Archives: Quiz

What is accounting profit? A) gross revenue minus explicit costs B) gross revenue minus implicit costs C) gross revenue minus explicit and implicit costs D) the same as economic profit Figure 18-1 Refer to Figure 18-1. Area E+H represents A) […]

Figure 5-9 Companies producing toilet paper bleach the paper to make it white. The bleach is discharged into rivers and lakes and causes substantial environmental damage. Figure 5-9 illustrates the situation in the toilet paper market. Refer to Figure 5-9. […]

If a 6 percent increase in income leads to a 4 percent increase in quantity demanded for audio books, the income elasticity of demand is A) -0.67. B) 67. C) 5. D) An income tax system is ________ if marginal […]

If equilibrium is achieved in a competitive market A) there is no deadweight loss. B) the deadweight loss will be maximized. C) the deadweight loss will equal the sum of consumer surplus and producer surplus. D) the deadweight loss will […]

Figure 18-7 Figure 18-7 shows the Lorenz curve for a hypothetical country. Refer to Figure 18-7. The second highest 20 percent of households A) earn 24 percent of the society’s total income. B) earn 28 percent of the society’s total […]

Consumer surplus in a market for a product would be equal to ________ if the market price was zero. A) zero B) the area between the supply curve and the demand curve C) the area above the supply curve D) […]

When a firm’s long-run average cost curve is horizontal for a range of output, then that range of production displays A) increasing returns to scale. B) constant returns to scale. C) decreasing returns to scale. D) constant average fixed costs. […]

Table 12-1 Table 12-1 shows the short-run cost data of a perfectly competitive firm that produces plastic camera cases. Assume that output can only be increased in batches of 100 units. Refer to Table 12-1. If the market price of […]

Figure 5-7 Refer to Figure 5-7. The marginal benefit of reducing pollution curve is the same curve as A) the supply of pollution reduction curve. B) the demand for pollution reduction curve. C) the positive externality curve. D) the external […]

If, for a given percentage decrease in price, quantity supplied decreases by a proportionately smaller percentage, then supply is A) unit elastic. B) perfectly elastic. C) relatively inelastic. D) elastic. A monopolistically competitive firm will A) charge the same price […]

Which of the following statements is true? A) Opportunity cost = explicit cost – implicit cost. B) Total cost = fixed cost + implicit cost. C) Total cost = fixed cost + variable cost. D) Variable cost = wages + […]

The key characteristics of a monopolistically competitive market structure include A) few sellers. B) sellers selling similar but differentiated products. C) high barriers to entry. D) sellers acting to maximize revenue. Table 4-4 Table 4-4 shows the demand and supply […]

Figure 5-2 Figure 5-2 shows a market with a negative externality. Refer to Figure 5-2. The deadweight loss due to the externality is represented by the area A) abc. B) abf. C) abd. D) ade. Which of the following is […]

Pierre can produce either a combination of 20 bow ties and 30 neckties or a combination of 35 bow ties and 15 neckties. If he now produces 35 bow ties and 15 neckties, what is the opportunity cost of producing […]

Why do most firms in monopolistic competition typically make zero profit in the long run? A) because firms produce differentiated products B) because the lack of entry barriers would compete away profits C) because firms do not produce at their […]

Table 11-7 Table 11-7 shows cost data for Lotus Lanterns, a producer of whimsical night lights. Refer to Table 11-7. What is the average total cost of production when the firm produces 120 lanterns? A) $1,680 B) $72 C) $14 […]

Figure 1-3 Refer to Figure 1-3. Calculate the area of the trapezoid X. A) $270 B) $720 C) $810 D) $2,520 “A competitive market achieves economic efficiency by maximizing the sum of consumer surplus and producer surplus.” This statement A) […]

Table 14-7 The payoff matrix shown above assumes that Perfect Plants and Florabunda Florist must decide whether to offer same-day delivery for their products. The matrix shows how much profit each firm will earn if it does or does not […]

An individual’s labor supply curve shows A) the maximum wage rates offered to that individual by various potential employers. B) the relationship between wages and the quantity of labor that she is willing to supply. C) the relationship between wages […]

If, for a given output level, a perfectly competitive firm’s price is less than its average variable cost, the firm A) is earning a profit. B) should shut down. C) should increase output. D) should increase price. The government of […]

Figure 4-4 Refer to Figure 4-4. The figure above represents the market for pecans. Assume that this is a competitive market. Which of the following is true? A) If the price of pecans is $3 the output will be economically […]

Article Summary Recent studies about wealth inequality and income inequality indicate that the American public’s estimates of the distribution of wealth and income are quite different than actual data suggests. With respect to wealth, the top 20 percent of households […]

Figure 17-3 Refer to Figure 17-3. In Panel A, at low wages (segment i) A) the substitution effect outweighs the income effect. B) the income effect outweighs the substitution effect. C) the substitution effect offsets the income effect. D) labor […]

The marginal product of labor is calculated using the formula A) L/Q. B) ΔL/ΔQ. C) ΔQ/ΔL. D) Q/L. To maximize profit a monopolist will produce where A) marginal revenue is equal to marginal cost. B) demand for its product is […]

