Econ Chapters 5-7, 13-15

Refer to Table 5-2.Using the midpoint method, if the price falls from $200 to $150, the absolute value of the price elasticity of demand is a. 5.3 b. 2.8. c. 0.8. d. 0.36.

b. 2.8

If a 6% decrease in price for a good results in a 2% increase in quantity demanded, the price elasticity of demand is 0.02 .33 3 4

.33

A dairy produces and sells organic milk. Last year it sold 500,000 gallons of milk at a price of $7 per gallon. For last year, the firm's 1. total revenue was $3.5 million. 2. economic profit was$3.5 million. 3. accounting profit was $3.5 million. 4. explicit costs were $3.5 million.

1.

A firm has a fixed cost of $500 in its first year of operation. When the firm produces 100 units of output, its total costs are $3,500. When it produces 101 units of output, its total costs are $3,750. What is the marginal cost of producing the 101st unit of output? 1. $250 2. $275 3. $340.91 4. $350

1.

A long-run supply curve is flatter than a short-run supply curve because 1. firms can enter and exit a market more easily in the long run than in the short run. 2. long-run supply curves are sometimes downward sloping. 3. competitive firms have more control over demand in the long run. 4. firms in a competitive market face identical cost structures.

1.

Answer1.002.45Question1ptsEditthisQuestionDeletethisQuestionSuppose theincome elasticity of demand is -0.5 for good X. This implies that a 5% decrease in income will cause the quantity demanded of good X to 1. increase by 2.5%, and X is an inferior good. 2. decrease by 2.5% and X is a normal good. 3. increase by 10% and X is an inferior good. 4. decrease by 10% and X is a normal good.

1.

Because natural monopolies have a declining average cost curve, regulating natural monopolies by setting price equal to marginal cost would 1. cause the monopolist to operate at a loss. 2. result in a less than optimal total surplus. 3. maximize producer surplus. 4. result in higher profits for the monopoly.

1.

Changes in the output of a perfectly competitive firm, without any change in the price of the product, will change the firm's 1. total revenue. 2. marginal revenue. 3. average revenue. 4. All of the above are correct.

1.

Consider luxury weekend hotel packages in Las Vegas. When the price is $250, the quantity demanded is 2,000 packages per week. When the price is $280, the quantity demanded is 1,700 packages per week. Using the midpoint method, the price elasticity of demand is about 1. 1.43, and an increase in the price will cause hotels' total revenue to decrease. 2. 1.43, and an increase in the price will cause hotels' total revenue to increase. 3. 0.70, and an increase in the price will cause hotels' total revenue to decrease. 4. 0.70, and an increase in the price will cause hotels' total revenue to increase.

1.

Donald produces nails at a cost of $200 per ton. If he sells the nails for $350 per ton, his producer surplus per ton is 1. $150. 2. $200. 3. $350. 4. $550.

1.

For a monopolist, when does marginal revenue exceed average revenue? 1. never 2. when output is less than the profit-maximizing level of output 3. when output is greater than the profit-maximizing level of output 4. for all levels of output greater than zero

1.

For a monopolist, when the output effect is greater than the price effect, marginal revenue is 1. positive. 2. negative. 3. zero. 4. maximized.

1.

For an individual firm operating in a competitive market, marginal revenue equals 1. average revenue and the price for all levels of output. 2. average revenue, which is greater than the price for all levels of output. 3. average revenue, the price, and marginal cost for all levels of output. 4. marginal cost, which is greater than average revenue for all levels of output.

1.

How does a competitive market compare to a monopoly that engages in perfect price discrimination? 1. In both cases, total social welfare is the same. 2. Total social welfare is higher in the competitive market than with the perfectly price discriminating monopoly. 3. In both cases, some potentially mutually beneficial trades do not occur. 4. Consumer surplus is the same in both cases.

1.

If a market is allowed to move freely to its equilibrium price and quantity, then an increase in supply will 1. increase consumer surplus. 2. reduce consumer surplus. 3. not affect consumer surplus. 4. Any of the above are possible.

