A small public park in a large town with many other parks often has very few visitors
because of its size. There is no fee to enter the park, but few people visit it, since other
parks have more amenities. This park is _____ in consumption and _____.
A) rival; excludable
B) nonrival; excludable
C) nonrival; nonexcludable
D) rival; nonexcludable
(Table: Comparative Advantage I) Look at the table Comparative Advantage I. Sweden
has an absolute advantage in producing:
A) cell phones only.
B) herring only.
C) both cell phones and herring.
D) neither cell phones nor herring.
(Table: Costs of Birthday Cakes) Look at the table Costs of Birthday Cakes. Assume
that fixed costs are $10. What is the average fixed cost of 2 cakes?
A) $5
B) $10
C) $25
D) $30
Assume that the marginal utilities for the first three units of a good consumed are 200,
150, and 125, respectively. The total utility for the first unit is:
A) 125.
B) 150.
C) 200.
D) 350.
Figure: Market for Hamburger
s
(Figure: The Market for Hamburgers) The figure The Market for Hamburgers shows the
weekly market for hamburgers in Irvine, Kentucky. If the price of a hamburger is $1
and 200 hamburgers are supplied, producer surplus will equal:
A) $60.
B) $65.
C) $50.
D) $360.
In a single year, Argentina can raise 100 tons of beef or produce 1,000 boxes of tulips.
In the same growing season, Venezuela can raise 50 tons of beef or produce 750 boxes
of tulips. When the two countries begin trading beef for tulips, we expect the price of
beef in Argentina:
A) to fall.
B) to rise.
C) to remain at the autarky price.
D) to be 10 boxes of tulips.
Suppose Susan owns a business that operates in a market characterized by monopolistic
competition. Susan’s profit-maximizing price is $12, her profit-maximizing output is
900 units per week, and her profits are $1,800 per week. Susan decides that she needs
more profits and therefore raises her price to $15. At the new price of $15:
A) profits will increase.
B) profits will remain at $1,800.
C) marginal revenue will be greater than marginal cost.
D) marginal revenue will be less than marginal cost.
If the Herfindahl”Hirschman index (HHI) for an industry is 900, the market is
considered:
A) strongly competitive.
B) somewhat competitive.
C) oligopolistic.
D) monopolistic.
When a business hires people in other countries to perform various tasks, _____ has
occurred.
A) comparative advantage
B) globalization
C) offshore outsourcing
D) pauper labor
Figure: Seasonally Adjusted Unemployment Rate
(Figure: Seasonally Adjusted Unemployment Rate) Look at the figure Seasonally
Adjusted Unemployment Rate. The distance between each labeled point on the
horizontal axis is one year. Unemployment was ______ between 1/2001 and 1/2003 and
______ between 1/2007 and 1/2008.
A) increasing; decreasing
B) increasing; increasing
C) decreasing; increasing
D) decreasing; decreasing
If chicken and beef are substitutes, then a fall in the price of chicken will bring about:
A) an increase in the demand for beef.
B) a decrease in the demand for beef.
C) a decrease in the quantity demanded of beef.
D) no change in the demand for beef.
(Table: Amy’s Utility Function) Look at the table Amy’s Utility Function. Amy is an
entrepreneur with income of $40,000. Amy is considering development of a new
product. The probability that her new product earns Amy $30,000 in additional income
is 0.5, and the probability that Amy incurs a reduction of $10,000 from her current
income is 0.5. Amy’s expected income after developing her new product is:
A) $45,000.
B) $35,000.
C) $50,000.
D) $60,000.
Figure: PPV
(Figure: PPV) Look at the figure PPV, which shows the demand and marginal revenue
for a pay-per-view football game on cable TV. Assume that the marginal cost and
average cost are a constant $40. If the cable company practices perfect price
discrimination, deadweight loss will be:
A) $180.
B) $100.
C) $40.
D) $0.
Scenario: Linear Production Possibility Frontier Largetown has a linear production
possibility frontier, and it produces socks and shirts with 80 hours of labor. The table
shows the number of hours of labor necessary to produce one pair of socks or one shirt.
(Scenario: Linear Production Possibility Frontier) Look at the scenario Linear
Production Possibility Frontier. What is the maximum number of pairs of socks
Largetown can produce?
A) 40
B) 20
C) 2
D) 4
Which of the following statements in CORRECT?
A) If the government can make the tax system fairer without additional inefficiency, it
should do so to maximize equity.
B) If the government can make the tax system fairer without additional inefficiency,
then the existing tax system is perfectly designed.
C) There is no trade-off between equity and efficiency in the tax system.
D) If the government can make the tax system fairer without additional inefficiency, it
should seek to maximize equity at the expense of efficiency.
(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. Which of the
following is a point on Sergei’s short-run supply curve?
A) P = $10; Q = 0
B) P = $20; Q = 2
C) P = $110; Q = 3
D) P = $75; Q = 5
Figure: The Gains from International Trade
(Figure: The Gains from International Trade) Look at the figure The Gains from
International Trade. If each country specializes completely in the good for which it has
a comparative advantage, each country must trade _____ computer(s) for _____ box of
roses to consume at combination C¢.
A) 1; 0.5
B) 2; 1
C) 0.5; 1
D) 1; 1
The relation between two variables that move in the same direction is said to be:
A) independent.
B) neutral.
C) positive.
D) indirect.
Figure: The Consumption of Video Games and E-Books
(Figure: The Consumption of Video Games and E-Books) Look at the figure The
Consumption of Video Games and E-Books. Which chart shows the effect of a decrease
in income when both video games and e-books are normal goods?
A) A
B) B
C) C
D) D
Figure: Market Failure
(Figure: Market Failure) Look at the figure Market Failure. Suppose it represents the
demand for and marginal cost per pound of shrimp in the bay. The additional cost of the
shrimp due to the depletion of the common resource is equal to AC. Without
government intervention, the market will produce _____ pounds of shrimp.
A) 0
B) E
C) F
D) G
Critics of advertising argue that it:
A) tends to make markets more perfect.
B) leads to low-cost mass production.
C) results in higher prices to consumers.
D) encourages competition through new-product advertising.
The amount by which total utility changes when an additional unit of a good is
consumed is called _____ utility.
A) average
B) additional
C) maximum
D) marginal
The assumptions of perfect competition imply that:
A) individuals in the market determine the market price.
B) firms in the market accept the market price as given.
C) there will be no new competition due to natural monopolies.
D) the price will be decreasing yearly.
Figure: Demand and Marginal Revenue
(Figure: Demand and Marginal Revenue) The figure Demand and Marginal Revenue
refers to a software upgrade. The producer incurred fixed costs of $10 million to
produce the upgrade; the marginal cost of allowing consumers to download the upgrade
is zero. What is the efficient price of the upgrade?
A) $0
B) $50
C) $75
D) $100
If two combinations of two goods yield the same level of satisfaction, then they are on:
A) the same price line.
B) the same budget constraint.
C) the same indifference curve.
D) different indifference curves.
The category compensation of employees:
A) includes the earnings of proprietors.
B) doesn’t include benefits such as health insurance.
C) can be attributed in a large part to the return on human capital.
D) includes payments in kind that are common in rural areas.
Which of the following is CORRECT about celebrity spokespersons?
A) Celebrities are better informed about the relative merits of different products than
the rest of us.
B) Celebrity advertising signals consumers that the product is reliable, because the firm
is willing to pay the high fees associated with hiring a celebrity.
C) Consumers assume that the celebrity has researched the product and that the claims
being made on his or her behalf are true.
D) None of the statements is correct.
(Table: Coffee and Salmon Production Possibilities II) Look at the table Coffee and
Salmon Production Possibilities II. This table shows the maximum amounts of coffee
and salmon, both measured in pounds, that Brazil and Alaska can produce if they just
produce one good. Alaska has an absolute advantage in producing:
A) coffee only.
B) salmon only.
C) both coffee and salmon.
D) neither coffee nor salmon.
Figure: PPV
(Figure: PPV) Look at the figure PPV, which shows the demand and marginal revenue
for a pay-per-view football game on cable TV. Assume that the marginal cost and
average cost are a constant $20. If the cable company is in a perfectly competitive
industry, what price will it charge?
A) $20
B) $40
C) $60
D) $100
(Table: Marginal Benefit from Additional Streetlights) Look at the table Marginal
Benefit from Additional Streetlights. Suppose that the marginal cost of installing a
streetlight is $6. What is the socially optimal number of streetlights in the
neighborhood?
A) 1
B) 2
C) 3
D) 4