Archives: Quiz

What is the endowment effect? A) Children who receive a large inheritance are less likely to work. B) The more you have of something, the more you want to get rid of it. C) The act of owning a good […]

Figure 3.17 (Figure 3.17) Figure 3.17 shows the effect of a government subsidy. Which of the following statements is TRUE? I. The area of the deadweight loss is C + D + E + G + H + I. II. […]

Nancy’s ratio of marginal utilities for coffee and lipstick is 3/1, while the price ratio of coffee to lipstick is 1.5/1. Which of the following statements is TRUE? I. Coffee provides Nancy with 3 times the utility of lipstick. II. […]

Figure 16.7 (Figure 16.7) Which of the following statements is TRUE? A) The efficient quantity of pollution occurs at 6,000 units of pollution or less. B) At 2,000 units of pollution, the marginal benefit of pollution is less than the […]

What is econometrics? A) a bias in which people overemphasize small risks while ignoring large risks B) the use of statistical and analytical techniques to test economic theory C) the use of mathematical theory to speculate on cause and effect […]

Answer the following questions. a. Graphically illustrate an industry in long-run equilibrium. You should use two diagrams: one for the industry supply and demand curves and another for a representative firm. b. Starting from the position of long-run equilibrium, graphically […]

Sweet Steel and Molten Metal create sulfur dioxide emissions from their production process. The total abatement cost (TAC) and marginal abatement cost (MAC) for each company are given by: Sweet Steel: TACS= 100,000+ 1eS 2 and MACS= 2eS Molten Metal: […]

Answer the following questions. a. Define economies of scope using these cost functions: TC(Q1,Q2), TC(Q1,0), and TC(0,Q2). b. Why do economies of scope arise? Table 11.1 Payoffs: Henry’s Monthly Profit, Nancy’s Monthly Profit (Table 11.1) If car dealerships are legally […]

When ________ substitutes exist, a monopolist has ________ power to raise price. A) more; more B) more; no C) fewer; no D) fewer; more Speedy Flowers competes in the monopolistically competitive flower delivery industry in a city. The firm raises […]

Figure 20.2 Refer to Figure 20.2. ________ has a comparative advantage in producing ________. A) England; trucks B) England; cars and trucks C) the United States; trucks D) the United States; cars and trucks In the short run, it is […]

Figure 16.3 Refer to Figure 16.3. When Bill plays his saxophone he imposes costs on his wife. If Bill does not take these costs into consideration he will play his saxophone for ________ hours per day. A) zero B) three […]

Suppose that the demand for good Y and the supply of good Y both increase. (a.) Is it possible to predict whether the equilibrium quantity of good Y will increase, decrease, or remain the same as a result of these […]

The so-called tragedy of commons relates to the idea that A) no one has an incentive to maintain collectively owned property. B) collectively owned resources tend to be underused. C) collective ownership provides the proper private incentives for efficiency because […]

Los Angeles International Airport (LAX) is located next to Playa Del Rey. The noise from air traffic negatively affects individuals living in Playa Del Rey, however, this cost is not considered by airlines or air travelers. The airlines feel they […]

A soybean farmer sells soybeans in a perfectly competitive market and hires labor in a perfectly competitive market. The market price of soybeans is $10 a bushel, the wage rate is $15, the farmer employs eleven workers and the marginal […]

Figure 13.4 Refer to Figure 13.4. This firm’s marginal revenue will be negative at A) $6. B) $14. C) all prices. D) prices between $8 and $12. Quantity demanded will equal quantity supplied if a ________ is set ________ the […]

Assuming there are no externalities, if a firm produces an output level where the benefits to consumers ________ the cost to suppliers to produce it, then price is ________ marginal cost. A) are less than; greater than B) exceed; less […]

Figure 5.1 Refer to Figure 6.1. Assume Tom is on budget constraint AC and the price of a hot dog is $2.50. Tom’s monthly income is A) $16. B) $50. C) $80. D) $100. For a monopolist to sell more […]

________ is a change that makes some people better off and nobody worse off. A) A government transfer program such as Social Security B) A reduction in interest rates C) A price floor that increases income to suppliers D) Voluntary […]

Jane has $500 a week to spend on clothing and food. The price of clothing is $25 and the price of food is $10. The clothing and food pairs in Jane’s choice set include ________ units of clothing and ________ […]

________ reflects household willingness to pay, and ________ reflects the opportunity cost of the resources needed to produce a good. A) Marginal utility; price B) Price; marginal cost C) Price; average total cost D) Demand; price Suppose that an international […]

If the interest rate is 10%, the current market value of $1 to be delivered in one year is A) $0.91. B) $0.99. C) $1.00. D) $1.10. In some nations, the government pays parents to send their children to school. […]

________ is on the World Bank’s list of low-income countries, yet its capital city is one of the top ten centers of commerce in the world. A) India B) Mexico C) Rwanda D) Thailand Chronic food shortages, explosive population growth, […]