1.

If a tax is imposed on a market with inelastic demand and elastic supply, then 1. buyers will bear most of the burden of the tax. 2. sellers will bear most of the burden of the tax. 3. the burden of the tax will be shared equally between buyers and sellers. 4. it is impossible to determine how the burden of the tax will be shared.

1.

If a tax is levied on the sellers of a product, then the supply curve will 1. shift up. 2. shift down. 3. become flatter. 4. not shift.

1.

If the price elasticity of supply for a window manufacturer is 1.5, 1. a 10% increase in the price of windows results in a 15% increase in the quantity of windows supplied. 2, supply is considered to be inelastic. 3. the manufacturer is likely operating very near capacity. 4. All of the above are correct.

1.

If the price elasticity of supply for wheat is less than 1, then the supply of wheat is 1.inelastic. 2. elastic. 3. unit elastic. 4. quite sensitive to changes in income.

1.

If thegovernment levies a $5 tax per ticket on buyers of NFL game tickets, then the price paid by buyers of NFL game tickets would 1. increase by less than $5. 2. increase by exactly $5. 3. increase by more than $5. 4. decrease by an indeterminate amount.

1.

In "Venezuela Versus the Market," the price control placed on coffee 1. created a shortage of coffee. 2. resulted in higher profits for coffee growers. 3. increased coffee exports to other countries. 4. increased the amount of land and coffee used in production.

1.

In the short-run, a firm's supply curve is equal to the 1. marginal cost curve above its average variable cost curve. 2. marginal cost curve above its average total cost curve. 3. average variable cost curve above its marginal cost curve. 4. average total cost curve above its marginal cost curve.

1.

OPEC successfully raised the world price of oil in the 1970s and early 1980s, primarily due to 1. an inelastic demand for oil and a reduction in the amount of oil supplied. 2. a reduction in the amount of oil supplied and a world-wide oil embargo. 3. a world-wide oil embargo and an elastic demand for oil. 4. a reduction in the amount of oil supplied and an elastic demand for oil.

1.

Refer to Figure 15-19. If the monopoly firm perfectly price discriminates, then consumer surplus amounts to 1. $0. 2. $1,562.50. 3. $3,125. 4. $6,250.

1.

Refer to Figure 15-19. If the monopoly firm perfectly price discriminates, then the deadweight loss amounts to 1. $0. 2. $1,562.50. 3. $3,125. 4. $6,250.

1.

Refer to Figure 5-11. If price increases from $10 to $20, total revenue will 1. increase by $120, so demand must be inelastic in this price range. 2. increase by $320, so demand must be inelastic in this price range. 3. decrease by $120, so demand must be elastic in this price range. 4. decrease by $320, so demand must be elastic in this price range.

1.

Refer to Figure 5-14.Over which range is the supply curve in this figure the most elastic?Correct Answer 1. $16 to $40 2. $40 to $100 3. $100 to $220 4. $220 to $430

1.

Refer to Figure 6-1. The price ceiling shown in panel (a) 1. is not binding. 2. creates a surplus. 3. creates a shortage. 4. Both a) and b) are correct.

1.

Refer to Figure 6-17.A government-imposed price of $12 in this market is an example of a 1. binding price ceiling that creates a shortage. 2. non-binding price ceiling that creates a shortage. 3. binding price floor that creates a surplus. 4. non-binding price floor that creates a surplus.

1.

Refer to Figure 6-29. Suppose D1 represents the demand curve for gasoline in both the short run and long run, S1 represents the supply curve for gasoline in the short run, and S2 represents the supply curve for gasoline in the long run. After the imposition of the $2, the price paid by buyers will be 1. higher in the long run than in the short run. 2. higher in the short run than in the long run. 3. equivalent in the short run and the long run. 4. unable to be determined without additional information.

1.

Refer to Figure 7-10. Which area represents producer surplus when the price is P1?Correct Answer 1. BCG 2. ACH 3. ABGD 4. DGH

1.

