If a good is a necessity with few substitutes, then demand will tend to:
A) be more price-elastic.
B) be more price-inelastic.
C) have price elasticity equal to 1.
D) be the same as that of a luxury good.
Figure: The Production Possibilities for Two Countries
(Figure: The Production Possibilities for Two Countries) Look at the figure The
Production Possibilities for Two Countries. If Indonesia specializes completely in the
production of the good of its comparative advantage, it will produce:
A) 600 radios.
B) 800 radios.
C) 800 tires.
D) 1,200 tires.
Since the public safety that a police force provides is _____ in consumption, the
efficient price _____.
A) rival; is zero
B) nonrival; is zero
C) rival; equals marginal social benefit
D) nonrival; equals marginal social benefit
(Table: Competitive Market for Good Z) Look at the table Competitive Market for
Good Z. If the supply curve for good Z is linear, it can be expressed as:
A) Qs = 3P.
B) Qs = 50 ” 2P.
C) Qs = 100 ” 2P.
D) Qs = Qd
The Sherman Antitrust Act:
A) was aimed at preventing the establishment of more monopolies and was the
beginning of antitrust policy.
B) introduced the HHI measure to industries.
C) initially allowed firms to collude legally.
D) allowed the establishment of trusts.
Who wrote The Wealth of Nations, a book that many credit with establishing economics
as a discipline?
A) Karl Marx
B) David Ricardo
C) Adam Smith
D) John Maynard Keynes
If countries engage in international trade:
A) they give up the ability to specialize in production.
B) worldwide levels of production are lower.
C) they will be consuming inside their production possibility frontiers.
D) they will be consuming outside their production possibility frontiers.
Which of the following will NOT shift the labor supply curve?
A) a change in attitude toward work
B) changes in a spouse’s income
C) changes in expectations about future wealth
D) a change in the wage rate
Figure: Prices, Cost Curves, and Profits
(Figure: Prices, Cost Curves, and Profits) Look at the figure Prices, Cost Curves, and
Profits. If the price is P2 and the firm is profit-maximizing, then the firm’s profit is:
A) (fg) × Q3.
B) (de) × Q2.
C) (fg) × Q2.
D) (de) × P2.
Figure: The Total Product
(Figure: The Total Product) Look at the figure The Total Product. If the firm hires more
than L2 labor, the total product will _____ because the marginal product of labor is
_____.
A) decrease; positive
B) increase; positive
C) decrease; negative
D) increase; negative
A statement that the minimum wage should be increased is a:
A) positive statement.
B) normative statement.
C) ceteris paribus assumption.
D) scientific conclusion based on marginal analysis.
(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. How many
tubs of ice cream will Sergei produce in the long run?
A) 1
B) 2
C) 3
D) 4
If the United States increases tariffs on imports of lumber from Canada (which raises
the price of lumber in the United States), the equilibrium price of new homes in the
United States will _____ and the equilibrium quantity of new homes in the United
States will _____.
A) increase; increase
B) increase; decrease
C) decrease; increase
D) decrease; decrease
Assuming that all other factors of production are held constant, marginal product is the
change in _____ output resulting from a one-unit change in _____.
A) total; a variable input
B) total; a fixed input
C) total; total product
D) per unit; a fixed input
If the market for corn is in equilibrium:
A) every buyer who wants to consume corn can acquire corn.
B) every producer who wants to sell corn can do so.
C) the price is set so that the quantity of corn produced is equal to the quantity of corn
consumed.
D) all producers of corn earn the same amount of income from the sale of corn.
Figure: Monopolistic Competition II
(Figure: Monopolistic Competition II) Which of the panels in the figure Monopolistic
Competition II shows a monopolistic competitor earning a profit in the short run?
A) panel (a)
B) panel (b)
C) panel (c)
D) panels (a) and (c)
We are forced to make choices because of:
A) exploitation.
B) efficiency.
C) scarcity.
D) the margin.
Figure: Short-Run Costs II
(Figure: Short-Run Costs II) Look at the figure Short-Run Costs II. Curve 1 is the
_____ cost curve.
A) average total
B) average variable
C) marginal
D) total
Frank buys only milk and cereal, both of which are normal goods, and he always
maximizes his utility. Frank’s boss cuts Frank’s pay by $200 per month. What happens
to Frank’s marginal rate of substitution between milk and cereal?
A) It fluctuates randomly.
B) It decreases.
C) It increases.
D) It stays constant.
Which of the following is a positive statement?
A) The rate of unemployment is 4%.
B) A high rate of economic growth is the most important economic goal for the country.
C) Everyone in the country should be covered by national health insurance.
D) Baseball players should not be paid higher salaries than the president of the United
States.
Figure: The Production Possibilities for Two Countries
(Figure: The Production Possibilities for Two Countries) Look at the figure The
Production Possibilities for Two Countries. Malaysia has an absolute advantage in
producing:
A) radios.
B) tires.
C) both radios and tires.
D) neither radios nor tires.
Figure: Davina’s Labor Supply Choice
(Figure: Davina’s Labor Supply Choice) The figure Davina’s Labor Supply Choice
shows Davina’s time allocation budget line when her hourly wage is $10 or $15 and she
has 80 hours to allocate between labor and leisure; it also shows two of her indifference
curves for income and leisure. When Davina earns $10 per hour, she works _____ hours
and enjoys _____ hours of leisure.
A) 20; 60
B) 30; 50
C) 40; 40
D) 50; 30
Figure: The Production Possibilities for Two Countries
(Figure: The Production Possibilities for Two Countries) Look at the figure The
Production Possibilities for Two Countries. If Indonesia and Malaysia trade 1 radio for
1 tire, the most that Indonesia can consume is _____ radios and _____ tires, while the
most that Malaysia can consume is _____ radios and _____ tires.
A) 300; 600; 800; 200
B) 200; 900; 600; 300
C) 1,200; 400; 800; 200
D) 600; 600; 1,000; 600
In terms of the production possibility frontier, inefficient use of available resources is
shown by:
A) an increase in the labor force growth rate.
B) a movement from one point to another along the production possibility frontier.
C) an inward shift of the production possibility frontier due to the lack of opportunity.
D) production at a point inside the production possibility frontier.
Figure: Demand and Supply of Gasoline
(Figure: Demand and Supply of Gasoline) Look at the figure Demand and Supply of
Gasoline. Given the equilibrium after a change in supply from S1 to S2:
A) at the old price of $2.50, there will be pressure for the price to fall.
B) the new price will be $2.00.
C) the new quantity will be 600.
D) the price will remain constant.
If a firm hires labor such that W < VMPL, then profit:
A) is maximized.
B) can be increased by hiring less labor.
C) can be increased by hiring more labor.
D) can be increased by increasing the wage.
Figure: Shifts in Demand and Supply II
(Figure: Shifts in Demand and Supply II) Look at the figure Shifts in Demand and
Supply II. The graph shows how supply and demand might shift in response to specific
events. Suppose a drought destroys one-third of the nation’s peanut crop. Which panel
BEST describes how this will affect the market for peanuts?
A) panel A
B) panel B
C) panel C
D) panel D
Mario sees popcorn and pretzels as perfect substitutes. He is always willing to
substitute 3 cups of popcorn for 1 cup of pretzels. If the price of a cup of popcorn is $3
and the price of a cup of pretzels is $1, Mario will eat:
A) only pretzels.
B) only popcorn.
C) mostly pretzels.
D) The answer is impossible to determine.
(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. If the market
price of a tub of ice cream is $50, how much is Sergei’s profit at the profit-maximizing
output?
A) $680
B) $330
C) $150
D) $40