Refer to the graph shown. If hamburger dinners are produced by a perfectly competitive
industry with a market demand D:
A. output will be the same as it would be under monopoly.
B. price will equal marginal cost.
C. price will equal $6.
D. price will be greater than marginal revenue.
Answer:
Refer to the table shown to answer the question. Between $2.20 and $2.40, demand is:
A. elastic.
B. unit elastic.
C. inelastic.
D. perfectly elastic.
Answer:
In the linear equation y = mx + b, an increase in b will:
A. shift the curve up.
B. shift the curve down.
C. cause the curve to become steeper.
D. cause the curve to become flatter.
Answer:
Models that that require knowledge of the relevant history to reach a conclusion are
referred to as:
A. codependent models.
B. deductive models.
C. mathematical models.
D. path-dependent models.
Answer:
Refer to the following graph.
If the price is set at Pc:
A. a non-price rationing mechanism must determine which producers will be able to
sell the product.
B. a non-price rationing mechanism must determine which buyers will be able to
purchase the product.
C. anyone willing and able to pay the asking price will be able to purchase the product.
D. the demand curve will shift to the left to achieve a new equilibrium.
Answer:
Refer to the graph shown. If market price is currently $3.00 per unit, this perfectly
competitive firm will maximize profit by producing:
A. 450 units of output.
B. 650 units of output.
C. 850 units of output.
D. between 550 and 650 units of output.
Answer:
Refer to the graph shown which shows total product. At point B:
A. marginal product is at its minimum.
B. marginal product is at its maximum.
C. marginal product is zero.
D. average product per worker is at its maximum.
Answer:
To have shadow prices you have to have:
A. opportunity costs.
B. money prices.
C. free markets.
D. laws.
Answer:
Refer to the graph shown. If the monopoly firm maximizes profit, it will produce:
A. 15 units of output and charge a price of $3.50 per unit.
B. 15 units of output and charge a price of $2.00 per unit.
C. 25 units of output and charge a price of $2.50 per unit.
D. 30 units of output and charge a price of $2.00 per unit.
Answer:
Joseph Gallo poured two glasses of wine from the same bottle but put a more expensive
price tag on one glass than on the other. He let people test both and asked which they
wanted; most wanted the more expensive glass, not knowing that both had come from
the same bottle. This kind of experiment tells us that:
A. preferences are given and are not shaped by society.
B. decision making is costless.
C. people probably want to drink wine for the sense of indulgence it gives them rather
than for the taste.
D. people never make rational choices.
Answer:
What is necessary for businesses to be profitable?
A. They must ignore the principle of consumer sovereignty.
B. They must ignore the invisible hand.
C. They must equalize their total revenues and total costs.
D. Entrepreneurship must be present.
Answer:
The graph shows that:
A. the effect of taxes is to make the distribution of income less equal.
B. the effect of taxes is to make the distribution of income more equal.
C. before-tax income and after-tax income are both equally distributed.
D. taxes are highly regressive.
Answer:
Suppose that the current equilibrium price of silver is $34 per ounce. If silver is
produced under conditions of perfect competition and the industry is in long-run
equilibrium, the average total cost of producing silver:
A. is less than $34 per ounce.
B. is $34 per ounce.
C. exceeds $34 per ounce.
D. is indeterminate.
Answer:
Scientists are very hesitant to base any knowledge on heuristic models because:
A. they do not contain any implications for government policy and influencing choice.
B. it is easy to believe a story and make sense of it within its own frame.
C. they only use the deductive approach.
D. they contain too many equilibria.
Answer:
Refer to the graph shown that depicts a third-party payer market for prescription drugs.
If the co-payment is $2 per pill, what will be the quantity demanded?
A. 15
B. 30
C. 45
D. 60
Answer:
A firm’s total variable cost increases from $4,000 to $4,020 as the firm increases its
output from 400 to 401 units. What is the marginal cost of producing the 401st unit?