The optimal level of provision of public goods is where society’s total willingness to pay per unit is equal to the ________ cost of producing the good. A) total B) average C) variable D) marginal Table 10.1 Refer to Table […]

Producer surplus is A) the difference between the maximum a person is willing to pay and current market price. B) the difference between current market price and full costs of production for the firm. C) the difference between willingness to […]

The notion of utilitarian justice is that A) through income redistribution, the rich sacrifice a little and the poor gain a lot. B) any change that makes some people better off without making anyone worse off should be undertaken. C) […]

The cross-price elasticity of demand between good X and good Y is 5. Given this information, which of the following statements is true? A) The demand for goods X and Y is inelastic. B) Goods X and Y are substitutes. […]

The price of a good will be demand determined if A) the demand for the good is unit elastic. B) the demand for the good is perfectly inelastic. C) the supply of the good is perfectly elastic. D) the supply […]

Table 6.2 Refer to Table 6.2. Diminishing marginal utility sets in after the ________ donut per day. A) first B) second C) third D) fourth You are hired as an economic consultant to The Pampered Pet Shop. The Pampered Pet […]

Normative economics A) is the focus of most modern economic reasoning. B) answers the question “What ought to be?” C) predicts the consequences of alternative actions. D) answers the question “What is?” Economic costs A) include both a normal rate […]

Unemployment benefits are A) paid regardless of a person’s income from other sources and regardless of assets. B) reduced by an amount that is equal to an individual’s income from other sources. C) not paid to individuals with assets valued […]

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 […]

Table 8.5 Refer to Table 8.5. Assume that Polynesian Fruit sells fruit baskets in a perfectly competitive market. The market price of a fruit basket is $44. To maximize profits, Polynesian Fruit should sell ________ fruit baskets and their profit […]

You always have math problems to work in class whenever you forget to bring your calculator to school. Concluding that forgetting your calculator causes your professor to assign math problems is an example of the A) fallacy of composition. B) […]

Assume there are two people in a society. Person A is willing to pay $70 to have one unit of a public good produced and Person B is willing to pay $80 to have one unit of a public good […]

Table 7.2 Inputs Required to Produce a Product Using Alternative Technologies Refer to Table 7.2. If the hourly price of labor is $10 and the hourly price of capital is $1, which production technology should be selected? A) A B) […]

An economist has estimated that the maintenance of a public park costs $25,000 a year and that the public park generates $30,000 a year in revenue for merchants near the park. From society’s point of view, the maintenance of this […]

Figure 7.4 Refer to Figure 7.4. The marginal product of the third worker is A) 10. B) 28.67. C) 32. D) 42. An example of an ineffective price ceiling would be the government setting the price of wheat at ________ […]

Related to the Economics in Practice on page 175: When there are a few empty seats in a movie theater, the marginal cost of adding extra customers to occupy those seats A) is probably close to zero. B) will be […]

The term “Fourth World” is used to describe countries that A) are stagnant and have fallen far behind the economic advances of the rest of the world. B) have experienced rapid economic growth. C) are more developed than “Third World” […]

If an economy is producing on its production possibility frontier but is not producing what people want, the economy A) is experiencing technological advancement. B) is producing at more than one point on the production possibility frontier. C) is not […]

Participating in a seminar that helps to improve your performance at work represents an investment in your ________ capital. A) human B) social C) tangible D) financial Related to the Economics in Practice on page 361: Suppose you see the […]

The largest portion of federal government revenues comes from ________. A) the individual income tax B) excise taxes C) social insurance payroll taxes D) corporate income taxes If income decreases by 20% and, in response, the quantity of housing demanded […]

Ceteris paribus, when market interest rates ________, firms undertake ________ investment projects. A) decrease; no B) increase; more C) decrease; less D) increase; fewer The marginal cost of producing 25 units of a public good is $100. There are two […]

The main decision for a profit maximizing perfectly competitive firm is not what ________ but what ________. A) level of output to produce; price to charge B) price to charge; level of output to produce C) level of output to […]

Table 8.3 Refer to Table 8.3. What is the total cost of producing zero units of output? A) $0 B) $15 C) $30 D) indeterminate from the given information Figure 9 Refer to Figure 6.9. The marginal utility of the […]

A tariff imposed on imported wine will cause the domestic ________ of wine to increase and the domestic ________ of wine to increase. A) price; production B) cost; price C) imports; exports D) revenues; imports In 2006, the infant mortality […]

A firm will undertake an investment if the present value of the A) income stream associated with the investment is greater than the full cost of the investment project. B) income stream associated with the investment is less than the […]

Figure 6.2 Refer to Figure 6.2. Along budget constraint AC, the opportunity cost of one beer is A) 1/4 of a gardenburger. B) 1 gardenburger. C) 2 gardenburgers. D) changing as Mr. Lingle moves down his budget constraint. If the […]

You and your brother are splitting a piece of cake. You cut it into two pieces and your brother selects his piece first. Thus, you cut it into two equally sized pieces. This is an example of ________. A) utilitarian […]