Refer to the graph below.
Laura’s production possibility curve for math and economics problems in one night is
shown in the graph. Her opportunity cost of finishing six math problems instead of four
math problems is:
A. one economics problem.
B. two economics problems.
C. three economics problems.
D. four economics problems.
Answer:
Refer to the graph shown. Area C plus area E is:
A. smaller than area A, because demand is elastic between $30 and $40.
B. larger than area A, because demand is inelastic between $30 and $40.
C. smaller than area A, because demand is inelastic between $30 and $40.
D. larger than area A, because demand is elastic between $30 and $40.
Answer:
A firm with a highly inelastic demand for coal will:
A. cut consumption more than a firm with a highly elastic demand when price goes up.
B. cut consumption less than a firm with a highly elastic demand when price goes up.
C. refuse to cut consumption for any reason.
D. stop using gasoline entirely if a tax is imposed.
Answer:
New Jersey raises its minimum wage while neighboring Pennsylvania does not.
Economists compare the labor market in both states to draw conclusions about the
effect of a minimum wage on employment and wages. This is an example of:
A. experimental economics.
B. a natural experiment.
C. an economic principle.
D. the economic decision rule.
Answer:
What do all economists have in common?
A. They believe institutions are the primary forces in the market.
B. They believe that the invisible hand results in the most efficient outcome.
C. They use highly mathematical models to explain real-world events.
D. They believe that models must capture the importance of incentives.
Answer:
In a perfectly competitive market, an increase in market demand in a long-run
constant-cost industry causes:
A. an increase in price, quantity, and profit in the short run.
B. an increase in price, quantity, and profit in the long run.
C. a decrease in price, a decrease in quantity, and a decrease in profit in the short run.
D. a decrease in price, a decrease in quantity, and a decrease in profit in the long run.
Answer:
A perfectly competitive firm in the long run earns:
A. positive economic profits but zero normal profits.
B. positive normal profits but zero economic profits.
C. positive economic profits and positive normal profits.
D. zero economic profits and zero normal profits.
Answer:
A supply curve that intersects the horizontal (quantity) axis is:
A. inelastic.
B. elastic.
C. perfectly elastic.
D. unit elastic.
Answer:
If there is a complete set of markets that are perfectly competitive:
A. the marginal cost of producing goods will exceed their marginal benefit.
B. the marginal cost of producing goods will be less than their marginal benefit.
C. every person’s utility function is at a maximum.
D. the invisible hand guides the economy to a Pareto optimal position.
Answer:
Refer to the following graph.
The demand curve with the greatest elasticity is:
A. A.
B. B.
C. C.
D. D.
Answer:
Helped by desktop publishing, the number of vintage baseball card forgeries has
flooded the market for vintage baseball cards. Dealers left the market for fear of
purchasing a phony. What was the effect on the market for vintage baseball cards
assuming phonies cannot be detected?
A. Demand shifted to the left, supply did not change, price declined, and quantity
traded declined.
B. Supply shifted to the right, demand did not change, price declined, and quantity
traded rose.
C. Supply shifted to the right, demand shifted to the left, and price rose.
D. Supply shifted to the right, demand shifted to the left, and price declined.
Answer:
Share distribution of income is the relative division of total income among:
A. capitalists, workers, and landowners.
B. income groupings.
C. socioeconomic groupings.
D. nationality groupings.
Answer:
Refer to the graph shown. Given the production possibility curve, the opportunity cost
of reading 2 more articles when you are already reading 11 articles is on average:
A. ½ CD per article.
B. 2 CDs per article.
C. 2/3 CD per article.
D. 3 CDs per article.
Answer:
Suppose that there is a renewed interest in eating caviar at the same time that the supply
of Russian caviar shrinks. What would be the most likely effect of these events on the
price and quantity of caviar sold?
A. Price rose and quantity sold fell
B. Price rose and the effect on the quantity of caviar sold is ambiguous
C. Price fell and the effect on the quantity of caviar sold is ambiguous
D. Price fell and quantity sold rise
Answer:
To calculate the marginal utility of consuming the Nth product:
A. subtract additional satisfaction from consuming the (N – 1)th production from the
additional satisfaction from consuming the Nth product.
B. subtract total satisfaction from consuming N – 1 products from total satisfaction from
consuming N products.