A. $10
B. $4,000
C. $20
D. $4,020
Answer:
To be successful in increasing prices for their product, members of a cartel:
A. do not talk to one another.
B. limit output.
C. encourage entry.
D. engage in predatory pricing.
Answer:
Refer to the following graphs.
A recent report indicated that 50 intensive-care unit patients die for every 1,000 who are
managed with a heart device known as the right heart catheter. Suppose as a result, the
FDA limited supply of the heart catheters. The effect of the report and subsequent
action by the FDA on the market for right heart catheters is best shown by which of the
graphs?
A. I
B. II
C. III
D. IV
Answer:
The text suggests that if economists had a mantra, it would be:
A. do unto others before they do unto you.
B. justice is the measure of all things.
C. when one person benefits, another is hurt.
D. trade is good.
Answer:
Refer to the graph shown depicting a monopolistically competitive firm. The marginal
revenue curve is represented by curve:
A. A.
B. B.
C. C.
D. D.
Answer:
Total consumer surplus is measured as the area:
A. between the demand curve and the supply curve.
B. above the demand curve.
C. between the vertical axis, the demand curve, and a horizontal line through the market
price.
D. between the demand curve and the horizontal axis.
Answer:
The adoption of the QWERTY keyboard in the early days of mechanical typewriters,
with its continued use today, has been suggested as a metaphor for:
A. technological lock-in.
B. a lazy monopoly.
C. reverse engineering.
D. X-inefficiency.
Answer:
In a perfectly competitive constant-cost industry:
A. factor prices do not change as industry output increases.
B. factor prices rise as industry output increases.
C. factor prices fall as industry output increases.
D. there is no way to predict what will happen to factor prices as industry output
increases.
Answer:
Refer to the graph shown. Which supply curve is unit elastic?
A. A
B. B
C. C
D. D
Answer:
Most technological advance takes place in:
A. the public sector.
B. oligopolistic industries.
C. monopolistic industries.
D. competitive industries.
Answer:
The long-run industry supply curve will be upward-sloping if:
A. input prices are fixed no matter what the level of output.
B. output prices are fixed no matter what the level of output.
C. input prices increase with the level of output.
D. there are no economies or diseconomies of scale.
Answer:
What two assumptions are traditional economists likely to make that behavioral
economists are less likely to make?
A. Incentives are important, and people base decisions on the economic decision rule.
B. Purposeful behavior and predictable irrationality.
C. Rationality and self-interest.
D. Not all information is available, and the invisible hand is efficient.
Answer:
Which of the following is most likely an action that supports competition?
A. Requiring professionals, such as architects and engineers, to be licensed
B. Using tariffs to restrict the ability of foreign firms to sell products in domestic
markets
C. Preventing two dominant firms in the same market from merging
D. Granting subsidies to farmers based on production levels
Answer:
If quantity demanded falls by 25 percent when price rises by 50 percent, demand is said
to be:
A. elastic.
B. inelastic.
C. proportional.
D. responsive.
Answer:
For a monopolist, the price of the product:
A. equals the marginal revenue.
B. is less than the marginal revenue.
C. exceeds the marginal revenue.
D. equals the marginal cost.
Answer:
When you purchase and eat a hamburger, no one else can eat the same hamburger.
When you download a file on the Internet, the file is still available for others to
download. Economists explain this difference between hamburgers and computer files
by saying that the hamburger is:
A. excludable whereas the computer file is not.
B. nonexcludable whereas the computer file is not.
C. rival in consumption whereas the computer file is not.
D. nonrival in consumption whereas the computer file is not.
Answer:
Under monopolistic competition, a firm’s ability to influence the price of the product it
sells arises because:
A. sellers in the market have large market shares.
B. sellers in the market have small market shares.
C. the product of each seller is differentiated from that of others.
D. each seller sells a standardized product.
Answer:
Refer to the following graph.
This set of cost curves is:
A. correct.
B. wrong because the total cost and variable cost curves are reversed.
C. wrong because the fixed cost curve is drawn incorrectly.
D. wrong because the total cost and variable cost curves are actually the average total
cost and average variable cost curves.
Answer: