Econ 4001

17) Suppose the production of mp3 players can be represented by the following production function: q = L0.4K0.4. The firm currently produces q1 units. If all inputs doubled, the new level of output will equal A) 2 ^0.4 q1. B) 2 ^0.8 q1. C) 0.8 q1. D) 1.6 q1.

B) 2 0.8 q1.

14) Joe's budget constraint equals 500 = 2F + 100S, where $500 is Joe's income, $2 is the price of food (F) and $100 is the price of shelter (S). How much food can Joe buy if he buys one unit of shelter? A) 2 units B) 200 units C) 250 units D) 400 units

B) 200 units

8) Long-Run Production: Two Variable Inputs At Joey's Lawncutting Service, a lawn mower cannot cut grass without a laborer. A laborer cannot cut grass without a lawn mower. Which graph in the above figure best represents the isoquants for Joey's Lawncutting Service when capital per day is on the vertical axis and labor per day is on the horizontal axis? A) Graph A B) Graph B C) Graph C D) Graph D

A) Graph A

16) Suppose the production of mp3 players can be represented by the following production function: q = L0.4K0.4. Which of the following statements is TRUE? A) The production function has decreasing returns to scale. B) The production function has increasing returns to scale. C) The production function has constant returns to scale. D) Returns to scale vary with the level of output.

A) The production function has decreasing returns to scale.

11) If a profit-maximizing firm finds that, at its current level of production, MR < MC, it will A) decrease output. B) increase output. C) shut down. D) operate at a loss.

A) decrease output.

6) If the price elasticity of demand for a good is greater than one in absolute value, economists characterize that demand is A) elastic. B) inelastic. C) perfect. D) vertical.

A) elastic.

18) An optimum that occurs as a corner solution A) includes only one good. B) cannot be an equilibrium. C) cannot exhaust the budget constraint. D) includes the exact same amounts of each good.

A) includes only one good.

5) If the demand for orange juice is expressed as Q = 2000 - 500p, where Q is measured in gallons and p is measured in dollars, then at the price of $3, the demand curve A) is elastic. B) has a unitary elasticity. C) is inelastic. D) is perfectly inelastic.

A) is elastic.

6) An individual's demand curve for a good can be derived by measuring the quantities selected as A) the price of the good changes. B) the price of substitute goods changes. C) income changes. D) All of the above.

A) the price of the good changes.

8) A demand curve for a Giffen good would be A) upward sloping. B) downward sloping. C) horizontal. D) vertical.

A) upward sloping.

1) An indifference curve represents bundles of goods that a consumer A) views as equally desirable. B) ranks from most preferred to least preferred. C) refers to any other bundle of goods. D) All of the above.

A) views as equally desirable.

6) Which of the following statements is NOT true? A) AC = AFC + AVC B) C = F + VC C) AVC = wage/MPL D) AFC = AC - AVC

C) AVC = wage/MPL

4) Consumers will always pay the entire amount of a specific tax whenever A) demand is perfectly inelastic. B) supply is perfectly elastic. C) Both A and B above. D) Either A or B above but not at the same time.

C) Both A and B above.

10) If a competitive firm maximizes short-run profits by producing some quantity of output, which of the following must be true at that level of output? A) p > MC B) MR > MC C) p ≥ AVC D) All of the above

C) p ≥ AVC

2) A horizontal demand curve for a firm implies that A) the firm is a monopoly. B) the market the firm is operating in is not competitive. C) the firm is selling in a competitive market. D) the products of that firm are very different from other firms' products.

C) the firm is selling in a competitive market.

9) In the late 1980s, the health benefits of oat bran were widely advertised. If the price of oats increased 50%, causing the quantity of oats supplied to increase by 40%, then the price elasticity of supply was A) 1.25. B) -1.25. C) -0.80. D) 0.80.

D) 0.80.

10) Suppose the short-run production function is q = 10 ∗ L. If the wage rate is $10 per unit of labor, then AVC equals A) q. B) q/10. C) 10/q. D) 1.

D) 1.

9) If the utility function (U) between food (F) and clothing (C) can be represented as U = square root (FxC), the marginal rate of substitution of clothing for food equals A) -C/F. B) -F/C. C) - Square root C/F D) - square root F/C

A -C/F

11) If the utility for two goods "x" and "y" is measured as U = x + y, then it can be concluded that A) "x" and "y" are perfect substitutes. B) "x" and "y" are perfect complements. C) "x" and "y" are both bads. D) the indifference curves on the x,y graph will be upward sloping.

A) "x" and "y" are perfect substitutes.