C. divide total satisfaction from consuming all N products by the price of the product.
D. divide total satisfaction from consuming all N products by N.
Answer:
Costs that are spent and cannot be changed in the period of time under consideration are
called:
A. variable costs.
B. total costs.
C. marginal costs.
D. fixed costs.
Answer:
Suppose that the firms in the perfectly competitive oat industry are currently receiving a
price of $2 per bushel for their product and there are constant returns to scale. The
minimum possible average total cost of producing oats in the long run is $1 per bushel.
Other things being equal, it follows that:
A. the price of oats will be $2 in the long run.
B. the price of oats will be somewhere between $1 and $2 in the long run.
C. the price of oats will be $1 in the long run.
D. it is not possible to determine the price of oats in the long run from the information
given.
Answer:
The text suggests that real-world competition is best seen as:
A. a process.
B. a state.
C. nonexistent.
D. existing only if government intervenes.
Answer:
Refer to the table shown. If the output of bicycles is 4 per week, the average cost of
producing each bicycle is:
A. $100.
B. $110.
C. $120.
D. $140.
Answer:
Opponents of government intervention in the economy argue that government’s
attempts to correct informational problems:
A. are justified in most cases though politically difficult to implement.
B. are not necessary since an efficiently operating market system ensures that adequate
information will be provided.
C. often create greater problems, such as FDA restrictions on experimental drugs for
AIDS which could save lives.
D. will make market transactions much more efficient.
Answer:
All of the following are justifications for government intervention except:
A. too much competition.
B. informational problems.
C. externalities.
D. public goods.
Answer:
Refer to the graph shown. If a natural monopolist were not regulated, the firm would
charge:
A. P1.
B. P2.
C. P3.
D. P4.
Answer:
What distinguishes economists from other scientists?
A. Economists see the world through a lens of incentives; other scientists focus on other
aspects of the world.
B. Economists use models; other scientists build scaled-down replicas of what they are
studying.
C. Economists use regression models; other scientists use only correlations among
variables.
D. Economists focus more on policy issues compared with other scientists.
Answer:
The long run is a period during which:
A. no inputs can be varied and all inputs are fixed.
B. some inputs can be varied and some inputs are fixed.
C. some inputs can be varied and no inputs are fixed.
D. all inputs can be varied and no inputs are fixed.
Answer:
Demand is said to be elastic when the:
A. percentage change in quantity demanded is less than the percentage change in price.
B. percentage change in quantity demanded is greater than the percentage change in
price.
C. change in quantity demanded is less than the change in price.
D. change in quantity demanded is greater than the change in price.
Answer:
Which price ceiling will cause the greatest excess demand?
A. $1
B. $2
C. $3
D. $4
Answer:
Which of the following is the best example of a network externality?
A. pollution
B. parks
C. museums
D. the Internet
Answer:
Market economies are based upon:
A. private property and individual good will toward others.
B. government planning and individual good will toward others.
C. government planning and individual self-interest.
D. private property and individual planning.
Answer:
If supply is highly inelastic and demand shifts to the right:
A. price probably will rise significantly; quantity hardly changes at all.
B. price will hardly change at all; quantity will rise significantly.
C. price will rise significantly as will quantity.
D. price and quantity will hardly change at all.
Answer:
Refer to the graph above. The per-unit cost incurred by a monopolist that is
X-inefficient but produces the profit-maximizing level of output is best illustrated by:
A. A.
B. B.
C. C.
D. D.
Answer:
Refer to the table shown. If the number of workers is three, total output is:
A. 9.
B. 16.
C. 27.
D. 36.
Answer:
Refer to the graph shown. When price rises by 10 percent, quantity supplied rises by 10
percent. Which curve best demonstrates the elasticity of supply in this example?
A. A
B. B
C. C
D. D
Answer:
“For-benefit” corporations are created to pursue multiple goals, such as profitability,
social responsibility, and value for the broader society. These firms provide examples
of:
A. nonentrepreneurial thinking.
B. long-run efficiency.
C. technical inefficiency.
D. social entrepreneurship.
Answer:
The primary problem with estimating elasticity of demand is that:
A. data on the prices firms charge are unavailable.
B. data on the quantities firms sell are unavailable.
C. real-world changes in quantity demanded are the result of changes in price only.
D. real-world changes in quantity demanded are the result of changes in many variables
other than price alone.
Answer: