Econ 1 Exam 2

If the government offers a subsidy to a market, the subsidy will be shared between buyers and sellers according to: 1. The size of |Ed| compared to the size of Es. 2. How responsive buyers are to price changes compared to how responsive sellers are to the price changes. 3. How steep the demand curve is compared to how steep the supply curve is. 4. All of the above 5. None of the abov

$) all of the above

According to the article "A Place for Cost-Benefit Analysis": 1. Environmentalists originally supported the use of cost benefit analysis but now often mistrust the use of cost benefit analysis. 2. Cost benefit analysis is bad for the environment because it is always used to justify environmental destruction. 3. If you can save 10 people by killing one person, cost benefit analysis will find this to be acceptable social policy. 4. All of the above. 5. None of the above.

1 environmentalists originally supported the use of cost benefit analysis but now often mistrust the use of cost benefit analysis

Suppose you decide to quit your job to start your own plumbing business. You currently work for a local construction company earning $55,000 per year, you will pay $5,000 for advertising your new business, $20,000 for a work truck with a 5% rate of depreciation, $10,000 for plumbing supplies, $3,000 for an accountant to help with the business accounts and $5,000 in taxes. In addition, you withdraw $30,000 of your own savings from the bank where it is earning 2% per year in interest so that you can meet these listed expenses while waiting to earn revenues. If this is an entire list of your business expenses, then you will incur ____ in accounting cost and _____ in economic cost from your plumbing business during the year of operations. 1. $24,000; $79,600 2. $44,000; $55,600 3. $43,000; $98,600 4. $44,000; $85,600 5. $24,000; $55,60

1) $24,000; $79,600

Suppose Mary is trying to decide how to spend her upcoming Friday night. She is considering several mutually exclusive options. She can go to dinner and a movie with her friend Julie; worth $50 of happiness to her. She can eat delivery pizza and watch "It's Always Sunny in Philadelphia" on TV with her friend Maggie; also worth $50 of happiness to her. She can go for a run with Julie and Maggie and then head to the sauna at the recreation center; worth $40 of happiness to her. If she decides to go out to dinner and a movie with Julie, what opportunity cost will she pay? A) $50 B) $40 C) $90 D) $140 E) None of the above

1) $50

Suppose a firm hires a second worker and has MPL=5 and APL=4. If the firm then hires a third worker and has MPL=7, then which of the following could possibly be the APL when the third worker is hired? 1. 5 2. 2 3. 3 4. 1 5. None of the above

1) 5

6. Assuming a market was not initially experiencing a market failure and that buyers and sellers are both responsive to price changes, then the imposition of a binding price ceiling or a binding price floor will always creat____ 1) A dead weight loss 2) greater consumer surplus 3) greater efficiency 4) greater producer surplus 5) none of the above

1) A dead weight loss

Suppose APL=14 and MPL=16 when 7 workers are hired. What can we expect to happen to APL when we hire the 8th worker if his MPL = 17? 1) APL will increase, but will still be less than 17. 2. APL will increase, but will be greater than 17. 3. APL will decrease, but will be greater than 0. 4. APL will stay the same since it is an average over all production levels. 5) none of the above

1) APL will increase, but will still be less than 17

Which of the following statements is true for a firm producing in a perfectly competitive market? 1) If the firm is able to sell at a price greater than its average variable cost of production (P>AVC), then it may be making a loss but should not shut down immediately. 2) The firm will always maximize its profit by producing at a level where is marginal cost of production is exactly equal to its average cost of production (MC=ATC). 3) The firm will be making an economic loss if it produces at a level where selling price is exactly equal to average total production cost (P=ATC). 4) The firm will be making a loss and should shut down immediately any time selling price is less than average total production cost (P<ATC). 5) All of the above

1) If the firm is able to sell at a price greater than its average variable cost of production(P> AVC), then it may be making a loss but should not shut down immediately

Average product of labor achieves its highest point when: 1. Marginal product of labor is equal to the average product of labor 2. Marginal product of labor is at its maximum 3. Marginal product of labor is at its minimum 4. The point where marginal product of labor is increasing the fastest 5. None of the above

1) Marginal product of labor is equal to the average product of labor

Suppose the government decides to place a $3 per pack tax on cigarette buyers. If cigarette producers are perfectly price inelastic, then we can predict that this tax will result in ____ and will have a tax effectiveness rate equal to ____. 1. No resource misallocation; 100% 2. No resource misallocation; 0% 3. A large amount of resource misallocation; impossible to determine with information given. 4. A small but positive amount of resource misallocation; impossible to determine with information given. 5. None of the abov

1) No resource misallocation; 100%

28. According to the article "Majority of Americans Support Price Controls on Gas," 1. Price controls artificially hold down the price, which reduces the incentive on the part of consumers to use less and the incentive for producers to produce more. 2. If the U.S. government decides to impose price controls on the gasoline market, this would be the first time price controls have ever been used in the U.S. gasoline market. 3. Price controls simply would not be effective at holding down gas prices because there is no way for the government to enforce them. 4. All of the above 5. None of the above

1) Price controls artificially hold down the price, which reduces the incentive on the part of consumers to use less and the incentive for producers to produce more

In order to figure out how a tax burden is shared, we need to know: 1) Price elasticity of demand and price elasticity of supply 2) size of the imposed tax 3) number of buyers and sellers in the market 4) monopolistic position of the seller in the market 5) detailed information on government tax policy

1) Price elasticity of demand and price elasticity of supply

In their product, we call then____. a monopolistic market, since producers can individually control the price they charge for 1. Price makers 2. Price setters 3. Price takers 4. All of the above 5. None of the above

1) Price makers

Suppose a market has a downward sloping demand curve but a flat or horizontal supply curve. If a $2 per unit tax is placed on buyers in this market we can predict that: 1) Ps will stay the same but Pb will rise by $2. 2) Neither Ps nor Pb will change. 3) Ps will fall by $1 and Pb will rise by $1. 4) Ps will fall by $2 but Ps won't change. 5) None of the abov

1) Ps will stay the same but Pb will rise by $2

5. Which of the following statements regarding price ceilings is true? 1) A binding price ceiling will result in an excess demand for a product 2) the short run impact of a price ceiling is always greater than the long run impact 3) buyers wil not be happy with a price ceiling because it forces them to pay a market price 4) all of the above 5) none of the above

1) a binding price ceiling will result in an excess demand for a product

According to the article "Balancing Act: Lives vs. Regulations", what is the "senior death discount"? 1. A phrase used to refer to a 37% discount put on the value of saving an older person's life by the EPA when doing cost benefit analysis. 2. A discount given to senior citizens when paying government fees. 3. A phrase used to refer to the reduction in life expectancy of senior citizens. 4. A common 37% discount given to senior citizens applying for death benefits from social security. 5. A phrase used to refer to the commonly held social belief that senior citizens are less valuable than younger people.

1) a phrase used to refer to a 37% discount put on the value of saving an older person's life by the EPA when doing cost benefit analysis

22. Which of the following could create an excess supply in a market? 1. A price floor set above the market equilibrium price 2. A price floor set below the market equilibrium price 3. A price ceiling set above the market equilibrium price 4. A price ceiling set below the market equilibrium price 5. None of the above

1) a price floor set above the market equilibrium price

According to the article "The Skinny on Taxing Fatty Foods," what is a food desert? 1. A residential area (often an urban area) where food buying options are limited to fast food and convenience stores. 2. A high sugar and high fat food that people like to consume after each meal. 3. A commercial area selling no food. 4. A food choice with high calories but no nutrition. 5. None of the above

1) a residential area (often an urban area) where food buying options are limited to fast food and convenience stores

Suppose Aaron is a law student. In his first year of school he considered a study abroad program in Greece. He expected the marginal benefit to be $3000 and the marginal cost to be $5000. He decided not to go. In his third year of law school he re-evaluated his decision based on better information about the true costs and benefits of studying in Greece and decided that the actual marginal benefits would have been $4500. Based on this information, which of the following is true about Aaron's initial decision not to go to Greece? 1. Aaron's decision was a rational and good decision 2. Aaron's decision was rational and bad decision 3. Aaron's decision was an irrational and good decision 4. Aaron's decision was an irrational and bad decision 5. None of the above

1) aarons decision was a rational and good decision

13. Suppose the government decides to impose a binding price floor on the market for apples with the intention of helping apples farmers. If this price floor is binding, then which of the following would we expect to be present in the market? 1. An excess supply of the apples 2. An excess demand of the apples 3. An increase in consumer surplus 4. A misallocation of resources with too many units of the product being bought and sold 5. None of the above

1) an excess supply of the apples

If the price of electric cars falls, economists would predict which of the following? 1. An increase in the quantity of electric cars demanded by consumers. 2. An increase in the demand for electric cars. 3. An increase in both the demand and the quantity demanded of electric cars. 4. A reduction in the supply of electric cars. 5. A reduction in the supply as well as an increase in the demand of electric cars.

1) an increase in the quantity of electric cars demanded by consumers

Suppose there are 3 groups of smokers. For members of the first group the private marginal benefit (PMB) of smoking is $10 and the private marginal cost (PMC) is $7. For members of the second group the PMB is $8 and PMC is $7 while for the third group the PMB is $6 and the PMC is $5.50. All smokers cause external cost to non-smokers in the amount of $0.50. If we have to place the same Pigovian tax on all smokers, what tax rate would we need in order to encourage at least 2 groups to quit smoking? 1. At least $1.01 2. Only $1 3. At most $0.50 4. $3 5. None of the above.

1) at least $1.01

37. According to the article "Majority of Americans Support Price Controls on Gas," Gallup polls indicate that 53% of Americans favor imposing price controls to reduce gas prices. Which of the following price controls is meant in this case? 1)Binding price ceiling. 2) Binding price floor. 3) Non-binding price ceiling. 4) Non-binding price floor. 5) None of the above

1) binding price ceiling

According to the article "The Extraordinary Science of Addictive Junk Food," how does Cadbury, producer of Dr Pepper and its extensions, save money based on results of Howard Moskowitz's research? 1. By edging back on the key ingredient, Dr Pepper syrup, without sacrificing the taste "bliss" 2. By changing the content of the key ingredient, Dr Pepper syrup 3. By constructing a completely new key ingredient, extension of Dr Pepper syrup 4. All of the above 5. None of the above

1) by edging back on the key ingredient, Dr Pepper syrup, without sacrificing the taste "bliss"

According to the article 'Driving Directions: What to Charge for a Charge?' 1. Charging anything more than $2 per hour for a charge results in electric car operation costs higher than the cost of operating a car with gasoline. 2. A charge price between $2 and $5 is the profit maximizing price. 3. Charge prices are currently very consistent with prices ranging from $1 to $1.50 per hour. 4. All of the above 5. Only1and2

1) charging anything more than $2 per hour for a charge results in electric car operation costs higher than the cost of operating a car with gasoline

According to the article "Asian Demand Helps Drive Up the Price of Dairy," 1. Chinese consumers, as a result of rising income and increased taste for dairy products, are helping to drive up milk prices around the world. 2. Drought in the U.S. is leading to higher dairy prices around the world. 3. German producers and retailers are causing higher dairy prices as a result of their price fixing agreements. 4. All of the above 5. None of the above

1) chinese consumers, as a result of rising income and increased taste for dairy products, are helping to drive up milk prices around the world

If consumer income rises, we can expect a change in _________. If market price rises, we can expect a change in ________. 1. Demand; quantity demanded 2. Quantity demanded; demand 3. Demand; demand 4. Demand; supply 5. Supply; quantity supplied

1) demand; quantity demanded

According to the article, "Device Makers Add Fee to Cover Health Tax," the last paragraph of the article says that "companies seen baking in the cost of the tax would feel 'a very swift and vocal objection in the market-place'." This quote means that: 1. Device producers will have a difficult time passing the entire tax onto device consumers because device consumers are responsive to price changes and will likely cut back on purchases if price rises. 2. Device producers will not be allowed to pass the tax onto device consumers because special interest groups will lobby Congress for help against this unfair price increase. 3. Device producers will lose all their product sales if they try to make device consumers share the cost of the tax. 4. Device producers will be able to pass the tax entirely on to device consumers but those consumers will be very unhappy about this. 5. None of the abov

1) device producers will have a difficult time passing the entire tax onto device consumers because device consumers are responsive to price changes and will likely cut back on purchases if price rises

Ceteris Paribus means: 1. Everything else held constant. 2. No other agents. 3. No substitution effect. 4. The Law of Demand and Supply controls the market. 5. None of the above.

1) everything else held constant

If there is a negative consumption externality, social marginal costs 1. exceed private marginal costs 2. are equal to private marginal costs 3. are less than private marginal costs 4. can be either greater or smaller than private marginal costs 5. are equal to the amount of the externality

1) exceed private marginal costs

What is the following could be an example of a production externality? 1. Farmers' use of pesticides to grow crops results in pollution of their neighbors' well water. 2. Smokers harm people around them with second hand smoke. 3. College students become better citizens and more educated voters when they consume more education services. 4. All of the above 5. None of the above

1) farmers use of pesticides to grow crops results in pollution of their neighbors well water

According to the article 'A Taste of a Distant Home, Minus the Chopping,' 1. For some people, the food nostalgia they experience is related to the familiarity of the packaging. 2. For some people, ethnic food is felt to be healthier than American food. 3. For some people, food allergies prevent them from consuming traditional foods. 4. All of the above. 5. Only 1 and 3

1) for some people, the food nostalgia they experience is related to the familiarity of the packaging

A sunk cost is a cost that: 1. has already been incurred and cannot be recovered. 2. is additional to any other opportunity costs. 3. is equal to total costs. 4. is equal to accounting cost but not to economic cost. 5. None of the Above

1) has already been incurred and cannot be recovered

A producer will raise price to maximize profit if 1. He realizes that his consumers are price inelastic. 2. He realizes that his consumers are price elastic. 3. He realizes that his consumers are unit price elastic. 4. He realizes that his consumers are infinitely price elastic. 5. He realizes that his consumers are perfectly price elastic.

1) he realizes that his consumers are price inelastic

The marginal cost of production measures: 1. How much extra a producer spends each time it produces one more unit of output. 2. How much extra a producer produces each time it spends one extra dollar on inputs. 3. Total cost divided by production level. 4. total cost divided by number of workers. 5. none of the above

1) how much extra a producer spends each time it produces one more unit of output

According to the article "EPA Knocks $900,000 Off Value of a Life", when the EPA (Environmental Protection Agency) estimates the value of a life what factors does it NOT take into account? 1. How much people earn. 2. How much people are willing to pay to avoid certain risks. 3. How much extra employers pay their workers to take on additional risks. 4. All of the above. 5. Only (b) and (c).

1) how much people earn

When a government agency warns consumers about an E. Coli contamination of a particular brand of spinach, we observe an example of government intervening in the free market in order to 1. Improve the information available to consumers. 2. Internalize the negative consumption externality. 3. Internalize the negative production externality. 4. Pick economic winners and losers in the market for spinach. 5. Increase the level of competition in the market for spinach.

1) improve the information available to consumers

Which of the following statements is incorrect regarding market failure? 1. Individuals make the best private decisions which are also the best decisions for society. 2. The free market system fails to achieve economic efficiency. 3. Government can provide better information to improve economic efficiency. 4. Externalities, both positive and negative, can be internalized through taxes or subsidies. 5. Without market failure, the free market outcome may be socially optimal.

1) individuals make the best private decisions which are also the best decisions for society

What are variable inputs? 1. Inputs that a producer can choose to change based on the desired production level 2. Inputs that change without a producer's knowledge 3. Inputs that only become known to a producer after production has begun 4. Inputs that depend on the quantities of other inputs 5. Inputs that have prices that frequently chang

1) inputs that a producer can choose to changed based on the desired production level

According to the article "EPA Knocks $900,000 off Value of a Life", the Environmental Protection Agency (EPA) reduced the value of saving a human life by $900,000. What is the economic significance of this reduction? 1. It means less human lives will be saved through environmental protection regulations. 2. It means the EPA believes it is now less costly to save a human life and more environmental protection regulations will now pass the cost benefit analysis test. 3. It means that more environmental protection regulations will be found to be economically advisable through cost benefit analysis. 4. All of the above 5. None of the above

1) it means less human lives will be saved through environmental protection regulation

If a producer is earning a positive economic profit, then: 1. It must also earn a positive accounting profit. 2. It must incur no implicit cost. 3. Its resources are not efficiently allocated. 4. Its implicit cost must be smaller than its explicit cost. 5. None of the abov

1) it must also earn a positive accounting profit

Suppose John has to make a decision about traveling to Paris. After accounting for all his expected marginal benefits ($1500) and expected marginal costs ($500), he makes a rational decision to go to Paris. While living in Paris, John realizes that his actual marginal benefits of the trip are only $700. He also realized that his actual marginal costs of the trip have changed. Which of the following is true about the actual marginal costs of the trip to Paris for John, if his decision to travel to Paris is still a good decision? 1. John's actual marginal costs of the travel are at most $700. 2. John's actual marginal costs of the travel are at least $800. 3. John's actual marginal costs of the travel are at most $1000. 4. John's actual marginal costs of the travel are $1500. 5. It is impossible to tell without additional information.

1) johns actual marginal costs of the travel are at most $700

Suppose Lupita opens a tailoring business and her only costs are labor and supplies. She is committed to hiring each worker for a month at a time and she buys her supplies one month at a time. If she is now planning out her desired production amount for 12 months from now, then she is said to be making a _____ because all her inputs are considered to be ____. 1. long-run production decision; variable 2. long-run production decision; fixed 3. short-run production decision; variable 4. short-run production decision; fixed 5. variable production period; variabl

1) long-run production decision; variable

France is one of the world's significant wine producers. Which of the following statements would best describe a positive production externality that comes about as a result of wine production in France? 1. Many people consider French vineyards to be attractive which results in increased tourism for surrounding areas. 2. French vineyards are often found next to rivers, using up the river's resources and polluting the river to some extent. 3. French wines contain antioxidants, the consumption of which benefits the immune system and helps prevent the common cold. 4. Studies have shown that alcohol related vehicle accidents substantially increase in areas around vineyards. 5. None of the above

1) many people consider french vineyards to be attractive which results in increased tourism for surrounding areas

What would we predict would happen in a market currently experiencing an excess demand? 1. Market price will increase, consumers will decrease their quantity demanded and sellers will increase their quantity supplied. 2. Market price will increase, demand will decrease and supply will increase. 3. Market price will fall, Qd will rise and Qs will fall. 4. Demand will fall until the market reaches equilibrium. 5. None of above

1) market price will increase, consumers will decrease their quantity demanded and sellers will increase their quantity supplied

In the long run, a perfectly competitive firm will charge a price equal to ___. 1. Minimum Average Total Cost. 2. Minimum Average Fixed Cost. 3. Minimum Marginal Cost. 4. V ariable Cost. 5. None of the above

1) minimum average total cost

According to the article "Balancing Act: Lives vs. Regulations", what do the economists Viscusi and Jones-Lee find? 1. Older people in both England and the United States tend to discount their own lives. 2. Older people in the United States only tend to discount their own lives. 3. Older people tend to more highly value their own lives. 4. Older people tend to live longer than younger people. 5. Society tends to place an equal value on all lives.

1) older people in both England and the United States tend to discount their own lives

Which of the following is most likely to be a fixed input for a bakery in its short-run production process? 1. Ovens (Capital) 2. Workers (Labor) 3. Flour, Eggs (Supplies) 4. Electricity (Utilities) 5. Yeast (Supplies

1) ovens (capital)

According to the article 'A Taste of a Distant Home, Minus the Chopping,' what is served by the food delivery services in addition to prepared foods? 1. Packaged products imported from their countries of origin. 2. Clothing imported from their countries of origin. 3. Spices and food ingredients imported from their countries of origin. 4. All of the above. 5. Only 1 and 3

1) packaged products imported from their countries of origin

A positive production externality can be internalized though which of the following tools: 1. Pigovian Subsidy. 2. Pigovian Tax. 3. Economic Surplus. 4. Higher Utility. 5. Externality Tax.

1) pigovian subsidy

Suppose that consumers plan to buy 20% fewer oranges when the price of oranges rises by 10%. According to this information, we can say that the demand for oranges is 1. Price elastic. 2. Price inelastic. 3. Perfectly price elastic. 4. Perfectly price inelastic. 5. Unit price elastic.

1) price elastic

Suppose you are running a business and you hire a lot of minimum wage workers. If the minimum wage increases and you are responsive to price of labor changes, which of the following actions could you take to try to reduce your production costs in the short-run? 1. Reduce the work hours of your workers 2. Increase the price of your output. 3. Replace some of these workers with new machinery and technology (fixed inputs) 4. All of the above 5. None of the abov

1) reduce the work hours of your workers

Suppose the cross-price elasticity of demand between pork and beef is equal to +2. Based on this information, we can predict that a 10% increase in the price of pork will cause the demand for beef to _____, because these goods are ______. 1. rise by 20%, substitutes. 2. rise by 20%, complements. 3. rise by 5%, substitutes. 4. rise by 5%, complements. 5. None of the above.

1) rise by 20%, substitutes

According to the article "How Much Is Your Time Worth", why did Sarah Kalliney, the Manhattan executive, fight Sprint over a late fee? 1. She got satisfaction from preventing them from taking money from her that she felt was not theirs to take. 2. Her time was less valuable than the amount of the late fee, so it made economic sense to fight for a return of the fee. 3. She made an irrational decision to fight for the fee because her time was too valuable. 4. She made a bad decision to fight for the fee. Her decision was based on bad information. 5. None of the above.

1) she got satisfaction from preventing them from taking money from her that she felt was not theirs to take

According to the article 'A Taste of a Distant Home, Minus the Chopping,' one of the problems facing individuals who wish to cook their traditional food specialties is that: 1. Some ingredients are hard to find. 2. Recipes are hard to find. 3. They have to compete with specialty restaurants. 4. All of the above. 5. Only 1 and 3

1) some ingredients are hard to find

If we place a tax on supplier of a product and the supply curve is flatter than the demand curve then we can predict that: 1. Suppliers will bear less of the tax burden. 2. Suppliers will bear more of the tax burden. 3. Suppliers will bear all of the tax burden. 4. Suppliers will bear none of the tax burden. 5. Suppliers and demanders will equally share the tax burden

1) suppliers will bear less of the tax burden

According to the article "Obama Tax Hikes," how do tax increases affect the cost of productive factors? 1. Tax increases increase factor costs. 2. Tax increases decrease factor costs. 3. Tax increases do not affect factor costs. 4. Tax increases affect factor costs ambiguously. 5. None of the above

1) tax incases increase factor costs

Which of the following is false? 1. The amount of a fixed input a business uses in the long-run is greater than the amount that it uses in the short-run. 2. In the long run all inputs are variable. 3. The marginal product of labor measures how much extra output a firm gets when it hires one extra worker. 4. The average product of labor varies with the marginal product of labor. 5. Average product of labor measures how much output is produced divided by how many workers are hired

1) the amount of a fixed input a business uses in a the long-run is greater than the amount that it uses in the short-run

Which of the following is true regarding costs of production? 1. The average fixed cost of production will always decrease as quantity produced increases. 2. The marginal cost of production always increases when quantity produced increases. 3. The fixed cost of production increases when quantity produced increases. 4. The average variable cost must be larger than the average fixed cost. 5. None of the above

1) the average fixed cost of production will always decrease as quantity produced increases

1. A consumer's reservation price is: 1) The highest price that the consumer is willing to pay 2) The lowest price that the consumer is willing to pay 3) the market clearing price 4) equal to the sellers reservation price 5) none of the above

1) the highest price that the consumer is willing to pay

Suppose you have been offered a job this summer in St. Louis for a salary of $2000 per month. The cost of housing in St. Louis is $700 per month. You have also been offered a job this summer in Columbia for $1500 per month. The cost of housing in Columbia is $400 per month. If this is the only relevant information, then you would rationally choose ____ because you expect to be ___ better off with this job. 1. the job in St. Louis; $200 2. the job in Columbia; $1100 3. the job in Columbia; $1900 4. the job in St. Louis; $1300 5. None of the above

1) the job in st,louis;200

The inverse (or negative) relationship between the price of a good or service and the quantity of that good or service consumers are willing to purchase is called: 1. The law of demand 2. the income effect 3. the substitution effect 4. the market 5. ceteris paribus

1) the law of demand

What does the Law of Demand state? 1. There is an inverse relationship between the price of a good and the quantity that consumers are willing and able to purchase. 2. There is always more demand for a good than producers are able to produce. 3. Consumers who demand more goods must also pay higher prices for the goods. 4. For every good demanded, a good must be supplied. 5. Consumers demand more of a good when the price of the good is higher.

1) there is an inverse relationship between the price of a good and the quantity that consumers are willing and able to purchase

When firms go bankrupt in a free market economy, it tells us that: 1. These firms are not the most efficient producers. 2. Government should intervene in the market to prevent these firms from going bankrupt. 3. These firms should hire more workers to avoid bankruptcy. 4. These firms should increase the price for their product to avoid bankruptcy. 5. None of the above.

1) these firms are not the most efficient producers

According to the article "Balancing Act: Lives vs. Regulations", how does the EPA (Environmental Protection Agency) use its estimates of the value of a life? 1. To determine whether the environmental regulation should be adopted. 2. To determine the amount of payments in insurance claims. 3. To determine the amount of compensation in wrongful-death lawsuits. 4. All of the above. 5. None of the above.