20) If the marginal rate of technical substitution for a cost minimizing firm is 10, and the wage rate for labor is $5, what is the rental rate for capital in dollars? A) .5 B) 1 C) 2 D) 10

A) .5

17) If the government decides to levy an ad valorem tax on product with a perfectly inelastic supply. The consumers tax incidence will be A) 0 B) 1 C) .5 D) Cannot be determined.

A) 0

) Suppose the total cost of producing T-shirts can be represented as TC = 50 + 2q. The marginal cost of the 5th T-shirt is A) 2. B) 10. C) 12. D) 60.

A) 2.

18) Which of the following is an example of an ad valorem tax? A) 5% of price. B) 5% of quantity sold. C) $0.50 per unit sold. D) Government regulation.

A) 5% of price.

) The above figure shows the short-run production function for Albert's Pretzels. The marginal productivity of labor for the third worker is A) 6. B) 8. C) 24. D) not known from the information provided.

A) 6.

10) As more people quit smoking in the United States, what is expected to happen to the price elasticity of supply of cigarettes? A) It will decrease. B) It will increase. C) It can increase or decrease. D) It will not change.

A) It will decrease.

7) Skateboards are produced according to the production function, q = 10K0.25L0.5 - L. At what quantity of labor does total product begin to decline given that capital is fixed at 16 units in the short-run? A) L = 100. B) L = 10. C) L = 5. D) Not enough information is given.

A) L = 100.

10) How much labor does a firm require to produce q = 1000 when capital is fixed at 5 and they have a production function equal to q = 200L0.5K0.5? A) L = 5 B) L = 2.5 C) L = 200 D) L = 2.25

A) L = 5

9) Suppose the total cost of producing T-shirts can be represented as TC = 50 + 2q. Which of the following statements is TRUE at all levels of production? A) MC = AVC B) MC = AC C) MC > AFC D) All of the above.

A) MC = AVC

9) What is the MRTS for a firm with the following production function, q = 10L0.5K0.3? A) MRTS = - 5K/3L B) The firm will substitute a constant 3 units of capital for 5 units of labor. C) The MRTS does not exist because labor and capital are perfect complements. D) None of the above.

A) MRTS = - 5K/3L

11) The elasticity of supply of rental units in New York City is estimated to be about 0.10. Current price restrictions (price floors) are estimated to decrease the price of rental units by 10% below equilibrium price. By how much would price and quantity supplied change if the price floors were removed from the rental unit market in New York City? A) Price will increase by 10% and quantity supplied will increase by 1%. B) Price will decrease by 10% and quantity supplied will increase by 1%. C) Price will increase by 10% and quantity supplied will decrease by 1%. D) Price and quantity supplied will increase by 10%.

A) Price will increase by 10% and quantity supplied will increase by 1%.

18) The slope of the isocost line tells the firm how much A) capital must be reduced to keep total cost constant when hiring one more unit of labor. B) capital must be increased to keep total cost constant when hiring one more unit of labor. C) more expensive a unit of capital costs relative a unit of labor. D) the isocost curve will shift outward if the firm wishes to produce more.

A) capital must be reduced to keep total cost constant when hiring one more unit of labor.

3) In a perfectly competitive market, A) firms can freely enter and exit. B) firms sell a differentiated product. C) transaction costs are high. D) All of the above.

A) firms can freely enter and exit.

21) Behavioral economics extends traditional economic models by A) including insights from psychology and human cognition models. B) modeling behavior rather than prices. C) admitting that individuals are irrational. D) admitting that incentives are very important.

A) including insights from psychology and human cognition models.

23) Bounded rationality suggests that A) individuals might make "incorrect" decisions because they are unable to consider all possible options. B) individuals would rather have less choice to more choice. C) rational decisions can only be made when choices are restricted. D) individuals are happier when their choices are restricted or "bounded."

A) individuals might make "incorrect" decisions because they are unable to consider all possible options.

1) A vertical demand curve results in A) no change in quantity when the supply curve shifts. B) no change in price when the supply curve shifts. C) no change in the supply curve being possible. D) no change in quantity when the demand curve shifts.

A) no change in quantity when the supply curve shifts.

18) The above figure shows the isoquants for producing steel. Increasing returns to scale are A) present when producing less than 10,000 tons. B) present when producing less than 20,000 tons. C) present when producing less than 30,000 tons. D) never present.

A) present when producing less than 10,000 tons.

9) In response to an increase in the wage rate, the income effect will usually cause a person to A) supply fewer hours of labor. B) supply more hours of labor. C) supply the same hours of labor. D) have a horizontal labor supply curve.