Refer to Figure 7-11.If the supply curve is S', the demand curve is D, and the equilibrium price is $150, what is the producer surplus?Correct Answer 1. $625 2. $1,250 3. $2,500 4. $5,000

1.

Refer to Scenario 13-15.Joan's total-cost curve isCorrect Answer 1. increasing at an increasing rate. 2. increasing at a decreasing rate. 3. increasing at a constant rate. 4. decreasing.

1.

Refer to Scenario 13-20. Marginal cost will be 1. rising at all points. 2. falling at all points. 3. U-shaped. 4. constant.

1.

Refer to Table 13-17. Which firm has economies of scale over the entire range of output? 1. Firm 1 only 2. Firms 1 and 2 only 3. Firm 2 only 4. Firm 3 only

1.

Refer to Table 13-3. The marginal product of the fourth worker is 1. 10 units. 2. 60 units. 3. 230 units. 4. 240 units.

1.

Refer to Table 6-3.How many units of the good are sold after the imposition of the price floor? 1. 5 2. 9 3. 10 4. 15

1.

Suppose ABC Aluminum Inc. owns 80% of the world's bauxite, a mineral used in the production of aluminum. Which of the following reasons describes the fundamental barrier to entry for the aluminum industry? 1. monopoly resources 2. government regulation 3. the production process 4. Both a and b are correct.

1.

The Federal Insurance Contribution Act (FICA) tax is an example of a(n) 1. payroll tax. 2. sales tax. 3. farm subsidy. 4. income subsidy.

1.

The fundamental source of monopoly power is 1. barriers to entry. 2. profit. 3. decreasing average total cost. 4. a product without close substitutes.

1.

The long-run average total cost curve is always 1. flatter than the short-run average total cost curve, but not necessarily horizontal. 2. horizontal. 3. falling as output increases. 4. rising as output increases.

1.

The price elasticity of demand measures how much... 1. quantity demanded responds to a change in price. 2. quantity demanded respondsto a change in income. 3. price responds to a change in demand. 4. demand responds to a change in supply.

1.

Which of the followinggovernmental actions would eliminate some or all of the inefficiency that results from monopoly pricing? The government could 1. regulate the monopoly. 2. prohibited the monopoly from price discriminating. 3. force the monopoly to operate at a point where its marginal revenue is equal to its marginal cost. 4. None of the above would eliminate anyinefficiency associated with a monopoly.

1.

otal revenue minus only explicit costs is called 1. accounting profit. 2. economic profit. 3. average total cost. 4. implicit profit.

1.

Refer to Figure 5-2. As price falls from Pa to Pb, which demand curve represents the most elastic demand? 1. D1 2. D2 3. D3 4. All of the above are equally elastic.

1. D1

If the price of milk rises, when is the price elasticity of demand likely to be the lowest? 1. immediately after the price increase 2. one month after the price increase 3. three months after the price increase 4. one year after the price increase

1. Immediately after the price increase

Goods with many close substitutes tend to have 1. More elastic demand 2. less elastic demands. 3. price elasticities of demand that are unit elastic. 4. income elasticities of demand that are negative.

1. more elastic demands

For a vertical demand curve, 1. the slope is undefined, and the price elasticity of demand is equal to 0. 2. the slope is equal to 0, and the price elasticity of demand is undefined. 3. both the slope and price elasticity of demand are undefined. 4. both the slope and price elasticity of demand are equal to 0.

1. slope is undefined and price elasticity of demand is equal to 0

A binding price floor will reduce a firm's total revenue 1. always.Correct Answer 2. when demand is elastic. 3. when demand is inelastic. 4. never.

2.

A firm produces 300 units of output at a total cost of $1,000. If fixed costs are $100, 1. average fixed cost is $10. 2. average variable cost is $3. 3. average total cost is $4. 4. average total cost is $5.

2.

A key characteristic of a competitive market is that 1. government antitrust laws regulate competition. 2. producers sell nearly identical products. 3. firms minimize total costs. 4. firms have price setting power.

