Laura’s Pizza Place incurs $800,000 per year in explicit costs and $100,000 in implicit
costs. The restaurant earns $1.3 million in revenues. Based on this information, what is
accounting profit for Laura’s Pizza Place?
A) $200,000
B) $400,000
C) $500,000
D) $900,000
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.
If at a price of $50, Ghani sells 20 hand-made leather cell-phone covers but at a price of
$60, zero units are sold. Based on this information, the demand for his cell-phone
covers is
A) elastic or perfectly inelastic.
B) elastic or perfectly elastic.
C) unit-elastic.
D) perfectly inelastic.
Consider the following methods of taxing a corporation’s income:
a. A flat tax, as opposed to a progressive tax, is levied on corporate profits.
b. A system whereby a corporation calculates its annual profit and notifies each
shareholder of her portion of the profits. The shareholder would then be required to
include this amount as taxable income for her personal income tax. The corporation
does not pay a tax.
c. A system where the federal government continues to tax corporate income through
the corporate income tax but allows individual taxpayers to receive, tax free, corporate
dividends and capital gains.
Which of the methods above would avoid double taxation?
A) a, b, and c
B) a and b only
C) a and c only
D) b and c only
The slope of a typical isoquant is negative because to produce a given output, a
producer
A) will use more of one input only if it uses more of another.
B) can use less of one input only if the productivity of that input increases
C) can use less of one input only if it uses more of another.
D) will use more of one input only if the price of that input falls.
Olive oil producers want to sell more olive oil at a higher price. Which of the following
events would have this effect?
A) an increase in the price of olive oil presses
B) a decrease in the cost of transporting olive oil to markets
C) an increase in the price of land used to plant olives
D) research finds that consumption of olive oil reduces the risk of heart disease
The KOF Index measures the ________.
A) distribution of the global workforce
B) extent of globalization
C) gross regional product of an area
D) extent of technological innovation in a nation
Figure 15-4
Figure 15-4 shows the demand and cost curves for a monopolist.
Refer to Figure 15-4. What is the profit-maximizing/loss-minimizing output level?
A) 600 units
B) 800 units
C) 940 units
D) 1,160 units
Which of the following is an implicit cost of production?
A) the loss in the value of capital equipment due to wear and tear
B) the salary you pay yourself for running your business
C) the utility bill paid to water, electricity, and natural gas companies
D) the interest you pay your mother for the money she loaned you to start your business
If, when a firm doubles all its inputs, its average cost of production decreases, then
production displays
A) diminishing returns.
B) economies of scale.
C) diseconomies of scale.
D) declining fixed costs.
The volatility of a stock’s market price is indicated by
A) the highest stock price and the lowest stock price over the previous year.
B) the price of newly issued shares compared to the price of previously issued shares.
C) the difference between the stock’s selling price and its asking price.
D) the stock’s price-earnings ratio.
The term “property rights” refers to
A) the physical possession of a house or any other property which the owner legally
purchased.
B) the ability to exercise control over one’s own resources within the confines of the
law.
C) the government’s right to appropriate land from wealthy land owners to redistribute
to peasants.
D) the right of a business not to have its assets confiscated by the government in the
event that the business is accused of committing fraud.
Which of the following would shift a nation’s production possibilities frontier outward?
A) discovering a cheap way to convert sunshine into electricity
B) an increase in demand for the nation’s products
C) a decrease in the unemployment rate
D) a law requiring workers to retire at age 50
The term ________ refers to entities cooperating across national boundaries.
A) internationalization
B) supranationalism
C) denationalization
D) multiculturalism
Figure 12-5
Figure 12-5 shows cost and demand curves facing a typical firm in a constant-cost,
perfectly competitive industry.
Refer to Figure 12-5. If the market price is $20, what is the average profit at the
profit-maximizing quantity?
A) $5
B) $6
C) $9
D) $20
Figure 15-6
Figure 15-6 shows the cost and demand curves for a monopolist.
Refer to Figure 15-6. The monopolist’s total cost is
A) $1,116.
B) $1,240.
C) $1,660.
D) $1,726.40.
Delaware and North Dakota have identical state gasoline taxes of 23.0 cents per gallon.
When added to the federal gasoline tax of 18.4 cents per gallon, the total tax on one
gallon of gasoline in these two states is 41.4 cents. On October 8, 2013, the average
price of one gallon of regular gasoline was $3.309 in Delaware and $3.394 in North
Dakota. Briefly explain whether this is an example of price discrimination. Assume that
the gasoline being sold is identical in both states.
Sources: gaspricewatch.com and gasbuddy.com.
A curve showing the lowest cost at which a firm is able to produce a given level of
output in the long run is
A) a long-run production function.