A) supply fewer hours of labor.

6) If the average productivity of labor equals the marginal productivity of labor, then A) the average productivity of labor is at a maximum. B) the marginal productivity of labor is at a maximum. C) Both A and B above. D) Neither A nor B above.

A) the average productivity of labor is at a maximum.

2) The assumption of completeness means that A) the consumer can rank all possible consumption bundles. B) more of a good is always better. C) the consumers can rank all affordable consumption bundles. D) all preferences conditions are met.

A) the consumer can rank all possible consumption bundles.

7) If two bundles are on the same indifference curve, then A) the consumer derives the same level of utility from each. B) the consumer derives the same level of ordinal utility from each but not the same level of cardinal utility. C) no comparison can be made between the two bundles since utility cannot really be measured. D) B and C.

A) the consumer derives the same level of utility from each.

4) A firm's marginal cost can always be thought of as the change in total cost if A) the firm produces one more unit of output. B) the firm buys one more unit of capital. C) the firm's average cost increases by $1. D) the firm moves to the next highest isoquant.

A) the firm produces one more unit of output.

2) In the long run, all factors of production are A) variable. B) fixed. C) materials. D) rented.

A) variable.

In tracing out a​ price-consumption curve​ (PCC) for good​ X, which of the following variables is held​ constant? A. Consumer income B. Consumer satisfaction​ (utility) C. Consumption of all other goods. D. The price of good X

A. Consumer income

Remy views ice cream and fudge sauce as perfect complements. Is it possible that either of these goods or both of them are Giffin​ goods? A. Neither good can be a Giffen good because there is no substitution effect with perfect complements. B. One or both goods could be a Giffen good because there is only an income effect with perfect complements. C. Neither good can be a Giffen good because price changes have no effect on the quantity consumed with perfect complements. D. Both goods could be Giffen goods because the substitution effect reinforces the income effect with goods consumed in fixed proportions. E. Only one good could be a Giffen good because the sizes of the substitution and income effects are the same with goods consumed in fixed proportions.

A. Neither good can be a Giffen good because there is no substitution effect with perfect complements.

Suppose that Boston consumers pay twicetwice as much for avocados as for​ tangerines, whereas San Diego consumers pay halfhalf as much for avocados as for tangerines. Assuming that consumers maximize their​ utility, which​ city's consumers have a higher marginal rate of substitution of avocados for​ tangerines? Explain your answer. If Boston consumers pay relatively moremore for avocados than San Diego​ consumers, then​ (in absolute​ value) the marginal rate of substitution​ (MRS) of avocados for tangerines for consumers in Boston when maximizing utility is A. smaller because MRS equals the ratio of prices. B. larger because MRS equals the ratios of marginal utility to price. C. the same size because MRS is unrelated to prices. D. smaller because MRS equals the opportunity set. E. larger because MRS equals the ratio of marginal utilities.

A. smaller because MRS equals the ratio of prices.

8) A small business owner earns $50,000 in revenue annually. The explicit annual costs equal $30,000. The owner could work for someone else and earn $25,000 annually. The owner's business profit is ________ and the economic profit is ________. A) $20,000, $5,000 B) $20,000, -$5,000 C) $25,000, -$5,000 D) $45,000, -$5,000

B) $20,000, -$5,000

4) Suppose the demand function for a good is expressed as Q = 100 - 4p. If the good currently sells for $10, then the price elasticity of demand equals A) -1.5. B) -0.67. C) -4. D) -2.5.

B) -0.67.

7) If a consumer doubles her quantity of ice cream consumed when her income rises by 25%, then her income elasticity of demand for ice cream is A) 8.0. B) 4.0. C) .25. D) .08.

B) 4.0.

12) Suppose the supply curve and the demand curve both have unitary elasticity at all prices. The price increase to consumers resulting from a specific tax of $1 imposed on sellers will be A) $1. B) 50 cents. C) zero. D) impossible to calculate without knowing the slope of the supply curve.

B) 50 cents.

22) A firm produces output according to the production function, q = L4/3K1/2 and faces input prices equal to w = $20 and r = $80. What is the minimum cost of producing 1140 units of output? A) Cost = $780. B) Cost = $694 C) Cost = $2,071. D) Not enough information is given to answer this problem.

B) Cost = $694

13) Individuals derive utility from picnics, p, and kayak trips, k. Assuming that an individual's utility is U(p,k) = k0.5p0.5 and income is $100, what is the marginal rate of substitution (MRS) between picnics and kayak trips? A) MRS = 1. B) MRS = -1. C) MRS = - 1/2 D) There is no substitution because picnics and kayak trips are perfect complements.