1) to determine whether the environmental regulation should be adopted

According to the article 'A Taste of a Distant Home, Minus the Chopping,' what business opportunities are exploited by the Gobble.com web-site? 1. To serve professionals who crave the food specialties of their youth. 2. To serve Native Americans with their native dishes. 3. To serve customers who are willing to try new dishes from other cuisines. 4. All of the above. 5. Only 1 and

1) to serve professionals who crave the food specialties of their youth

If the government offers buyers a subsidy, the demand curve shifts _____ and if it offers a subsidy to sellers, the supply curve shifts _____. 1. to the right; to the right 2. to the right; to the left 3. to the left; to the right 4. to the left; to the left 5. vertically up; vertically u

1) to the right; to the right

The expected marginal economic surplus a person can earn from a decision is equal to: 1. Total expected marginal benefit minus total expected marginal cost of that decision. 2. Expected marginal benefit plus expected marginal cost of that decision. 3. Expected marginal benefit times expected marginal cost of that decision. 4. The derivative of marginal expected benefit minus the derivate of marginal expected cost. 5. None of the above

1) total expected marginal benefit minus total expected marginal cost of that decision

According to the article "Where Airfares are Taking Off," when United Airlines and Continental Airlines merged, the average fare to between Houston and Chicago___ compared to the overall fare increase (which includes markets not affected by the merger) of ____ for the same time period. 1. 57%; 16% 2. 40%; 50% 3. 54%; 44% 4. 98%; 54% 5. None of the above

1. 57%; 16%

According to the article "Obama announces WTO case against China over rare earths," China produces for the world market___. 1. 91% of the world's tungsten. 2. 95% of the world's molybdenum. 3. 85% of the world's cerium. 4. All of the above 5. None of the above

1. 91% of the world's tungsten.

In which of the following markets is a firm able to earn a positive economic profit in the long-run? 1. A monopolistic market 2. An imperfectly competitive market 3. A perfectly competitive market 4. All of the above 5. None of the above

1. A monopolistic market

The article entitled "The Future of Agriculture May Be Up" discusses the growing trend of vertical farming. From an economic point of view, vertical farming results in: 1. A shift out of the production possibilities frontier as a country gains more "land" resource by creating land vertically rather than horizontally. 2. No gain in actual production resources but a more efficient use of current resources. 3. A loss of home and office space. 4. Both 2 and 3. 5. None of the above

1. A shift out of the production possibilities frontier as a country gains more "land" resource by creating land vertically rather than horizontally.

Which of the following could cause the US's PPF (Production possibilities frontier) to shift outward? 1. An increase in technology 2. A reduction of the legal work age 3. a reduction of production mistakes 4. All of the above 5. None of the above

1. An increase in technology

Suppose next month a huge snowstorm hits Columbia dropping 2 foot of snow. What could we expect to happen to the market for snow shovels? 1. An increase in the demand for snow shovels and higher price. 2. An increase in the supply of snow shovels and higher price. 3. Both an increase in the demand and a decrease in the supply of snow shovels with an unpredictable change in the price. 4. Higher price of snow shovels and a reduction in the quantity demanded. 5. None of the above

1. An increase in the demand for snow shovels and higher price.

When we say that a country has the comparative advantage in the production of a good, then we know that the country must: 1. Be able to produce that good at a lower opportunity cost than any other country. 2. Also have the absolute advantage in the production of that good. 3. Be able to produce that good at a higher opportunity cost than any other country. 4. Both 1and 2 5. Both 2 and3

1. Be able to produce that good at a lower opportunity cost than any other country.

Which of the following is the best definition of economics, according to your textbook? 1. Economics is the study of how people make choices when faced with scarcity. 2. Economics is the study of how businesses make profit maximizing decisions. 3. Economics is the study of how economies function. 4. Economics is the study of how markets function to allocate goods and services. 5. Economics is the study of how producers, consumers and the government interact to regulate market activity.

1. Economics is the study of how people make choices when faced with scarcity.

The free market outcome will be ____ the socially optimal outcome if there is a negative externality and it will be _____ the socially optimal outcome if there is a positive externality. 1. Greater than; less than 2. Less than; less than 3. Less than; greater than 4. Greater than; greater than 5. Impossible to determine with the information given

1. Greater than; less than

Suppose a country is completely closed to international trade so that all purchases and sales of products within the country have to be produced within the country. If this country does not have the comparative advantage in the production of computers, then we can predict that the domestic market price of computers will be _____. 1. Higher than the world price 2. Equal to the world price 3. Lower than the world price 4. Impossible to predict 5. None of the above

1. Higher than the world price

Free trade is likely to result in which of the following? 1. If you are a worker in an industry with the comparative advantage, you will see more employment opportunities with free trade. 2. Countries with the absolute advantage in the production of a good always benefit from free trade regardless of whether or not they have the comparative advantage. 3. A country with the absolute advantage in the production of a good must also have the comparative advantage in the production of that good. 4. Small countries will be hurt by free trade because they are less likely to have the comparative advantage. 5. None of the above

1. If you are a worker in an industry with the comparative advantage, you will see more employment opportunities with free trade.

According to the article 'The Future of Agriculture May Be Up,' which of the following may be a long- run benefit of the implementation of vertical farming? 1. Improved domestic food security 2. Lower food costs 3. More genetically modified foods 4. Lower calorie foods 5. All of the above

1. Improved domestic food security

Which of the following best describes absolute advantage? 1. It is an ability to produce a greater amount of output with the same amount of resources. 2. It is the case when a firm has a greater share of a market. 3. It is the case when a consumer has bargaining power over a firm. 4. It is availability of the means of production that gives a producer an edge over another producer. 5. All of the above.

1. It is an ability to produce a greater amount of output with the same amount of resources.

Suppose you are running a monopolistic firm and you are trying to decide how much to produce in order to maximize profit. You are currently producing 10 units and at this production level you find that your marginal revenue earned is $25 and your marginal cost is $20. You also cannot price discriminate. What level of production should you choose? 1. Produce more than 10 units. 2. Produce less than 10 units. 3. Produce nothing, shutdown immediately. 4. Produce 10 units until you can get rid of some of your fixed inputs. 5. None of the above.

1. Produce more than 10 units.

According to the textbook, which of the following statements is true? 1. Production points located outside the PPF are not currently possible, and production points located inside the PPF are possible, but inefficient. 2. Economic growth is represented by an inward shift of the PPF. 3. An individual who is more efficient than another individual at making good 'A' and equally as efficient at making good 'B' has no incentive to specialize and trade with the other individual. 4. International trade is a "win-lose game", because when one country gains from trade, the other country must lose from trade. 5. None of the above

1. Production points located outside the PPF are not currently possible, and production points located inside the PPF are possible, but inefficient.

According to the article "Can Firms Aim to Do Good if It Hurts Profit?" a benefit corporation is a legal structure designed to do what? 1. Provide legal protection from investor lawsuits when an entrepreneur chooses to benefit the local community or environment. 2. Provide investors with the best return on their investment (ROI). 3. Create non-profit organizations. 4. All of the above 5. None of the above

1. Provide legal protection from investor lawsuits when an entrepreneur chooses to benefit the local community or environment.

In the Production Possibilities Frontier (PPF) model, we can draw straight line PPFs for countries if we assume that____. 1. Resources are identical in production. 2. Each country can only produce two types of goods or services. 3. Countries have a fixed amount of resources and level of technology. 4. None of the above. 5. All of the above.

1. Resources are identical in production.

Because of ______ people make ______. 1. Scarcity; choices 2. Scarcity; models 3. Limited resources; unlimited wants 4. Needs and wants; cost benefit analysis choices 5. None of the above

1. Scarcity; choices

Suppose that a more advanced technology for producing cars has recently been invented in Japan. This new technology allows automobile-building companies to produce more cars without hiring more labor or using more machines. If Japan's Production Possibilities Frontier (PPF) is represented on the graph with the production of cars being measured on the vertical axis and the production of computers on the horizontal axis then how would we represent the impact of this new technology on Japan's PPF? 1. Shift out PPF on the vertical axis. 2. Shift out PPF on the horizontal axis. 3. Shift out PPF symmetrically on both axes. 4. Shift in PPF on the horizontal axis but shift out on the vertical axis. 5. None of the above.

1. Shift out PPF on the vertical axis.

Which of the following best describes the Production Possibilities Frontier (PPF) Model? 1. The PPF shows us all the combinations of goods and services a country can produce assuming it is fully and efficiently using all of its currently available resources. 2. The PPF shows us all the combinations of goods and services a country is currently producing. 3. The PPF shows us all the combinations of goods and services a country is currently consuming. 4. The PPF shows us the separation point between production levels in two different countries. 5. None of the above

1. The PPF shows us all the combinations of goods and services a country can produce assuming it is fully and efficiently using all of its currently available resources.

What do we mean when we refer to a markup? 1. The difference between the price charged by a producer and its marginal cost of production. 2. The difference between the price charged by a price maker and the market equilibrium price. 3. The difference between the price government regulators allow a natural monopoly to charge and the equilibrium price. 4. The difference between the price charged by a producer and its average total cost of production. 5. None of the above.

1. The difference between the price charged by a producer and its marginal cost of production.

Suppose in a monopolistic market, the profit-maximizing level of production is 50 units. At that production level, the monopolist charges $75 per unit. If the marginal cost of production is $50 then which of the following statements is correct about this market? 1. The markup charged by the monopolist is $ 25 2. The deadweight loss is $615 3. The resource misallocation is 25 units two few bought and sold 4. None of above 5. All of the above

1. The markup charged by the monopolist is $ 25

If an economy is operating at a point inside its production possibilities frontier, then we may conclude that: 1. This economy is not operating at full efficiency. 2. This economy is a free market economy. 3. This economy is operating at full employment level. 4. Maximum output is produced in this economy. 5. None of the above.

1. This economy is not operating at full efficiency.

Suppose that the price of a textbook at the university bookstore is $85 and the quantity supplied by the bookstore is currently 25 textbooks. If the quantity currently demanded by students is equal to 20 textbooks, then we would predict that the price being charged by the bookstore is currently ____ and this market is experiencing ____ of this textbook. 1. Too high; an excess supply 2. Too low; an excess supply 3. Too high; an excess demand 4. Too low; an excess demand 5. The equilibrium price; equilibrium sales

1. Too high; an excess supply

According to the article "Learning to set the Right Price," sometimes a sales guy would walk into a meeting and say "'It's a thousand dollars...per user...per month...plus maintenance' and as long as the customer didn't blink, he would keep pushing the price up." This quote refers to a salesman doing which of the following? 1. Trying to find the customer's reservation price. 2. Trying to maximize sales. 3. Trying to lose customers. 4. Trying to produce consumer surplus. 5. None of the above

1. Trying to find the customer's reservation price.

Which of the following best describes collusion? 1. Two or more firms cooperating to reach a non-competitive agreement on pricing strategy. 2. A situation in a market where producer surplus shrinks due to market imperfections. 3. Perfectly competitive firms getting together and agreeing on a common price to charge in the market. 4. A market crashes due to unforeseen shocks to the market. 5. All of the above

1. Two or more firms cooperating to reach a non-competitive agreement on pricing strategy.

According to the article "Land for Learning," the sponsor of the bill to establish land-grant colleges and universities believed that higher education: 1. Was necessary to the economic growth of the nation. 2. Should be reserved for the wealthy and privileged. 3. Should be purely academic in nature; practical arts such as farming and mechanics should be taught in traditional apprenticeship programs rather than at college and university. 4. Should be provided by the federal government without charge to students. 5. Both 1 and 4.

1. Was necessary to the economic growth of the nation.

Suppose a country opens up to free trade. We can predict that the country will become an exporter of a product if for that product____. 1. World Price > Domestic Price 2. World Price = Domestic Price 3. World Price < Domestic Price 4. Marginal Revenue = Marginal Cost 5. None of the above

1. World Price > Domestic Price

Regardless of whether world price of a good is higher or lower than the price of that good in a domestic economy, the domestic economy will experience ____ if it opens up to free trade with the rest of the world. 1. an increase in economic surplus 2. an increase in consumer surplus 3. an increase in producer surplus 4. all of the above 5. none of the above

1. an increase in economic surplus

Average Cost Pricing Regulation is used by the government to limit monopolistic firms in the price they can charge for their product. They are not allowed to charge a price that is: 1. more than their average total cost of production. 2. less than their average total cost of production. 3. more than their average variable cost of production. 4. more than 10% above their average marginal cost of production. 5. none of the above

1. more than their average total cost of production.

uppose you run an auto dealership. You make $1 million in sales for the year but you spend $700,000 on explicit expenses and $300,000 on implicit expenses. We would say that you have non-opportunity costs equal to ____ and opportunity costs equal to _____. 1. $700,000; $300,000 2. $0; $1 million 3. $700,000; $1 million 4. $0; $700,000 5. None of the abov

2) $0; 1 million

Suppose you have a week off from school and you are trying to decide what to do with your free time. You can watch the entire 23 seasons of "The Simpsons" reruns, read "War and Peace" or learn to speak Swedish. The price of "The Simpsons" box set is $120, the price of the novel is $15 and the price of the Rosetta Stone Swedish language software is $400. If these are all mutually exclusive activities and this is all the relevant information, what is the opportunity cost of learning Swedish? 1. $400 2. $120 3. $15 4. $135 5. None of the above

2) $120

Suppose James is a tennis instructor who is able to earn $20 per hour giving tennis lessons. If he also owns a farm where he grows organic lettuce that he sells to local restaurants and he spends $100 on lettuce seeds, 10 hours of his time growing the lettuce and he can sell the lettuce for $400, then how much accounting profit does he make from his lettuce production ____ and how much economic profit does he make from his lettuce production ____? Assume that these are the only costs he incurs. 1. $300; $200 2. $300; $100 3. $400; $200 4. $400; $100 5. none of the abov

2) $300;$100

Suppose a private company is planning to build a nuclear power plant. The company expects the marginal benefit it would earn to be $20 million and the marginal cost it would incur to be $15 million. In addition, the company estimates that unavoidable radiation leakages will lead to $6 million in harm to local residents but the company does not officially consider pollution costs when making its private production decisions. Based on this information, the private company expects to earn ____ in economic surplus while we expect society to earn ____ in economic surplus if the plant is built. 1. $14 million; $5 million 2. $5 million; -$1 million 3. $14 million; -$1 million 4. $5 million; $14 million 5. $5 million; $11 million

2) $5 million; -$1 million

John is running a furniture retail shop. One day, He found good antique chairs at a wholesale store, and the price per chair was $120. He decided to buy 20 chairs at this price. However, the price went up to $160 in a few days because David, another retail shop owner, also wanted to buy them. As a result, John decided to buy only 14 chairs. What is John's price elasticity of demand for the antique chair? 1. ‐ 0.11 2. ‐ 0.90 3. ‐ 1.11 4. ‐ 1.72 5. None of the above

2) -.90

A fall in the price of lemons from $10.5 to $9.0 per bushel increases quantity demanded from 100 bushels to 170 bushels. What is the price elasticity of demand for lemons? 1. 4.9 2. ‐4.9 3. 46.7 4. ‐46.7 5. ‐0.2

2) -4.9

Suppose there are 9 workers in a pizza restaurant and they can produce 180 pizzas a day. After the restaurant hires one more worker its production level rises to 195 pizzas. The marginal productivity of labor for the last worker hired is __ and his average productivity of labor is ___. 1. 20; 19.5 2. 15; 19.5 3. 18; 17.7 4. 20; 20 5. 18; 20

2) 15; 19.5

Suppose you have just invented a new type of widget and you are trying to decide what price to charge. You take a survey and find that when you charge $100, the quantity demanded is 10, when you charge $75, the quantity demanded is 25, and when you charge $50, the quantity demanded is 50. If you decide to sell your widget for $65, which quantity could be the quantity consumers will demand at that price? 1) 15. 2) 40. 3) 55. 4) 25. 5) None of the above

2) 40

According to the article "The Futility of Price Controls," John F. Kennedy's pressure on the U.S. steel industry to impose informal price controls lead to which result? 1. Lower levels of U.S. inflation. 2. An opening for countries such as Japan to gain steel markets and a decline in the U.S. steel industry. 3. Lower profits for U.S. steel companies in the short-run but higher profits in the long-run. 4. All of the above 5. None of the above

2) An opening for countries such as Japan to gain steel markets and a decline in the U.S. steel industry

According to the article "The Rock and the Hard Place on the Deficit," why does conventional analysis underestimate the effects of tax changes on the economy? 1. Because conventional analysis uses wrong models. 2. Because conventional analysis links the tax changes to what is happening in the economy. 3. Because conventional analysis is done by the non-economists. 4. Because conventional analysis uses wrong data. 5. None of the abov

2) Because conventional analysis links the tax changes to what is happening in the economy

11. What is the difference between a binding price floor and a non-binding price floor? 1. Binding price floors are legally enforced and non-binding price floors are not legally enforced. 2. Binding price floors are set above the market equilibrium price and non-binding price floors are set below the market equilibrium price. 3. Binding price floors require a producer to hold the price constant at a given level and non-binding price floors allow the producer to increase the price. 4. Binding price floors are the government's imposed minimum price and non-binding price floors are the producer's reservation price. 5. Binding price floors shift the supply curve and non-binding price floors do not shift the supply curve.

2) Binding price floors are set above the market equilibrium price and non-binding price floors are set below the market equilibrium price

Suppose Paddy's Pub, a small bar located in the sunny city of Philadelphia, is producing in a perfectly competitive market. If the pub sells drinks for $4 each, sells 50 drinks per night, has an AFC of production equal to $2 per drink and spends a total of $250 on production costs per night, then Paddy's Pub should do what in the short-run? 1) Shut down, because the firm is making a negative profit, since the price per drink is less than average total cost. 2) Continue to produce in the short run until the firm can get rid of its fixed inputs, and then shut down, since the price is greater than average variable cost but smaller than average total cost. 3) Continue to produce even in the long run, since the firm is making a positive profit (price is greater than average total cost). 4) Raise the price per drink, since the firm cannot make a positive profit at the current price level. 5) It is impossible to determine what the firm should do in this situation since variable cost is not provided in the question.

2) Continue to produce in the short run until the firm can get rid of its fixed inputs, and then shut down, since the price is greater than average variable cost but smaller than average total cost.

8. A binding price ceiling is usually graphically depicted by a: 1. Horizontal line above the equilibrium price 2. Horizontal line below the equilibrium price 3. V ertical line along the horizontal axis 4. Parallel line to the demand curve 5. None of the above

2) Horizontal line below the equilibrium price

Suppose the market for a product has an equilibrium price of $6 and an equilibrium quantity being bought and sold equal to 100,000 units. If the government decides to offer a $3 per unit subsidy to the buyers of this product and we observe that the equilibrium price rises to $7, then we know that: 1. Ps has risen to $7, Pb has fallen to $4 and Es>|Ed| 2. Ps has risen to $7, Pb has fallen to $4 and |Ed|>Es 3. Pb has risen to $7, Ps has fallen to $4 and Es>|Ed| 4. Pb has risen to $7, Ps has fallen to $4 and |Ed|>Es 5. None of the abov

2) Ps has risen to $7. Pb has fallen to $4 and |Ed|>Es

Which of the following best describes the purpose of copyright and patent protection? 1) To limit the number of competitors in a particular market. 2) To encourage inventors of socially desirable products to continue to innovate by ensuring that they will be compensated for their investments. 3) To ensure that the products that firms produce meet a particular standard so that firms are less likely to sell faulty products. 4) To help raise tax revenue for the government by selling copyright and patent protections to firms. 5) To keep track of which individuals invented which products, and when, so that the government can assess the rate of technological growth of the economy.

2) To encourage inventors of socially desirable products to continue to innovate by ensuring that they will be compensated for their investments.

Suppose we observe a 15% increase in the price of train travel which leads to a 7.5% reduction in the demand for bus travel. Based on this information we can predict that: 1. Travelers consider train and bus travel to be substitutes but there is a weak or inelastic relationship between the two. 2. Travelers consider train and bus travel to be complements but there is a weak or inelastic relationship between the two. 3. Travelers consider train and bus travel to be complements and there is a strong or elastic relationship between the two. 4. Travelers consider train and bus travel to be substitutes and there is a strong or elastic relationship between the two. 5. Train travelers are price elastic while bus travelers are price inelastic.

2) Travelers consider train and bus travel to be complements but there is a weak or inelastic relationship between the two

When a business earns total revenue that is exactly equal to the sum of its explicit costs and implicit costs, we say it is earning___. 1. An above normal rate of return. 2. A normal rate of return. 3. A below normal rate of return. 4. No rate of return. 5. None of the abo

2) a normal rate of return

According to the demand and supply model, which of the following would we predict would be the result of the following market shocks? 1. A simultaneous increase in both demand and supply of a product will lead to a higher market equilibrium price for the product. 2. A simultaneous reduction in both demand and supply of a product will lead to a lower market equilibrium quantity bought and sold of the product. 3. An increase in supply along with a simultaneous reduction in demand will lead to a lower market equilibrium quantity bought and sold of the product. 4. A decrease in supply along with a simultaneous increase in demand will lead to a lower market equilibrium price for the product. 5. None of the above

2) a simultaneous reduction in both demand and supply of a product will lead to a lower market equilibrium quantity bought and sold of the product

Assuming buyers and sellers are price responsive, which of the following pairs of simultaneous market shocks will definitely result in a higher equilibrium price? 1. An increase in demand and an increase in supply. 2. An increase in demand and a decrease in supply. 3. A decrease in demand and an increase in supply. 4. A decrease in demand and a decrease in supply. 5. For each of the above, we need to know the relative sizes of the market shocks to be able to determine whether the new equilibrium price is higher or lower than the original equilibrium price.

2) an increase in demand and a decrease in supply

Which of the following is likely to result in a change in the quantity demanded for good X but not in a change in the demand for good X? 1. An increase in population resulting in an increase in the number of good X consumers. 2. An increase in the price of good X. 3. A government report detailing new evidence that consumption of good X leads to cancer. 4. Higher household income for consumers of good X. 5. All of the above are equally likely to lead to a change in both the quantity demanded and the demand for good X.

2) an increase in the price of good X

Adam Smith wrote "An Inquiry into the Nature and Causes of the Wealth of Nations" in which he described how which of the following seems to direct the flow of scarce resources to producers and the flow of goods to consumers in an economically efficient manner? 1. Government 2. An invisible hand 3. Politicians 4. Consumers 5. Producers

2) an invisible hand

If we offer a subsidy to buyers of a product, we can be sure that: 1. Buyers will get the entire benefit of the subsidy. 2. Buyers may or may not get benefit of the subsidy, depending on how responsive they are to price changes relative to how responsive sellers are to price changes. 3. Buyers will get exactly half of the benefit of the subsidy. 4. Economic surplus will increase. 5. Both2and

2) buyers may or may not get benefit of the subsidy, depending on how responsive they are to price changes relative to how responsive sellers are to price changes

The economic model that represents how people make decisions is called: 1. Marginal analysis 2. Cost benefit analysis 3. Decision analysis 4. Externality analysis 5. None of the above

2) cost benefit analysis

If the consumption or production of a good causes a negative externality, then the optimal Pigovian tax to impose would be: 1. greater than the size of the externality. 2. equal in size to the externality. 3. less than the size of the externality. 4. twice the amount of the externality. 5. equal to the amount of the externality divided by the number of people affected by the externality.

2) equal in size to the externality

According to the article "A Place for Cost-Benefit Analysis", the story of Sophie's Choice by William Stryon illustrates which cost benefit analysis concept? 1. Human life is priceless and it is impossible to try to put a price on a human life. 2. Even when two things are considered priceless, when forced to put a price on them, we often can. 3. Cost benefit analysis is immoral 4. All of the above. 5. Both (1) and (3).

2) even when two things are considered priceless, when forced to put a price on them, we often can

Firms that shut down in the short run still have to pay their___. 1. Variable costs. 2. Fixed costs. 3. Total cost. 4. All of the above. 5. None of the above

2) fixed costs

Suppose we decide to offer a $1 per gallon subsidy to buyers of milk. Which of the following predictions could we make regarding the impact of this subsidy on the market for milk? 1. If milk consumers are more responsive than milk suppliers to price changes, then milk consumers will get more of the subsidy. 2. If milk suppliers are less responsive than milk consumers to price changes, then milk suppliers will get more of the subsidy 3. The subsidy will have the same impact on milk price that a $1 per gallon tax would have on milk price. 4. The subsidy will encourage market activity and increase economic surplus. 5. None of the abov

2) if milk suppliers are less responsive than milk consumers to price changes, then milk suppliers will get more of the subsidy

Which of the following is not a characteristic of a perfectly competitive market? 1. Producers are "price-takers." 2. Individual producers engage in high levels of advertising. 3. Price competition forces producers to sell at the marginal cost of production. 4. Individual producers can easily enter or exit the market. 5. The products made by a given producer are identical to the products made by any another producer in the same market

2) individual producers engage in high levels of advertising

What is a Pigovian subsidy? 1. It is a subsidy to help the poor. 2. It is a subsidy to fix a market failure caused by the existence of a positive externality. 3. It is a subsidy to protect the rich. 4. It is subsidy that comes from a government welfare program. 5. None of the abov

2) it is a subsidy to fix a market failure caused by the existence of a positive externality

Suppose the government needs to raise additional tax revenue and it is considering placing a $1 per unit tax on market A, which has a current Pe=$10 and Qe=100 units or market B, which also has a current Pe=$10 and Qe=100 units. Based on this information, which market should it tax if it wants to raise the most tax revenue? 1. It can tax either market since it will earn $100 in revenue from either. 2. It should tax whichever market has the least price responsive buyers and sellers. 3. It should tax whichever market has the most price responsive buyers and sellers. 4. It should split the tax between the two markets, placing a $0.50 cent per unit tax on each. 5. None of the abov

2) it should tax whichever market has the least price responsive buyers and sellers

Which of the following often serves as a signal in a free market system that the producer is the efficient producer? 1. Its ability to produce at the most stable cost. 2. Its ability to make a profit. 3. Its ability to gain the greatest number of customers. 4. Its need to file for bankruptcy. 5. None of the above

2) its ability to make a profit

a perfectly competitive firm maximizes its profit by adjusting _____. 1) Its output price until the price equals to the average cost. 2. Its output quantity until the marginal cost equals to the marginal revenue. 3. Its output price until the price equals to the marginal cost. 4. Its output price until the marginal cost equals to the marginal revenue. 5. None of the above

2) its output quantity until the marginal cost equals to the marginal revenue

Suppose a manufacturer is harming its neighbors by releasing pollution into the environment. Which of the following would be an economically efficient way to reduce this pollution? 1. Set up a regulatory agency to enforce a total ban on pollution. 2. Make the manufacturer pay a Pigovian tax in the amount of the harm its pollution imposes on its neighbors. 3. Do nothing. The manufacturer is creating jobs and jobs are always good for society. 4. Offer the manufacturer a subsidy in the amount of the pollution amount to encourage greater job creation. 5. None of the above

2) make the manufacturer pay a Pigovian tax in the amount of the harm its pollution imposes on its neighbors

Jill and Mary are roommates. Mary is a smoker and Jill is not. Jill places a value of $150 on having a smoke free home while Mary places a value of $300 on being able to smoke at home. Which of the following arrangements could make both happier? 1. Jill could offer Mary $200 not to smoke. 2. Mary could pay Jill $160 for permission to smoke in their apartment. 3. Mary could pay Jill $140 for permission to smoke in their apartment. 4. Jill could offer Mary $150 not to smoke. 5. None of the above.

2) mary could pay jill $160 for permission to smoke in their apartment

Suppose that the price of gasoline is currently $3 per gallon and a consumer wishes to purchase 15 gallons. If nothing else changes other than price, then according to the law of demand, if price falls to $2 per gallon next month, which of the following could be a desired gasoline purchase for this consumer next month? 1. less than 15 gallons 2. more than 15 gallons 3. 15 gallons is the only possible desired purchase amount since gas is a necessity 4. impossible to determine from the information given 5. none of the above

2) more than 15 gallons

According to the article 'Driving Directions: What to Charge for a Charge?' 1. Most charging locations currently charge $1 hour. 2. Most ChargePoint electric car charging locations are currently free. 3. The current system of charging results in an excess supply of charging services. 4. All of the above 5. None of the above

2) most chargepoint electric car charging locations are currently free

If smokers hurt people around them with second hand smoke and if this is considered to be a negative externality, then which of the following tools could the government use to try to fix this externality problem and reduce smoking? 1. Subsidy 2. Pigovian Tax 3. Tax Credit 4. Transfer 5. None of the above

2) pigovian tax

When externalities are internalized through Pigovian taxes/subsidies, then 1. Private expected marginal benefits are equal to private expected marginal costs. 2. Private actual economic surplus becomes equal to social actual economic surplus. 3. Social economic surplus is always positive. 4. Social economic surplus is greater than private economic surplus. 5. Social economic surplus is smaller than private economic surplus.

2) private actual economic surplus becomes equal to social actual economic surplus

According to the revenue maximizing rule if the absolute value of the price elasticity of demand for a product is less than 1 then the firm should 1. Lower the price. 2. Raise the price. 3. Don't change the price. 4. Leave the market. 5. None of the above.

2) raise the price

According to the article "Making a Difference", which city has been affected by Joe Edwards' entrepreneurial success? 1. Kansas City 2. St. Louis 3. Memphis 4. New York 5. Washington, D.C.

2) st. louis

Which of the following statements about subsidies (that are not Pigovian) is false? 1) Subsidies encourage market activity. 2) Subsidies result in more economic efficiency and do not result in deadweight losses. 3) Subsidies can be offered to either demanders or suppliers in a market. 4) Subsidies to suppliers shift the supply curve to the right. 5) Subsidies can result in a misallocation of resources

2) subsidies result in more economic efficiency and do not result in deadweight losses

According to the article "The Extraordinary Science of Addictive Junk Food," what is the second largest ingredient of many of the Prego spaghetti sauces? 1. Tomatoes 2. Sugar 3. Salt 4. Pepper 5. Fat

2) sugar

The difference between the buyer's price and the seller's price when a tax is imposed on a market is called: 1) Reservation price. 2) Tax wedge. 3) Tax incidence. 4) Resource misallocation. 5) None of the above.

2) tax wedge

The revenue maximizing pricing rule states that firms will maximize revenue at a price where 1. The absolute value of the price elasticity of demand is greater than 1. 2. The absolute value of the price elasticity of demand is equal to 1. 3. The absolute value of the price elasticity of demand is less than 1. 4. The absolute value of the price elasticity of demand is equal to 0. 5. None of the above.

2) the absolute value of the price elasticity of demand is equal to 1

In a free market, if a good involves a negative consumption externality, then: 1. the amount of the good consumed will be less than the socially desirable amount. 2. the amount of the good consumed will be greater than the socially desirable a free market, if a good involves a negative consumption externality, then: amount. 3. the amount of the good consumed will be equal to the socially desirable amount. 4. the amount of the good consumed will be either less than or equal to the socially desirable amount. 5. the amount of the good consumed will exceed the amount of the good produced.

2) the amount of the good consumed will be greater than the socially desirable amount

According to the article "Hog Prices Wallow Near 2‐Year Low," which of the following events has had an impact on hog prices? 1. Recent flooding in Florida and Louisiana as a result of Hurricane Isaac. 2. The erosion on corn and soybean crops this summer as a result of the drought in the U.S. 3. Flooding in Louisiana in 2005 as a result of Hurricane Katrina. 4. The destruction of hundreds of homes in Colorado Springs as a result of wildfires. 5. Destruction to farms in the Philippines this year as a result of Tropical storm Doksuri.

2) the erosion on corn and soybean crops this summer as a result of the drought in the U.S.

When government provides students with low interest student loans and scholarships, we have an example of: 1. The government improving the private information available to perspective students. 2. The government internalizing the positive consumption externality of education. 3. The government internalizing the positive production externality of education. 4. The government trying to decrease the number of unemployed young people. 5. All of the above.

2) the government internalizing the positive consumption externality of education

Which of the following is not an explicit cost of production? 1. Cost of supplies used to produce a good 2. The rent a business owner cannot earn when she uses for her business a property she personally owns. 3. Salary and benefits paid to workers. 4. Cost of property-related expenses, such as real estate tax, rent, or utility bills 5. All of the above are explicit cost

2) the rent a business owner cannot earn when she uses for her business a property she personally owns

Which of the following statements is correct? 1. The long-run for a producer is the period of time in which at least one of its inputs is not fixed. 2. The short-run for a producer is the period of time in which at least one of its inputs is fixed. 3. The cut-off between short-run and long-run is one year. 4. The short-run for a producer is the period of time in which all its inputs are fixed. 5. Both 2 and 3

2) the short-run for a producer is the period of time in which at least one of its inputs is fixed

Which of the following is the definition of Economic Profit? 1. Total revenue minus explicit cost 2. Total revenue minus opportunity cost 3. Total revenue minus implicit cost 4. All of the above 5. None of the abov

2) total revenue minus opportunity costs

According to the article "The Rock and the Hard Place on the Deficit," conventional analysis ____________ the effect of tax changes on the economy _________. 1. underestimates; slightly 2. underestimates; substantially 3. overestimates; slightly 4. overestimates; substantially 5. estimates; precisel

2) underestimates; substantially

According to the article "Hog Prices Wallow Near 2‐Year Low," which of the following is the cause of hog farmers losing money on the sale of their hogs? 1. A reduction in the supply of hogs. 2. Weak domestic demand for pork. 3. Increased slaughter prices. 4. All of the above 5. None of the above

2) weak domestic demand for pork

According to the article "The Rock and the Hard Place on the Deficit," 1. Poorer households typically pay more of a tax increase out of their savings than wealthier households do. 2. Wealthier households typically pay more of a tax increase out of their savings than poorer households do. 3. Tax increases typically cause wealthier households to reduce spending more than they cause ordinary households to reduce spending. 4. Tax increases on wealthier households likely have a larger impact on the economy than they have when placed on ordinary households. 5. None of the above

2) wealthier households typically pay more of a tax increase out of their savings than poorer households do

Where is average product of labor at its highest point? 1. When it is less than marginal product of labor 2. When it is equal to marginal product of labor 3. When it is greater than marginal product of labor 4. When profits are negative 5. None of the abov

2) when it is equal to marginal product of labor

Suppose you are making a decision using perfect information. Which of the following statements will be correct? 1. Your private expected marginal benefits are equal to your private actual marginal costs. 2. Your private expected marginal benefits are equal to your private actual marginal benefits. 3. Your private expected economic surplus is greater than your private actual economic surplus. 4. Your private expected economic surplus is smaller than your private actual economic surplus. 5. None of the above.

2) your private expected marginal benefits are equal to your private actual marginal benefits

Suppose you represent the typical small firm producing in a perfectly competitive market where the market equilibrium price is equal to $50. If you and your competitors have each chosen to produce 150 units of output and you each have an average total cost of production at that production level equal to $30, then you are each earning ____ in profit and we can expect _____. 1. $7500; no change in number of firms in the market 2. $3000; more firms to enter the market 3. $3500; more firms to enter the market 4. -$4500; firms to leave the market 5. none of the above

2. $3000; more firms to enter the market

Suppose you were considering traveling to Mali last year. You expected the benefits to be $5400 and the costs to be $4500. You decided to make the trip but violence broke out in the country and you found that the actual benefits of the trip are only $2500 while the actual costs are $6000. Based on this information your expected economic surplus earned from making the trip was _____ and your decision was ______. 1. $900; good 2. $900; rational 3. ‐$3500 irrational 4. $3500; bad 5. None of the above.

2. $900; rational

If two individuals have the same number of resources available to them and if person 'A' can produce more output from those resources than can person 'B', then we would say that person 'A' has the ___. 1. Comparative advantage 2. Absolute advantage 3. Entrepreneurship edge 4. Higher opportunity cost 5. None of the above

2. Absolute advantage

Which of the following firms is likely to engage in the most advertising? 1. A perfectly competitive firm. 2. An imperfectly competitive firm. 3. A monopolistic firm. 4. A collusive firm. 5. All of the above types of firms are equally likely to advertise

2. An imperfectly competitive firm.

Which of the following events could cause a country's production possibilities frontier to shift out? 1. A reduction in its rate of unemployment. 2. An increase in its population. 3. An improvement in the country's efficiency of resource use. 4. A reduction in discriminatory hiring practices that keep some workers out of the labor force. 5. All of the above could cause a country's production possibilities frontier to shift out.

2. An increase in its population.

Positive statements _____while normative statements ______. 1. Are facts; are opinions 2. Are potentially testable and provable; are subjective 3. Are true; are false 4. Are optimistic; are pessimistic 5. None of the above

2. Are potentially testable and provable; are subjective

A producer is said to price discriminate if it does which of the following? 1. If it charges some consumers a lower price than it charges other consumers because it likes some consumers more than it likes other consumers. 2. If it charges some consumers a lower price than it charges other consumers because some consumers have a lower reservation price than other consumers. 3. It is pays it suppliers a lower price than it charges its customers. 4. If it pays a lower price for its labor input than it pays for its capital input. 5. None of the above

2. If it charges some consumers a lower price than it charges other consumers because some consumers have a lower reservation price than other consumers.

According to the article "Chilly North Sea Comes Back to Life," new technology is resulting in___. 1. Increased access to natural gas. 2. Increased access to natural gas and oil. 3. Lower cost refining cost of oil to gasoline. 4. The ability of North Sea nations to produce outside their production possibilities frontier. 5. None of the above

2. Increased access to natural gas and oil.

According to the article "Where Airfares are Taking Off," what is the reason for higher airfares according to Delta's spokesman? 1. Reduced supply of air travel. 2. Increased demand for air travel. 3. Increased government regulation of air travel. 4. All of the above 5. None of the above

2. Increased demand for air travel.

Suppose two countries, country A and country B, have similar resources and technology and similar production possibilities frontier. If country A is able to shift out its PPF faster and farther than country B, then it is possible that country A___. 1. Is importing resources from other countries. 2. Is choosing to consume less today in order to build more capital for future production. 3. Has a lower cost of production. 4. All of the above; 5. None of the above;

2. Is choosing to consume less today in order to build more capital for future production.

When the price of shoes falls, consumers change their desired quantity of shoes purchased because: 1. Of the substitution effect. 2. Of both the income effect and the substitution effect. 3. They can afford more shoes. 4. Shoes look like a better deal than before the price change. 5. None of the above

2. Of both the income effect and the substitution effect.

f a monopolist can price discriminate, its MR curve lies____ and if a monopolist cannot price discriminate, its MR curve lies ____. 1. On the demand curve; above the demand curve 2. On the demand curve; below the demand curve 3. Above the demand curve; below the demand curve 4. Below the demand curve; above the demand curve 5. None of the above, price discrimination has no impact on the MR curve

2. On the demand curve; below the demand curve

For must be ___. a point of production on a PPF graph to be possible but not fully efficient, the production point 1. Outside the PPF. 2. On the lower half of the PPF. 3. On the upper half of the PPF. 4. Inside the PPF. 5. None of the above.

2. On the lower half of the PPF. 3. On the upper half of the PPF. 4. Inside the PPF.

According to the article "Learning to set the Right Price," setting a price that is too low can reduce sales because customers use price as an indication of product quality. Which of our "ideal market" assumptions is violated if this is true? 1. Market failure 2. Perfect information 3. Perfect competition 4. Profit maximizing rule 5. None of the aboe

2. Perfect information

If a producer is charging each individual consumer a different price based on that consumer's individual reservation price, then we say that producer is: 1. Maximizing profit 2. Perfectly price discriminating 3. Maximizing utility 4. Maximizing consumer surplus 5. None of the above

2. Perfectly price discriminating

According to the article 'Land for Learning,' which of the following subjects were taught at U.S. universities before the Morrill Act became law? 1. Microeconomics 2. Political economy 3. War strategies 4. English literature 5. All of the above

2. Political economy

Which of the following is not a characteristic of a market served by a monopoly? 1. There is only one producer in the market. 2. Resources are efficiently allocated and economic surplus is maximized. 3. No good substitutes exist for the good produced. 4. There tends to be less product innovation. 5. All of the above are characteristics of monopolistic markets.

2. Resources are efficiently allocated and economic surplus is maximized.

Consumers are said to be least responsive to price changes when the demand curve is: 1. Most stable 2. Steepest 3. Closest to the origin 4. Flattest 5. None of the above

2. Steepest

According to the textbook, Congress increased the immigration quota for highly skilled workers in the late 20th century. What was this immigration law change called? 1. The 2009 North American Immigration Act (NIIA). 2. The Einstein Exemption. 3. The Economic Exemption. 4. The Clear Skies Act. 5. The Kyoto Protocol.

2. The Einstein Exemption.

A "market failure" is said to occur whenever: 1. A producer declares bankruptcy. 2. The free market outcome is not the same as the socially optimal outcome. 3. An economic model fails to accurately predict the free market equilibrium outcome. 4. The government intervenes in the free market. 5. None of the above

2. The free market outcome is not the same as the socially optimal outcome.

. According to the articles, which of the following is true with respect to how government agencies value a human life saved? 1. They each place exactly the same value on a life saved. 2. They each use a different method of calculating the value of a life saved and as a result place a different value on a life saved. 3. They each use the same method of calculating the value of a life saved. 4. They sometimes determine that the value of a life saved is priceless, although they sometimes place a monetary value on improving a person's health or reducing injury. 5. None of the above.

2. They each use a different method of calculating the value of a life saved and as a result place a different value on a life saved.

According to the article "Obama announces WTO case against China over rare earths," U.S. Senator Chuck Schumer thinks: 1. The case against China should be solved through WTO action. 2. WTO action can take too long, often requiring years for a case to be resolved. 3. China is reducing the export of rare earths for environmental reasons. 4. The U.S. should refuse to purchase rare earth minerals from China. 5. None of the above

2. WTO action can take too long, often requiring years for a case to be resolved.

Suppose the free market gives us an outcome that earns $20 billion of economic surplus for society but that 60% of this goes to the richest 20% of the population with the remaining 40% shared by the poorer 80% of the population. Suppose we are considering government intervention that would result in a more equal division of economic surplus but would reduce economic surplus to only $19 billion. Should we allow this government intervention? 1. No, any reduction in the economic pie is bad for society. 2. Yes, if we believe that the benefit we get from greater equity is worth more than $1 billion. 3. Yes, greater equity is always better for society. 4. Yes, but only if we care more about the poor than about the rich. 5. None of the above

2. Yes, if we believe that the benefit we get from greater equity is worth more than $1 billion.

Suppose the market for oranges has an equilibrium market price of $2. Suppose as well that this market contains only five consumers with the following respective reservation prices: $6, $5, $4, $3, and $2. At the market equilibrium outcome, how much consumer surplus will be earned in total? 1. $20 2. $18 3. $10 4. $5

3) $10

Suppose a market at equilibrium produces $7000 in economic surplus for society. Suppose that same market producers only $6800 in economic surplus for society with a price ceiling imposed on the market. Based on this information we know that the price ceiling has caused: 1. Deadweight loss but it is not possible to determine the amount from the information given. 2. No deadweight loss. 3. $200 of deadweight loss. 4. $6800 of deadweight loss. 5. $7000 of deadweight loss.

3) $200 of deadweight loss

Suppose that Kate's Bakery earned $5,000 in revenue last year and incurred $2,000 in total explicit costs. The bakery also incurred positive implicit costs but we do not know the amount of these implicit costs. Based on the information we do have, we can say that Kate's Bakery earned ____ in accounting profit and _____ in economic profit. 1. $3000; impossible to determine with the information given 2. impossible to determine with the information given; impossible to determine with the information given 3. $3000; less than $3000 4. $3000; $3000 5. less than $3000; impossible to determine with the information give

3) $3000, less than $3000

Suppose you are running a business and you experienced the following business expenses for the year: $10,000 for employees, $20,000 for raw materials, $10,000 for rent. In addition, you took out a loan in the amount of $40,000 and agreed to a 10% rate of annual interest. You also purchased new machinery for the business: you paid $10,000 and the IRS allows you to use a 10% annual rate of depreciation. How much explicit cost did you incur for the year ____ and how much implicit cost ____? 1. $95,000; $95,000 2. $50,000; not enough information provided 3. $45,000; not enough information provided 4. $90,000: $95,000 5. none of the abov

3) $45,000; not enough info provided

15. Suppose the equilibrium wage rate in Missouri for unskilled workers is equal to $7 per hour. Which of the following could be a binding hourly minimum wage for the Missouri unskilled labor market? 1. $6.75 2. $7 3. $7.35 4. both2and3 5. none of the above

3) $7.35

Suppose that gasoline price is $3/gallon and you buy 30 gallons of gasoline per month. When gas price has risen to $3.6/gallon, your gas consumption decreases to 27 gallon per month. What is the price elasticity of your gasoline demand? 1. ‐0.1 2. ‐ 0.25 3. ‐0.5 4. ‐ 0.75 5. -1

3) -.5

A $10,000 federal subsidy offered to each college student would provide a benefit of: 1. Exactly $10,000 to each student. 2. Exactly $10,000 to each college enrolling a student. 3. $10,000 to students and colleges but the benefit would likely be shared by them. 4. Exactly $10,000 to each student and also $10,000 to each college enrolling a student. 5. $0, since subsidies have no net impact on well-functioning markets

3) 10,000 to students and colleges but the benefit would likely be shared by them

Suppose a pen producer is willing to supply 300 pens per month if pens sell for $1.25 each and 400 pens per month if pens sell for $1.30 each. Assuming a consistent relationship between pen price and quantity supplied, how many pens would we expect this producer to supply if the price of pens is $1.15 each? 1. 200 2. 350 3. 100 4. 250 5. None of above

3) 100

rooms for $15 each. Lauren's willingness to pay is $35, Leslie's willingness to pay is $25, and Lydia's willingness to pay is $30. Total consumer surplus for these three students is equal to: Suppose three students, Lauren, Leslie, and Lydia, each purchase a bulletin board for their 1. $15 2. $30 3. $45 4. $60 5. $90

3) 45

Suppose a bakery is selling green tea crepe cakes for $70 each. If five consumers come into the shop with reservation prices of $140, $100, $80, $70 and $50 respectively, how many cakes will be sold (assuming each buys no more than 1 cake) and how much consumer surplus will be earned in total from these sales? 1. 2; $120 2. 2; $20 3. 4; $110 4. 1; $20 5. 4; $390

3) 4; 110

29. According to the article "Majority of Americans Support Price Controls on Gas," 1. Gallup polls indicate that the majority of Americans want gasoline rationing. 2. Gallup polls indicate that the majority of Americans believe that high gasoline prices are the result of greedy oil companies earning record profits. 3. Americans' dissatisfaction with high gas prices may result in their emotions superseding their logic. 4. Gallup polls indicate that an increasing number of Americans feel that crisis in the Middle East is responsible for high gasoline prices. 5. None of the above

3) Americans' dissatisfaction with high gas prices may result in their emotions superseding their logic

Suppose we are examining the impact of government intervention on a labor market that has perfect information, no externalities, and perfect competition. In addition, both employers and workers are price responsive but neither is perfectly price responsive. If this labor market currently has an equilibrium price of labor equal to Pe=$8 per hour, and an equilibrium quantity of labor employed equal Qe=50 million hours, then if the government decides to impose a maximum wage law on this market at $6 per hour, we can expect the market to experience: 1. No resource misallocation or deadweight loss because this will be a non-binding price ceiling. 2. Resource misallocation but no deadweight loss. 3. Both resource misallocation and deadweight loss, but we don't have enough information to predict the amounts. 4. Resource misallocation and deadweight loss but no unemployment since this is a price ceiling rather than a price floor. 5. None of the abov

3) Both resource misallocation and deadweight loss, but we don't have enough information to predict the amounts 4) Resource misallocation and deadweight loss but no unemployment since this is a price ceiling rather than a price floor

Which of the following is the Latin term for "everything else held constant"? 1. Carpe Diem 2. Vice versa 3. Ceteris Paribus 4. None of the above 5. All of the above

3) Ceteris Paribus

7. What do we call the loss of economic surplus that society suffers when the government interferes in a well-functioning free market? 1. Market failure 2. Consumer surplus 3. Deadweight loss 4. Government failure 5. None of the above

3) Deadweight loss

Which of the following statements is true about how an economy decides what to produce? 1. It would be most practical to take a survey of what goods 300 million Americans want. 2. Command economies often lead to the most efficient method of deciding what is produced. 3. Letting people bid on items in the free market is the most efficient way to decide what to produce and how much to produce. 4. The President and Congress meet twice a year to estimate what our economy should produce. 5. All of the above.

3) Letting people bid on items in the free market is the most efficient way to decide what to produce and how much to produce

Which of the following best describes a graph that represents consumer demand for a good or service? 1. An upward sloping function with price measured on the horizontal axis and quantity measured on the vertical axis. 2. A downward sloping function with price measured on the horizontal axis and quantity measured on the vertical axis. 3. A downward sloping function with price measured on the vertical axis and quantity measured on the horizontal axis. 4. An upward sloping function with price measured on the vertical axis and quantity measured on the horizontal axis 5. All of the above

3) a downward sloping function with price measured on the vertical axis and quantity measured on the horizontal axis

20. Non-binding price floor refers to: 1. A legally minimum price set above the market equilibrium price 2. A legally maximum price set above the market equilibrium price 3. A legally minimum price set below the market equilibrium price. 4. A legally maximum price set below the market equilibrium price. 5. None of the above

3) a legally minimum price set below the market

Which of the following is a characteristic of a monopolistic market? 1. It is easy for a firm to enter the market. 2. Monopolists produce goods very similar to other firms' products. 3. A monopolistic market consists of one firm, generally large in size. 4. Monopolists maximize profit by producing as much of a good as possible. 5. All of the above

3) a monopolistic market consists of one firm, generally large in size

Suppose that buyers of health care are perfectly price inelastic while suppliers are responsive to price changes. If we make health care suppliers pay a tax on the health care they provide, then we can predict that health care buyers will pay _____ and that this tax will ____ the amount of health care bought and sold in this country. 1. None of the tax; not change 2. Most of the tax; reduce 3. All of the tax; not change 4. Part of the tax; reduce 5. None of the above

3) all of the tax; not change

The price of gasoline has increased significantly over the last year. However, suppliers still sell the same quantity of gasoline as last year. Which one of the following is a possible explanation for this market outcome? 1. The magnitude of a decrease in demand is greater than the magnitude of an increase in supply. 2. The magnitude of a decrease in demand is smaller than the magnitude of a decrease in supply. 3. An increase in demand and a decrease in supply are of the same magnitude. 4. An increase in demand and an increase in supply are of the same magnitude. 5. None of the above.

3) an increase in demand and a decrease in supply are of the same magnitude

According to the article "A Place for Cost-Benefit Analysis", why do businesses normally not include in their cost benefit analysis the costs they impose on the environment and on others? 1. Because business executives (decision makers) don't realize they are imposing any costs on the environment or on others. 2. Because business executives (decision makers) often forget about those costs. 3. Because business executives (decision makers) choose to ignore those costs. 4. All of the above. 5. Both (a) and (b).

3) because business executives (decision makers) choose to ignore those costs

According to the article "How Much Is Your Time Worth", why did the Manhattan executive who earns roughly $200 per hour spend nearly 10 hours battling her cell phone company over $9 in late fees? 1. Because she is very stingy and tries to save every dollar she can. 2. Because she was on vacation and was able to spare some time for this battle. 3. Because she enjoyed the satisfaction of getting justice on her cell phone company. 4. All of the above. 5. None of the above.

