Which of the following is an example of an artificially scarce good?
A) diamonds, because their supply is artificially restricted by monopoly producers
B) music that is downloadable from the Internet for a fee
C) a daily newspaper
D) hot dogs in a sports stadium, because the number of suppliers is restricted
Figure and Table: The Changing Slope of an Indifference Curve
(Figure and Table: The Changing Slope of an Indifference Curve) Look at the figure
and table The Changing Slope of an Indifference Curve. The slope between points X
and Y is:
A) 3.
B) “5.
C) “0.33.
D) “3.
If the price of a cookie is $1 and the price of a brownie is $2, the price of cookies in
terms of brownies is:
A) 0.5.
B) 1.0.
C) 2.0.
D) undefined.
The total consumer surplus for good X can be calculated in all ways EXCEPT as:
A) the sum of the individual consumer surpluses for all buyers of X.
B) the area below the demand curve for X and above the price of X.
C) the area bounded by the demand curve for X and the two axes.
D) the sum, for all buyers of X, of the difference between what each buyer is willing to
pay for X and the amount actually paid.
In a perfectly competitive industry, the market demand curve is usually:
A) perfectly inelastic.
B) perfectly elastic.
C) downward-sloping.
D) relatively elastic.
(Table: Variable Costs for Lawns) Look at the table Variable Costs for Lawns. During
the summer, Alex runs a lawn-mowing service, and lawn-mowing is a perfectly
competitive industry. Assume that costs are constant in each interval; that is, the
variable cost of mowing 1 through 10 lawns is $100. His only fixed cost is $1,000 for
the mower. His variable costs include fuel, his time, and mower parts. If the price for
mowing a lawn is $70, how much is Alex’s profit per unit at the profit-maximizing
output?
A) “$10
B) $10
C) $34
D) $14
If there is a 25% probability that Joseph will earn $10 per hour at his job today and a
75% probability that he will earn $20 per hour today, his expected pay per hour is:
A) $10.00.
B) $15.00.
C) $17.50.
D) $20.00.
(Table: Market for Fried Twinkies) Look at the table Market for Fried Twinkies. If the
government imposes a quota of 5,000 on the fried Twinkie market, the quota rent per
fried Twinkie will be:
A) $1.20.
B) $0.30.
C) $1.50.
D) $1.00.
The pair of items that is likely to have the largest positive cross-price elasticity of
demand is:
A) coffee and tea.
B) skis and ski boots.
C) pizza and pepperoni.
D) milk and cookies.
The Orlando, Florida, theme park industry tends to follow a price leadership model.
This means that:
A) each theme park sets its own price and operating hours independent of what other
parks do.
B) Disney often sets a price and rival theme parks then follow with similar if not
identical prices.
C) Disney often sets prices only to be undercut by rival firms who prefer to engage in
price wars.
D) firms use explicit written agreements to charge identical prices.
Diminishing marginal returns occur when:
A) each additional unit of a variable factor adds more to total output than the previous
unit.
B) each additional unit of a variable factor adds less to total output than the previous
unit.
C) the marginal product of a variable factor is increasing at a decreasing rate.
D) total product decreases.
In 2012, health care expenditures in the United States were approximately _____ per
person.
A) $500
B) $1,000
C) $9,000
D) $12,000
Figure: The Market for Sandwiches
(Figure: The Market for Sandwiches) Look at the figure The Market for Sandwiches. At
the competitive price of $5, 10 sandwiches are sold. At this competitive price, consumer
surplus equals _____ and producer surplus equals _____.
A) $50; $50
B) $100; $50
C) $50; $25
D) $100; $25
The profit-maximizing rule, expressed as _____, is adhered to by firms operating in a
market that is _____.
A) MC > MR; monopolistically competitive but not perfectly competitive
B) MC = MR; both monopolistically competitive and perfectly competitive
C) MC > MR; perfectly competitive but not monopolistically competitive
D) MC = MR; either monopolistically competitive or perfectly competitive, depending
on the costs of production
Scenario: Monopolistically Competitive Firm
For a monopolistically competitive firm, Q = 160 ” P; MC = 20 + 2Q; and TC = 20Q +
Q2 + 20.