B) MRS = -1.

13) Let the production function be q = ALaKb. The function exhibits increasing returns to scale if A) a + b = 1. B) a + b > 1. C) a + b < 1. D) Cannot be determined with the information given.

B) a + b > 1.

8) If a good has an income elasticity of demand greater than 1, one might classify that good as A) a necessity. B) a luxury. C) unusual. D) inelastic.

B) a luxury.

15) Lisa eats both pizzas and burritos. If the price of a pizza increases, Lisa's opportunity set A) becomes larger. B) becomes smaller. C) is unchanged. D) cannot be determined without more information.

B) becomes smaller.

10) If Fred's marginal rate of substitution of salad for pizza equals 5, then A) he would give up 5 pizzas to get the next salad. B) he would give up 5 salads to get the next pizza. C) he will eat five times as much pizza as salad. D) he will eat five times as much salad as pizza.

B) he would give up 5 salads to get the next pizza.

24) A firm is currently producing1140 units of output according to the production function q = L4/3K1/2 and faces input prices equal to w = $20 and r = $80. In the short run, capital is fixed at 5 units. In the long run, the firm's costs are A) lower because the firm substitutes towards more labor and away from capital. B) lower because the firm substitutes towards more capital and away from labor. C) higher because the firm substitutes towards more labor and away from capital. D) higher because the firm substitutes towards more capital and away from labor.

B) lower because the firm substitutes towards more capital and away from labor.

21) Suppose MPL = 0.5 ∗ (q/L) and MPK = 0.5 ∗ (q/K). In the long run, the firm will hire equal amounts of capital and labor A) all of the time. B) only when w = r. C) only when w = 0.5 ∗ r. D) at no point in time.

B) only when w = r.

19) By selecting a bundle where MRS = MRT, the consumer is A) achieving a corner solution. B) reaching the highest possible indifference curve she can afford. C) not behaving in an optimal way. D) All of the above.

B) reaching the highest possible indifference curve she can afford.

16) If both prices increases by 50%, A) budget constraint will be unchanged. B) slope of the budget constraint stay the same. C) slope of the budget constraint will decrease. D) budget constraint will shift outward in a parallel fashion.

B) slope of the budget constraint stay the same.

5) If a firm operates in a perfectly competitive market, then it will most likely A) advertise its product on television. B) take the price of its product as determined by the market. C) have a difficult time obtaining information about the market price. D) have an easy time keeping other firms out of the market.

B) take the price of its product as determined by the market.

17) If a person supplies fewer hours of labor in response to a wage increase, then A) the substitution effect is greater than the income effect. B) the income effect is greater than the substitution effect. C) the income effect equals the substitution effect. D) the person is not maximizing utility.

B) the income effect is greater than the substitution effect.

15) A Consumer Price Index (CPI) adjustment overcompensates for inflation because it ignores A) the income effect when relative prices change. B) the substitution effect when relative prices change. C) that some goods are inferior. D) that the substitution effect may offset the income effect.

B) the substitution effect when relative prices change.

Suppose that Boston consumers pay halfhalf as much for avocados as for​ tangerines, whereas San Diego consumers pay twicetwice as much for avocados as for tangerines. Assuming that consumers maximize their​ utility, which​ city's consumers have a higher marginal rate of substitution of avocados for​ tangerines? Explain your answer. If Boston consumers pay relatively lessless for avocados than San Diego​ consumers, then​ (in absolute​ value) the marginal rate of substitution​ (MRS) of avocados for tangerines for consumers in Boston when maximizing utility is A. the same size because MRS is unrelated to prices. B. larger because MRS equals the ratio of prices. C. larger because MRS equals the ratio of marginal utilities. D. smaller because MRS equals the opportunity set. E. smaller because MRS equals the ratios of marginal utility to price.

B. larger because MRS equals the ratio of prices.

Why would a​ consumer's demand for a supermarket product change when the product price is quoted inclusive of taxes rather than before​ tax? Is the same effect as likely for people buying a​ car? Whether taxes are quoted as part of a supermarket​ product's price might affect consumer demand because A. taxes are salient. B. mentally calculating the impact of taxes has a cost. C. shoppers often have prior experience. D. calculating taxes is costless. E. rationality is boundless.

