Econ 211 Final Review

Wendy leaves her job as a dancer to start her own dance studio. As a dancer, she made $34,000 per year. During the studio's first year she paid $4,300 per year for insurance, $1,846 for music and licensing fees, $150 for a boom box, and $11,300 for rent and utilities. She received $60,480 in tuition payments. Wendy's economic profit was: A) $8,884. B) $42,884. C) $51,596. D) $60,480.

A) $8,884.

Based on the graph, the profit earned by the monopolist is represented by the rectangle: A) abfe. B) aceg. C) adeh. D) abcd.

A) abfe.

Suppose that a customer's willingness to pay for a product is $79, and the seller's willingness to sell is $64. If the negotiated price is $68, how much is consumer surplus? A) $4 B) $11 C) $15 D) $21

B) $11

Which item is NOT a determinant of supply? A) the cost of resources B) national income C) prices of other commodities D) taxes and subsidies

B) national income

Based on the figure, Sp (MPC) represents the private supply curve of a particular type of nail polish, the manufacture of which is associated with the release of toxic chemicals into the atmosphere. SS (MSC) includes the cost of that toxicity borne by others. What is the socially optimal price of this nail polish? A) P1 B) P2 C) d D) 0

B) P2

At a price of $20, how many unicycles will John produce? A) 40 unicycles B) 42 unicycles C) 44 unicycles D) 46 unicycles

C) 44 unicycles

The profit-maximizing output is _____ units. A) 12 B) 31 C) 54 D) 57

C) 54

Which circumstance would increase the supply of pork sausage? A) a news release that provides details about the ingredients in pork sausage B) an increase in the number of chicken sausage buyers C) a decrease in the price of ingredients used to produce sausage D) an increase in the number of pork sausage buyers

C) a decrease in the price of ingredients used to produce sausage

In economics, the term "land" includes: A) mostly agricultural land. B) natural resources excluding water resources. C) all natural resources. D) resources found on the Earth's surface.

C) all natural resources.

What would be a possible opportunity cost of you going to a doctor for a check-up? A) the cost of getting nontraditional care B) the opportunity to make an acquaintance in the waiting room C) lost income due to not being at work for those hours D) the cost of the insurance reimbursing the doctor

C) lost income due to not being at work for those hours

In the graph, if the government sets a price of $5, there is a: A) shortage of 20 units. B) surplus of 20 units. C) shortage of 40 units. D) surplus of 40 units.

C) shortage of 40 units.

The price of gold increases by 200%. If the price elasticity of demand for gold is 0.4, what will happen in the market? A) Gold sales will increase by 1,000%. B) Gold sales will decrease by 40%. C) Gold sales will decrease by 5%. D) Gold sales will decrease by 80%.

D) Gold sales will decrease by 80%.

Inelastic demand has an elasticity that is: A) greater than 1. B) greater than or equal to 1. C) equal to 1. D) less than 1.

D) less than 1.

A shift in the demand curve is caused by a change in: A) the price of the item. B) the behavior of suppliers. C) costs of production. D) one of the determinants of demand.

D) one of the determinants of demand.

A country operating outside of the production possibilities frontier is: A) operating efficiently. B) operating inefficiently and at an unattainable level. C) operating inefficiently but in an area that can be attained with proper use of resources. D) operating impossibly because a country cannot operate outside the production possibilities frontier.

D) operating impossibly because a country cannot operate outside the production possibilities frontier.

Based on the graph, the income effect is shown by segment: A) ab. B) ac. C) bc. D) abc.

C) bc.

When oligopolies act jointly as a monopoly, they are acting as a: A) contestable market. B) competitive market. C) cartel. D) monopsony.

C) cartel.

The tragedy of the commons is MOST associated with: A) pure public goods. B) pure private goods. C) common property resources. D) public goods with exclusion.

C) common property resources.

A shift in the budget line in the figure from 3 to 2 is caused by a(n): A) increase in the price of honey. B) decrease in the price of honey. C) increase in the price of milk. D) decrease in the price of milk.

C) increase in the price of milk.

In the game table, the Nash equilibrium is: A) Up, Left = (4, 8) B) Up, Right = (3, 7) C) Down, Left = (6, 5) D) Down, Right = (5, 2)

C) Down, Left = (6, 5)

Based on the graph, the profit-maximizing price is at point: A) e. B) f. C) g. D) d.

A) e.

The concept of human capital is important to economists because: A) improvements to human capital lead to higher standards of living. B) it compares people with machinery. C) it helps managers plan for future growth. D) it shows ways for firms to reduce costs.

A) improvements to human capital lead to higher standards of living.

For a perfectly competitive firm, if MR > AVC and MR > MC, then the firm should: A) increase production. B) continue to produce at the same level of output. C) reduce production. D) shut down.

A) increase production.