3) because she enjoyed the satisfaction of getting justice on her cell phone company

34. According to the article "Economists Fret Over Return to Price Controls," Vermont legislators are willing to impose: 1. Binding price ceiling on rents. 2. Binding price ceiling on milk. 3. Binding price floor on milk. 4. Binding minimum wage. 5. None of the above

3) binding price floor on milk

47. If demand for a good is perfectly price elastic, then we can predict with certainty that at the market equilibrium outcome, 1. Producer surplus will be zero. 2. Total surplus will be zero. 3. Consumer surplus will be zero. 4. Consumer surplus will be equal to producer surplus 5. Consumer surplus will be infinit

3) consumer surplus will be zero

In market economies, who or what makes decisions about what goods get produced? 1. producers 2. consumers 3. consumers and producers 4. government regulators 5. industry groups

3) consumers and producers

For the law of demand to be observed in a market, what factors should be held constant? 1. Price and quantities of the good demanded 2. Price and consumers' income 3. Consumers' income and preferences 4. Quantities of the good demanded and consumers' preferences 5. Price and consumers' preferences

3) consumers income and preferences

A properly established Pigovian subsidy: 1. Is always shared equally between buyers and sellers. 2. Neither encourages nor discourages market activity. 3. Does not cause resource misallocation or deadweight loss. 4. All of the above 5. None of the abov

3) does not cause resource misallocation or deadweight loss

How are we able to determine the market demand for a product? 1. Consult government statistics 2. Find individual consumer demand curves and multiply them together. 3. Find individual consumer demand curves and add them together. 4. Use economic models. 5. None of the above

3) find individual consumer demand curves and add them together

According to the lecture, if demand for carrots is inelastic, then when the supply of carrots decreased due to drought last summer, we know that the percentage change in Pe was _______ the percentage change in Qe in the market for carrots. 1. Equal to 2. Less than 3. Greater than 4. We can't say because it depends on consumers' income 5. We can't say because it depends on the price elasticity of all substitute goods

3) greater than

According to the article, "Device Makers Add Fee to Cover Health Tax," Tampa General Hospital bought about $114 million worth of medical devices this year. Based on this current sales figure, the congressional budget forecasters estimate that the tax of 2.3% of sales will raise approximately $29 billion in tax revenue for the government by the year 2022. For this projected revenue number to be accurate the forecasters must: 1. Have realized that this tax on device producers will cause them to increase price which will decrease demand and shift the demand curve to the left causing a reduction in device sales and revenues. 2. Have realized that device producers may absorb some of the tax by lowering wages of workers, resulting in more of the device tax making its way to government tax revenues. 3. Have factored in the likelihood that device buyers are responsive to price changes and will likely reduce their quantity of devices demanded so that actual revenue raised is less than this expected revenue raised. 4. Both 1 and 3. 5. All of the abov

3) have factored in the likelihood that device buyers are responsive to price changes and will likely reduce their quantity of devices demanded so that actual revenue raised is less than this expected revenue raised

According to the article "Pain Pills' Littlest Victims," who gets affected financially the most by the prescription-pain-pill epidemic? 1. Mothers of newborn babies 2. Newborn babies 3. Hospitals where newborn babies are delivered 4. All of the above 5. None of the above

3) hospitals where newborn babies are delivered

Producers that choose to produce using many workers and not much machinery are said to produce in a way that is: 1. capital intensive 2. profit maximizing 3. labor intensive 4. cost minimizing 5. none of the abov

3) labor intensive

Economists believe that people make decisions "on the margin." Which of the following statements is true regarding this marginal decision making process? 1. Marginal decision making involves a consideration of all opportunity costs, including those that are sunk. 2. Private decision making involves a consideration of both internal and external opportunity costs. 3. Marginal decision making considers only those costs and benefits that occur because of the decision. These are costs and benefits that wouldn't occur if the decision is not made. 4. All of the above. 5. None of the above.

3) marginal decision making considers only those costs and benefits that occur because of the decision. these are costs and benefits that wouldn't occur if the decision is not made

What is the name we give to the number of extra loaves of bread we are able to produce each time we hire one additional unit of labor? 1. Average Productivity of Labor 2. Short-Run Production Increase 3. Marginal Productivity of Labor 4. Per Unit Real Revenue 5. None of the abov

3) marginal productivity of labor

According to the textbook, what is the summation of all of the individual consumer demand curves? 1. Equilibrium price 2. Equilibrium quantity. 3. Market demand. 4. Market supply. 5. None of the above.

3) market demand

Many societies make the rich pay more in tax than the poor pay in order to: 1. Make the economic pie bigger 2. Help achieve the goal of efficiency 3. More equally divide the economic pie 4. Eliminate externalities 5. All of the above

3) more equally divide the economic pie

According to the article "Obama Tax Hikes," the Obama tax plan would result in: 1. Faster economic growth. 2. More jobs. 3. More unemployed Americans. 4. Increased business investment. 5. All of the abov

3) more unemployed americans

33. According to the article "With Venezuelan Food Shortages, Some Blame Price Controls," 1. Price controls in Venezuela are extremely popular because they result in lower prices, lower inflation and greater availability of products for the poor. 2. Price controls in Venezuela are not binding. 3. Price controls mean prices are too low for companies and producers to make a profit so they produce less, resulting in shortages. 4. All of the above 5. None of the above

3) price controls mean prices are too low for companies and producers to make a profit so they produce less, resulting in shortages

In charge for their product, they are __. a perfectly competitive market, since producers cannot individually control the price they 1. Price makers 2. Price setters 3. Price takers 4. All of the above 5. None of the above

3) price takers

Which of the following statements does not describe a perfectly competitive market? 1. All producers are selling a product that seems to be identical in the eyes of consumers. 2. There are no barriers keeping out new firms or preventing existing firms from leaving the market. 3. Producers in the market are considered to be price makers. 4. There will be a very large number of very small producers in the market. 5. Producers will not be able to earn an above normal rate of return in the long-run

3) producers in the market are considered to be price makers

Which of the following statements regarding government subsidies is false? 1. Pigovian subsidies are used to fix market failures. 2. Subsidies are shared by buyers and the sellers according to how responsive each is to price changes. 3. Subsidies always lead to a more efficient allocation of scarce resources. 4. Pigovian subsidies increase economic surplus but non-Pigovian subsidies reduce economic surplus. 5. Non-Pigovian subsidies encourage too much market activity

3) subsidies always lead to a more efficient allocation of scarce resources

When making a decision on the margin, which of the following costs should not be considered? 1. Marginal costs 2. Opportunity costs 3. Sunk costs 4. Phantom costs 5. All of the above should be considered in any cost benefit analysis.

3) sunk costs

What happens if producers of a product are offered a subsidy? 1. Both supply and demand shift to the right. 2. Both supply and demand shift to the left. 3. Supply shifts to the right. 4. Demand shifts to the right. 5. Supply shifts to the left

3) supply shifts to the right

According to the article 'A Taste of a Distant Home, Minus the Chopping,' the business model for gobble.com dates back to: 1. The 1950s 2. The 1980s 3. The 1920s 4. All of the above. 5. None of the above

3) the 1920s

According to the article "Asian Demand Helps Drive Up the Price of Dairy," 1. Chinese consumers have historically had a high demand for dairy products. 2. China tries to insulate its domestic market from international price changes. 3. The U.S., Canada and the European Union try to insulate their domestic markets from international price changes. 4. All of the above 5. None of the above

3) the U.s, canada and the european union try to insulate their domestic markets from international price changes

30. According to the article "The Futility of Price Controls," Emperor Diocletian tried price controls in ancient Rome in the early 4th century. Which of the following methods did he employ to try to enforce these price controls? 1. Monetary fines for anyone violating the price controls. 2. Imprisonment for anyone violating the price controls. 3. The death penalty for anyone violating the price controls. 4. Forfeiture of property for anyone violating the price controls. 5. All of the above

3) the death penalty for anyone violating the price controls

According to the textbook, a society is maximizing the economic pie when it achieves economic efficiency. What would most likely happen if we try to divide the economic pie more equally through, for example, minimum wage laws? 1. There would be no effect on the size of the economic pie. 2. The economic pie would grow. 3. The economic pie would shrink. 4. Every member of the society would be able to buy more of the economic pie. 5. Low-skilled workers would be able to buy more of the economic pie.

3) the economic pie would shrink

According to the article "Booze Tax Could Make Us All Healthier," 1. All the research that has been done on the link between alcohol price and drinking behavior has found that higher prices lead to less drinking. 2. Higher alcohol prices result in lower rates of suicide. 3. The effect of an alcohol tax may differ depending on culture. 4. All of the above 5. None of the above

3) the effect of an alcohol tax may differ depending on culture

According to the article "Booze tax could make us all healthier," which of the following statements is true about the link between alcohol prices and drinking habits of the population? 1. A decrease in alcohol prices always brings an increase in alcohol consumption. 2. A decrease in alcohol prices always brings a decrease in alcohol consumption. 3. The effect that a change in alcohol prices has on alcohol consumption depends on drinking culture of the population. 4. All of the above. 5. None of the above.

3) the effect that a change in alcohol prices has on alcohol consumption depends on drinking culture of the population

9. What is a consumer's reservation price? 1. The price a consumer pays for a good after accounting for opportunity costs 2. The price a consumer would pay for a good if she got to choose the market price 3. The highest price that a consumer would be willing to pay for a good 4. The most recent price that a consumer has paid for a good 5. None of the above

3) the highest price that a consumer would be willing to pay for a good

According to the article "Pain Pills' Littlest Victims," how do hospitals deal with the babies born dependent on drugs? 1. The hospitals follow a single protocol approved by the American Academy of Pediatrics. 2. The hospitals follow different protocols approved by the American Academy of Pediatrics. 3. The hospitals try different treatments and settle on their own approaches. 4. The hospitals send the babies home with their mothers. 5. The hospitals refuse to admit pregnant women who took painkillers during pregnancy.

3) the hospitals try different treatments and settle on their own approaches

14. Seller's reservation price is 1. The highest price a seller is willing to accept for a product. 2. The most recent price a seller accepted for a product. 3. The lowest price a seller is willing to accept for a product. 4. The highest price that a seller has ever accepted for a product. 5. None of the above

3) the lowest price a seller is willing to accept for a product

Who receives the benefit of a subsidy offered to consumers of a product? 1. The subsidy is helpful to buyers since this is a subsidy to consumers. 2. The subsidy is helpful to sellers since the buyers are purchasing more. 3. The subsidy is helpful to buyers and sellers, with the more responsive party receiving less of the subsidy. 4. The subsidy is not helpful to buyers nor sellers because the government is creating a deadweight loss. 5. The subsidy is helpful to buyers and sellers, with the more responsive party receiving more of the subsidy

3) the subsidy is helpful to buyers and sellers, with the more responsive party receiving less of the subsidy

Which of the following would likely occur if workers are offered a subsidy? 1. The equilibrium quantity of labor will decrease. 2. The equilibrium price of labor will increase. 3. The subsidy will be shared by workers and employers. 4. all of the above 5. none of the abov

3) the subsidy will be shared by workers and employers

According to the article "Booze Tax Could Make Us All Healthier," the studies cited and examined by the researchers were conducted mainly in: 1. The United States, 2. Canada 3. The United States, Canada and Scandinavia 4. Denmark 5. Canada and Denmark

3) the united states, canada, and scandinavia

What does the Law of Supply state? 1. Producers produce as many goods as possible in order to satisfy as many needs as possible. 2. Individual producers are each able to change the market supply. 3. There is a positive relationship between price and the quantity that producers are willing to supply. 4. Only producers are allowed to supply goods to the market. 5. Producers can only make a profit when they supply goods.

3) there is a positive relationship between price and the quantity that producers are willing to supply

Which of the following best describes the relationship between equity and efficiency? 1. The more equally a society divides its resources, the more efficient it is. 2. The primary job of economists is to maximize a society's equity, at the expense of efficiency, so that everyone can have a fair amount of the "economic pie." 3. There is often a trade-off between equity and efficiency; oftentimes, for a society to divide its resources more equally, some efficiency needs to be sacrificed, and vice versa. 4. For a society to increase the size of its "economic pie", it should sacrifice efficiency for equity. 5. There is no relationship between equity and efficiency; the two concepts are independent of each other.

3) there is often a trade-off between equity and efficiency; oftentimes, for a society to divide its resources more equally, some efficiency needs to be sacrificed, and vice versa

In your textbook in unit V, the bakery example shows a producer experiencing rising marginal product of labor. Why does MPL rise in this example? 1. This happens because more labor means more output. 2. This happens because the producer has enough equipment. 3. This happens because the workers are able to begin acting as a team and divide the baking tasks among themselves 4. This happens due to the effect of crowing of fixed inputs 5. None of the abov

3) this happens because the workers are able to begin acting as a team and divide the basking tasks among themselves

What is the assumed primary goal of a producer? 1. To maximize revenue 2. To minimize cost 3. To maximize profit 4. To maximize social welfare 5. None of abov

3) to maximize profit

How does a free market determine the equilibrium price of a product and the equilibrium amount of the product that will be bought and sold? 1. Government regulators set the price and sales amounts. 2. Collusion on the part of firms determines the price and sales amounts. 3. Uncoordinated negotiation between buyers and sellers determines the price and sales amounts. 4. Computer programs running economic models determine the price and sales amounts 5. none of the above

3) uncoordinated negotiation between buyers and sellers determines the price and sales amounts

In market economies, such as the United States, how do we determine what goods and services citizens want? 1. Surveys are sent to each home asking residents to list the things they want to consume. 2. By creating a survey, sending to a randomly selected sample of the population. 3. We can look at market prices. If a good or service is desired, it will have a positive market price. 4. A committee of experts uses a market model to predict consumption patterns. 5. None of the above

3) we can look at market prices. if a good or service is desired, it will have a positive market price

If the quantity demanded of a product exceeds the quantity supplied: 1) We know that consumer and producer expectations of costs and benefits are not equal. 2) We know that there will be an excess supply (surplus) of the product. 3) We know that there will be an excess demand (shortage) of the product. 4) We know that we will be in market equilibrium. 5) We know that firms will respond by lowering price.

3) we know that there will be an excess demand (shortage) of the product

Empirical research shows that there is a positive relationship between the price of a product and the quantity producers would like to supply to the market. We call this the Law of Supply. According to this law, what happens when price rises? 1. We see an increase in quantity supplied and an increase in supply. 2. We see a decrease in supply and a decrease in quantity supplied. 3. We see an increase in quantity supplied but no change in supply. 4. We see an increase in supply but no change in quantity supplied. 5. We see an increase in supply but no change in demand.

3) we see an increase in quantity and supplied but no change to supply

Which of the following states the rule for how the benefit of a subsidy gets distributed between buyers and sellers of a product? 1. Whoever is more responsive to price changes gets more of the subsidy. 2. Whoever is less responsive to price changes gets less of the subsidy. 3. Whoever is more responsive to price changes gets less of the subsidy. 4. Regardless of price responsiveness, the subsidy will be shared evenly. 5. Whoever officially is offered the subsidy by the government gets all of the subsidy benefit

3) whoever is more responsive to price changes gets less of the subsidy

Suppose Marcie currently makes $3 million in revenue charging $3 per chocolate bar and selling 1 million chocolate bars. If her Qs rises to 1.5 million chocolate bars and her customers' Qd falls to 0.9 million at a price of $4 per chocolate bar, should she raise her price to $4 per chocolate bar if she wants to maximize her sales revenue? 1. Yes, her sales revenue will rise to $6 million. 2. No, her sales revenue will fall to $2.7 million. 3. Yes, her sales revenue will rise to $3.6 million. 4. Yes, her sales revenue will rise to $4 million 5. Impossible to determine with the information given.

3) yes, her sales revenue will rise to 3.6 million

Suppose you are making a decision using perfect information. Which of the following statements is true about your decision? 1. Your decision will be rational decision but not good. 2. Your decision will be good but not rational. 3. Your rational decision will be a good decision. 4. Your rational decision will be a bad decision. 5. None of the above.

3) your rational decision will be a good decision

Suppose you are running a small business with the following operating expenses. You paid $2000 for a piece of equipment 2 months ago (in January) that you continue to use. It does not depreciate. You hire hourly workers at a rate of $10 per hour and you expect to pay them a total of $6400 for the month of March. You signed a 12 month rental contract for your store location at a rate of $2000 per month and there are 6 months remaining on the contract. You expect to pay a total of $1000 for materials for your product for the month of March. Which of the following statements is correct about your production costs for the month of March? 1. Y our fixed cost is $4,000. 2. Your total cost is $11,400. 3. Your variable cost is $7,400. 4. All of the above. 5. None of the above

3) your variable cost is $7,400

Suppose the government places a tax of $10 per book on sellers of textbooks and as a result we observe an $8 increase in textbook prices. Based on this information we can predict that: 1. 2. 3. 4. 5. 27. The called: 1. 2. 3. 4. 5. |Ed|<1 and Es>1 |Ed|>Es |Ed|<Es |Ed|>0 and Es<0 Both Ed and Es are less than 0 but both |Ed| and |Es| are greater than 0

3) |Ed|<Es

Suppose consumers in a monopolistic market are currently paying $50 per unit for a product, the monopolist is earning $20 in marginal revenue and the monopolist is producing at its profit maximizing production level. Suppose as well that this product would sell for $25 in a perfectly competitive market. How much markup is the monopolist charging per unit? 1. $5. 2. $25. 3. $30. 4. $45. 5. Impossible to determine since no information about the monopolist's marginal cost curve has been given.

3. $30.

uppose you have three mutually exclusive opportunities this weekend. You can spend the weekend in town working; you place a value of $400 on this option. You can travel to Colorado with friends for a ski weekend; you place a value of $300 on this option. You can go home to visit family and friends; you place a value of $500 on this option. What is the opportunity cost of staying in town to work? 1. $300 2. $400 3. $500 4. $800 5. $1200

3. $500

Suppose you open a factory and, using your profit maximizing rule, determine that your maximum profit occurs when you produce 100 units. You also know that the market is perfectly competitive, the prevailing market equilibrium price is $10, the total cost of producing 100 units is $1250 and the variable cost of producing 100 units is $850. Your firm will earn short-run profit of ____ at this production level and will pay _____ in fixed costs if you shut-down operations immediately. 1. $1000; $850 2. -$250; impossible to determine with the information given 3. -$250; $400 4. $0; $0 5. Impossible to determine with the information given

3. -$250; $400

Suppose you are running a business in a perfectly competitive market where the market equilibrium price for your product is $5 and you have chosen to produce 20 units of output. If your ATC of production is equal to $7 and your AVC of production is equal to $4 at this production level then you are making a short-run profit equal to ____ and you should _____. 1. $100; shut down immediately 2. $40; continue to produce 3. -$40; continue to produce at a loss until you can find a way to get rid of fixed inputs 4. $20; continue to produce 5. None of the above

3. -$40; continue to produce at a loss until you can find a way to get rid of fixed inputs

Which of the following is an example of the "voting with dollars problem"? 1. Campaign contribution laws allow the rich to have an undue influence on elections. 2. Online auction sites, such as EBay, don't always allow products to be efficiently allocated because some dollar votes don't get counted due to differences in time zones. 3. A 5 bedroom home is more likely to go to a rich family with 2 kids than to a poor family with 6 kids even though the poor family likely gets more benefit from the house. 4. All of the above 5. None of the above

3. A 5 bedroom home is more likely to go to a rich family with 2 kids than to a poor family with 6 kids even though the poor family likely gets more benefit from the house.

Suppose an economy increases its production efficiency by better using its current resources but does not gain new resources. How would we represent this with our PPF model? 1. An inward shift of the PPF. 2. An outward shift of the PPF. 3. A movement of the production level from a point inside the PPF to another point closer to the PPF. 4. A movement from a point inside the PPF to a point outside the PPF. 5. None of the above, since resources being used more efficiently implies that economic growth has occurred.

3. A movement of the production level from a point inside the PPF to another point closer to

According to the article "Learning to set the Right Price," if you are introducing a new product into the market, sometimes you have to do what when setting the initial price? 1. Determine how much profit you want to make. 2. Find out how much your competitors are charging. 3. Guess. 4. All of the above 5. None of the above

3. Guess.

Which of the following would most likely result in a direct change in the demand for sugar? 1. A sugar shortage. 2. A reduction in the cost of producing sugar. 3. Higher consumer income. 4. Lower sugar prices. 5. All of the above are equally likely to cause a change in the demand for sugar.

3. Higher consumer income.

Suppose new tax rules reduce the number of tax preparers by requiring all tax preparers complete at least two years of college training to get certified. Suppose these same rules increase the difficulty of preparing ones taxes, resulting in more people going to a tax preparer for assistance. What would be the likely impact on the market for tax preparation services? 1. Higher equilibrium price and higher equilibrium quantity 2. Higher equilibrium price but no change in equilibrium quantity 3. Higher equilibrium price but an unpredictable change in equilibrium quantity 4. An unpredictable change in equilibrium price and unpredictable change in equilibrium quantity 5. None of the above

3. Higher equilibrium price but an unpredictable change in equilibrium quantity

When can a country's CPF exceed its PPF? 1. If this country is self-sufficient. 2. If this country has new technology to produce more output. 3. If this country specializes in its comparative advantage and trades with other countries. 4. All of the above. 5. Only 2 and 3.

3. If this country specializes in its comparative advantage and trades with other countries.

Which of the following is true regarding price elasticity of demand? 1. If |Ed| is larger than 1, then the good is price elastic and consumers are less price responsive. 2. If |Ed| is larger than 1, the good is price inelastic and consumers are more price responsive. 3. If |Ed| is larger than 1, the good is price elastic and consumers are more price responsive. 4. Goods that consumers consider to be necessities have larger |Ed| while goods that consumers consider to be luxuries have smaller |Ed|. 5. None of the above.

3. If |Ed| is larger than 1, the good is price elastic and consumers are more price responsive.

According to the textbook, which of the following is a reason for a country to restrict free trade? 1. To make more efficient use of world-wide resources. 2. To protect domestic consumers from high foreign prices. 3. In order to protect domestic consumers from potentially unsafe imports. 4. All of the above. 5. None of the above

3. In order to protect domestic consumers from potentially unsafe imports.

According to the article "Chilly North Sea Comes Back to Life," new technology is resulting in___. 1. An increase in the demand for oil and gasoline. 2. A reduction in the demand for drilling rigs as production shifts to the ocean floor. 3. Increased access to resources which is leading to a shortage of drilling rigs. 4. All of the above 5. None of the above

3. Increased access to resources which is leading to a shortage of drilling rigs.

The monopolist will generally produce ____ and charge a price that is ____ compared to a perfectly competitive producer. 1. Less; lower 2. More; higher 3. Less; higher 4. More; lower 5. None of the above

3. Less; higher

You are analyzing the market for snow shovels in Columbia and find that through an average winter, the equilibrium price of snow shovels in Columbia is $10 and the equilibrium quantity bought and sold is 20,000. However, this winter we are expecting much more snow than usual, which will mean people will need to shovel their driveways more often. In addition, more snow makes it much more costly for shovel companies to ship the shovels to Columbia in shipping trucks. Which of the following is a possible market outcome for shovels this winter? 1. P=$10,Q=25,000 2. P=$8,Q=20,000 3. P=$12,Q=20,000 4. P=$5,Q=30,000 5. None of the above

3. P=$12,Q=20,000

In order to achieve production efficiency, an economy must achieve which of the following? 1. Produce the goods and services that people most want. 2. Produce goods and services without wasting resources. 3. Produce the goods and services that people most want and produce them in a way that doesn't waste resources. 4. Produce the goods and services that people most want, produce them in a way that doesn't waste resources and make sure they go to the people who want them the most. 5. Make sure the goods and services that are produced go to the people who want them the most.

3. Produce the goods and services that people most want and produce them in a way that

According to the article "Can Firms Aim to Do Good if It Hurts Profit?" some producers want to make business decisions that consider the impact on the community and environment. From an economic perspective, we would say that these businesses want to make business decisions that do not maximize their_____ but that do maximize their _____. 1. Profit; positive externalities 2. Accounting profit; economic profit 3. Profit; economic surplus 4. Economic profit; accounting profit 5. None of the above

3. Profit; economic surplus

Suppose that income of consumers in China increases and they buy more cars. According to the textbook, we would expect a shift to the _____ of the demand curve for gasoline and will therefore likely observe _____ Pe and _____ Qe as a result. 1. Right; lower; lower. 2. Left; lower; lower. 3. Right; higher; higher. 4. Left; higher; higher. 5. Right; lower; higher.

3. Right; higher; higher.

Economists generally believe the most efficient way to deal with a positive externality is to: 1. Mandate the purchase of the product so that the amount of the positive externality reaches its maximum value. 2. Tax producers or consumers of the product in the amount of the externality 3. Subsidize producers or consumers of the product in the amount of the externality. 4. Ban the use of the product so that the externality disappears. 5. None of the above

3. Subsidize producers or consumers of the product in the amount of the externality.

According to the article "Booze Tax Could Make Us All Healthier," 1. All the research that has been done on the link between alcohol price and drinking behavior has found that higher prices lead to less drinking. 2. Higher alcohol prices result in lower rates of suicide. 3. The effect of an alcohol tax may differ depending on culture. 4. All of the above 5. None of the above

3. The effect of an alcohol tax may differ depending on culture.

Suppose we have a good for which the demand is perfectly price elastic. If there is a market shock to the supply such that it increases, then we could predict that 1. The new equilibrium price will be higher while the new equilibrium quantity will be the same. 2. The new equilibrium price will be lower while the new equilibrium quantity will be the same. 3. The new equilibrium price will be the same while the new equilibrium quantity will be higher. 4. The new equilibrium price will be the same while the new equilibrium quantity will be lower. 5. We cannot make any prediction due to lack of information.

