 said
that he or she would transfer. Based on this information, the price elasticity of demand
for education at this university is:
A) 1.
B) highly elastic.
C) highly inelastic.
D) 0.
Scenario: Flood Area
Suppose you own a home that is estimated to be worth $250,000. You live in a flood
plain; as a result, the probability that you will lose your home to a flood is 30%.
(Scenario: Flood Area) Look at the scenario Flood Area. A flood may occur, causing
you to lose your entire home. In this case, your expected loss resulting from the flood
would be:
A) $250,000.
B) $75,000.
C) $15,000.
D) $100,000.