The market structure associated with many firms that sell a standardized product is: A) perfect competition. B) monopolistic competition. C) oligopoly. D) monopoly

A) perfect competition.

The figure depicts the cost curves for a firm in a perfectly competitive industry in the long run. If the market price is $36, how many units of output should this firm produce? A) 0 units B) 9 units C) 12 units D) 14 units

B) 9 units

If the market price is $18, John makes: A) an economic profit but not a normal profit. B) a normal profit or zero economic profit. C) less than a normal rate of profit. D) more than a normal rate of profit.

B) a normal profit or zero economic profit.

A natural monopoly exists because a firm: A) experiences persistent increasing marginal costs. B) experiences economies of scale. C) can underprice its competition. D) can price discriminate.

B) experiences economies of scale.

In the graph, producer surplus equals _______. A) $8 B) $5 C) $10 D) $25

D) $25

Based on the table, assume that a consumer has a budget of $12, water costs $2 per bottle, and chips cost $3 per bag. When utility is maximized, the MU/P for both goods is: A) 20. B) 5. C) 3. D) 10.

D) 10.

If Tamara is given a $3-per-hour pay increase, and in response, she decides to work more hours, then: A) Tamara's labor supply curve is upward sloping. B) Tamara's labor supply curve is backward bending. C) the income effect is dominating the substitution effect. D) Tamara's labor supply curve is flat.

A) Tamara's labor supply curve is upward sloping.

If the price is $17, in the long run, some unicycle producers: A) leave the industry. B) enter the industry. C) begin to advertise. D) become monopolies.

A) leave the industry.

Suppose there is unseasonable summer weather in a resort town. We can expect demand to shift _____ and the equilibrium price for hotels to _____. A) left; fall B) left; rise C) right; fall D) right; rise

A) left; fall

The income effect for labor supply states that people work: A) less as wages rise because their ability to purchase goods increases. B) more as wages rise because their ability to purchase goods increases. C) less as wages rise because the opportunity cost of leisure increases. D) more as wages rise because the opportunity cost of leisure increases.

A) less as wages rise because their ability to purchase goods increases.

Which of the answer choices lists market structures in order from the highest number of sellers to the lowest? A) perfect competition, monopolistic competition, oligopoly, monopoly B) oligopoly, perfect competition, monopoly, monopolistic competition C) monopoly, monopolistic competition, perfect competition, oligopoly D) monopoly, oligopoly, monopolistic competition, perfect competition

A) perfect competition, monopolistic competition, oligopoly, monopoly

A community college creates _____ for a community. A) positive externalities B) negative externalities C) a tragedy of the commons D) a common property resource market failure

A) positive externalities

If the price the U.S. Post Office charges to deliver Express Mail rises, the demand facing FedEx will rise because its respective services are _____ goods. A) substitute B) complementary C) inferior D) luxury

A) substitute

The price of a Chinese buffet dinner is $10 and an evening of bowling costs $20. Bill has $100 per month to spend on these two goods. If Bill wants to go bowling four times this month, he can only eat at his favorite Chinese buffet _____ times this month. A) two B) four C) six D) eight

A) two

In the table, assume that a consumer has a budget of $12, water costs $2 per bottle, and chips cost $3 per bag. Utility will be maximized by buying: A) no water and 4 bags of chips. B) 3 bottles of water and 2 bags of chips. C) 2 bottles of water and 3 bags of chips. D) 3 bottles of water and 3 bags of chips.

B) 3 bottles of water and 2 bags of chips.

Suppose you and your best friend are each deciding whether to spend the weekend in Key West or to stay home and study for next week's exam. The payoffs for each of the four possible outcomes are shown in the table (where higher numbers are better and the first number in each box represents your payoff, while the second number represents your friend's payoff). Which of these scenarios is the Nash equilibrium? A) You and your friend both travel, for a payoff of (85, 60). B) You travel but your friend studies, for a payoff of (75, 70). C) You study but your friend travels, for a payoff of (80, 50). D) You and your friend both study, for a payoff of (70, 80).

B) You travel but your friend studies, for a payoff of (75, 70).

When regulating a natural monopoly, average cost pricing is more effectively used than marginal cost pricing because average cost pricing: A) leads to lower social costs than marginal cost pricing. B) allows the firm to earn a normal rate of return on investment, while marginal cost pricing will lead to economic losses. C) is more economically fair than marginal cost pricing. D) leads to a lower market price than marginal cost pricing.

B) allows the firm to earn a normal rate of return on investment, while marginal cost

When the price of hamburgers increased from $1.50 to $2.75, the quantity demanded decreased from 375 units sold to 250 units sold. Using the midpoint method, hamburgers are said to be: A) elastic. B) inelastic. C) unitary elastic. D) monetary elastic

B) inelastic.