3. The new equilibrium price will be the same while the new equilibrium quantity will be higher.

Charlie, Dee, Dennis, and Frank all run a small bar in Philadelphia. They hear from a reliable source that as a result of a recent economic recession, people are beginning to reduce their visits to bars, and that this trend of fewer bar visits is going to continue. Their source also tells them that although their bar will remain open, many other bars in the Philadelphia area are going to shut down and will attempt to open a more profitable business instead. If their source is correct, and we can assume that these changes in the market will occur simultaneously, what can Charlie, Dee, Dennis, and Frank expect to happen to the price and sales of drinks in the Philadelphia area? 1. They will be forced to sell their drinks at a lower price to attract customers, and will sell fewer drinks. 2. They will sell their drinks at a higher price, since they have lost competition, but will have fewer customers since bars aren't as popular. 3. They can't be sure what will happen to the price of their drinks, but they can be sure that fewer drinks will be sold in the city of Philadelphia. 4. Since many of the other bars will shut down, they will have less competition, and will sell their drinks at a higher price and to more customers, since customers from other bars will be more likely to visit their bar. 5. They really won't be able to make an accurate prediction as to how the price and quantity of their drinks will change until they actually experience the effects of the market shocks.

3. They can't be sure what will happen to the price of their drinks, but they can be sure that fewer drinks will be sold in the city of Philadelphia.

How do economists determine which country is better at producing a good or service? 1. They pick the country that can produce the larger absolute quantity of the good. 2. They pick the country with the highest opportunity cost. 3. They pick the country with the lowest opportunity cost. 4. They pick the country that can produce most profitably. 5. None of the above

3. They pick the country with the lowest opportunity cost.

In which of the situations would a producer choose to stop production immediately? 1. When MR=MC 2. When P<A TC but P>A VC 3. When P<ATC and P<AVC 4. BothAandB 5. All of the above

3. When P<ATC and P<AVC

Suppose a very small country opens up to free trade with the rest of the world. If the world price of a good is higher than the domestic price of that good within this small country, then when the small country opens up to free trade with the rest of the world, the small country will become an_____ of this good and its domestic price for the good will _____. 1. importer; sell 2. importer; rise 3. exporter; rise 4. exporter; fall 5. impossible to determine with the information given

3. exporter; rise

Suppose Jack works at a company where he earns $50,000 per year. He is considering quitting his job in order to start his own business as a baker. He is able to use a small store he owns that has a market rental rate of $20,000 per year for his business but he has to kick out the current tenants. He expects he'll need to hire two workers at a wage of $20,000 per year per worker to help run the business. He also anticipates spending $10,000 per year on materials. He believes he can charge $5 per loaf for the bread he produces and expects to be able to produce and sell 30,000 loaves per year. How much accounting profit _____ and how much economic profit _____ does Jack expect he could earn from this business baking bread? 1. $50,000; $20,000 2. $150,000; $80,000 3. $100,000; $120,000 4. $100,000; $30,000 5. $120,000; $50,00

4) $100,000; $30,000

Suppose a local factory produces steel, but this steel production causes $100 of pollution for every 1 ton of steel produced. The factory owners don't consider this pollution cost since they do not pay for the cleanup. Clean-up is paid for by the local community. If the factory produces three hundred tons of steel per year, what will be the amount of the Pigovian tax that the government should impose on this factory in order to solve this market failure problem? 1. $100 2. $300 3. $3000 4. $30,000 5. None of the above

4) $30,000

Suppose the price of Coke increases by 5%, which results in the demand for Pepsi rising by 10%. What is the cross price elasticity of demand between Coke and Pepsi? 1. 0 2. +0.5 3. +1 4. +2 5. +5

4) +2

Suppose Pat, an 8th grade social studies teacher in Columbia Public Schools, is considering quitting this year to start a tutoring business called "Pat's Learning Center". Pat is currently paid $60,000 per year for teaching, but expects to earn $110,000 in total revenue from the tutoring business. Pat expects to pay $30,000 for additional workers, $10,000 for supplies and $20,000 for rent. How much economic profit ____ does Pat expect to earn from the tutoring business and is this a normal rate of return ___? 1. $10,000; Yes, this is a normal rate of return. 2. $50,000; No, this is an above normal rate of return. 3. $50,000; Yes, this is a normal rate of return. 4. -$10,000; No, this is a below normal rate of return. 5. none of the abov

4) -$10,000; no, this is a below normal rate of return

Suppose you currently don't own a car and you are trying to decide whether to buy one by comparing the following costs and benefits. You expect to gain benefits of $10,000 from the convenience of having your own car and $3,000 from feeling really proud of your new ride. The car costs $11,000. This car will also result in $6,000 in pollution costs which you don't really care about. The private expected marginal benefit of buying a new 1. 2. 3. 4. 5. car for you is __________ and the private expected marginal cost is ________. $10,000; $17,000. $13,000; $17,000. $10,000; $6,000. $13,000; $11,000. None of the above.

4) 13,000; 11,000

Suppose a market exists with Pe=$10 and Qe=10 million units. If the government decides to make suppliers pay a $3 per unit tax and as a result we observe a change in price to new Pe=$12 and a change in quantity to new Qe=5 million units, then we can calculate the tax effectiveness rate as _____. 1. 200% 2. 120% 3. 100% 4. 50% 5. none of the above

4) 50%

Which of the following statements is true regarding a producer's production costs? 1. A producer's fixed cost of production rises as its production level rises. 2. A producers average fixed cost of production is constant at all production levels. 3. A producer's marginal cost of production is higher for a producer with higher fixed costs of production than for a producer with lower fixed costs of production. 4. A producer's marginal cost of production is lowest where its marginal product is highest. 5. none of the above

4) A producer's marginal cost of production is lowest where its marginal product is highest

Which of the following conditions is necessary to guarantee that the free market outcome is the most economically efficient outcome? 1. Consumers and producers in the market have "perfect information". 2. There exists no externalities in the market. 3. There is perfect competition in the market. 4. All of the above are necessary to ensure that the free market outcome is the most economically efficient. 5. None of the above is necessary to ensure that the free market outcome is the most economically efficient because the free market outcome is always the most economically efficient outcome.

4) All of the above are necessary to ensure that the free market outcome is the most economically efficient

23. Which of the following best defines consumer surplus (CS)? 1. CS is the money consumers have left over after purchasing all of the goods that they want. 2. CS is the difference between the total amount that consumers actually purchase and the amount that they want to purchase. 3. CS is the difference between the quantity consumers want to buy and the amount producers want to sell at a particular price. 4. CS is the difference between the maximum consumers are willing to pay for an item and the amount that they actually have to pay for that item. 5. CS refers to any situation in which the presence of a large number of consumers shifts the demand curve to the right, causing a large increase in equilibrium price and a large increase in equilibrium quantity demanded.

4) CS is the difference between the maximum consumers are willing to pay for an item and the amount that they actually have to pay for that item

If buyers and sellers are responsive to price changes, then taxes and subsidies (assuming they are not Pigovian) create: 1. Extra revenue for the government. 2. Increased producer surplus 3. Increased economic surplus 4. Deadweight loss 5. None of the abov

4) Deadweight loss

Which of the following statements is not true? 1) World production levels increase when countries specialize in their comparative advantage and trade with each other 2) When countries specialize in their comparative advantage there is a better world wide allocation of resources. 3) Both importing and exporting countries benefit from free trade. 4) Free trade is good for every individual within a country. 5) Free trade results in increased competition which generally drives down prices.

4) Free trade is good for every individual within a country.

Which of the following, if any, provides a good economic argument for patent protection on pharmaceuticals? 1) With patent protection, we are guaranteed that P = ATC. 2) With patent protection, we are guaranteed that P < ATC. 3) With patent protection, we are guaranteed that P > ATC. 4) If we get rid of patent protection, there will be less of an incentive to invest into new advancements in medical treatments. 5) There is no reason that we should have patents because they likely for a monopoly, causing P > A TC.

4) If we get rid of patent protection, there will be less of an incentive to invest into new advancements in medical treatments.

According to the article "With Venezuelan Food Shortages, Some Blame Price Controls," price controls: 1. Are used only for luxury goods. 2. Are used only for necessities. 3. Are used only for products that sell for exorbitant prices. 4. Make products hard to find. 5. None of the above

4) Make products hard to find

Suppose the labor market is in a socially optimal free market equilibrium with Pe=$8 per hour and Qe=8 million hours of employment demanded and supplied. Suppose now that the government decides to make workers pay a $4 per hour tax when they supply their labor to the market and we observe an increase in the buyer's price to Pb=$9 per hour and resource misallocation of 2 million hours too few bought and sold. Based on this information we know that the seller's price will be ____ and that tax effectiveness rate will be equal to _____. 1. Ps=$13; 133% 2. Ps=$8; 133% 3. Ps=$9; 25% 4. Ps=$5; 75% 5. None of the above

4) Ps=$5; 75%

Which of the following is correct regarding economic profit? 1. When economic profit is negative, the firm must declare bankruptcy. 2. When we calculate economic profit we include only implicit costs. 3. Economic profit will always be larger than accounting profit. 4. A business making a normal rate of return is making efficient use of its resources. 5. All of the above

4) a business making a normal rate of return is making efficient use of its resources

Which of the following is most likely to illustrate an example of an externality? 1. A person is willing to work at a firm but not currently employed there. 2. A person is considering purchasing a product but then chooses a new option. 3. A person receives an additional income, unrelated to his/her job. 4. A person is playing music loudly in a dorm room, ignoring the fact that it affects his/her roommates' studying. 5. All of the above.

4) a person is playing music loudly in a dorm room, ignoring the fact that it affects his/her roommates studying

A decrease in the supply of a product is always represented by: 1. A movement upwards on the supply curve. 2. A movement downwards on the supply curve. 3. A shift to the right in the supply curve 4. A shift to the left in the supply curve 5. None of the above

4) a shift to the left in the supply curve

Which of the following could be a reason for the government to offer buyers or sellers in a market a subsidy? 1. To encourage market activity 2. To fix a market failure 3. To reduce a Deadweight loss 4. Above all 5. None of al

4) above all

18. Which of the following government policies can be considered to be a form of price control? 1. Minimum wage 2. Rent control 3. Agricultural price supports 4. All of the above 5. None of the above

4) all of the above

3. Consumer surplus: 1) is equal to a consumer's reservation price minus the price paid for a product 2) is equal to the amount of economic surplus a consumer has after making a consumption decision 3) the area under the demand curve and above the price paid 4) all of the above 5) none of the above

4) all of the above

36. According to the article "Majority of Americans Support Price Controls on Gas," 1. Gallup polls indicate that a majority of Americans now support drilling in U.S. coastal and wilderness areas. 2. Right now, gas in the U.S. is being rationed by price. 3. Gallup polls indicate that some Americans support releasing supplies from the federal government's strategic petroleum reserve. 4. All of the above. 5. None of the above.

4) all of the above

According to the article "A Place for Cost-Benefit Analysis", environmentalists often distrust the use of cost benefit analysis because they believe that: 1. CBA is anthropocentric: they only value human life and not animal life. 2. CBA tells us to sacrifice the one for the sake of the many. 3. CBA treats all values as mere commodities. 4. All of the above. 5. Only (1) and (2).

4) all of the above

According to the article "EPA Knocks $900,000 off Value of a Life", which of the following methods of valuing a human life is used by insurance agencies and in wrongful death lawsuits? 1. Earnings capacity: how much money could the person have earned? 2. How much could the person have contributed to society? 3. How much was the person loved by family and friends? 4. All of the above. 5. None of the above.

4) all of the above

According to the article "Hog Prices Wallow Near 2‐Year Low," the recent drought in the U.S. has led to: 1. Higher prices for corn and soybeans which are often used to feed hogs. 2. A reduction in the price of hogs. 3. Farmers "thinning their herds" of hogs. 4. All of the above 5. None of the above

4) all of the above

According to the article "How Much Is Your Time Worth", you may decide to change the oil in your car on your own: 1. Even if it costs you more than paying a mechanic to change the oil as long as you enjoy changing the oil yourself. 2. Even if you dislike changing the oil yourself as long as it costs you less in time and supplies than you would pay a mechanic to change the oil for you. 3. And this might be a bad decision for you if you miscalculate your true costs and benefits of changing the oil yourself. 4. All of the above. 5. None of the above.

4) all of the above

According to the article "Obama Tax Hikes," which of the following statements describe the results of the Obama tax plan? 1. Slower economic growth 2. Fewer jobs 3. More unemployed Americans 4. All of the above 5. None of the abov

4) all of the above

According to the article "The Extraordinary Science of Addictive Junk Food," what are the ingredients of Lunchables, Oscar Mayer's product? 1. Sliced bologna and ham 2. Processed cheese 3. Crackers 4. All of the above 5. Only (1) and (3)

4) all of the above

According to the article "The Extraordinary Science of Addictive Junk Food," what makes potato chips the perfect addictive food? 1. A coating of salt 2. A fat content that rewards the brain with instant feelings of pleasure 3. Sugar in the starch of the potato 4. All of the above 5. Packaging

4) all of the above

According to the article "The Extraordinary Science of Addictive Junk Food," what were moral considerations for Howard Moskowitz when he was helping food companies create the greatest amount of crave? 1. He did not see any moral issues in it 2. He had to survive and could not afford to be a moral creature 3. He had no qualms about his own work 4. All of the above 5. None of the above

4) all of the above

According to the article "The Futility of Price Controls," prices of which of the following goods cannot be controlled for any length of time? 1. The prices of farm commodities due to their dependence on the weather 2. Prices of energy and raw materials due to their co-movement with international prices 3. Prices of exported goods due to implied stupidity of giving foreigners a gift of lower price on exported goods 4. All of the above 5. None of the above

4) all of the above

According to the article "The Rock and the Hard Place on the Deficit," 1. Spending cuts will slow economic recovery in the near term. 2. Tax increases will slow economic recovery in the near term. 3. Spending cuts will likely slow economic recovery in the near term more than tax increases will slow economic recovery. (note: there was a typo in this choice so we will be looking at a way to give credit back to students who chose the wrong answer because of this typo. We'll send an announcement when we figure out how we will be able to do this.) 4. All of the above 5. None of the abov

4) all of the above

According to the article "The Rock and the Hard Place on the Deficit," which of the following statements are true about the study done by Christina and David Romer? 1. Prominent Reagan-era supply-side economists hypothesized that a tax increase would lead to a reduction in tax revenues. 2. A large number of academic studies have found that the impact of higher tax rates on economic growth are relatively small. 3. Higher tax rates reduce the rewards of work and investing. 4. All of the above. 5. None of the abov

4) all of the above

According to the article "The Skinny on Taxing Fatty Foods," what are some of the similarities between consumption of cigarettes and consumption of fatty foods? 1. Increased risk of chronic disease and premature death 2. Aggressive marketing campaigns by the industries producing these goods 3. Additives put into the products to trigger addictive cravings 4. All of the above 5. None of the above

4) all of the above

According to the article 'Driving Directions: What to Charge for a Charge?' what are the reasons for charging a fee at charging stations? 1. To cover the cost of equipment 2. To cover the cost of maintenance 3. To force people to move their cars when the charge is completed 4. All of the above 5. None of the abov

4) all of the above

According to the article 'Driving Directions: What to Charge for a Charge?' what should be taken into account when determining the appropriate price for a charge? 1. Higher prices can discourage public charging. 2. How high the charging price is relative to the price of gasoline. 3. High price can wipe out the savings inherent in operating an electric vehicle. 4. All of the above. 5. None of the above

4) all of the above

According to the article 'Driving Directions: What to Charge for a Charge?' when do people often use public chargers to top off their electric car batteries? 1. While people are shopping 2. While people are at a movie 3. While people are at work 4. All of the above 5. Only1and2

4) all of the above

According to the article, "Device Makers Add Fee to Cover Health Tax," the new health care law makes medical device makers (producers) pay a tax of 2.3% to help finance the health care system and as a result we know that: 1. These device producers are passing at least some of this new tax on to their device customers. 2. Hospital executives (device customers) say they are also footing the bill for this tax as they sign new contracts to buy medical devices with higher prices. 3. Some medical device producers are explicitly passing this tax onto their customers as a "medical device adjustment" surcharge and some are quietly "baking it into the contract." 4. All of the above 5. None of the abov

4) all of the above

According to the textbook, which factor can cause a supply curve to shift? 1. A change in production cost 2. A reduction in the number of producers 3. Advanced technology that can increase worker productivity 4. All of the above 5. None of the above

4) all of the above

According to the textbook, which of the following market shocks can result in a change in the demand for a product? 1. A decrease in consumer income 2. A change in consumer preferences 3. A change in the price of related goods 4. All of above 5. None of above

4) all of the above

Economists distinguish between "positive statements" and "normative statements." Which of the following is an accurate statement regarding these two kinds of statements? 1. Normative statements often include words such as "should," "ought," "good," or "fair." 2. A positive statement can be a wrong statement. 3. The statement, "Some states in the U.S. increase their state minimum wage each year based on changes in the rate of inflation," is an example of a positive statement. 4. All of the above. 5. None of the above

4) all of the above

Economists generally dislike government intervention in the free market but do allow for some role for the government in the economy. Which of the following is a government role that can possibly be justified by economists as a way to improve market efficiency? 1. Defining and protecting property rights. 2. Providing consumers with access to better information to make better consumption choices. 3. Dealing with externalities by inducing market participants to internalize them through Pigovian taxes/subsidies. 4. All of the above 5. None of the above.

4) all of the above

If a market is not currently in equilibrium, we can get to the equilibrium outcome by: 1. reducing price if there is an excess supply. 2. increasing price if there is an excess demand 3. allowing unhindered negotiation between buyers and sellers. 4. All of the above 5. None of the above

4) all of the above

Sunk costs are: 1. costs that have already been incurred and cannot be recovered. 2. costs that need to be ignored when people make decisions. 3. costs that cannot be changed by any decisions made in the future. 4. All of the above. 5. None of the above

4) all of the above

Suppose a producer can produce 120 units of output when it hires 3 workers and 160 units of output when it hires 4 workers. Which of the following statements is correct regarding this producer? 1. The marginal productivity of the 4th worker is 40 units. 2. The average productivity of labor is equal to the marginal productivity of labor when 4 workers are hired. 3. The average productivity of the 3rd worker is 40 units. 4. All of above. 5. None of above

4) all of the above

Suppose buyers in a market have received a $1000 per unit subsidy from the government and that as a result of this subsidy the market equilibrium price rose by $500. Based on this information, which of the following could possibly be the values of Ed and Es? 1. -0.5; 0.5 2. -2; 2 3. -1/4; 1/4 4. All of the above 5. None of the

4) all of the above

What is the relationship between economic cost, opportunity cost, explicit cost and implicit cost? 1. opportunity cost= economic cost 2. opportunity cost= explicit cost + implicit cost 3. economic cost= explicit cost + implicit cost 4. All of the above 5. None of the abov

4) all of the above

When we use the demand and supply model to prove that the free market outcome is the most economically efficient, which of the following assumptions are we making? 1. Decision makers have perfect information. 2. There are no externalities. 3. Perfect competition exists in the market. 4. All of above 5. None of the above

4) all of the above

Which of the following could result in a market failure? 1) Imperfect information 2) Externalities 3) Imperfect competition 4) All of the above 5) None of the above

4) all of the above

Which of the following describes the average fixed cost of production? 1. It is the difference between the average total cost and the average variable cost. 2. It varies with production level. 3. It decreases as production level increases. 4. All of the above 5. None of the above

4) all of the above

Which of the following is true regarding a consumer's reservation price? 1. It is the highest price a consumer is willing to pay for a good. 2. We can obtain a consumer's reservation price for a good from the market demand curve for that good. 3. It is determined by the marginal benefit the consumer expects to get from the consumption of the good. 4. All of the above. 5. None of above

4) all of the above

f two countries specialize in producing just those goods in which they each have the comparative advantage then we can predict that ____. 1. There will be a better allocation of world-wide resources. 2. Total world-wide production will increase. 3. Each country has the opportunity to increase its consumption of goods and services. 4) all of the above 5. None of the above

4) all of the above

Which of the following statements about marginal productivity of labor (MPL) is correct? 1. MPL measures how much extra output is produced by a firm when it hires one more unit of labor. 2. MPL can increase if a firm benefits from teamwork and specialization by its workers. 3. MPL can decrease if a firm hires too many workers and crowds its fixed inputs 4. All of the above 5. None of the abov

4) all of the abover

Which of the following gives an example of a business experiencing crowding of its fixed inputs? 1. Only one waiter shows up for work and has to wait on the entire restaurant alone. 2. A company facing a tight deadline hires additional workers to help the original workers get the project completed on time. 3. Two employees are working together on a project for the business. 4. An employee has to wait for a turn at the cash register because another employee is currently using it. 5. None of the Abov

4) an employee has to wait for a turn at the cash register because another employee is currently using it

Suppose you opened a textbook factory and hired 4 workers. After producing for a period of time, you notice that the marginal productivity of the 3rd worker is 10, and the marginal productivity of the 4th worker is 15. You expect that you would continue to benefit from teamwork and specialization if you were to add a 5th worker to your production process. If that is true, what is the most reasonable expectation for the marginal product of the 5th worker? 1. At most 10. 2. At least 10. 3. At most 15. 4. At least 15. 5. Exactly 15

4) at least 15

Which of the following is the main difference between long-run and short-run production decisions? 1. In the long-run, a firm has more production costs than in the short-run. 2. Outputs are more durable in the long-run. 3. All inputs are fixed in the short-run. 4. At least one input is fixed in the short run 5. The cut-off between the short-run and the long-run is one year for all businesses

4) at least one input is fixed in the short run

Which of the following is always decreasing as quantity produced is increasing? 1) Marginal cost 2) Average total cost 3) Average variable cost 4) Average fixed cost 5) Each of the above can either increase or decrease as quantity increase

4) average fixed cost

Suppose the unskilled labor market is experiencing no initial market failure, has Pe=$7.50 and Qe=59 million hours. If the government imposes a minimum wage on this market and as a result we observe that employment falls to 57 million hours, then we know that this minimum wage was a _____ and the labor market experienced a resource misallocation equal to _____. 1. Binding price floor or non-binding price ceiling; impossible to determine without knowing what happened to Qd and Qs. 2. Binding price floor if placed above Pe but a binding price ceiling if placed below Pe; 2 million hours of employment too few bought but we don't know how many hours too many sold. 3. Binding price ceiling; more than 2 million hours of labor too few bought and sold 4. Binding price floor; 2 million hours of labor too few bought and sold. 5. None of the above

4) binding price floor; 2 million hours of labor too few bought and sold

Which of the following statements refers to calculation of economic profit? 1. Total Revenue - Economic Cost 2. Total Revenue - (Explicit Cost + Implicit Cost) 3. Total Revenue - Marginal Cost 4. Both 1 and 2 5. None of the abov

4) both 1 and 2

According to the article "The Extraordinary Science of Addictive Junk Food," what were the food companies' products linked to by Yale University professor of psychology and public health Kelly Brownell? 1. Video games 2. Recreational drugs 3. Addictive prescription drugs 4. Cigarettes 5. None of the above

4) cigarettes

17. The reduction in economic surplus that results from the misallocation of resources is called: 1. Economic loss 2. Consumer loss 3. Producer loss 4. Deadweight loss 5. None of the above

4) deadweight loss

f a business incurs explicit costs of $150,000 for the year, what do we know about its economic cost of doing business? 1. Economic cost is $150,000 2. Economic cost is greater than $150,000 3. Economic cost is less than $150,000 4. Economic cost is at least $150,000 5. Not enough information is provided to answer this questio

4) economic cost is at least $150,000

Assuming buyers and sellers are price responsive, what will be the impact of a simultaneous demand decrease and a supply increase on equilibrium price and equilibrium quantity? 1. Equilibrium price decreases and equilibrium quantity decreases. 2. Equilibrium price decreases and equilibrium quantity increases. 3. Equilibrium price may either increase or decrease and equilibrium quantity may either increase or decrease. 4. Equilibrium price decreases and equilibrium quantity may either increase or decrease. 5. Equilibrium price may either increase or decrease, and equilibrium quantity decreases.

4) equilibrium price decreases and equilibrium quantity may either increase or decrease

Which of the following is true regarding a producer's cost of production? 1. Implicit cost is equal to opportunity cost. 2. Explicit cost is equal to non-opportunity cost. 3. Implicit cost is equal to economic cost. 4. Explicit cost is equal to accounting cost. 5. All of the abov

4) explicit cost is equal to accounting cost

What do economists mean when they refer to producers using a 'capital intensive production method"? 1. Firms buy a lot of machinery. 2. Firms have high level of market capitalization. 3. Firms make their production decisions only using computerized algorithms. 4. Firms produce using a lot of machinery and very few workers. 5. None of the above.

4) firms produce using a lot of machinery and very few workers

What do economists mean when they refer to producers using a 'labor intensive production method"? 1. Firms make their workers work really hard. 2. Employers allow their workers to make many of the critical production decisions. 3. Firms outsource production to foreign countries. 4. Firms produce using many workers and not much machinery. 5. None of the above.