(Scenario: Monopolistically Competitive Firm) Given the information in the scenario
Monopolistically Competitive Firm, what is the profit-maximizing level of output for
this firm in the short run?
A) 160 units
B) 20 units
C) 35 units
D) 180 units
Figure: Short-Run Costs
(Figure: Short-Run Costs) Look at the figure Short-Run Costs. At the given price, the
most profitable level of output occurs at quantity:
A) N.
B) P.
C) S.
D) T.
The strategy of reducing or eliminating risks by taking a small share in many
independent events or by taking advantage of the predictability associated with large
numbers of independent events is known as:
A) floating.
B) specializing.
C) pooling.
D) screening.
(Table: Demand for Crude Oil) Look at the table Demand for Crude Oil. Assume that
the crude oil industry is a duopoly and the marginal cost and fixed cost of producing
crude oil equals zero. Suppose that the two firms are maximizing industry profit and
splitting the profit evenly. If firm 1 decides to cheat and increase production by 10 more
barrels and firm 2 continues to produce 40 barrels, firm 2 will earn profits of:
A) $6,400.
B) $6,300.
C) $3,500.
D) $2,800.
The market for salmon is in equilibrium. A price ceiling, a price floor, and a quota limit
in this market would all cause:
A) deadweight loss arising from a quantity exchanged that is less than the equilibrium
quantity.
B) a supply price that exceeds a demand price.
C) revenue collected by the government on each unit of salmon harvested.
D) deadweight loss arising from a transfer of surplus from consumers to producers.
Unemployment insurance is a(n) _____ that is _____.
A) monetary transfer; means-tested
B) monetary transfer; not means-tested
C) in-kind benefit; means-tested
D) in-kind benefit; not means-tested
A choice made _____ is a choice whether to do a little more or a little less of
something.
A) at the fringe
B) in the beginning
C) at the margin
D) after the fact
Market equilibrium occurs when:
A) there is no incentive for prices to change in the market.
B) quantity demanded equals quantity supplied.
C) the market clears.
D) there is no incentive for prices to change in the market, quantity demanded equals
quantity supplied, and the market clears.
Figure: The Profit-Maximizing Output and Price
(Figure: The Profit-Maximizing Output and Price) Look at the figure The
Profit-Maximizing Output and Price. Assume that there are no fixed costs and AC =
MC = $200. At the profit-maximizing output and price for a monopolist, producer
surplus is:
A) $3,200.
B) $6,400.
C) $1,000.
D) $1,600.
An economy has achieved _____ if it _____ pass up any opportunities to make some
people better off without making others worse off.
A) efficiency; does not
B) equity; does
C) efficiency; does
D) equity; does not
Jill, a careful utility maximizer, consumes peanut butter and ice cream. Assume that
both peanut butter and ice cream are normal goods. She had just achieved the
utility-maximizing solution in her consumption of the two goods when the price of
peanut butter increased. As she adjusted to this event, the marginal utility of peanut
butter _____ and that of ice cream _____.
A) rose; rose
B) fell; fell
C) fell; rose
D) rose; fell
When the price of chocolate-covered peanuts decreases from $1.10 to $0.95, the
quantity demanded increases from 190 bags to 215 bags. In this price range, the
demand for chocolate covered peanuts is _____, and total revenue will _____ when
price decreases.
A) elastic; increase
B) elastic; decrease
C) inelastic; increase
D) inelastic; decrease
Payments from the government to assist individuals are called:
A) taxes.
B) transfers.
C) the welfare state.
D) SCHIP.
Yovanka has diabetes, and she will pay any amount of money for insulin. What is likely
the best characterization of Yovanka’s demand for insulin?
A) price-inelastic
B) price-elastic
C) perfectly price-inelastic
D) perfectly price-elastic