2.

A monopolist can sell 300 units of output for $45 per unit. Alternatively, it can sell 301 units of output for $44.60 per unit. The marginal revenue of the 301stunit of output is 1. -$120.00. 2. -$75.40. 3. -$0.40. 4. $75.40.

2.

A nonbinding price ceiling (i)causes a surplus. (ii)causes a shortage. (iii)is set at a price above the equilibrium price. (iv)is set at a price below the equilibrium price. 1. (i) only 2. (iii) only 3. (i) and (iii) only 4. (ii) and (iv) only

2.

An industry is a natural monopoly when (i)the government assists the firm in maintaining the monopoly. (ii)a single firm owns a key resource. (iii)a single firm can supply a good or service to an entire market at a smaller cost than could two or more firms. 1. (ii) onlyCorrect Answer 2. (iii) only 3. (i) and (ii) only 4. (ii) and (iii) only

2.

Antitrust laws have economic benefits that outweigh the costs if they 1. prevent mergers that would decrease competition and lower the costs of production. 2. prevent mergers that would decrease competition and raise the costs of production. 3. allow mergers that would decrease competition and raise the costs of production 4. None of the above is correct because antitrust laws never have economic benefits that outweigh the costs

2.

At Bert's Bootery, the total cost of producing twenty pairs of boots is $400. The marginal cost of producing the twenty-first pair of boots is $83. We can conclude that the 1. average variable cost of 21 pairs of boots is $23. 2. average total cost of 21 pairs of boots is $23. 3. average total cost of 21 pairs of boots is $15.09. 4. marginal cost of the 20th pair of boots is $20.

2.

Consider a profit-maximizing monopoly pricing under the following conditions. The profit-maximizing price charged for goods produced is $12.The intersection of the marginal revenue and marginal cost curves occurs where output is 10 units and marginal cost is $6. The socially efficient level of production is 12 units. The demand curve and marginal cost curves are linear. What isthe value of the deadweight loss created by the monopolist? 1. $4 2. $6 3. $12 4. $16

2.

Constant returns to scale occur when the firm's long-run 1. total costs are constant as output increases. 2. average total costs are constant as output increases. 3. average cost curve is falling as output increases. 4. average cost curve is rising as output increases.

2.

David's firm experiences diminishing marginal product for all ranges of inputs. The total cost curve associated with David's firm 1. gets flatter as output increases. 2. gets steeper as output increases. 3. is constant for all ranges of output. 4. is unrelated to the production function.

2.

Economies of scale occur when a firm's 1. marginal costs are constantas output increases. 2. long-run average total costs are decreasing as output increases. 3. long-run average total costs are increasing as output increases. 4. marginal costs are equal to average total costs for all levels of output.

2.

Efficiency in a market is achieved when 1. a social planner intervenes and sets the quantity of output after evaluating buyers' willingness to pay and sellers' costs. 2. the sum of producer surplus and consumer surplus is maximized. 3. all firms are producing the good at the same low cost per unit. 4. no buyer is willing to pay more than the equilibrium price for any unit of the good.

2.

For a firm, the relationship between the quantity of inputs and quantity of output is called the 1. profit function. 2. production function. 3. total-cost function. 4. quantity function.

2.

If a firm in a competitive market doubles its number of units sold, total revenue for the firm will 1. more than double. 2. double. 3. increase but by less than double. 4. may increase or decrease depending on the price elasticity of demand.

2.

If a price ceiling is not binding, then 1. the equilibrium price is above the price ceiling. 2. the equilibrium price is below the price ceiling. 3. it has no legal enforcement mechanism. 4. None of the above is correct because all price ceilings must be binding.

2.

If the cross-price elasticity of two goods is negative, then the two goods are 1. necessities. 2. complements. 3. normal goods. 4. inferior goods.

2.