4) firms produce using many workers and not much machinery

According to the article "Pain Pills' Littlest Victims," the problem of drug-dependent babies is acute in which of the following states? 1. West Virginia 2. Kentucky 3. Tennessee 4. Florida 5. Missouri

4) florida

Suppose the City of Columbia want to help low-income workers in the construction trade. Which policy would be more beneficial to the workers: a $2 per hour subsidy given directly to workers or a $2 per hour subsidy given to employers who hire these workers? 1. It is always best to provide the subsidy directly to the worker to ensure the worker gets the full benefit of the subsidy. 2. It is always best to provide the subsidy directly to the employer to ensure that the taxes get paid on the extra income earned. 3. It doesn't matter whether the subsidy goes directly to the worker or the employer. The subsidy will always be shared equally by the two groups. 4. It doesn't matter whether the subsidy goes directly to the worker or the employer. The subsidy will be shared according to how responsive each is to price of labor changes. 5. None of above

4) it doesn't matter whether the subsidy goes directly to the worker or the employer. the subsidy will be shared according to how responsive each is to price of labor changes

Which of the following best describes a "tax wedge"? 1. It is the difference between the tax rate paid by the rich and the rate paid by the poor. 2. It is the area between the old demand curve and new demand curve after it has been shifted by a tax. 3. It is the difference between the total amount of tax paid by sellers and the total amount of tax paid by buyers. 4. It is the difference between the price that sellers receive (and pocket) and the price that buyers pay (out of pocket) after a tax has been imposed on a market. 5. It is the deadweight loss that occurs as a result of a tax

4) it is the difference between the price that sellers receive and the price that buyers pay after a tax has been imposed on a market

What would we expect to happen if we observe a market currently experiencing an excess supply? 1. The price of the product will increase. 2. The market will never reach the equilibrium. 3. The quantity supplied will increase. 4. Market price will fall, leading to higher Qd and lower Qs. 5. The supply will decrease.

4) market price will fall, leading to higher Qd and lower Qs

According to the article "Obama Tax Hikes," 1. The fundamental tax policy of the U.S. has been to increase tax burdens. 2. In Congress, there is bipartisan understanding that higher tax rates support stronger economic growth. 3. Bush-era tax policies likely weakened the macro economy. 4. No Congress has voted to raise significant sums of new tax revenues since 1996. 5. All of the abov

4) no congress has voted to raise significant sums of new tax revenues since 1996

Suppose a paper producer causes environmental damage in the amount of $1 for each 1,000 sheets of paper it produces. If the paper producer considers this damage to the environment when making its production decision, then which of the following is true? 1. A $1 Pigovian tax needs to be placed on the paper producer for each 1000 sheets of paper it produces. 2. This paper producer is choosing to produce more paper than society would optimally like it to produce. 3. This market is experiencing a market failure. 4. No Pigovian tax is needed to get paper production to the socially optimal level. 5. All of the above except for choice 4.

4) no pigovian tax is needed to get paper production to the socially optimal level

What do economists mean when they assert that people are rational? 1. People put a great deal of consideration into all choices made. 2. People make the best choices after consulting an expert. 3. People will make their choices randomly. 4. People make decisions in a consistent manner. 5. People make decisions that minimize their opportunity costs.

4) people make decisions in a consistent manner

How is the market price for a good determined in a competitive market? 1. Producers choose the price. 2. Consumers choose the price. 3. The government chooses the price. 4. Producers and consumers negotiate the price. 5. Economists choose the price.

4) producers and consumers negotiate the price

19. Which of the following results in deadweight loss? 1. Imperfect information 2. Market failure 3. Externalities 4. Resource misallocation 5. None above

4) resource misallocation

According to the article "How to Keep the Public Shopping," people who are depressed or having a bad day may go on shopping sprees because: 1. Sadness results in an inability to understand the value of money. 2. Sadness results in an inability to control behavior. 3. Depression results in an Endowment Effect. 4. Sadness reverses the Endowment Effect. 5. None of the above

4) sadness reverses the endowment effect

A tax on employers of labor will: 1. Shift the labor demand curve to the right. 2. Shift the labor supply curve to the left 3. Shift the labor supply curve vertically down. 4. Shift the labor demand curve to the left 5. None of the abov

4) shift the labor demand curve to the left

According to the article "Making a Difference", what kind of business did Joe Edwards initially open in The Loop? 1. Night club 2. Art gallery 3. Dance studio 4. Small restaurant and bar 5. None of the above

4) small restaurant and bar

According to the article "Booze tax could make us all healthier," which of the factors that the described study examined was NOT influenced by alcohol prices? 1. Alcohol-related mortality 2. Deaths from traffic accidents 3. Sexually transmitted diseases 4. Suicide rate 5. Violence and crime rates

4) suicide rate

What is a "tax wedge"? 1. The difference between Democratic and Republican desired tax policy. 2. The difference between the highest and lowest marginal tax rate used in the United States. 3. The amount of resource misallocation that is caused by tax policy. 4. The difference between the buyer's price and seller's price that arises as a result of taxing a market. 5. The difference between consumer surplus and producer surplus that arises as a result of taxing a market

4) the difference between the buyer's price and seller's price that arises as a result of taxing a market

If we impose a tax on workers: 1) the entire tax burden will be borne by workers 2) the labor supply curve will shift to the right. 3) there will be no deadweight loss. 4) the equilibrium price of labor will probably increase. 5) none of the above

4) the equilibrium price of labor will probably increase

What do economists mean when they speak of a market failure? 1. The free market has failed to satisfy all potential consumers. 2. The free market has failed to satisfy all potential consumers and all potential producers. 3. The free market has failed to raise the maximum possible tax revenue for the government. 4. The free market has failed to efficiently allocate society's scarce resources. 5. None of the above

4) the free market has failed to efficiently allocate society's scare resources

What is the deadweight loss? 1. The amount of money the government takes from a market via taxes 2. The value of faulty goods that a producer produces 3. The value of goods that consumer purchase but do not benefit from 4. The lost economic surplus due to a misallocation of resources 5. The sum of all consumer and producer costs in a market

4) the lost economic surplus due to a misallocation of resources

5. Suppose a market currently has Pe=$7 and Qe=6 million units. If a price floor is placed on this market that results in quantity demanded falling to Qd=5 million units and the quantity supplied rising to Qs=8 million units, then we know that: 1. Deadweight loss is equal to 1 million units too few. 2. Resource Misallocation is 2 million of hours too many bought and sold. 3. There will be an excess supply of 2 million units. 4. The market will end up with 5 million units bought and sold. 5. All of the above

4) the market will end up with 5 million units bought and sold

The difference between the short-run production process and the long-run production process is 1. Productivity level 2. Marginal cost 3. Total profit 4. Number of fixed inputs 5. All of the abov

4) the number of fixed inputs

The amount of sales revenue earned by a firm will be equal to: 1. Its opportunity costs 2. Its opportunity costs minus its sunk costs 3. Its profits minus its sunk costs 4. The price it charges per unit multiplied by the total number of units it sells. 5. None of the above

4) the price it charges per unit multiplied by the total number of units it sells

Suppose Jordan enjoys hamburgers from both McDonalds and Burger King restaurants. Currently a hamburger sells for $1 at each restaurant and he currently purchases 10 hamburgers each month from each restaurant. Suppose that McDonalds now raises its price to $2 per hamburger and Jordan decreases his McDonalds hamburger purchases. We would say he made this purchase change as a result of___. 1. The substitution effect. 2. The income effect 3. The expenditure effect 4. The substitution effect and the income effect 5. The substitution effect, the income effect, and the expenditure effect

4) the substation effect and the income effect

What does the "short-run" mean for a producer? 1. The time when a producer has no competition 2. The first 12 months after a producer has started producing goods 3. The final 3 months before a producer goes bankrupt 4. The time when a producer has at least one fixed production input 5. The time when specialization is still possibl

4) the time when a producer has at least one fixed production input

Due to a change in market supply equilibrium price changed from $1 to $2 and equilibrium quantity changed from 10 units to 5 units. Which of the following statement is correct about this market? 1. There was an increase in market supply; market demand is price elastic. 2. There was a decrease in market supply; market demand is price elastic. 3. There was an increase in market supply; market demand is price inelastic. 4. There was a decrease in market supply; market demand is price inelastic. 5. None of the above.

4) there was a decrease in market supply; market demand is price inelastic

According to the articles, which of the following is true with respect to how government agencies value a human life saved? 1. They each place exactly the same value on a life saved. 2. They each use the same method of calculating the value of a life saved. 3. They sometimes determine that the value of a life saved is priceless, although they sometimes place a monetary value on improving a person's health or reducing injury. 4. They each use a different method of calculating the value of a life saved and as a result place a different value on a life saved. 5. None of the above.

4) they each use a different method of calculating the value of a life saved and as a result place a different value on a life saved

According to the article "EPA Knocks $900,000 off Value of a Life", which U.S. government agency traditionally places the highest value on human life when using cost benefit analysis? 1. U.S. Department of Transportation 2. U.S. Department of Agriculture 3. The National Association of Clean Air Agencies 4. U.S. Environmental Protection Agency 5. None of the above

4) u.s. environmental protection agency

If consumers and producers are responsive to price changes, then what can we expect to happen to the market equilibrium price and quantity bought and sold if a market is hit by a simultaneous increase in both demand and supply? 1. Both Pe and Qe increase 2. Pe decreases and Qe increases 3. Pe increases but we cannot predict the change in Qe 4. We cannot predict the change in Pe, but Qe increases 5. None of the above

4) we cannot predict the change in Pe, but Qe increases

What are the only two differences we observe in a market when a government chooses to tax a buyer versus when it chooses to tax a seller? Assume no initial market failure. 1. Whether Pb rises or falls; whether Ps rises or falls 2. Whether RM is too many or too few units bought and sold; whether DWL is positive or negative 3. Whether Pe rises or falls; whether Qe rises or falls 4. Whether Pe rises or falls; whether demand shifts or supply shifts 5. None of the abov

4) whether Pe rises or falls; whether demand shifts or supply shifts

If we place a tax on a product, who will bear more of the burden of the tax? 1. The demanders of a good always pay more of the tax burden. 2. The suppliers of a good always pay more of the tax burden. 3. Whoever is more responsive to price changes pays more of the tax burden. 4. Whoever is less responsive to price changes pays more of the tax burden. 5. The demanders of a good and the suppliers of a good always split the tax burden equally

4) whoever is less responsive to price changes pays more of the tax burden

Suppose that a firm is a natural monopoly. The monopoly charges a price of $400 when it produces 1000 units. At this production level AVC = $100 and FC = $200,000 and economic profit is ____. If the government imposes the average cost pricing regulation on the firm, then the break-even price this firm would have to charge is equal to_____. 1. $300,000; $120 2. $300,000; $300 3. $100,000; $120 4. $100,000; $300 5. None of the above

4. $100,000; $300

Suppose a firm is maximizing its profit at a production level of 60 units and at this production level it has average total production costs of $20, average variable production costs of $10 and earns marginal revenue of $15. If this firm is producing in a perfectly competitive market, then the firm is earning a profit of ____ and in the short-run it should ____. 1. -$600; shut down immediately 2. $1200; continue to produce 3. $600; continue to produce 4. -$300; continue to produce 5. Impossible to determine with the information given

4. -$300; continue to produce

Which of the following models would be considered to be the best economic model? 1. A model of the textbook market that creates an exact replica of the conditions within the textbook market. 2. A model with no simplifying assumptions. 3. A model which is easy to use, contains no unnecessary assumptions, and has a 50% accuracy rate in making predictions. 4. A model of the bread market that predicts market equilibrium price and sales with a 100% accuracy rate. 5. Impossible to choose among the above choices

4. A model of the bread market that predicts market equilibrium price and sales with a 100% accuracy rate.

Which of the following statements about monopolistic markets is not true? 1. A monopolist is considered to be a price maker. 2. There must be barriers keeping out new producers. 3. A monopolist can earn a positive economic profit as well as positive accounting profit in the short-run and in the long-run. 4. A monopolist cannot make an economic loss since it can charge any price it wants. 5. None of these statements is false.

4. A monopolist cannot make an economic loss since it can charge any price it wants.

Suppose new immigration law makes it easier for immigrants to obtain legal residency if they are willing to set up new businesses in the U.S. Suppose many of these immigrants set up businesses producing clothing. What will be the likely impact on the clothing market in the U.S.? 1. Both an increase in the supply and a decrease in the demand for clothing, with an unpredictable change in the price of clothing. 2. An increase in the quantity of clothing supplied, resulting in higher price. 3. A shift of the clothing supply to the left, resulting in higher clothing price. 4. A shift of the clothing supply to the right, resulting in lower clothing price. 5. None of the above

4. A shift of the clothing supply to the right, resulting in lower clothing price.

Which of the following is not considered a capital resource? 1. A delivery vehicle used by a flower delivery business. 2. A sewing machine used by a tailoring shop. 3. Robotic equipment used in an auto factory 4. A truck used by a family for personal use. 5. All of the above are considered to be capital resources.

4. A truck used by a family for personal use.

A bike shop's fixed cost of production is $2000 and labor is the only variable cost of production. The wage for one worker is $400 per week. The bike shop is currently employing two workers and it produces 40 bikes per week. What is the shop's average variable cost (AVC) and average total cost (ATC) per week? 1. AVC=20andATC=50 2. AVC=10andATC=60 3. AVC=20andATC=40 4. AVC=20andATC=70 5. AVC=50andATC=70

4. AVC=20andATC=70

If a small country producing wheat has a domestic price of wheat that exceeds the world price of wheat, then we can predict that___ if the country opens up to free trade. 1. The country will become a wheat importer 2. Domestic consumers within the country will pay a lower price for wheat 3. Domestic producer surplus for wheat producers will fall 4. All above 5. None of the above

4. All above

A natural experiment: 1. Is not part of a controlled experiment. 2. Occurs in everyday life and provides the economist with data. 3. Is often used by an economist to test economic hypotheses. 4. All of the above 5. None of the above

4. All of the above

According to the article "Land for Learning," some members of Congress opposed the bill on the grounds that it: 1. Gave the federal government too much control over land in the states. 2. Would drive up land prices and hurt homesteaders. 3. Was too expensive. 4. All of the above 5. None of the above

4. All of the above

According to the article "The Future of Agriculture May Be Up," vertical farming: 1. May result in a reduction in pollution since food can be grown closer to urban consumers. 2. May result in a reduction in pollution since less fertilizer and less herbicide is needed on food grown indoors. 3. May be more costly than food grown in the traditional method. 4. All of the above 5. None of the above.

4. All of the above

According to the article "Where Airfares are Taking Off," which of the following airline mergers have occurred since 2008? 1. United and Continental 2. Delta and Northwest 3. Southwest and AirTran 4. All of the above 5. None of the above

4. All of the above

According to the article 'Land for Learning,' what was the reason for the country's slow economic growth in the first half of the nineteenth century? 1. The lack of education of the proprietors of the soil 2. The paucity of education in the mechanical arts 3. The lack of training of farmers and industrial workers 4. All of the above 5. None of the above

4. All of the above

For a country to be producing on its production possibilities frontier, and not inside its production possibilities frontier, it must: 1. Not be experiencing any unemployment. 2. Not have any workers sitting at home when they could be working. 3. Be employing child labor. 4. All of the above 5. None of the above

4. All of the above

Suppose the world price of cars is $20,000 per car but the domestic price of cars within a country that is completely closed to free trade is $30,000 per car. If this country takes down its trade restrictions and opens up to free trade with the rest of the world, we can expect: 1. Domestic car producers will lose sales. 2. Domestic car consumers will get more economic surplus from their car purchases. 3. Domestic car workers will lose employment opportunities. 4. All of the above 5. none of the above

4. All of the above

Suppose you see an advertisement for a concert this weekend. You want to attend but you find that the concert sold out within an hour of tickets going on sale. Approximately 150 people were turned away from the box office, unable to get tickets before the concert sold out. What does this tell us? 1. Official ticket price was set too low. 2. This market is not in equilibrium. 3. A higher ticket price would increase economic efficiency. 4. All of the above 5. None of the above

4. All of the above

When countries trade with each other according to our trade advice of producing what they have the comparative advantage in, we say the world experiences a gain from trade. Which of the following gains would the world experience? 1. More efficient use of limited world-wide resources. 2. Increased economic pie. 3. Greater consumption of goods and services by consumers around the world. 4. All of the above 5. Only1and2

4. All of the above

Which of the following statements is correct regarding oligopolistic markets? 1. It is closer to the monopoly extreme than to the perfectly competitive market extreme. 2. Firms have a strong incentive to engage in non-competitive collusive behavior. 3. Firms may engage in firm level advertising. 4. All of the above 5. None of the above

4. All of the above

Which of the following would be considered by an economist to be a positive statement? 1. People are rational. 2. The existence of externalities results in market failure. 3. People are irrational. 4. All of the above 5. None of the above

4. All of the above

If we draw a picture of a country's PPF as a straight line with a constant slope, then we are assuming that ____. 1. Resources within the country are identical in production. 2. The country has a constant opportunity cost of producing the good on the horizontal axis. 3. The country has a constant opportunity cost of producing the good on the vertical axis. 4. All of the above. 5. None of the above.

4. All of the above.

In the trade model we draw each country's production possibilities frontier as a straight line. Based on this statement, which of the following statements is accurate? 1. We are assuming that resources are identical in production. 2. This is a simplifying assumption that makes the model easier to work with. 3. This means each country has constant opportunity cost of production. 4. All of the above. 5. None of the above.

4. All of the above.

Suppose China and the United States wish to engage in free trade. China has the comparative advantage in textile production and the U.S. has the comparative advantage in computer production. Which of the following outcomes can we predict for these two countries if they engage in free trade with each other for textiles and computers? 1. U.S. textile workers will experience a loss of employment. 2. U.S. textile producers will experience a reduction in their economic surplus. 3. U.S. textile consumers will experience an increase in their economic surplus. 4. All of the above. 5. None of above.

4. All of the above.

Which of the following means the same as "maximizing economic surplus"? 1. Making the economic pie as big as possible. 2. Maximizing happiness. 3. Making the most efficient use of scarce resources. 4. All of the above. 5. None of the above.

4. All of the above.

In the free trade model, why do we draw the production possibilities frontier for each country as a straight line? 1. Because we are assuming that each country's comparative advantage is identical to its absolute advantage. 2. Because we are assuming that the consumption possibilities frontier is identical to the production possibilities frontier. 3. Because we are assuming each country is producing as efficiently as possible. 4. Because we are assuming that resources are identical in production within each country. 5. None of the above

4. Because we are assuming that resources are identical in production within each country.

Which of the following is an assumption we typically make when drawing a production possibilities frontier? 1. The country has a fixed amount of resources at a given point in time. 2. The country can produce only two goods or services. 3. The country is producing in only two comparison time periods. 4. Both1and2 5. Both2and3

4. Both1and2

According to the article "Can Firms Aim to Do Good if It Hurts Profit?" some supporters of the benefit corporation have a key concern. What is this concern? 1. The fee to register as a benefit corporation is too high and is preventing an efficient level of social corporate decision making. 2. Businesses might lose investors who choose more profitable investment opportunities. 3. Businesses might stop paying attention to producing at an efficient production level. 4. Businesses might adopt the label "benefit corporation" for marketing purposes without taking any real steps to benefit the community and environment. 5. All of the above

4. Businesses might adopt the label "benefit corporation" for marketing purposes without taking any real steps to benefit the community and environment.

According to most economists, which of the following is the most important role for the government to play in the economy? 1. Provide consumers with better information about the products they buy. 2. Fix externalities. 3. Help the market reach outcomes that are more equitable. 4. Define and protect property rights. 5. None of the above. The government should have no role in the economy.

4. Define and protect property rights.

Which productive input is probably most difficult to measure? 1. Labor 2. Capital 3. Land 4. Entrepreneurship 5. None of above.

4. Entrepreneurship

Which of the following statements regarding free international trade is true? 1. Free international trade leads to a more equitable, or more equal, division of world-wide economic surplus. 2. Free international trade increases economic surplus for countries that have the absolute advantage but decreases economic surplus for countries that do not have the absolute advantage. 3. Free international trade increases economic surplus for countries that have the comparative advantage but decreases economic surplus for countries that do not have the comparative advantage. 4. Free international trade leads to an increase in world-wide production because it allows for a more efficient allocation of world-wide resources. 5. All of the above

4. Free international trade leads to an increase in world-wide production because it allows for a more efficient allocation of world-wide resources.

The price elasticity of demand measures: 1. How responsive consumers are to income changes 2. How far the demand curve shifts when there is a change in price. 3. How much consumer expenditure changes when market price changes. 4. How responsive consumers are to price changes. 5. None of the above

4. How responsive consumers are to price changes.

The more necessary consumers consider a good to be, generally the: 1. More price elastic and steeper its demand. 2. More unitary elastic and stable its demand. 3. Less price elastic and flatter its demand. 4. Less price elastic and the steeper its demand. 5. None of the above

4. Less price elastic and the steeper its demand.

According to the demand and supply model, if supply of gasoline increases and demand for gasoline decreases, what is likely to happen to the market equilibrium quantity and price of gasoline? 1. Both market equilibrium price and market equilibrium quantity will increase. 2. Both market equilibrium price and market equilibrium quantity will decrease. 3. Market equilibrium price will increase and market equilibrium quantity will decrease. 4. Market equilibrium price will decrease and change in market equilibrium quantity is unknown (ambiguous). 5. Change in both market equilibrium price and market equilibrium quantity is unknown (ambiguous).

4. Market equilibrium price will decrease and change in market equilibrium quantity is unknown (ambiguous).

Which of the following is not true? 1. Monopolistic producers are price makers. 2. Monopolistic producers can earn positive economic profit in the long run. 3. There are insurmountable barriers to entry into a monopolistic market. 4. Monopolistic producers generally maximize economic surplus for society. 5. Monopolistic producers maximize profit at the production level where MR=MC.

4. Monopolistic producers generally maximize economic surplus for society.

According to the article "Can Firms Aim to Do Good if It Hurts Profit?" how many for-profit businesses have converted to benefit corporations in recent years? 1. 25 2. Fewer than 25 3. 324 4. More than 200 5. None of the above

4. More than 200

Which of the following statements is true? 1. Monopolistically competitive markets tend to have fewer producers than oligopolistic markets. 2. Oligopolistic markets tend to have less significant barriers to entry and exit than monopolistically competitive markets. 3. Oligopolistic markets are closer to the "perfect competition" extreme, while monopolistically competitive markets are closer to the "monopoly" extreme. 4. Oligopolistic markets are more heavily characterized by collusion and non-competition agreements than monopolistically competitive markets. 5. Goods produced in oligopolistic markets are similar but not identical, while goods produced in monopolistically competitive markets are completely identical.

4. Oligopolistic markets are more heavily characterized by collusion and non-competition agreements than monopolistically competitive markets.

In order to achieve economic efficiency, an economy must achieve which of the following? 1. Produce the goods and services that people most want. 2. Produce goods and services without wasting resources. 3. Produce the goods and services that people most want and produce them in a way that doesn't waste resources. 4. Produce the goods and services that people most want, produce them in a way that doesn't waste resources and make sure they go to the people who want them the most. 5. Make sure the goods and services that are produced go to the people who want them the most.

4. Produce the goods and services that people most want, produce them in a way that doesn't waste resources and make sure they go to the people who want them the most.

Which of the following is NOT typically a reason for a country to restrict free trade? 1. The country wants to protect jobs in a certain domestic industry. 2. The country wants to protect its consumers from foreign products that might be unsafe. 3. The country wants to protect a certain industry while it is first developing to give the industry an opportunity to become more efficient. 4. The country wants to protect its consumers from higher foreign prices. 5. The country wants to encourage another country to undergo some sort of political change, and restricts its trade with the other country as a way of punishing the other country.

4. The country wants to protect its consumers from higher foreign prices.

n the free market system, the way goods and services get rationed is through ____. 1. Government regulation 2. Cost benefit analysis 3. Models 4. The price system 5. None of the above

4. The price system

Which of the following is the best reason why we cannot rely upon the geographic size of a country alone in estimating its individual Production Possibilities Frontier (PPF)? 1. Most of the time, the larger the country, the smaller the PPF. 2. We don't have very accurate estimates of the geographic size of all countries. 3. Geographic size has nothing to do with a PPF. 4. There are other inputs; such as labor, machinery and technology, that affect the PPF as well. 5. Geographic size is all that is needed for an accurate picture of a country's PPF.

4. There are other inputs; such as labor, machinery and technology, that affect the PPF as well.

Which of the following is not a typical reason a country might give for imposing trade restrictions? 1. To protect developing domestic industries to give them time to become more efficient. 2. To protect domestic consumers against foreign products that might be unsafe and produced by less well-regulated industries. 3. To protect domestic jobs. 4. To reduce the excessive pollution that results from shipping products all around the world. 5. To maintain national security or punish countries that act in ways that are distasteful in the eyes of the international community.

4. To reduce the excessive pollution that results from shipping products all around the world.

Which one of the following statement about natural monopolies is correct? 1. Natural monopolies naturally evolve into monopoly markets because of the very small fixed costs of production along with the relatively small variable and marginal production costs. 2. It is not hard to become a natural monopoly because there are no entry barriers. 3. The only way to become a natural monopoly is to gain sole ownership of a natural resource (for example, gold, silver or coal). 4. Utility companies are probably the best example of a natural monopoly. 5. All of the above.