B. mentally calculating the impact of taxes has a cost.

For changes in the price of good X​ (holding income and the price of good Y​ constant), a vertical price consumption curve​ (as shown to the​ right), corresponds to​ a: A. perfectly inelastic demand curve. B.typical​ downward-sloping demand curve. C. perfectly elastic demand curve. D. constant and unitary elasticity of demand.

B.typical​ downward-sloping demand curve.

14) If a firm is currently in short-run equilibrium earning a profit, what impact will a lump-sum tax have on its production decision? A) The firm will decrease output to earn a higher profit. B) The firm will increase output but earn a lower profit. C) The firm will not change output but earn a lower profit. D) The firm will not change output and earn a higher profit.

C) The firm will not change output but earn a lower profit.

14) Let the production function be q = ALaKb. The function exhibits decreasing returns to scale if A) a + b = 1. B) a + b > 1. C) a + b < 1. D) Cannot be determined with the information given.

C) a + b < 1.

1) Economists define a market to be competitive when the firms A) spend large amounts of money on advertising to lure customers away from the competition. B) watch each other's behavior closely. C) are price takers. D) All of the above.

C) are price takers.

1) Economic costs of an input include A) only implicit costs. B) only explicit costs. C) both implicit and explicit costs. D) whatever management wishes to report to the shareholders.

C) both implicit and explicit costs.

19) The slope of the isoquant tells the firm how much A) output increases when labor increases by one unit. B) output increases when capital and labor are doubled. C) capital must decrease to keep output constant when labor increases by one unit. D) a unit of capital costs relative to the cost of labor.

C) capital must decrease to keep output constant when labor increases by one unit.

5) The above figure shows the short-run production function for Albert's Pretzels. The average product of labor A) increases first and then decreases. B) decreases first and then increases. C) decreases throughout. D) increases throughout.

C) decreases throughout.

4) The above figure shows Bobby's indifference map for juice and snacks. Also shown are three budget lines resulting from different prices for snacks. As the price of snacks rises, Bobby's utility A) stays the same. B) increases. C) decreases. D) might change, but there is not enough information to determine.

C) decreases.

4) In a competitive market, if buyers did not know all the prices charged by the many firms, A) all firms still face horizontal demand curves. B) firms sell a differentiated product. C) demand curves can be downward sloping for some or all firms. D) the number of firms will most likely decrease.

C) demand curves can be downward sloping for some or all firms.

5) If two goods are perfect substitutes, then the indifference curves for those two goods would be A) upward sloping and concave to the origin. B) downward sloping and convex to the origin. C) downward sloping and straight. D) L-shaped.

C) downward sloping and straight.

7) Suppose a firm can only vary the quantity of labor hired in the short run. An increase in the cost of capital will A) increase the firm's marginal cost. B) decrease the firm's marginal cost. C) have no effect on the firm's marginal cost. D) More information is needed to answer the question.

C) have no effect on the firm's marginal cost.

5) The above figure shows Bobby's indifference map for juice and snacks. Also shown are three budget lines resulting from different prices for snacks. Bobby's demand for snacks is A) unit elastic. B) elastic. C) inelastic. D) perfectly elastic.

C) inelastic.

18) If Bobby thinks that leisure is an inferior good, then his labor supply curve A) is backward bending. B) is always negatively sloped. C) is always positively sloped. D) does not exist.

C) is always positively sloped.

9) If a firm is operating at an output level where losses are minimized, the firm A) has no incentive to stay in the industry. B) is better off exiting the industry. C) is maximizing profits. D) will shut down.

C) is maximizing profits.

16) The price of leisure A) is the same for everyone. B) depends on the number of hours worked. C) is measured as foregone earnings. D) is immeasurable.

C) is measured as foregone earnings.

14) Due to inflation, nominal prices are usually A) equal to real prices. B) smaller than real prices. C) larger than real prices. D) a constant proportion different from real prices.

C) larger than real prices.

22) In behavioral economics, the endowment effect refers to A) most people believe that most wealthy people inherit their wealth. B) many people would be indifferent between being endowed with money or knowledge. C) many people place a higher value on what they own than when they consider purchasing. D) most people respond to tax incentives to provide an endowment for their children.

C) many people place a higher value on what they own than when they consider purchasing.

12) If average cost is decreasing, A) marginal cost equals average cost. B) marginal cost exceeds average cost. C) marginal cost is less than average cost. D) Not enough information is given.

C) marginal cost is less than average cost.

12) Decreasing returns to scale may occur as increasing the amount of inputs used A) increases specialization. B) always increases the amount of output produced. C) may cause coordination difficulties. D) increases efficiency.

C) may cause coordination difficulties.