Katherine gives piano lessons for $20 per hour. She also grows flowers, which she arranges and sells at the local farmer's market. One day she spends 5 hours planting $50 worth of seeds in her garden. Once the seeds have grown into flowers, she can sell them for $150 at the farmer's market. Katherine's accounting profits are 1. $100, and her economic profits are $100. 2. $100, and her economic profits are $0. 3. $0, and her economic profits are $100. 4. $0, and her economic profits are $-100.

2.

Kelly is willing to pay $5.20 for a gallon of gasoline. The price of gasoline at her local gas station is $3.80. If she purchases ten gallons of gasoline, then Kelly's consumer surplus is 1. $1.40. 2. $14. 3. $3.80. 4. $52.

2.

Policymakers use taxes 1. to raise revenue for public purposes but not to influence market outcomes. 2. both to raise revenue for public purposes and to influence market outcomes. 3. when they realize that price controls alone are insufficient to correct market inequities. 4. only in those markets in which the burden of the tax falls clearly on the sellers.

2.

Price controls are usually enacted 1. as a means of raising revenue for public purposes. 2. when policymakers believe that the market price of a good or service is unfair to buyers or sellers. 3. when policymakers tax a good. 4. All of the above are correct.

2.

Price discrimination is the business practice of 1. bundling related products to increase total sales. 2. selling the same good at different prices to different customers. 3. pricing above marginal cost. 4. hiring marketing experts to increase consumers' brand loyalty.

2.

Refer to Figure 14-6. Firms will shut down in the short run if the market price 1. exceeds P3. 2. is less than P1. 3. is greater than P1 but less than P3. 3. exceeds P2.

2.

Refer to Figure 14-9. If there are 100 identical firms in this market, what is the value of Q2? 1. 10,000 2. 20,000 3. 40,000 4. 80,000

2.

Refer to Figure 14-9. When 100 identical firms participate in this market, at what price will 15,000 units be supplied to this market? 1. $1.00 2. $1.50 3. $2.00 4. The price cannot be determined from the information provided.

2.

Refer to Figure 5-1. Between point A and point B, the slope is equal to 1. -1/4, and the price elasticity of demand is equal to 2/3. 2. -1/4, and the price elasticity of demand isequal to 3/2. 3. -3/2, and the price elasticity of demand is equal to 1/4. 4. -2/3, and the price elasticity of demand is equal to 3/2.

2.

Refer to Figure 6-18. The effective price that sellers receive after the tax is imposed is 1. $6. 2. $10. 3. $16. 4. $24.

2.

Refer to Figure 7-14.At the equilibrium price, producer surplus is 1. $800. 2. $400. 3. $450. 4. $900.

2.

Refer to Scenario 13-11.The explicit cost for one birdhouse is 1. $4. 2. $5. 3. $8. 4. $9.

2.

Refer to Scenario 13-15.Joan's production function exhibits 1. increasing marginal product. 2. decreasing marginal product. 3. constant marginal product. 4. Any of the above could be correct.

2.

Refer to Table 13-3. At which number of workers does diminishing marginal product begin? 1. 1 2. 2 3. 3 4. 4

2.

Refer to Table 13-3.If the firm can sell its output for $1 per unit, what is the profit-maximizing level of output? 1. 240 units 2. 230 units 3. 190 units 4. 170 units

2.

Refer to Table 14-9. At which quantity of output is marginal revenue equal to marginal cost? 1. 3 units 2. 5 units 3. 7 units 4. 9 units

2.

Refer to Table 15-21. If the monopolist can engage in perfect price discrimination, what is total profit at the profit-maximizing quantity? 1. $325 2. $435 3. $565 4. $1000

2.

Refer to Table 6-3.Following the imposition of a price floor $2 above the equilibrium price, irate buyers convince Congress to repeal the price floor and to impose a price ceiling $1 below the former price floor. The resulting market price is 1. $2. 2. $3. 3. $4. 4. $5.

2.

Refer to Table 7-1. If the price of the product is $130, then who would be willing to purchase the product? 1. Calvin 2. Calvin and Sam 3. Calvin, Sam, and Andrew 4. Calvin, Sam, Andrew, and Lori

2.