4. Utility companies are probably the best example of a natural monopoly

An experimental firm with a passion for studying economics decides that it wants to hire its workers, one by one, in order to see how much each additional worker contributes to the firm's level of production. Furthermore, each worker in the market is equally capable of producing the product in question. As the firm hires workers one by one, is it possible for the firm to see its firm marginal productivity of labor first increase at low levels of hiring and then start to decrease as it reaches higher levels of hiring? 1. No. All workers are equally skilled so the marginal productivity of labor will either always increase or always decrease as more workers are hired. 2. No. All workers are equally skilled so the marginal productity of labor will always be the same, regardless of how many workers are currently hired. 3. No. The marginal productivity of labor cannot change in the short run since labor is a fixed input. 4. Yes. It is possible that workers increase the firm marginal productivity as they engage in teamwork and specialization but it is also possible that they start to experience falling marginal productivity when too many workers are crowded into the fixed inputs of the firm. 5. Yes. All workers are equally good at producing so whenever the firm hires a new worker there is an equal chance that the marginal productivity will increase or decrease as a result of an additional hire

4. Yes. It is possible that workers increase the firm marginal productivity as they engage in teamwork and specialization but it is also possible that they start to experience falling marginal productivity when too many workers are crowded into the fixed inputs of the firm

. Which of the following is a characteristic of a monopolistically competitive market? 1. The market consists of a fairly large number of producers. 2. There might be a mix of producers, with some producers being very small in size and some being larger in size. 3. Competing producers are producing a product that is very similar in the eyes of consumers. 4. all of the above 5. none of the above

4. all of the above

Suppose a well-functioning market exists with no initial market failure where Pe=$10 and Qe=500 units. Now suppose the government offers buyers a subsidy of $3 whenever they buy a unit of this product and we observe a change to new Pe=$12 and new Qe=520 units. Based on this information, we can predict that the subsidy resulted in RM=_____ and DWL=_____. 1. 20 units too few bought and sold ; $60 2. 0, since this improved market activity ; $0, since this improved market activity 3. 520 units too many bought and sold ; $1560 4. 30 units too few bought and sold ; $30 5. 20 units too many bought and sold ; $3

5) 20 units too many bought and sold; 30

26. According to the article "Economists Fret Over Return to Price Controls," 1. Price control on housing (rent control) hurts the young and immigrants. 2. Price control on housing (rent control) may be the most effective way to destroy a city - except for bombing. 3. The South Bronx lost 40% of its housing stock in the 1960s and 1970s as a result of price controls. 4. Price control on housing (rent control) is a way politicians can buy votes. 5. All of the above

5) All of the above

Suppose you are granted a copyright for a product you produce. This copyright means that___. 1) No one else is allowed by law to produce or profit from this product without your permission. 2) You will probably be able to charge a price for this product that is greater than the competitive market price. 3) You will likely choose to produce less of this product than society would like you to produce. 4) You are likely to make more profit than could be earned without the copyright protection. 5) All of the above.

5) All of the above.

Which of the following describes the marginal cost of production? 1. MC refers to the average cost of producing a unit of output. 2. MC equals the difference between explicit costs and implicit costs of production. 3. MC refers to any "marginally small" cost associated with the production process. 4. MC refers to the reduction in profit associated with producing too many units. 5. MC refers to the additional cost associated with producing one extra unit

5) MC refers to the additional cost associated with producing one extra unit

12. Which of the following statements is NOT true regarding the price ceiling? 1. Price ceiling is a maximum price set below the market equilibrium price. 2. Price ceiling creates excess demand. 3. Price ceiling creates deadweight loss. 4. Price ceiling provides a gain for buyers but a loss for sellers. 5. Price ceiling provides a gain for sellers but a loss for buyers.

5) Price ceiling provides a gain for sellers but a loss for buyers

27. According to the article "Economists Fret Over Return to Price Controls," which of the following individuals is advocating for price controls? 1. N. Gregory Mankiw 2. Dr. Edward Glaeser 3. Dr. Tyler Cowen 4. Assar Lindbeck 5. Ted Gullicksen

5) Ted Gullicksen

According to the article "Hog Prices Wallow Near 2‐Year Low," why are hog prices declining to their lowest level in nearly two years? 1. Farmers are not waiting for hogs to get as large as usual before slaughtering them and offering them to the market. Even smaller hogs, in addition to the usual supply of larger hogs, are being offered for supply. 2. Farmers are thinning their herds to reduce animal feed costs. 3. The eroded corn and soybean crops triggered record high prices for the corn and soybean meal that hog farmers feed their swine causing hog farmers to slaughter and supply to the market more hogs than usual. 4. Prices are being pressured by weak domestic demand for pork. 5. All of the above.

5) all of the aboe

21. Which of the following is true about resource misallocation? 1. Resource misallocation is created when resources are not being used in their most efficient manner. 2. Resource misallocation is measured as the difference between the socially optimal quantity produced and consumed and the quantity that is actually produced and consumed. 3. Resource misallocation causes a reduction in economic surplus. 4. Resource misallocation can be caused by government intervention in a market. 5. All of the above.

5) all of the above

According to the article "Asian Demand Helps Drive Up the Price of Dairy," what factors contributed to the rising price of milk? 1. Growing appetite for dairy in Asia. 2. Shrinking European production of milk. 3. Rising cost of animal feed. 4. Long‐standing drought in Australia and New Zealand, the world's largest milk‐ exporting regions. 5. All of the above.

5) all of the above

According to the article "Economists Fret Over Return to Price Controls," which of the following are the explanations of the Alaska State Sen. Bill Wielechowski for oil prices control? 1. The oil is produced in Alaska. 2. The transportation costs are the lowest across the nation. 3. The gas taxes are the lowest across the nation. 4. The refineries in Alaska are colluding to keep the oil price high. 5. All of the above

5) all of the above

According to the article "How Much Is Your Time Worth", when you make a decision about doing a project yourself rather than hiring a professional to do the project, what should be taken into account? 1. How much you earn per hour. 2. How many hours of time you will save if you hire a professional. 3. How much would it cost to hire a professional. 4. How much you enjoy or dislike doing the project yourself. 5. All of the above.

5) all of the above

According to the article "How Much Is Your Time Worth," when you make a decision about doing a project yourself rather than hiring a professional to do the project, what should be taken into account? 1. How much you earn per hour. 2. How many hours of time you will save if you hire a professional. 3. How much would it cost to hire a professional. 4. How much you enjoy or dislike doing the project yourself. 5. All of the above.

5) all of the above

According to the article "How to Keep the Public Shopping," 1. Anger makes people assess situations more optimistically. 2. Fear makes people exaggerate risks. 3. Fear makes people minimize benefits. 4. Disgust makes people want to get rid of things. 5. All of the above

5) all of the above

According to the article "Making a Difference", what happened to the Loop when Joe Edwards succeeded with his business venture? 1. An old movie theater, the Tivoli, was returned to its 1924 splendor. 2. St. Louis has been publicized as the hometown of Chuck Berry. 3. The Loop was named one of the "10 Greatest Streets in America." 4. Young people, who left St. Louis for college, now return to live in St. Louis. 5. All of the above.

5) all of the above

According to the article "The skinny on taxing fatty foods," what are important similarities between cigarettes and food, as the Urban Institute study points out? 1. Increased risk of chronic diseases 2. Increasing risk of premature death. 3. Aggressive marketing campaigns by the industry. 4. Usage of additives that trigger "hard-to-control cravings" by the industry 5. All of the above.

5) all of the above

Economists assume that rational people try to maximize ______ when making decisions. 1. Happiness 2. Welfare 3. Benefit 4. Economic surplus 5. All of the above

5) all of the above

If universities and students are responsive to price changes, then federal subsidies to higher education have the effect of: 1. Raising tuition (Pe) if the subsidy is offered to students in the form of grants and scholarships but lowering tuition (Pe) if the subsidy is offered to the university. 2. Lowering the out-of-pocket cost of education (Pb) paid by students. 3. Raising the amount of money the university gets to pocket per student enrolled (Ps). 4. Causing resource misallocation and deadweight loss, assuming there was no initial market failure in the market for education. 5. All of the above

5) all of the above

If we say a particular producer is a price taker, then which of the following correctly describes the market that it operates in? 1. There are no barriers for entering and leaving this market. 2. There exists a very large number of competing producers. 3. The product produced by its competitors is identical to what it is producing. 4. All the producers in this market are very small in size. 5. All of the above

5) all of the above

In a perfectly competitive market: 1) There will be a very large number of very small firms and these firms will be considered to be price takers in the market. 2) Each firm has a horizontal demand curve even though the market demand curve will be down-ward sloping. 3) Firms will be able to earn any rate of return in the short-run but will only be able to earn a normal rate of return in the long-run. 4) Each firm's marginal revenue curve is identical to its demand curve. 5) All of the above

5) all of the above

Suppose Charlie produces an amazing new product called "kitten mittens," and the market equilibrium price is $3 per pair and quantity bought and sold is 1000 pairs. Suppose as well that the government decides to impose a binding price ceiling on this market. Which of the following results could we expect to occur? 1. If Charlie still wants to sell kitten mittens, he will have to do so at a lower price. 2. The new quantity demanded will be greater than the new quantity supplied. 3. Charlie's producer surplus will shrink. 4. This policy may or may not result in deadweight loss, depending on how responsive Charlie is to price changes. 5. All of the above

5) all of the above

Suppose a family with school age children is considering a move to another community with better schools. Which of the following factors would that family likely consider in its cost benefit analysis of the move? 1. The cost of housing in the new community compared to the cost of housing in its current community. 2. The cost of commuting to work from the new community compared to the cost of commuting from its current community. 3. Whether the move will impact the college acceptance probability of the family's children. 4. None of the above 5. All of the above

5) all of the above

Suppose a farmer produces apples in a perfectly competitive market. According to this information, 1. The quantity of apples that the farmer produces will not affect the market equilibrium price of apples. 2. This farmer's profit maximizing production strategy will be to produce the amount of apples for which marginal revenue equals marginal cost. 3. This farmer will stop producing apples immediately if the price of apples is less than the average variable cost of producing apples. 4. This farmer's total revenue will always increase as more apples are produced and sold. 5. All of the above

5) all of the above

Suppose consumers consider gasoline to be a necessity and are not very responsive to gasoline price changes. If the government decides to help out struggling gasoline suppliers by placing a binding price floor on the gasoline market, we can predict that (assume the gasoline market is not initially in market failure): 1. There will be only a small reduction in gasoline market activity. 2. There will be only a small amount of resource misallocation. 3. There will be only a small amount of deadweight loss. 4. Gasoline suppliers will likely experience higher sales revenues.

5) all of the above

The article "A Place for Cost-Benefit Analysis" considers which of the following cost benefit analysis issues? 1. The problems caused for society when many businesses routinely fail to consider the costs they impose on others when making decisions using CBA. 2. How CBA should treat qualitative costs and benefits, not just quantitative costs and benefits. 3. How CBA treats items that people consider to be "priceless". 4. How CBA works when applied to public policy decisions. 5. All of the above.

5) all of the above

Which of the following is likely to happen if a tax is placed on buyers in a market where buyers and sellers are price responsive? Assume no initial market failure. 1. There will be a reduction of market activity. 2. There will be a reduction in economic surplus. 3. Resources will be misallocated. 4. Both buyers and sellers will share the tax burden. 5. All of the abov

5) all of the above

Which of the following is true regarding subsidies? 1. Whoever is more responsive to price changes gets less of the subsidy 2. Whoever is less responsive to price changes gets more of the subsidy. 3. Subsidies tend to encourage market activity because they lower the cost of participating in the market. 4. Sometimes subsidies occur in response to perceived positive externalities. 5. All of the Abov

5) all of the above

Which of the following may result in a deadweight loss to the economy? 1. A tax placed on the demanders of a product. 2. A subsidy offered to the demanders of a product. 3. A tax placed on the suppliers of a product. 4. A subsidy offered to the suppliers of a product. 5. All of the abov

5) all of the above

Which of the following statements is correct about the long-run equilibrium outcome for a perfectly competitive market? 1. All perfectly competitive firms charge a price equal to the market equilibrium price which is also equal to their minimum average total cost of production. 2. No firms have any additional incentives to enter or leave the market. 3. The economic profit for perfectly competitive producers is zero. 4. Perfectly competitive producers earn only a normal rate of return. 5. All of the above

5) all of the above

Which of the following would be defined by an economist as a market? 1. The garage sale last Sunday in Columbia, MO. 2. An e-bay auction on the internet. 3. The New York Stock Exchange. 4. The university book store. 5. All of the above.

5) all of the above

Which of the transactions below takes place in a market? 1. The purchase and sale of a used car. 2. The purchase and sale of a new car. 3. The purchase and sale of a share of General Motors stock. 4. The purchase and sale of a pair of shoes at a department store. 5. All of the above

5) all of the above

For any firm, its fixed production costs: 1. Are the same at every production level 2. Are equal to the amount spent on fixed inputs. 3. Are higher for production levels above the equilibrium level of production(Qe). 4. Are higher for firms with elastic supply and lower for firms with inelastic supply. 5. Both 1 and 2 are true

5) both 1 and 2 are true

According to the article "The Rock and the Hard Place on the Deficit," which of the following statements are true about the study done by Christina and David Romer? 1. The study examined only federal tax policy. 2. The study examined both federal and state tax policies. 3. The study addresses the key problem of the conventional analysis of the effect of tax changes. 4. All of the above. 5. Both 1 and 3

5) both 1 and 3

According to the article "The Futility of Price Controls," what are the reasons that price controls that are still effective in New York City in the form of rent controls are not eliminated? 1. Because of the awful effects price controls have had on the housing stock. 2. Because of them being a mess. 3. Because politicians are afraid that elimination of price controls would cause rents to jump. 4. Because the political power of those benefiting from the price controls outweighs the political power of those losing from the price controls. 5. Both 3 and 4.

5) both 3 and 4

If we impose a tax on the suppliers of a product, we could predict that: 1. It is certain that suppliers will bear the entire burden of the tax. 2. It is certain that suppliers and demanders will equally share the burden of the tax. 3. It is possible (but not certain) that suppliers will bear the entire burden of the tax. 4. The tax will be shared between suppliers and demanders according to how responsive each is to price changes. 5. Both 3 and 4 are possible prediction

5) both 3 and 4 are possible predictions

When deriving a demand curve for a product, what factors must be held constant? 1. Price and quantity demanded 2. Price and consumer income 3. Market equilibrium price and market equilibrium quantity 4. Supply, Demand, and equilibrium 5. Everything other than price and quantity demanded

5) everything other than price and quantity demanded

If a producer is earning a below normal rate of return then we know that it is earning _____ in accounting profit. 1. less than $0 2. $0 3. less than its total explicit costs 4. less than its economic profit 5. impossible to determine from the information give

5) impossible to determine from the information given

If workers and employers are equally responsive to changes in the price of labor, then if the government places a tax on suppliers of labor, we can predict that the buyer's price (Pb) will _____, the seller's price (Ps) will ______ and the tax burden will be ______. 1. Decrease; decrease; paid by workers. 2. Increase; increase; paid by employers. 3. Increase; not change; paid by employers. 4. Stay the same; increase; paid by workers. 5. Increase; decrease; shared equally by workers and employers

5) increase; decrease; shared equally by workers and employers

If American products are made using more labor than machinery and Swiss products are made using more machinery than labor, then we would say that American firms produce using a more ____ and Swiss firms produce using a more ____ production method. 1. Profit maximizing; depreciating. 2. Depreciating; profit maximizing. 3. Labor-intensive; profit maximizing. 4. Capital-intensive; labor intensive. 5. Labor-intensive; capital-intensive

5) labor-intensive; capital intensive

4. Which of the following statements regarding government intervention in markets is true? 1) price floors are used to help consumers avoid high market prices 2) price ceilings always benefit sellers and harm buyers; society may or may not be harmed 3) to be effective, a price floor should be set below the market equilibrium price and a price ceiling should be set above the market equilibrium 4) Government intervention in the market is always bad for society because free markets always allocate societies scare resources in the most efficient way possible 5) none of the above

5) none of the above

Suppose a market is not initially in market failure so that the free market outcome is the socially optimal outcome. If we impose either a tax or a subsidy on this market then we can predict that the market will: 1. Suffer resource misallocation and deadweight loss as a result of the tax because it discourages market activity but not as the result of the subsidy since it encourages market activity. 2. Suffer resource misallocation (RM) and deadweight loss (DWL), with the amounts of these two harms being larger the less responsive buyers and sellers are to price changes. 3. End up in a disequilibrium with Qd no longer equal to Qs. The market will experience either an excess demand or an excess supply at the new final outcome. 4. All of the above 5. None of the above

5) none of the above

Suppose producers are price responsive but buyers are not at all price responsive (buyers are perfectly price inelastic). What would happen if producers were offered a $3 subsidy for producing and selling their product to these consumers? 1. The supply curve would shift to the left and the subsidy would be shared equally between buyers and sellers. 2. The market equilibrium price would fall, but it would fall by less than $3. 3. The supply curve would shift to the right and the subsidy would be shared between suppliers and consumers with $1 going to suppliers and $2 going to consumers. 4. This would result in resource misallocation and deadweight loss. 5. None of the abov

5) none of the above

What is the difference between "accounting profit" and "economic profit"? 1. There is no difference between them. They are identical. 2. They differ both in the way they calculate total revenue and in the way they calculate total cost. 3. Accounting profit excludes implicit costs while economic profit excludes explicit costs. 4. Accounting profit is always smaller than economic profit. 5. None of the above

5) none of the above

Which of the following is an example of an implicit cost of doing business? 1. The $100,000 of your own cash you invested in your business. 2. The depreciation you experienced on computers purchased for the business. 3. The wages you paid to family members working in your business. 4. All of the above 5. None of the abov

5) none of the above

Which of the following statements about economic efficiency and social equity is true? 1. Societies always value economic efficiency more than social equity. 2. Societies never sacrifice economic efficiency when they attempt to achieve social equity. 3. A society is said to achieve economic efficiency if it is able to create the greatest amount of equity possible with the limited available resources. 4. All of the above. 5. None of the above.

5) none of the above

Which of the following statements is true regarding subsidies offered to buyers and/or sellers of a product? 1. Subsidies tend to reduce market activity. 2. Buyers get more of the subsidy if demand is more price elastic than supply. 3. Subsidies do not change the amount of consumer surplus or producer surplus earned. 4. Subsidies encourage market activities, leading to a more efficient use of scarce resources. 5. None of the abov

5) none of the above

Which of the following is not an explicit cost of production for a baker? 1. The rent you lose when you choose to use your own property to establish your bakery. 2. The stress you feel from running your own bakery business. 3. The interest earnings you lose on your personal savings when you take the money out of the bank to help finance your bakery. 4. The money you could be making as a pharmacist if you did not quit to start your own bakery. 5. None of the above is an explicit cost of production for a baker

5) none of the above is an explicit cost of production for a baker

According to the article "How to Keep the Public Shopping," which of the following statements is true? 1. People who are feeling sad are more likely to reduce selling price of a good than emotionally neutral people. 2. People who are feeling sad are willing to pay more for a good than emotionally neutral people. 3. Disgust reduces both selling and buying prices. 4. Happy people are willing to pay more only when buying a good but not when selling a good. 5. Only (1), (2) and (3).

5) only 1 2 and 3

According to the article "Asian Demand Helps Drive Up the Price of Dairy," what factors contributed to the rising consumption of milk in China? 1. Rising income of Chinese consumers 2. Increasing familiarity with - taste for - nonnative foods among young Chinese urbanites. 3. Shrinking dairy industry in China. 4. All of the above. 5. Only (1) and (2).

5) only 1 and 2

According to the article "Pain Pills' Littlest Victims," what are the substances that some newborn babies are dependent on? 1. Prescribed painkillers (e.g., oxycodone) 2. Prescribed anti-addiction drugs (e.g., methadone) 3. Illegal drugs (e.g., cocaine) 4. All of the above 5. Only (1) and (2)

5) only 1 and 2

According to the article "The Extraordinary Science of Addictive Junk Food," how is production optimization done? 1. Using statistical analysis methods 2. Having ordinary customers taste the products 3. Animal-testing the products 4. All of the above 5. Only (1) and (2)

5) only 1 and 2

According to the article "The Extraordinary Science of Addictive Junk Food," where does a conscious effort toget people hooked on convenient and inexpensive foods take place? 1) In scientific labs 2) In grocery store aisles 3) In consumers' brains 4) All of the above 4) Only (1) and (2)

5) only 1 and 2

According to the article "The skinny on taxing fatty foods," what are important differences between cigarettes and food, as the Urban Institute study points out? 1. Some unhealthy foods provide more than a trivial amount of nutrition. 2. Exercise can reverse the overconsumption of unhealthy foods. 3. All ingredients in food can trigger "hard-to-control cravings" that increase the consumption of the fatty food. 4. All of the above. 5. Only (1) and (2).

5) only 1 and 2

According to the article "With Venezuelan Food Shortages, Some Blame Price Controls," what are the problems that Mr. Chavez and his ministers are trying to solve with price controls in V enezuela? 1. The existence of gap between poor and rich that existed in Venezuela. 2. The fact that the poor in Venezuela could not afford a range of foods and other goods. 3. The budget deficit that Venezuela run every year. 4. All of the above. 5. Only 1 and 2.

5) only 1 and 2

According to the article "How to Keep the Public Shopping," which of the following statements is true about the Carnegie Mellon University study? 1. The study concentrated on the effects of happiness on economic decision making. 2. The study concentrated on the effects of sadness on economic decision making. 3. The study concentrated on the effects of disgust on economic decision making. 4. All of the above. 5. Only (2) and (3).

5) only 2 and 3

According to the article 'A Taste of a Distant Home, Minus the Chopping,' what are the reasons for the flourishing of the ethnic catering services? 1. There is an increasing number of customers who come from overseas and crave their native foods. 2. Their client base is working longer hours with less time to fix traditional food on its own. 3. Their client base is spending more time commuting to and from work and has less time to fix traditional food on its own. 4. All of the above. 5. Only 2 and 3

5) only 2 and 3

Average Total Cost equals ___. 1. Fixed Cost + Variable Cost. 2. Average Fixed Cost + Average Variable Cost. 3. Total Cost / Quantity Produced. 4. All of the above. 5. Only 2 and 3

5) only 2 and 3

According to the article "With Venezuelan Food Shortages, Some Blame Price Controls," what was the effect of the price controls in Venezuela on coffee market? 1. Price controls had no effect on coffee market in Venezuela. 2. Price controls increased production of coffee in Venezuela. 3. Price controls decreased consumption of coffee in Venezuela. 4. Price controls decreased production of coffee in Venezuela. 5. Price controls drastically decreased production of coffee in Venezuela turning country from exporter into importer of coffee.

5) price controls drastically decreased production of coffee in Venezuela turning country from exporter into importer of coffee

According to the textbook, if Ed=‐0.75 for a good, then the good is ______; if Ed=‐1 for a good, then the good is _____; but if Ed=‐1.75 for a good, then the good is _____. 1. Price inelastic; price elastic; price inelastic. 2. Price inelastic; unit price elastic; price inelastic. 3. Price elastic; unit price elastic; price inelastic. 4. Price elastic; unit price elastic; price elastic. 5. Price inelastic; unit price elastic; price elastic.

5) price inelastic; unit price elastic; price elastic

What happens to the amount of sales revenue a producer can earn from selling its product as the producer raises its price per unit? 1. Sales revenue must increase since it will be earning more revenue per unit sold. 2. Sales revenue must decrease since it will be selling fewer units. 3. Sales revenue must increase since it will both be earning more revenue per unit sold and will be selling more units. 4. Sales revenue must remain unchanged since the greater amount earned per unit is directly offset by the smaller number of units consumers are willing to buy. 5. Sales revenue may increase, decrease or remain unchanged depending on how consumers respond to the price per unit increase.

5) salves revenue may increase, decrease or remain unchanged depending on how consumers respond to the price per unit increase

Which of the following identifies the profit-maximizing production level? 1. The level of production where total revenue equals total cost. 2. The level of production where total revenue is largest. 3. The level of production where total cost is smallest. 4. The level of production where marginal cost is smallest. 5. The level of production where total revenue minus total cost is largest

5) the level of production where total revenue minus total cost is largest

Which of the following is true regarding how market economies decide how to produce? 1. Competition between firms is good for consumers because it drives prices down, but is bad for society because firms waste money on competing with each other. 2. Competition between firms is good for society because it results in less waste of resources, but is bad for consumers because it makes it difficult to determine which producer is the more efficient producer. 3. Capital-intensive production methods are more efficient than labor-intensive production methods because capital is cheaper to rent than labor is. 4. Labor-intensive production methods are more efficient than capital-intensive production methods because capital often requires repair and maintenance. 5. The lowest-cost producer is considered to be the most efficient producer.

5) the lowest-cost producer is considered to be the most efficient producer

in a perfectly competitive market, which of the following is true about an individual producer? 1) The producer's profit-maximizing level of production will be at a point where its marginal revenue is lower than the market price. 2. If the market price is lower than the producer's average total cost, it should shut down immediately. 3. In the long run, the producer cannot make any accounting profit. 4. In the long run, the market equilibrium price will be equal to the producer's minimum MC of production. 5. The producer's marginal revenue will always be the same regardless of its production level

5) the producer's marginal revenue will always be the same regardless of its production level

2. When a price floor is imposed below the market price, the result will be that: 1) surpluses occur 2) shortages occur 3) supply and demand will shift up to the new equilibrium 4) economics inefficiences occur 5) there will be no effect on the market equilibrium because this is not a binding price

5) there will be no effect on the market equilibrium because this is not a binding price

According to the textbook, at higher prices consumers are more responsive to price changes. Consequently, in absolute value, the price elasticity of demand must be _____ at the higher price, and we say that the demand at this price is _____. 1. <0; price inelastic. 2. >0; price inelastic. 3. =1; unit price elastic. 4. <1; price elastic. 5. >1; price elastic.

5. >1; price elastic.

Which of the following factors can increase a country's production possibilities frontier over time? 1. More investment in education. 2. The invention of new production technology. 3. The construction of new transportation systems. 4. An increase in a country's birth rate. 5. All of above.