12) When the price of a good changes, the income effect can be found by comparing the equilibrium quantities purchased A) on the old budget line and the new budget line. B) on the original indifference curve when faced with the original prices and when faced with the new prices. C) on the new budget line and a hypothetical budget line that is a shift back to the original indifference curve parallel to the new budget line. D) on the new indifference curve.

C) on the new budget line and a hypothetical budget line that is a shift back to the original indifference curve parallel to the new budget line.

2) The above figure shows Bobby's indifference map for juice and snacks. Also shown are three budget lines resulting from different prices for snacks assuming he has $20 to spend on these goods. Which of the following points are on Bobby's demand curve for snacks? A) p = 2, q = 10 B) p = 2, q = 13 C) p = 2, q = 5 D) p = 1, q = 20

C) p = 2, q = 5

7) The demand curve that an individual competitive firm faces is known as its A) excess demand curve. B) market demand curve. C) residual demand curve. D) leftover demand curve.

C) residual demand curve.

20) If the food stamp program in the United States moved from coupons redeemable for food to cash payments A) everyone would buy less food and more of other goods. B) everyone would buy more food and less of other goods. C) some people might buy less food and obtain a higher level of utility. D) some people might buy less food and obtain a lower level of utility.

C) some people might buy less food and obtain a higher level of utility.

3) The above figure shows Bobby's indifference map for juice and snacks. Also shown are three budget lines resulting from different prices for snacks. This information could be used to determine A) the slope of Bobby's demand curve for juice. B) the amount by which Bobby's demand curve for juice shifts when his income rises. C) the amount by which Bobby's demand curve for juice shifts when the price of snacks rises. D) All of the above.

C) the amount by which Bobby's demand curve for juice shifts when the price of snacks rises.

13) The competitive firm's supply curve is equal to A) its marginal cost curve. B) the portion of its marginal cost curve that lies above AC. C) the portion of its marginal cost curve that lies above AVC. D) the portion of its marginal cost curve that lies above AFC.

C) the portion of its marginal cost curve that lies above AVC.

17) If a consumer's budget line for food (F) and shelter (S) is represented as F = 250 - 5S, we know that A) the consumer's income is 250. B) the price of shelter is 5. C) the price of shelter is 5 times the price of food. D) All of the above.

C) the price of shelter is 5 times the price of food.

2) The above figure shows the supply and demand curves for rice in the U.S. and in Japan. Assume there is no trade between the two countries. If bad weather causes the supply curves in each country to shift leftward by the same amount, then A) the price will increase the same amount in both countries. B) the price will decrease the same amount in both countries. C) the price will increase more in Japan than in the U.S. D) the price will decrease more in Japan than in the U.S.

C) the price will increase more in Japan than in the U.S.

West Virginians who live near the border with other states can shop on either side of the border. If they buy food in West​ Virginia, their total cost is the price of the food plus the tax. If they buy across the border in states that do not tax​ food, the total cost is the price plus the cost due to the extra travel. Tosun and Skidmore​ (2007) found that West Virginian food sales dropped​ 8% in border counties when a​ 6% sales tax on food was imposed. Explain why. Food sales in West Virginia dropped​ 8% in border counties when it​ (West Virginia) added a​ 6% sales tax on food because A. food in West Virginia became an imperfect substitute for food across the state border. .B. the incomes of West Virginians decreased relative to the incomes of residents of neighboring states. C. the cost of food became greater in West Virginia than across the state border. D. food in West Virginia is a perfect complement for food across the state border. E. the cost of traveling across the West Virginia state border became greater.

C. the cost of food became greater in West Virginia than across the state border.

16) Suppose the demand curve for movie tickets has unitary price elasticity and the supply curve is perfectly price elastic. If 3 million tickets are currently sold at a price of $5, approximately how much tax revenue could the government generate from a $1 specific tax? A) $18 million B) $3 million C) $2.7 million D) $1.5 million

C) $2.7 million

2) Sarah earns $40,000 per year working for a large corporation. She is thinking of quitting this job to work full time in her own business. She will invest her savings of $50,000 (which currently has an annual 10% rate of return) into the business. Her annual opportunity cost of this new business is A) $0. B) $40,000. C) $45,000. D) $90,000.

C) $45,000.

3) Suppose the inverse demand curve for a good is expressed as Q = 50 - 2p. If the good currently sells for $3, then the price elasticity of demand is A) -3 ∗ (2/50). B) -2 ∗ (50/3). C) -2 ∗ (3/44). D) -3 ∗ (44/2).

