The airline industry is an example of a(n) ________ industry.
A) perfectly competitive
B) monopolistic
C) monopolistically competitive
D) oligopolistic
Figure 6.5
Refer to Figure 6.5. Molly’s budget constraint is EF. If her income decreases and the
price of CDs increases, her new budget constraint is
A) CD.
B) BD.
C) AD.
D) Both B or C are correct.
The unemployment rate was falling during all of the years that I was a student, but as
soon as I graduated, the unemployment rate started to rise. Therefore, the job market
was waiting until I started looking for employment to start to go bad. This statement is
an example of
A) fallacy of composition.
B) post hoc, ergo propter hoc fallacy.
C) ceteris paribus fallacy.
D) fallacy of inductive reasoning.
If the interest rate is 5%, the current market value of $1 to be delivered in one year is
A) $0.91.
B) $0.95.
C) $1.00.
D) $1.10.
The Lawn Ranger, a landscaping company, has total costs of $7,000 and total fixed
costs of $5,000. The Lawn Ranger’s total variable costs are
A) $2,000.
B) $3,000.
C) $5,000.
D) indeterminate because the firm’s output level is unknown.
As a result of adverse selection problems in the health insurance market, it is likely that
over time
A) fewer healthy people will be insured.
B) fewer unhealthy people will be insured.
C) fewer healthy and unhealthy people will be insured.
D) more healthy people will be insured.
Figure 5.3
Refer to Figure 5.3. Use the midpoint formula. If the price of a gardenburger decreases
from $10 to $8, the price elasticity of demand equals ________ and demand is
________.
A) 5; elastic
B) -0.5; inelastic
C) -4.5; elastic
D) -9.0; inelastic
Table 19.3
Refer to Table 19.3. The tax rate structure in this example is
A) proportional.
B) progressive.
C) regressive.
D) marginal.
Suppose that iPhones are normal goods. If the income of iPhone users decreases, you
predict that in the market for iPhones,
A) both equilibrium price and quantity will fall.
B) both equilibrium price and quantity will increase.
C) equilibrium price will increase, and quantity will decrease.
D) equilibrium price will fall, but quantity will increase.
A perfectly price inelastic demand curve will be a ________ line.
A) horizontal
B) vertical
C) positively sloped
D) negatively sloped
Table 16.2
Refer to Table 16.2. This glass-recycling firm is perfectly competitive and IS forced to
take damage costs into account. If the market price of the product is $25, the firm will
produce ________ tons of glass.
A) 0
B) 2
C) 3
D) 4
Figure 6.1
Refer to Figure 6.1. Along budget constraint AC, the opportunity cost of one hot dog
A) is 1/4 of a hamburger.
B) is 1/2 of a hamburger.
C) is 2 hamburgers.
D) changes as you move down along the budget constraint.
Assume Dell Computer Company operates in a perfectly competitive market producing
5,000 computers per day. At this output level, price exceeds this firm’s marginal cost. It
follows that producing one more computer will cause this firm’s
A) total cost to decrease.
B) profits to increase.
C) profits to decrease.
D) profits to remain unchanged.
If a firm’s total costs are $100 when 10 units of output are produced and $105 when 11
units of output are produced, the marginal cost of the 11th unit is
A) $1.
B) $3.
C) $5.
D) $9.36.
Table 6.1
Refer to Table 6.1. The marginal utility of the third dozen oysters per day is
A) 10.
B) 30.
C) 44.
D) 134.
Adverse selection and moral hazard are examples of
A) asymmetric information.
B) selection problems.
C) risk aversion.
D) mechanism designs for dealing with informational problems.
The Speedy Typesetting Company, a perfectly competitive firm, is currently producing
where P = MC and is earning a normal profit. The yearly licensing fee that this firm
must pay for the use of a statistical software program was just increased from $1,000 to
$1,200. In the short run, this firm will most likely
A) reduce the amount of output it produces because its cost curves have shifted up and
to the left.
B) continue to produce the same amount of output because only its fixed costs have
increased.
C) produce more units of output to increase revenue to cover the additional fixed costs.
D) shut down because it will no longer be earning a normal profit.
Table 2
Refer to Table 6.2. If the price of a donut is $2, the price of a burrito is $4, and Luigi
has $12 of income, Luigi’s utility maximizing combination of donuts and burritos per
day is
A) 1 donut and 2 burritos.
B) 4 donuts and 1 burrito.
C) 2 donuts and 1.5 burritos.
D) indeterminate from this information.
The marginal benefit for a particular food is described by MB = 30 – q,
where q refers to the quantity of the food. The marginal cost of producing the food is
described by MC = 2q. There is a negative externality associated with food production
and the marginal social cost of food production is MSC = 4q.
The efficient output level is ________ and the efficient price is ________.
A) 10 units of food; $20
B) 6 units of food; $24
C) 0 units of food; $0
D) 29 units of food; $25.71
If you own a condo and you decide to lease it to your cousin,
A) there is no opportunity cost of leasing the condo because you own it.
B) there is an opportunity cost of leasing the condo because you could have chosen to
live in it.
C) there is no opportunity cost of leasing the condo because you collect rent from your
cousin.
D) the only cost relevant to this decision is the price you paid for the condo.
Firms that are “breaking even” are
A) earning zero economic profits.
B) earning less than a normal rate of return.
C) shutting down in the short run.
D) All of the above are correct.
Where L represents labor and X represents output, MPL x PX is the value of labor’s
marginal product while the wage rate is the
A) value of labor’s marginal revenue
B) cost of a marginal unit of labor
C) marginal cost of a unit of output
D) marginal revenue of a unit of output
________ involves a country selling its exports at a price lower than its cost of
production.
A) Dumping
B) Having an absolute advantage
C) Having a comparative advantage
D) An export quota
As firms ________ a monopolistically competitive industry, the demand and marginal
revenue curves facing each firm begin to shift to the ________.
A) expand in; right
B) exit; left
C) enter; right
D) enter; left
A ________ is rival in consumption, and viewers are excludable.
A) television signal sent by cable
B) fireworks show in a local park
C) television signal broadcast through the air
D) solar eclipse
Table 20.1
Refer to Table 20.1. Before specialization, Mexico produces 160 bushels of oranges and
40 bushels of bananas, and Guatemala produces 30 bushels of oranges and 40 bushels
of bananas. After specialization, the increase in banana production is
A) 10 bushels of bananas.
B) 15 bushels of bananas.
C) 20 bushels of bananas.
D) 40 bushels of bananas.
Table 8.1
Refer to Table 8.1. Assume that the relevant time period is the short run. Assuming the
price of labor (L) is $5 per unit and the price of capital (K) is $10 per unit, the average
total cost of producing two units of output is
A) $10.
B) $20.
C) $45.
D) $50.
If the slope of a straight line is 5 and if X (the variable on the horizontal axis) increases
by 4, then Y (the variable on the vertical axis) will
A) decrease by 0.8.
B) decrease by 20.
C) increase by 0.8.
D) increase by 20.
The mistake of inferring causality from ________ is called the post hoc, ergo propter
hoc fallacy.
A) two events happening one after the other
B) two or more related events occurring at the same time
C) two or more unrelated events occurring at the same time
D) the same event occurring multiple times
When Burning Bob’s Salsa House hires one worker, 30 customers can be served in an
hour. When Burning Bob’s Salsa House hires two workers, 50 customers can be served
in an hour. The marginal product of the second worker is ________ customers served
per hour.
A) 20
B) 30
C) 50
D) 5