5. All of above.

According to the article 'The Future of Agriculture May Be Up,' which of the following are the immediate benefits of the implementation of vertical farming? 1. Reduction in the number of delivery trucks 2. Reduction in the transportation cost of food 3. Reduction in the amount of pollution 4. Increased access of city dwellers to fresh, healthy food 5. All of the above

5. All of the above

Which of the following occurs with monopoly? 1. Consumers are charged a markup 2. Consumers tend to get poorer customer service 3. Society gets less product innovation 4. Economic activity is discouraged as resources get misallocated (Qm<Qe) 5. All of the above

5. All of the above

hy might a country restrict free trade? 1. To protect domestic jobs 2. To protect national security 3. To protect domestic consumers from potentially unsafe imports 4. To protect infant industries 5. All of the above

5. All of the above

Which of the following would be considered an externality? 1. Second hand smoke 2. The happiness your parents get from your education. 3. Pollution caused by a restaurant that dumps fry grease in the location watershed. 4. All of the above. 5. All of the above may be externalities, but only if the decision maker ignores the impact on others.

5. All of the above may be externalities, but only if the decision maker ignores the impact on

Which of the following is true regarding winners and losers from free trade? 1. Free trade can increase the size of a country's economic pie, but can also re-divide the economic pie so that some people are better off and others are worse off. 2. Industries that have a comparative advantage gain from free trade, while industries without a comparative advantage lose from free trade. 3. The gains from trade are often spread out over a relatively large number of people, so these individuals typically do not have a very big incentive to lobby for free trade. 4. The harm from free trade is often placed on a relatively small number of people, so these individuals typically have a very big inventive to lobby against free trade. 5. All of the above.

5. All of the above.

Which of the following statements regarding copyright and patent protection is true? 1. We want to protect the creators so that we can keep progress and development in the fields of art and science. 2. Copyright and patent protection can reduce market activity because they often result in consumers paying higher prices. 3. They might be necessary to encourage producers to produce these products by giving them a way to recoup their high fixed production costs. 4. They turn producers into legal monopolists. 5. All of the above.

5. All of the above.

According to the textbook, which of the following statements is false? 1. An increase in demand shifts the demand curve to the right. 2. A decrease in demand shifts the demand curve to the left. 3. An increase in supply shifts the supply curve to the right. 4. A decrease in supply shifts the supply curve to the left. 5. An increase in demand shifts the demand curve vertically up and an increase in supply also shifts the supply curve vertically up.

5. An increase in demand shifts the demand curve vertically up and an increase in supply also shifts the supply curve vertically up.

Suppose a city with a population of 100,000 has two utility companies, Electric Co. and Utility Isn't Just for Economists Inc., The city decides it wants just one utility producer and has decided that the company with the lower break-even price will be allowed to stay. If Electric Co. has a fixed cost of $10 million and average variable costs of $100 and Utility Isn't Just for Economists Inc. has average fixed costs of $10,000 and average variable costs of $500 then which company will be allowed to stay? 1. There is not enough information to answer this question. 2. Both companies would be suitable to operate in the city. 3. The city should let the free market decide who should be the natural monopoly. 4. Utility Isn't Just for Economists, Inc. 5. Electric Co.

5. Electric Co.

What was the purpose of the Einstein Exemption? 1. It was an attempt to reduce the rate of unemployment. 2. It was an attempt to increase capital exports. 3. It was an attempt to slow the growth of illegal immigration. 4. It was an attempt to exceed the speed of light. 5. It was an attempt to bring in more skilled immigrants.

5. It was an attempt to bring in more skilled immigrants.

Suppose a producer is in a perfectly competitive market where the market equilibrium price of its product is equal to $85. The producer chooses its profit maximizing production level of 100 units and at this production level it has average total production costs equal to $120 and average variable production costs equal to $70. Based on this information, we would expect that ___. 1. The producer should shut down immediately because it earns a negative profit. 2. The producer should not shut down because it earns a positive profit. 3. The long rum equilibrium price is $70. 4. All of the above. 5. None of above.

5. None of above.

According to an economist, which of the following is a "need"? 1. A house 2. An education 3. Government 4. All of the above 5. None of the above

5. None of the above

Suppose the market for corn is a perfectly competitive market where the market equilibrium price of corn is $8 per bushel and the ATC of corn production is $12 per bushel. Which of the following would we predict to happen to the corn market? 1. Profits in the short run will attract more producers to the industry 2. The market supply curve shifts to the right 3. The equilibrium price decreases, thereby causing long run profit to move towards zero 4. All of the above 5. None of the above

5. None of the above

Which of the following statements is correct about monopolistically competitive markets? 1. There are no barriers to firm entry or firm exit. 2. There are only very large producers. 3. In the long-run outcome market equilibrium price will be equal to minimum ATC of production. 4. All of the above 5. None of the abov

5. None of the above

When we draw a production possibilities frontier, which of the following categories of labor is not counted as part of the country's potential resource pool? 1. Children under the age of 16 are not counted as potential labor since under federal law they are not allowed to work. 2. People who are temporarily unemployed are not counted since they are expecting to be called back to work soon. 3. Immigrants are not counted. 4. Human capital is not counted since a country's resources consist of only concrete physical items. 5. None of the above resources should be excluded from a country's potential resource pool.

5. None of the above resources should be excluded from a country's potential resource pool.

Suppose you are starting your last year in college pursuing a math degree. You have spent 3 years of time studying for this degree, you have paid $60,000 for tuition and fees pursuing this degree and you have spent two summers in math internships for no pay. You are now considering changing your degree to theater. Which of the previous costs should be considered in your new cost benefit analysis to answer the question: "Should I change my degree to theater?" 1. The three years of time already spent in school pursuing your math degree. 2. The $60,000 in tuition and fees already paid pursuing your math degree. 3. The two weekends spent in math internships. 4. The three years of time already spent in school and the $60,000 in tuition and fees already paid pursuing the math degree, but not the unpaid internships. 5. None of the above should be considered in your decision since they are all sunk costs.

5. None of the above should be considered in your decision since they are all sunk costs.

If we assume that the Production Possibilities Frontier (PPF) for a country is a downward-sloping straight line in a two-dimensional graph, then which of the following statements is correct? 1. The country's resources are not identical in production. 2. The opportunity cost grows larger and larger as the country tries to increase production of one particular good. 3. The points outside the Production Possibilities Frontier (PPF) are currently possible if the country fully employs all its resources. 4. The points inside the Production Possibilities Frontier (PPF) are currently possible and efficient. 5. None of the above.

5. None of the above.

Suppose you were considering traveling to Mali last year. You expected the benefits to be $5400 and the costs to be $4500. You decided to make the trip but violence broke out in the country and you found that the actual benefits of the trip are only $2500 while the actual costs are $6000. Based on this information your actual economic surplus earned from making the trip was _____ and your decision was ______. 1. $900; good 2. $900; rational 3. ‐$3500; irrational 4. $3500; bad 5. None of the above.

5. None of the above.

What is the difference between a point inside the PPF and a point outside the PPF? 1. Points inside the PPF are production levels the economy has achieved in the past, while points outside the PPF are production levels that the economy is predicted to achieve in the future. 2. Points inside the PPF are production levels where relatively more consumption goods are being produced, where points outside the PPF are production levels where relatively more capital goods are being produced. 3. Points inside the PPF are production levels where resources are being used inefficiently, while points outside the PPF are production levels that can be reached when resources are fully employed (resources are used as efficiently as possible). 4. Points inside the PPF are production levels where all resources are identical in production (no increasing opportunity cost), while points outside the PPF are production levels where not all resources are identical in production (increasing opportunity cost). 5. Points inside the PPF are production levels that are possible with currently available resources, while points outside the PPF are production levels that are not possible with currently available resources.

5. Points inside the PPF are production levels that are possible with currently available resources, while points outside the PPF are production levels that are not possible with currently available resources.

According to the price elasticity of demand, producers are charging the revenue maximizing price when ____. 1. Price elasticity of supply is equal to 1. 2. Price elasticity of demand is > 1. 3. The demand curve is most price elastic. 4. The supply curve is least price elastic. 5. Price elasticity of demand is equal to ‐1.

5. Price elasticity of demand is equal to ‐1.

If a country does not trade with other countries, its consumption possibilities frontier (CPF) is limited by its: 1. Ability to specialize. 2. Technology. 3. Comparative advantage. 4. Entrepreneurship and technology. 5. Production possibilities frontier (PPF).

5. Production possibilities frontier (PPF).

Which of the following statements is correct about average fixed cost (AFC) of production? 1. Average fixed cost (AFC) of production is the total cost (TC) divided by the total number of units produced (Q). 2. Average fixed cost (AFC) of production is fixed when the total number of units produced (Q) is increasing. 3. Average fixed cost (AFC) of production is the difference between average total cost (ATC) and average variable cost (AVC). 4. Average fixed cost (AFC) of production is decreasing first and then increasing when the total number of units produced (Q) is increasing. 5. All of the above

Average fixed cost (AFC) of production is the difference between average total cost (ATC) and average variable cost (AVC).

Which of the following statements is correct about the Production Possibilities Frontier (PPF) Model? 1. 2. 3. 4. 5. It's a boundary between currently possible and impossible production levels. The opportunity cost gets bigger when we produce more and more of the same good. The boundary tells us what production level a country currently produces. All of above. None of above.

It's a boundary between currently possible and impossible production levels.

For producers trying to maximize profit, which of the following is the full profit maximizing rule? 1) Produce up to the production level where MR=MC as long as P>ATC and P>AVC. 2) Produce at the production level where MR-MC is greatest as long as ATC=AVC. 3) Produce at the production level where MR>MC as long as MR is also greater than ATC and AVC. If MR is greater than ATC but less than AVC, then shut down immediately. 4) Produce at the level where MR=MC. If P<ATC, then you are making a loss and will eventually shut-down operations, but if P≥AVC then don't shut down until you can find a way to get rid of your fixed inputs. 5) None of the above

Produce at the level where MR=MC. If P<ATC, then you are making a loss and will eventually shut-down operations, but if P≥AVC then don't shut down until you can find a way to get rid of your fixed inputs.

if travelers consider rail travel and air travel to be substitutes, then a reduction in the price of rail travel will likely result in: a) a shift to the left of the air travel demand curve b) a shift to the right of the air travel demand curve c) a shift to the left of the air travel supply curve d) a shift to the right of the air travel supply curve e) a movement to a higher point on the air travel demand curve and to a lower point on the air travel supply curve

a) a shift to the left of the air travel demand curve

Suppose a rational freshman at the University of Missouri is enrolled in 4 courses this semester but is considering enrolling in a fifth course. The fifth course would fulfill a general education requirement and allow him to graduate a semester early. However, this class would increase his study load and likely reduce his cumulative GPA from 3.5 to 3.35. If the student ultimately decides to enroll in this fifth class, what does this tell us about the value he places on GPA versus early graduation? A) Graduating a semester early must be worth more than 0.15 GPA points. B) Graduating a semester early must be worth more than 3.5 GPA points. C) Graduating a semester early must be worth less than 3.35 GPA points. D) Graduating a semester early must be worth less than 0.15 GPA points. e) none of the above

a) graduating a semester early must be worth more than 0.15 GPA points

f an individual uses cost benefit analysis to make a decision, which of the following must be true? A) The outcome must be based on that person's expectations of costs and benefits. B) The decision must include any external costs or benefits. C) The decision must turn out to be a good decision. D) All of the above E) None of the above

a) the outcome must be based on that person's expectations of costs and benefits

Which of the following should be considered by a rational person making a decision? a) the probability of a cost or benefit occurring b) the externalities that arise as a result of his or her decision c) sunk costs d) all of the above e) none of the above

a) the probability of a cost or benefit occurring

Suppose you have an hour of time available to you and you have four mutually exclusive things you can do with that hour. You can attend class, sleep, play video games or watch TV. Suppose that you place the following values on the hour spent in each of these ways; going to class is worth $110, sleeping is worth $100, playing video games is worth $95 and watching TV is worth $90. If you choose to go to class, what opportunity cost have you incurred? A) $110 B) $100 C) $10 D) $285 E) None of the above

b) $100

According to the article "The Economic Organisation of a P.O.W. Camp", what tool improved the transparency of the price system and made prices more similar throughout the camp? a. People wandering through the camp bungalows calling their sale offers. b. An Exchange and Mart notice board in every bungalow. c. Introduction of Bully Marks. d. Establishment of Entertainment Committee. e. Launching the Restaurant and the Shop.

b) an exchange and mart notice board in every bungalow

According to the article which referenced TSA screening for air travelers, the present system of TSA screening which allows airlines to give preferred screening to first-class passengers, is: a. illegal b. anti-egalitarian c. unconstitutional d. all of the above e. None of the above

b) anti-egalitarian

Suppose Jack is trying to decide whether or not to buy a new car? He has an old car worth $5000 to him that he expects he can sell for $3000. The new car he wants to buy is worth $30,000 to him but he expects he can negotiate a deal and get it for only $27,000. He also expects the new car to save him $4000 in fuel and maintenance expenses over the car's life. If these are all the relevant details to consider, the rational decision is to _____ because he will expect to be ____ if he buys the car. A) buy the car; $10,000 better off B) buy the car; $5000 better off C) not buy the car; $20,000 worse off D) not buy the car; $10,000 E) impossible to determine from the available information

b) buy the car; $5000 better off

According to the article "The Economic Organisation of a P.O.W. Camp," a. Barter (exchanging any good for any other good) existed side-by-side with sales made using currency (usually cigarettes) on a fairly equal basis. b. Markets developed originally as barter markets (exchanging any good for any other good) but eventually an accepted unit of exchange in the form of cigarettes developed. c. Barter markets (exchanging any good for any other good) are more economically efficient than markets using a common form of currency for exchange. d. all of the above e. None of the above

b) markets developed originally as barter markets ( exchanging any good for any other good) but eventually an accepted unit of exchange in the form of cigarettes developed

The article "The Economic Organisation of a P.O.W. Camp," shows that: a. Cigarettes are a superior form of money than gold. b. Markets naturally develop whenever there is a need to allocate limited resources. c. Markets cannot exist efficiently unless government issued currency exists. d. all of the above e. None of the above

b) markets naturally develop whenever there is a need to allocate limited resources

When performing a cost benefit analysis: A) Two rational people making the same decision (for example, should I smoke) will always make the same decisions. If they make different decisions it must be that one is irrational. B) Only additional or marginal costs and benefits are included in the analysis. Sunk costs are ignored. C) A rational decision made using cost benefit analysis is the same as a good decision. D) None of the above e) all of the above

b) only additional or marginal costs and benefits are included in the analysis. sunk costs are ignored

According to the article "The Economic Organisation of a P.O.W. Camp," a. Prices for food were primarily determined by the chief Medical Officer who was worried about malnutrition on the part of heavy smokers. b. Price of goods and services went up and down according to how much food and how many cigarettes were available for exchange. c. Prices for goods and services in the camp were most affected by prison officials. d. all of the above e. None of the above

b) price of goods and services went up and down according to how much food and how many cigarettes were available for exchange

According to the article which referenced TSA screening for air travelers, Senator Ben Nelson of Nebraska is sponsoring legislation that would: a. Allow a select group of frequent travelers enjoy a streamlined security inspection. b. Prohibit airlines from allowing elite passengers to receive preferential security treatment. c. Require TSA to use congestion pricing d. Eliminate over-burdensome security screening, such as the removal of shoes and belts before going through screening and limits on liquids. e. None of the above

b) prohibit airlines from allowing elite passengers to receive preferential security treatmenat

The assumption economists make that people are "rational" means that A) Their decisions are always right. B) They make decisions in a consistent manner. C) Their decisions always turn out the way they expect them to. D) None of the above. E) All of the above.

b) they make decisions in a consistent manner

According to your textbook, what does it mean to be rational? (a) You make decisions randomly. (b) You make decisions in a consistent manner. (c) You always make good decisions. (d) All of the above (e) None of the above

b) you make decisions in a consistent manner

Suppose Valentine's Day is approaching and you want to spend the day with your boyfriend or girlfriend. You expect to spend $200 for dinner and entertainment in this case. However, you also have an important exam coming up and you desperately need the extra exam review time. You expect you could increase your course score from a B- to an A- by spending Valentine's Day in an intensive 24-hour study session. You place a value of $500 on this grade boost. If this is the only relevant information, then what is the opportunity cost of spending the day with your boyfriend or girlfriend? A) $500. B) $200. C) $700 D) $300 E) None of the above

c) $700

According to the article "How to Make Airport Security Safe, Secure, and Fair for Everyone", who is responsible for the two-tiered system through TSA security? a. TSA b. American government c. Airline companies d. Airline ticket selling web-sites (i.e. Expedia.com, Orbitz.com, etc.) e. All of the above

c) airline companies

Which of the following best defines an opportunity cost? A) An opportunity cost is a cost that you cannot avoid incurring, regardless of what decision you choose to make. B) An opportunity cost measures the additional benefit you get when you purchase an additional unit of a product. C) An opportunity cost is the value of the next best alternative given up when you make a decision. D) An opportunity cost is any cost already incurred prior to making a decision. E) All of the above provide equally good definitions of an opportunity cost.

c) an opportunity cost is the value of the next best alternative given up when you make a decision

According to the article "The Economic Organisation of a P.O.W. Camp", what commodity was used as a currency up to the fullest status? a. Marmalade b. Chocolate c. Cigarettes d. Butter e. Clothing

c) cigarettes

According to the article "How to Make Airport Security Safe, Secure, and Fair for Everyone", what is the best way to deal with long lines to TSA screening checkpoints? a. Eliminate the security check altogether. b. Allow frequent flyers and first-class passengers to proceed without security check. c. Make passengers demanding short queues pay a fee to the government (use congestion pricing). d. Increase the current Security Fee. e. None of the above.

c) make passengers demanding short queues pay a fee to the government ( use congestion pricing)

Suppose the State of Missouri has decided to build a dam on the Mississippi River in order to control seasonal flooding. The state estimates that the economic benefit of the reduced flooding will be $10 million over the life of the dam. However, the dam will create a reservoir which will take productive farmland out of operation. The value of the loss of this farmland is expected to be $8 million. If this is the only relevant information, then in order for this dam to be a good decision for the State of Missouri, the building cost must be _____. a) greater than $18 million b) less than $8 million c) no more than $2 million d) equal to $2 million e) none of the above

c) no more than $2 million

Free trade is good for a country: a) only if the country becomes an importer b) only if the country becomes an exporter c) regardless of whether the country becomes an importer or an exporter d) only if the country imports raw materials and exports finished products e) only if the country exports luxury goods

c) regardless of whether the country becomes an importer or an exporter

Which of the following is equal to "expected economic surplus" from a decision? a) total marginal benefits minus total marginal costs minus sunk costs b) the sum of all expected marginal benefits c) the sum of all expected marginal benefits minus the sum of all expected marginal costs. d) Expected Marginal Benefit - Expected Marginal Cost - Expected Total Cost e) none of the above

c) the sum of all expected marginal benefits minus the sum of all expected marginal costs

According to the textbook, how should we treat sunk costs when making decisions on the margin? (a) We should take them into account as any other costs. (b) We should take them into account but double their value. (c) We should ignore them. (d) All of the above. (e) None of the above.

c) we should ignore them

Suppose Tom bought a used car in late 2008 at a cost of $10,000. By mid-2009 he discovered that the car's air conditioning system was not functioning and he had to decide whether to spend an additional $1000 on fixing this problem or to get rid of the car. If this is the only relevant information, then in late 2008 Tom faced sunk costs of ____ and in mid-2009 he faced sunk costs of ____. A) $10,000; $11,000 B) $0; $11,000 C) $0; $0 D) $0; $10,000 E) $11,000; $0

d) $0;$10,000

Suppose you are at a movie with a friend. You paid $20 for the non-refundable ticket and you've spent an hour of your time. You place a value of $10 on an hour of your time. Suppose there is an hour left on the movie but it is truly boring and you are not enjoying it. If this is all the relevant information, then you expect the costs of staying until the end of the movie to be ____ and the benefits to be _____. A) $20; $20 B) $20; $10 C) $30; $10 D) $10; $0 E) None of the above

d) $10;$0

1. According to the textbook, when people make decisions on the margin: (a) they make a small decision at a time. (b) they consider expected costs and benefits. (c) they make a new decision based on a new situation. (d) All of the above. (e) None of the above.

d) all of the above

According to the article which referenced TSA screening for air travelers, longer lines for air travelers going through screening are the result of: a. Increased security b. Increased number of air travelers c. More convenient rolling luggage with more passengers bringing more carry-on luggage d. All of the above e. None of the above

d) all of the above

Suppose you have decided to travel to Japan during the summer vacation. You expect to earn $1500 in marginal benefit from this trip. Based on this information, which of the following could be the expected marginal cost of the trip? a) $0 b) $1000 C) $1500 d) All of the above e) None of all

d) all of the above

When you consider sunk costs while making a decision, you can be said to be: a) making a mistake during your cost benefit analysis. b) "crying over spilt milk." c) considering more than just marginal costs. d) all of the above e) none of the above

d) all of the above

ccording to your textbook, which of the following is a sunk cost? (a) A non‐refundable deposit paid on an apartment rental. (b) Time spent studying for a class that you are now considering dropping. (c) The fee for a hotel reservation on Expedia that is charged regardless of whether or not you end up staying at the hotel. (d) All of the above (e) None of the above

d) all of the above

A pro-con list is a useful decision-making tool, but it also has shortcomings. Which one of the following is a shortcoming of a pro-con list as compared to a cost benefit analysis? A) A pro-con list is unable to include items unless they have an actual dollar value. B) A pro-con list is unable to include externalities while a cost benefit analysis must include externalities. C) A pro-con list can only be used before a decision is made while a cost-benefit analysis can be performed only after a decision is made. D) It is more difficult to compare the size of the pros and cons than to compare the size of the costs and benefits because pros and cons do not use a compare unit of measurement. E) All of the above.

d) it is more difficult to compare the size of the pros and cons than to compare the size of the costs and benefits because pros and cons do not use a compare unit of measurement

Suppose you are considering moving into an apartment with a friend. You expect the benefits of sharing an apartment with your friend to be $1000. You expect two costs; sharing a bathroom with your friend who is messy and listening to your friend's music, which you do not enjoy. Suppose you put a value of $200 on the cost to you of the bathroom sharing. The cost to you of being forced to listen to your roommate's music must be ______ for you to rationally decide to move in with your friend. A) Equal to $800 B) Equal to $1200 C) Greater than $1200 D) No more than $800 e) none of the above

d) no more than $800

As the word is being used in this course, what does it mean when we say that a person is making a rational decision? A) The decision is not based on emotion; it is based purely on reason. B) The decision is made while the thought process is unhindered by drugs or alcohol. C) You believe the decision will have benefits but no costs to you. D) You believe the decision will maximize your overall happiness. E) all of the above are necessary for your decision to be rational

d) you believe the decision will maximize your overall happiness

According to the article "How to Make Airport Security Safe, Secure, and Fair for Everyone", which of the following statements is true? a. Airlines are bundling the preferential treatment during flights with expedited access to the TSA screening process for their frequent flyers and first-class passengers. b. The present two-tiered system of access to TSA security check is not illegal. c. The present two-tiered system of access to TSA security check is unfair because it is required by the government and the same fee is paid by all passengers regardless the ticket price. d. The airline companies should not get to decide who gets streamlined TSA security inspection. e. All of the above.

e) all of the above

According to the article "The Economic Organisation of a P.O.W. Camp", what commodity was the subject of trade and exchange in the camp? a. Marmalade b. Chocolate c. Cigarettes d. Butter e. All of the above

e) all of the above

By assuming that people are rational we mean that: A) They make their decisions in a consistent manner. B) They always try to make good decisions. C) They always try to make themselves as happy as possible. D) People donate to charity because they feel they benefit from charitable donations. E) All of the above

e) all of the above

In order to build a model of how people make decisions, we need to make some important simplifying assumptions. Which one of the following assumptions do economists often make? A) People are rational. B) A person's rational decision-making goal is to make him or herself as happy as possible. C) People attempt to maximize their economic surplus. D) People make decisions in a consistent manner. E) All of the above.

e) all of the above

The term "economic surplus" can also mean A) Happiness. B) Benefit. C) Welfare. D) None of the above. E) All of the above.

e) all of the above

Which of the following statements is true with respect to a pro-con list? A) Two people making the same decision (for example, should I attend college) can make different decisions based on the items each includes in his or her pro-con list. B) The items included in a pro-con list are based on an individual's expectations of the pros and the cons of the decision. These expectations may be wrong. C) Other parties (parents, school officials, friends, government, etc.) may be able to get you to change your decision by offering you incentives or disincentives. D) A pro-con list is inferior to a cost benefit analysis because it lacks a common unit of measurement; it is more difficult to decide whether pros are bigger than cons than to decide if benefits are bigger than costs. E) All of the above.

e) all of the above

According to your textbook, what does it mean to make decisions on the margin? (a) In a cost benefit analysis, you always compare benefits to costs. (b) In a cost benefit analysis, you always use expected costs and benefits. (c) In a cost benefit analysis, you only consider costs that are non‐refundable. d) All of the above (e) None of the above

e) none of the above

Suppose you buy a share of a company (a stock) and its price falls after you make your purchase. Based on cost benefit analysis, you should hang on to the stock: 1. if it is sunk cost. 2. never. You should always sell a stock that has cost you money. 3. you are rational. It is always better to hang onto a stock that has fallen in value until it has risen enough to recover your lost dollars. 4. if you feel it is likely to increase in value again in the near future and if you feel this increase in value will be more than the increase in value of other stocks available for purchase. 5. none of the above

if you feel it is likely to increase in value again in the near future and if you feel this increase in value will be more than the increase in value of other stocks available for purchase