Scenario 15-3A monopoly firm maximizes its profit by producing Q = 500 units of output. At that level of output, its marginal revenue is $30, its average revenue is $60, and its average total cost is $34.Refer to Scenario 15-3. At Q = 500, the firm's marginal cost is 1. less than $30. 2. $30. 3. $34. 4. greater than $34.

2.

Suppose the government has imposed a price ceiling on laptop computers. Which of the following events could transform the price ceiling from one that is not binding into one that is binding? 1. Improvements in production technology reduce the costs of producing laptop computers. 2. The number of firms selling laptop computers decreases. 3. Consumers' income decreases, and laptop computers are a normal good. 4. The number of consumers buying laptop computers decreases.

2.

The Three Amigo's company produced and sold 500 dog beds. The average cost of production per dog bed was $50. Each dog be sold for a price of $65. The Three Amigo's total costs are 1. $7,500. 2. $25,000. 3. $32,500. 4. $67,500.

2.

The deadweight loss associated with a monopoly occurs because the monopolist 1. maximizes profits. 2. produces an output level less than the socially optimal level. 3. produces an output level greater than the socially optimal level. 4. equates marginal revenue with marginal cost.

2.

The market demand curve for a monopolist is typically 1. unit price elastic. 2. downward sloping. 3. horizontal. 4. vertical.

2.

Total revenue minus both explicit and implicit costs is called 1. accounting profit. 2. economic profit. 3. average total cost. 4. total cost.

2.

When a certain monopoly sets its price at $8 it sells 64 units. When the monopoly sets its price at $10 it sells60 units. The marginal revenue for the firm over this range is 1. $11. 2. $22. 3. $33. 4. $44.

2.

When a firm experiences continually declining average total costs, 1. the firm is a price taker. 2. society is better served by having one firm supply the product. 3. the firm will earn higher profits than if average total costs are increasing. 4. All of the above are correct.

2.

When marginal cost exceeds average total cost, 1. average fixed cost must be rising 2. average total cost must be rising. 3. average total cost must be falling. 4. marginal cost must be falling.

2.

Which of the following statements is correct for a monopolist? (i)The firm maximizes profits by equating marginal revenue with marginal cost. (ii)The firm maximizes profitsby equating price with marginal cost. (iii)Demand equals marginal revenue. (iv)Average revenue equals price. 1.(i), (iii), and (iv) only 2. (i) and (iv) only 3.(i), (ii), and (iv) only 4.(i), (ii), (iii), and (iv)

2.

n a graph, the area below a demand curve and above the price measures 1. producer surplus. 2. consumer surplus. 3. deadweight loss. 4. willingness to pay.

2.

Which of the following is likely to have the most price inelastic demand? 1. strawberry-banana milk shakes 2. gasoline in the short run 3. diamond earrings 4. box seats at a major league baseball game

2. Gasoline in the short run

Refer to Table 5-2.Using the midpoint method, if the price falls from $100 to $50, the price elasticity of demand is 1.zero 2.inelastic. 3.unit elastic. 4.elastic.

2. Inelastic

A difference between explicit and implicit costs is that 1. explicit costs must be greater than implicit costs. 2. explicit costs do not require a direct monetary outlay by the firm, whereas implicit costs do. 3. implicit costs do not require a direct monetary outlay by the firm, whereas explicit costs do. 4. implicit costs must be greater than explicit costs.

3.

An example of an explicit cost of production would be the 1. cost of forgone labor earnings for an entrepreneur. 2. lost opportunity to invest in capital markets when the money is invested in one's business. 3. lease payments for the land on which a firm's factory stands. 4. Both a and c are correct.

3.

Assume a certain firm in a competitive market is producing Q = 1,000 units of output. At Q = 1,000, the firm's marginal cost equals $15 and its average total cost equals $11. Thefirm sells its output for $12 per unit.Refer to Scenario 14-1. At Q = 999, the firm's profits equal 1. $993. 2. $997. 3. $1,003. 4. $1,007.

3.