B) a long-run marginal cost curve.
C) a minimum efficient scale curve.
D) a long-run average total cost curve.
The purpose of the General Agreement on Tariffs and Trade (GATT) was to ________.
A) create an international currency
B) regulate exchange rates
C) create regional trade organizations
D) promote free trade
All of the following are characteristics of game theoryexcept
A) rules that determine what actions are allowable.
B) payoffs that are the results of the interaction among players’ strategies.
C) strategies that players employ to attain their objectives.
D) independence among players
Twenty-seven countries in Europe have eliminated all tariffs with each other. This
group of countries is known as the
A) European Union.
B) United Federation of Europe.
C) Gruppo Euro.
D) European Free Trade Association.
Figure 9-4
Suppose the U.S. government imposes a $0.50 per pound tariff on sugar imports. Figure
9-4 shows the demand and supply curves for sugar and the impact of this tariff.
Use Figure 9-4 to answer questions a-i.
a. Following the imposition of the tariff, what is the price that domestic consumers must
now pay and what is the quantity purchased?
b. Calculate the value of consumer surplus with the tariff in place.
c. What is the quantity supplied by domestic sugar producers with the tariff in place?
d. Calculate the value of producer surplus received by U.S. sugar producers with the
tariff in place.
e. What is the quantity of sugar imported with the tariff in place?
f. What is the amount of tariff revenue collected by the government?
g. The tariff has reduced consumer surplus. Calculate the loss in consumer surplus due
to the tariff.
h. What portion of the consumer surplus loss is redistributed to domestic producers? To
the government?
i. Calculate the deadweight loss due to the tariff.
Firms disclose financial statements in ________ and in ________.
A) periodic filings to the federal government; annual reports to shareholders
B) daily filings to the federal government; daily reports to shareholders
C) monthly reports to shareholders; 5-year balance statements to the board of directors
D) weekly filings with the SEC; monthly reports to the Fed
Figure 11-7
Figure 11-7 shows the cost structure for a firm.
Refer to Figure 11-7. If output is 100 units what is the fixed cost of production?
A) $8
B) $800
C) $1,000
D) This cannot be determined from the diagram.
The branch of economics which studies how households and firms interact in markets is
called
A) macroeconomics.
B) microeconomics.
C) positive economics.
D) normative economics.
Government imposed quantitative limits on the amount of pollution firms are allowed
to produce is an example of
A) the Pigovian method of pollution control.
B) command and control approach to pollution reduction.
C) Coasian solution to pollution reduction.
D) a tradable emission allowance system of pollution control.
Table 17-3
Hotspur Incorporated, a manufacturer of microwave ovens, is a price taker in its input
and output markets. The firm hires labor at a constant wage rate of $800 per week and
sells microwave ovens at a constant price of $80. Table 17-3 shows the relationship
between the quantity of labor it hires and the quantity of microwave ovens it produces.
Refer to Table 17-3. What is the amount of profit added as a result of hiring the fourth
worker?
A) $7,200
B) $1,200
C) $800
D) $400
In the medical profession, pediatricians receive lower salaries than cardiologists.
Suppose the government passes comparable worth legislation that requires hospitals to
pay pediatricians the same salaries as cardiologists. Explain the effect of this legislation
and illustrate your answer with demand and supply graphs for the following two
scenarios:
a. hospitals respond by placing salaries at a level between the two existing salaries
b. hospitals respond by placing pediatricians’ salaries at the initial level of cardiologists.
If a decrease in income leads to in a decrease in the demand for mac and cheese, then
mac and cheese is
A) a normal good.
B) a neutral good.
C) a complement.
D) a necessity.
Figure 6-10
Refer to Figure 6-10. The supply curve on which price elasticity changes at every point
is shown in
A) Panel A.
B) Panel B.
C) Panel C.
D) Panel D.
Table 4-4
Table 4-4 shows the demand and supply schedules for labor market in the city of Pixley.
Refer to Table 4-4. If a minimum wage of $11.50 an hour is mandated, what is the
quantity of labor supplied?
A) 40,000
B) 570,000
C) 610,000
D) 1,180,000
Figure 16-5
Refer to Figure 16-5. Consider the following two pricing strategies:
a. a fixed fee and a per-unit price equal to the monopoly price
b. a fixed fee and a per-unit price equal to the competitive price
The firm represented in the diagram earns a higher profit under strategy ________ and
deadweight loss is eliminated under ________.
A) b; b
B) a; b
C) a; neither strategy
D) b; neither strategy
The financial situation at Starbucks in the late 2000s illustrates the fact that maintaining
long-run profits in a monopolistically competitive market is
A) impossible.
B) very difficult.
C) fairly easy.
D) almost always guaranteed.