Figure: The Optimal Consumption Bundle
(Figure: The Optimal Consumption Bundle) Look at the figure The Optimal
Consumption Bundle. Which of the following could lead to an optimal consumption
bundle on indifference curve I1?
A) an increase in income
B) a decrease in the price of restaurant meals
C) a decrease in the price of rooms
D) a decrease in income
It is certain that the equilibrium price will rise when the supply curve shifts to the
_____ and the demand curve shifts to the _____.
A) right; right
B) right; left
C) left; left
D) left; right
Figure: A Profit-Maximizing Monopoly Firm
(Figure: A Profit-Maximizing Monopoly Firm) Look at the figure A Profit-Maximizing
Monopoly Firm. The firm in this figure will produce _____ units of output per week.
A) 150
B) 200
C) 250
D) 300
Which of the following is the BEST example of making a choice at the margin?
A) buying a new car
B) quitting your job
C) drinking another cup of coffee
D) attending college
The quota rent is:
A) the difference between the demand price and the supply price at the quota limit.
B) the rent received by landlords who own rent-controlled apartments.
C) the opportunity cost of using a quota-controlled service or of buying a good that is
subject to an import quota.
D) the minimum rent that the owner of a building must receive before he or she is
willing to rent out the building.
Table: Denise’s Consumption of Coffee and Gasoline
(Table: Denise’s Consumption of Coffee and Gasoline) Look at the table Denise’s
Consumption of Coffee and Gasoline. Given the information provided, the price of each
cup of coffee is _____ and the price of each gallon of gasoline is _____.
A) $2; $2
B) $3; $6
C) $1; $2
D) $3; $3
Scenario: Accounting and Economic Profit
Rather than put the $100,000 that his grandmother left him in a mutual fund that earns
5% each year, Tommy Wang quit his job, which paid $60,000 per year, and started
Wang’s Wicker Furniture Store. He rented a showroom for $20,000 for the year,
purchased $60,000 in wicker furniture, and incurred costs of $40,000 for sales help and
advertising. Instead of using the capital for his own business, he could rent it to a rival
firm and earn $5,000 a year. In his first year, his revenue was $150,000.
(Scenario: Accounting and Economic Profit) Look at the scenario Accounting and
Economic Profit. The implicit cost of capital for Wang’s Wicker Furniture Store is:
A) $0.
B) $2,000.
C) $5,000.
D) $50,000.
(Table: Wages and Hours Worked) Look at the
table Wages and Hours Worked. Graphing the relation with wages on the vertical axis
and hours worked on the horizontal axis, the slope between point D and point E is:
A) 0.5.
B) 5.
C) 45.
D) 2.
A technological advance in the production of automobiles will _____ the _____
automobiles.
A) decrease; demand for
B) increase; supply of
C) decrease; demand
D) decrease; supply of
If a star college quarterback turns down a multimillion-dollar offer from the NFL to
return for his senior year of college, he may be exhibiting:
A) status quo bias.
B) mental accounting.
C) misperception of opportunity costs.
D) risk aversion.
(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 three mixers and bakes 400 cakes per day, what is her average fixed cost?
A) $0.05
B) $2.50
C) $5.00
D) $6.25
Phil’s Copy Studio pays its workers $60 per day and sells poster-size copies for $10 per
print. Now suppose during the holiday season the price of poster-size copies increases
to $12. What happens?
A) The demand for labor increases.
B) The demand for labor decreases.
C) The quantity demanded of labor increases, but the demand for labor curve does not
shift.
D) The quantity demanded of labor decreases, but the demand for labor curve does not
shift.
Figure: Cost Curves for Corn Producers
(Figure: Cost Curves for Corn Producers) Look at the figure Cost Curves for Corn
Producers. The market for corn is perfectly competitive. If the price of a bushel of corn
is $10, then in the short run the farmer will produce _____ bushels of corn and take an
economic loss equal to _____.
A) 0; average fixed costs
B) 0; total variable costs
C) 3; total fixed costs
D) 3; $22 per bushel
Figure: The Gasoline Market
(Figure: The Gasoline Market) Look at the figure The Gasoline Market. The pretax
equilibrium price is $3, and the equilibrium quantity before tax is 20,000 gallons. An
excise tax has been levied on each gallon of gasoline, shifting the supply curve upward.
The deadweight loss from this tax is equal to:
A) $1.50.