At price of $1.30 per pound, a local apple orchard is willing to supply 150 pounds of apples per day. At a price of $1.50 per pound, the orchard is willing to supply 170 pounds of apples per day. Using the midpoint method, the price elasticity of supply is about 1. 1.14 2. 1.00. 3. 0.875. 4. 0.50.

3.

At the profit-maximizing level of output, 1. marginal revenue equals average total cost. 2. marginal revenue equals average variable cost. 3. marginal revenue equals marginal cost. 4. average revenue equals average total cost.

3.

Consumer surplus 1. is closely related to thesupply curve for a product. 2. is represented by a rectangle on a supply-demand graph when the demand curve is a straight, downward-sloping line. 3. is measured using the demand curve for a product. 4. does not reflect economic well-being in most markets.

3.

Diminishing marginal product suggests that the marginal 1. cost of an extra worker is unchanged. 2. cost of an extra worker is less than the previous worker's marginal cost. 3. product of an extra worker is less than the previous worker's marginal product. 4. product of an extra worker is greater than the previous worker's marginal product.

3.

Diseconomies of scale occur when 1. average fixed costs are falling. 2. average fixed costs are constant. 3. long-run average total costs rise as output increases. 4. long-run average total costs fall as output increases.

3.

If a 25% change in price results in a 40% change in quantity supplied, then the price elasticity of supply is about 1. 0.63, and supply is elastic. 2. 0.63, and supply is inelastic. 3. 1.60, and supply is elastic. 4. 1.60, and supply is inelastic.

3.

If a pharmaceutical company discoversa new drug and successfully patents it, patent law gives the firm 1. partial ownership of the right to sell the drug for a limited number of years. 2. partial ownership of the rightto sell the drug for an unlimited number of years. 3. sole ownership of the right to sell the drug for a limited number of years. 4. sole ownership of the right to sell the drug for an unlimited number of years.

3.

If an increase in income results in a decrease in the quantity demanded of a good, then for that good, the 1. cross-price elasticity of demand is negative. 2. price elasticity of demand is elastic. 3. income elasticity of demand is negative. 4. income elasticity of demand is positive.

3.

If the government levies a $1,000 tax per boat on sellers of boats, then the price paid by buyers of boats would 1. increase bymore than $1,000. 2. increase by exactly $1,000. 3. increase by less than $1,000. 4. decrease by an indeterminate amount.

3.

If the government removes a binding price floor from a market, then the price paid by buyers will 1. increase, and the quantity sold in the market will increase. 2. increase, and the quantity sold in the market will decrease. 3. decrease, and the quantity sold in the market will increase. 4. decrease, and the quantity sold in the market will decrease.Question1

3.

In the short run, a firm operating in a competitive industry will produce the quantity of output where price equals marginal cost as long as the 1. price is less than average total cost. 2. marginal revenue exceeds the marginal cost. 3. price is greater than average variable cost. 4. price is greater than average fixed cost but less than average variable cost.

3.

Knowing that the demand for wheat is inelastic, if all farmers voluntarily did not plant wheat on 10 percent of their land, then 1. consumers of wheat would buy more wheat 2. wheat farmers would suffer a reduction in their total revenue. 3. wheat farmers would experience an increase in their total revenue. 4. the demand for wheat would decrease.

3.

Minimum-wage laws dictate 1. the exact wage that firms must pay workers. 2. a maximum wage that firms may pay workers. 3. a minimum wage that firms may pay workers. 4. both a minimum wage and a maximum wage that firms may pay workers.

3.

Monopolies are inefficient because they (i)eliminate barriers to entry. (ii)price their product at a level where marginal revenue exceeds marginal cost. (iii)restrict output below the socially efficient level of production. 1. (i) and (ii) only 2. (ii) and (iii) only 3. (iii) only 4. (i), (ii), and (iii)

3.

One assumption that distinguishes short-run cost analysis from long-run cost analysis for a profit-maximizing firm is that in the short run, 1. output is not variable. 2. the number of workers used to produce the firm's product is fixed. 3. the size of the factory is fixed. 4. there are no fixed costs.