Which of the following would cause an increase in the supply of peanut butter? A) a decrease in the price of grape jelly (assuming that peanut butter and grape jelly are complements) B) an increase in the price of peanut […]

Arnie Ziffel has $20 per week to spend on any combination of pineapples and green tea. The price of a pineapple is $4 and the price of a bottle of green tea is $2. The table below shows Arnie’s utility […]

An agreement negotiated by two countries that places a numerical limit on the quantity of a good that can be imported by one country from another country is called A) a non-tariff trade barrier. B) an export quota. C) an […]

Which of the following is likely to occur as the result of the law of diminishing marginal utility? A) Petra’s utility from her second apple was less than her satisfaction from her first orange. B) Hudson enjoyed his second slice […]

Which of the following correctly comments on the following statement? “The only way to increase the revenue from selling a product is to increase the product’s price.” A) It is not true. Revenue will increase as the price of the […]

Figure 18-2 Figure 18-2 shows a demand curve and two sets of supply curves, one set more elastic than the other. Refer to Figure 18-2. If the government imposes an excise tax of $1.00 on every unit sold, what is […]

Consider the market for pilots. What is likely to happen to the equilibrium wage and quantity of pilots if the government enforces a lower mandatory retirement age, say from age 65 to age 62? A) The equilibrium wage and the […]

The following appeared in a Florida newspaper a week after a hurricane hit the state. “Floridians are relieved that the storm produced no fatalities but homeowners face weeks, if not months, of rebuilding. Matters are made worse by the soaring […]

When demand is elastic, a fall in price causes total revenue to rise because A) when price falls, quantity sold increases so total revenue automatically rises. B) the increase in quantity sold is large enough to offset the lower price. […]

When BMW, an German company, purchases a welding machine that was made in Toronto, the purchase is A) both a German and a Canadian import. B) a German import and a Canadian export. C) a German export and a Canadian […]

A monopolistically competitive firm that is profitable in the short run will face competition that will eventually eliminate the firm’s profits in the long run. But the firm can stave off competition and continue to earn economic profits if A) […]

The public choice model raises questions about the government’s ability to regulate economic activity efficiently. Which of the following statements represents the views of most economists with regard to the role of government? A) Congress should abolish the Food and […]

A corporation is owned by its A) board of directors. B) stockholders. C) employees. D) CEO. Figure 15-4 Figure 15-4 shows the demand and cost curves for a monopolist. Refer to Figure 15-4. What is the profit-maximizing/loss-minimizing output level? A) […]

Table 9-1 Linda and Sandy own The Preppy Puppy, a dog grooming business. Table 9-1 lists the number of dogs Linda and Sandy can each bathe and groom in one week. Refer to Table 9-1. Select the statement that accurately […]

A numerical limit imposed by a government on the quantity of a good that can be imported into the country is called a A) tariff. B) quota. C) quantity floor. D) barricade. Congressman Murphy made the following proposal: “We should […]

Table 12-3 Arnie sells basketballs in a perfectly competitive market. Table 12-3 summarizes Arnie’s output per day (Q), total cost (TC), average total cost (ATC) and marginal cost (MC). Refer to Table 12-3. What will Arnie’s output be and how […]

Joss is a marketing consultant. Iris and Daphne are potential customers interested in commissioning Joss to undertake a market survey and compile the findings in a report. Iris is willing to pay $500 for the service while Daphne is willing […]

Which of the following exemplifies the tragedy of the commons? A) Residents on the northern coast of California receive only one public broadcasting signal which may be eliminated altogether if government funding is cut. B) The Pleasant Hill community is […]

Table 12-1 Table 12-1 shows the short-run cost data of a perfectly competitive firm that produces plastic camera cases. Assume that output can only be increased in batches of 100 units. Refer to Table 12-1. Suppose the fixed cost of […]

A personal exemption refers to A) the tax rate that applies to a particular tax bracket. B) the tax bracket that represents basic living expenses. C) an amount representing basic living expenses that can be subtracted from income. D) a […]

Table 14-4 Alistair Luggage and Baine Baggage are the only firms selling luggage in the upscale town of Montecito. Each firm must decide on whether to increase its advertising budget to compete for customers. If one firm increases its advertising […]

The Trans-Pacific Partnership (TPP) would ________ tariffs on most goods and services shipped between partnership countries and also ________ so-called non-tariff barriers to trade, such the licenses governments require to import some goods. A) eliminate; reduce B) raise; raise C) […]

Tanesha sells homemade candles over the Internet. Her annual revenue is $64,000 per year, the explicit costs of her business are $17,000, and the opportunity costs of her business are $22,000. What is her economic profit? A) $17,000 B) $25,000 […]

The government makes all economic decisions in a market economy. The level of output at which all economies of scale have been exhausted is known as A) constant returns to scale. B) minimum efficient scale. C) the economically efficient output […]

Local or state offices of the Department of Justice usually set prices for natural monopolies in their jurisdictions. If demand is inelastic, the absolute value of the price elasticity coefficient is greater than one. Answer: FALSE The income effect of […]

If the price of peaches, a substitute for plums, decreases the demand for plums will increase. Trade only occurs if there are only winners, and no losers, as a result of the trade. Answer: FALSE Economic profit is the difference […]