B) $5,000.
C) $15,000.
D) $4,375.
A key theme fundamental to all of economics is that:
A) wants are limited.
B) the United States is a rich country, but we are simply not aware of it.
C) people have unlimited wants but limited means to satisfy them.
D) resources are unlimited.
Oligopoly first became an issue in the United States when:
A) the Sons of Liberty dumped the East India Company’s tea into Boston Harbor in
1773.
B) the Emancipation Proclamation was issued in 1863.
C) the growth of railroads made possible a national market for goods in the second half
of the nineteenth century.
D) Google purchased Motorola Mobility in 2011.
Figure: A Changing Budget Constraint for Strawberries and Shortcake
(Figure: A Changing Budget Constraint for Strawberries and Shortcake) Look at the
figure A Changing Budget Constraint for Strawberries and Shortcake. Seb’s original
budget line is given by BL1 and his original indifference curve is given by I1. Which of
the following would have caused his budget line to move to BL2?
A) The price of strawberries increased.
B) The price of shortcake increased.
C) Seb’s income decreased.
D) The price of strawberries decreased.
A monopoly:
A) produces a product with no close substitutes.
B) is composed of a single buyer and several sellers.
C) is composed of a large number of small firms.
D) is composed of a small number of large firms.
The total producer surplus for a good can be calculated in all of the following ways
EXCEPT as:
A) the sum of the individual producer surpluses for all sellers of the good.
B) the area below the supply curve for the good up to the quantity of the good sold.
C) the area above the supply curve and below the price at which the good is being sold.
D) the sum, for all sellers of the good, of the difference between what each seller
receives and the minimum amount he or she is willing to accept for selling the good.
Figure and Table: The Market for Taxi Rides
(Figure and Table: The Market for Taxi Rides) Look at the figure and table The Market
for Taxi Rides. If the government imposes an excise tax of $1 per ride (causing the
supply curve to shift upward by that amount), then the government will collect tax
revenues of _____. However, the tax will cause a _____ deadweight loss to society.
A) $9 million; $0.5 million
B) $16 million; $1 million
C) $45 million; $1 million
D) $50 million; $0.5 million
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 $9, the short-run industry supply will be
_____ shirts.
A) 140
B) 200
C) 220
D) 240
Tonya’s budget constraint for gasoline (G) and clothes (C) each month can be expressed
by the equation G = 100 ” 2C. If the price of clothing is $10, the price of gasoline is
_____ and the total amount of income spent on both clothing and gasoline each month
is _____.
A) $5; $500
B) $2; $100
C) $1; $500
D) $2; $1,000
Consider the market for corn. What happens if there is an increased demand for corn
tortillas and at the same time a new corn seed becomes available that dramatically
increases the yield per acre?
A) Price and quantity decrease.
B) The change in price is indeterminate; quantity decreases.
C) The change in price is indeterminate; quantity increases.
D) Price increases; the change in quantity is indeterminate.
Figure: Demand for DVDs
(Figure: Demand for DVDs) Look at the figure Demand for DVDs. A decrease in the
rental price of DVD 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: Total Cost and Output) Look at the table Total Cost and Output, which describes
Sergei’s total costs for his perfectly competitive all-natural ice cream firm. What is the
minimum price that Sergei needs to receive for a tub of ice cream to stay in business in
the long run?
A) $10.00
B) $20.00
C) $33.33
D) $36.67
If a monopolist is producing a quantity that generates MC > MR, then profit:
A) is maximized.
B) is maximized only if MC = P.
C) can be increased by increasing price.
D) can be increased by decreasing price.
Which of the following is likely to be associated with inelastic supply?
A) The time under consideration is very short.
B) The inputs necessary for production cannot readily be increased.
C) The good is necessary for survival (e.g., a life-saving drug).
D) The time under consideration is very short and the inputs necessary for production
cannot readily be increased.
Figure: The Demand for e-Books
(Figure: The Demand for e-Books) If the price of e-Books increases from $6 to $8, total
revenue _____, which means that demand is _____.
A) increases; elastic
B) decreases; inelastic
C) remains constant; elastic
D) decreases; elastic
_____ illustrates a positive relationship between price and quantity.
A) A demand curve
B) A supply curve
C) A production possibility frontier
D) Equilibrium
It is said that consumers maximize utility because they are:
A) rational.
B) demand-constrained.
C) inferior.
D) comfortable.