Han and Micah have just started their own business: a food truck that sells specialty Vietnamese food. Although the start-up costs were low, Han and Micah charge a higher price for their food than their competitors because people from all over the city come to buy their food. What type of market structure do they face? A) perfect competition B) monopolistic competition C) oligopoly D) monopoly

B) monopolistic competition

If a market exchange imposes costs on a party not involved in the transaction, the cost is called a: A) positive externality. B) negative externality. C) public good. D) tragedy of the commons.

B) negative externality.

The price elasticity of demand is calculated by dividing the: A) percentage change in price by the percentage change in quantity demanded. B) percentage change in quantity demanded by the percentage change in price. C) change in quantity demanded by the change in price. D) change in price by the change in quantity demanded.

B) percentage change in quantity demanded by the percentage change in price.

If the price of shoes is $60 per pair, the _____ will be 30 pairs of shoes. A) quantity demanded B) quantity supplied C) market demand D) market supply

B) quantity supplied

As wages rise, if an employee works the same number of hours as before, then the: A) substitution effect dominates the income effect. B) substitution effect and the income effect are of equal magnitude. C) income effect dominates the substitution effect. D) employee's income will fall.

B) substitution effect and the income effect are of equal magnitude.

Demand refers to: A) consumers wanting a product so much that they insist on the product being produced. B) the goods and services buyers are willing and able to purchase at various prices in a given period of time. C) the amount consumers wish they could consume. D) the relationship between price and quantity that sellers bring to the market.

B) the goods and services buyers are willing and able to purchase at various prices in a given period of time.

An example of a negative externality created in the market system would be: A) poverty. B) water pollution. C) an increased number of patients with bird flu. D) unemployment

B) water pollution.

To pursue her goal of being a business owner, Mary left a job that paid $40,000 per year. At the end of her first year in business, her cash revenues summed to $90,000, and her explicit costs were $50,000. Also, in order to fund her business startup, Mary cashed in a $20,000 certificate of deposit that was providing a yield of 5%. Ceteris paribus, Mary's economic profit is: A) $40,000. B) $1,000. C) -$1,000. D) $0.

C) -$1,000.

If a cartel member is considering cheating in order to earn profits, it should: A) increase the price of the goods it sells at the quota quantity. B) decrease the price of the goods it sells at the quota quantity. C) increase the quantity it sells at the quota price. D) decrease the quantity it sells at the quota price.

C) increase the quantity it sells at the quota price.

A change from a technically or productively inefficient mix to an efficient mix of output would BEST be represented with a production possibilities frontier (PPF) as a: A) shift outward of the PPF. B) shift inward of the PPF. C) movement from inside the PPF onto the PPF. D) movement from a point on the PPF to a point inside the PPF

C) movement from inside the PPF onto the PPF.

There is a(n) _____ relationship between price and quantity demanded. A) indeterminate B) positive C) negative D) indeterminate, positive, and negative

C) negative

Suppose that a person discovers that, ceteris paribus, when the price of tomatoes increases, the demand for blue cheese decreases. From this he concludes that: A) tomatoes and blue cheese are substitutes. B) tomatoes are inferior goods and blue cheese is a normal good. C) tomatoes and blue cheese are complements. D) the demand curve for tomatoes has shifted to the left.

C) tomatoes and blue cheese are complements.

When negative externalities exist, an unregulated market will produce _____ of the good and the price will be _____ when compared to the socially optimal production. A) the same amount; the same B) too much; the same C) too much; too low D) too little; too high

C) too much; too low

Which statement does NOT explain the Coase theorem? A) It holds if transaction costs approach zero. B) It explains that benefits or income will be different for polluters and victims, depending on how property rights are assigned. C) It states that efficient results always occur regardless of who is given the property rights. D) It states that efficient results will occur if both parties share the property rights equally.

D) It states that efficient results will occur if both parties share the property rights equally.

Cartels are inherently unstable because: A) any one firm can make additional profits by selling additional output at a price below the marginal cost. B) of the disincentive to cheat. C) firms behave like competitive firms facing a market price. D) any one firm can make additional profits by selling additional output at a price above the marginal cost.

D) any one firm can make additional profits by selling additional output at a price above the marginal cost.

Public goods are: A) excludable and nonrival. B) nonexcludable and rival. C) excludable and rival. D) nonexcludable and nonrival.

D) nonexcludable and nonrival.

If the demand for iPhones rises as incomes increase, then the iPhone is a(n) _____ good. A) inferior B) abnormal C) supply D) normal

D) normal

In the graph, which shape represents consumer surplus? A) the triangle hjk B) the line hij C) the line hi D) the triangle hik

D) the triangle hik

If an economy is operating at a point that is inside of its production possibilities frontier, then it can be assumed that its resources are: A) efficiently allocated. B) over-utilized. C) fully utilized. D) underutilized.

D) underutilized.