C) -2 ∗ (3/44).

8) If the utility function (U) between food (F) and clothing (C) can be represented as U =square root (FxC) , the marginal utility of food equals A) square root F/C B) square root C/F C) 1/2 square root C/F D) 1/2 square root F/C

C) 1/2 square root C/F

11) Suppose the short-run production function is q = 10 ∗ L. If the wage rate is $10 per unit of labor, then MC equals A) q. B) q/10. C) 10/q. D) 1.

D) 1.

1) The above figure shows Bobby's indifference map for juice and snacks. Also shown are three budget lines resulting from different prices for snacks assuming he has $20 to spend on these goods. Which of the following points are on Bobby's price-consumption curve? A) 10 snacks and 20 juices B) 10 snacks and 0 juices C) 10 snacks and 5 juices D) 10 snacks and 15 juices

D) 10 snacks and 15 juices

1) An organization that converts inputs (like Labor, Capital etc.) into output can be a A) firm. B) sole proprietorship. C) corporation. D) All of the above.

D) All of the above.

10) An inferior good exhibits A) a negative income elasticity. B) a downward sloping Engel curve. C) a decline in the quantity demanded as income rises. D) All of the above.

D) All of the above.

13) A Giffen good has A) a positive substitution effect. B) a negative income effect. C) a larger income effect than substitution effect. D) All of the above.

D) All of the above.

3) The principle that "More is better" results in indifference curves A) sloping down. B) not intersecting. C) reflecting greater preferences the further they are from the origin. D) All of the above.

D) All of the above.

6) The perfectly competitive model makes a lot of fairly unrealistic assumptions. Why do economics text books still talk a lot about this model? A) Many markets are close to being perfectly competitive. B) It is an important model to use as a benchmark to compare other markets structures to. C) Perfectly competitive markets maximize societal welfare. D) All of the above.

D) All of the above.

7) As the price of a good rises, the consumer will experience A) a desire to consume a different bundle. B) a decrease in utility. C) a southern or western movement on the indifference map. D) All of the above.

D) All of the above.

16) In the short run, average variable costs are minimized when A) MPL equals APL. B) APL is maximized. C) MPL is maximized and APL is increasing. D) Both A and B.

D) Both A and B.

15) Suppose the short-run production function is q = 10 ∗ L. If the wage rate is $10 per unit of labor, then AFC equals A) 0. B) 1. C) 10/q. D) It cannot be determined from the information provided.

D) It cannot be determined from the information provided.

6) The indifference curves for left shoes and right shoes would most likely be A) upward sloping and concave to the origin. B) downward sloping and convex to the origin. C) downward sloping and straight lines. D) L-shaped.

D) L-shaped.

13) If average cost is positive, A) marginal cost equals average cost. B) marginal cost exceeds average cost. C) marginal cost is less average cost. D) Not enough information is given.

D) Not enough information is given.

9) A movement upward along an upward sloping Engel curve corresponds to A) upward sloping indifference curves. B) crossing indifference curves. C) a rotation in the budget constraint. D) a parallel shift in the budget constraint.

D) a parallel shift in the budget constraint.

4) Diminishing marginal rate of substitution can be seen when indifference curves A) cross. B) are convex. C) are downward sloping. D) become flatter as we move down and to the right.

D) become flatter as we move down and to the right.

15) If a government wants to maximize revenues from a tax it should A) impose it on sellers. B) impose it on consumers. C) choose a good with a relatively elastic demand. D) choose a good with a relatively inelastic demand.

D) choose a good with a relatively inelastic demand.

3) Short-Run Production: One Variable and One Fixed Input The above figure depicts a short-run production function for Albert's Pretzels. The marginal productivity of labor A) rises then falls as the amount of capital increases. B) falls then rises as the amount of labor increases. C) is greater than or equal to the average productivity of labor for all amounts of labor. D) is less than or equal to the average productivity of labor for all amounts of labor.

D) is less than or equal to the average productivity of labor for all amounts of labor.

12) A firm should always shut down if its revenue is A) declining. B) less than its average fixed costs. C) less than its total costs. D) less than its avoidable costs.

D) less than its avoidable costs.

13) A specific tax on sellers will A) shift the demand curve to the right. B) shift the demand curve to the left. C) shift the supply curve to the right. D) shift the supply curve to the left.

D) shift the supply curve to the left.

11) If consumer income and prices increase by the same percentage, A) the consumer will buy more of both goods. B) the consumer will buy more of both goods if they are both normal goods. C) the consumer will buy less of both goods if they are both inferior goods. D) the consumer's utility maximizing bundle stays the same.

D) the consumer's utility maximizing bundle stays the same.

12) Assuming that good "x" is measured on the x-axis and good "y" is measured on the y-axis, if the utility for the two goods "x" and "y" can be measured as U = y, then it can be concluded that A) "x" and "y" are perfect complements. B) "x" is a "bad". C) the indifference curves on the x,y graph are upward sloping. D) the indifference curves on the x,y graph are horizontal.

D) the indifference curves on the x,y graph are horizontal.

How much does his weekly budget have to rise for Hugo to buy one more donut per​ week? ​Hugo's income must rise A. by pD. B. by pC. C. by pD minus pC. D. by pD plus pC. .E. Both a and b are correct.

D. by pD plus pC.

For changes in the price of good X​ (holding income and the price of good Y​ constant), a vertical price consumption curve​ (as shown to the​ right), corresponds to​ a: A. typical​ downward-sloping demand curve. B. perfectly elastic demand curve. C. constant and unitary elasticity of demand. D. perfectly inelastic demand curve.

D. perfectly inelastic demand curve.

If an​ individual's labor supply curve slopes upward at low wages and bends backward at high​ wages, is leisure a Giffen​ good? If​ so, at high or low wage​ rates? With such a supply curve​ (as illustrated in the figure to the​ right), leisure A. could be a Giffen good for the​ backward-bending portion of the​ individual's labor supply curve. B. is necessarily a Giffen good for all portions of the​ individual's labor supply curve. C. is necessarily a Giffen good for the​ upward-sloping portion of the​ individual's labor supply curve. D. is necessarily a Giffen good for the​ backward-bending portion of the​ individual's labor supply curve. E. is not necessarily a Giffen good for any portion of the​ individual's labor supply curve.

E. is not necessarily a Giffen good for any portion of the​ individual's labor supply curve.

Quoting car prices after deducting sales taxes rather than in​ pre-tax form A. would have a larger effect on car sales because the demand for cars is inelastic. B. would have a larger effect on car sales because sales taxes are relatively low. C. would have a larger effect on car sales because taxes on cars are obvious. D. would have a smaller effect on car sales because for such an infrequent​ decision, the consumer would not calculate the taxes. E. would have a smaller effect on car sales because for such an important​ decision, the consumer would calculate the taxes.

E. would have a smaller effect on car sales because for such an important​ decision, the consumer would calculate the taxes.

In the diagram to the​ right, we have five different combinations of movies and books. Combination A represents 2 movies and 3 books. Combination C represents more books​ (7) and the same number of movies​ (2). Points​ B, E, and F are other combinations with more​ movies, more​ books, or more of both. Note that an indifference curve has been added. We now know​ that: When compared to combination​ E, combination B provides ___ satisfaction to the consumer. When compared to combination​ E, combination C provides ___ satisfaction to the consumer. When compared to combination​ A, combination C provides ___ satisfaction to the consumer.

LESS LESS MORE

15) Let the production function be q = ALaKb. The function exhibits constant returns to scale if A) a + b = 1. B) a + b > 1. C) a + b < 1. D) Cannot be determined with the information given.

A) a + b = 1.

5) Fixed costs are A) a production expense that does not vary with output. B) a production expense that changes with the quantity of output produced. C) equal to total cost divided by the units of output produced. D) the amount by which a firm's cost changes if the firm produces one more unit of output.

A) a production expense that does not vary with output.

11) Returns to scale refers to the change in output when A) all inputs increase proportionately. B) labor increases holding all other inputs fixed. C) capital equipment is doubled. D) specialization improves.

A) all inputs increase proportionately.

West Virginians who live near the border with other states can shop on either side of the border. If they buy food in West​ Virginia, their total cost is the price of the food plus the tax. If they buy across the border in states that do not tax​ food, the total cost is the price plus the cost due to the extra travel. Tosun and Skidmore​ (2007) found that West Virginian food sales dropped​ 8% in border counties when a​ 6% sales tax on food was imposed. Explain why. Food sales in West Virginia dropped​ 8% in border counties when it​ (West Virginia) added a​ 6% sales tax on food becauseA. food in West Virginia is a perfect complement for food across the state border. B. the cost of traveling across the West Virginia state border became greater. C. food in West Virginia became an imperfect substitute for food across the state border. D. the cost of food became greater in West Virginia than across the state border. E. the incomes of West Virginians decreased relative to the incomes of residents of neighboring states.

E. the incomes of West Virginians decreased relative to the incomes of residents of neighboring states.