3.

Refer to Figure 14-6. Firms will be earn losses in the short run but will remain in business if the market price 1. exceeds P3. 2. is less than P1. 3. is greater than P1 but less than P3. 4. exceeds P2.

3.

Refer to Figure 15-19. If there are no fixed costs of production, monopoly profit without price discrimination equals 1. $0. 2. $1,562.50. 3. $3,125. 4. $6,250.

3.

Refer to Figure 15-7.A profit-maximizing monopolist would earn profits of 1. $96. 2. $117. 3. $120. 4. $126.

3.

Refer to Figure 5-11. A decrease in price from $20 to $10 leads to a 1. decrease in total revenue of $200, so the price elasticity of demand is greater than 1 in this price range. 2. decrease in total revenue of $200, so the price elasticity of demand is less than 1 in this price range. 3. decrease in total revenue of $120, so the price elasticity of demand is less than 1 in this price range. 4. decrease in total revenue of $120, so demand is elastic in this price range.

3.

Refer to Figure 7-11.If the supply curve is S, the demand curve is D, and the equilibrium price is $100, what is the producer surplus? 1. $625 2. $1,250 3. $2,500 3. $5,000

3.

Refer to Figure 7-14.If the government imposes a price ceiling of $50 in this market, then producer surplus will decreaseby 1. $325. 2. $100. 3. $300. 4. $200.

3.

Refer to Figure 7-18. If total surplus is $240 and consumer surplus is 1. $100, then the price of the good is $130. 2. $130, then the price of the good is $120. 3. $160, then the price of the good is $100. 4. $120, then the price of the good is $90.

3.

Refer to Figure 7-18. Suppose the willingness to pay of the marginal buyer of the 3rdunit is $125. Then total surplus is maximized if 1. 1 unit of the good is produced and sold. 2. 2 units of the good are produced and sold. 3. 3 units of the good are produced and sold. 4. 4 units of the good are produced and sold.

3.

Refer to Figure 7-22. At the equilibrium price, total surplus is 1. $2,500. 2. $1,000. 3. $3,500. 4. $7,000.

3.

Refer to Figure 7-22. The efficient price is 1. $80, and the efficient quantity is 50. 2. $70, and the efficient quantity is 60. 3. $70, and the efficient quantity is 100. 4. $50, and the efficient quantity is 60.

3.

Refer to Figure 7-25.Suppose the government imposes a price floor of $28 in this market. If the sellers with the lowest cost are the ones who sell the good and the government does not purchase any excess units produced, then total surplus will be 1. $400. 2. $800. 3. $1,120. 4. $1,184.

3.

Refer to Scenario 13-5.Emily's total opportunity cost of capital is 1. $2,000. 2. $4,000. 3. $12,000. 4. $14,000.

3.

Refer to Scenario 13-9.Ellie's annual implicit costs will equal 1. $55,200. 2. $75,200. 3. $80,500. 4. $165,700.

3.

Refer to Table 13-9.For the firm whose production function and costs are specified in the table, its average-variable-cost curve is 1. constant. 2. decreasing. 3. increasing. 4. U-shaped.

3.

Refer to Table 13-9.For the firm whose production function and costs are specified in the table, its total-cost curve is 1. constant. 2. increasing at a decreasing rate. 3. increasing at an increasing rate. 4. unknown because there is no relationship between a firm's production function and its total-cost curve.

3.

Refer to Table 14-2.For this firm, the average revenue from selling 3 units is 1. $12. 2. $4. 3. $3. 4. $1.

3.

Refer to Table 14-2.For this firm, the marginal revenue from selling the 3rd unit is 1. $12. 2. $4. 3. $3. 4. $1.

3.

Refer to Table 14-9. In order to maximize profit, the firm will produce a level of output where marginal cost is equal to 1. $6. 2. $7. 3. $8. 4. $9.

3.

Refer to Table 5-7.Using the midpoint method, at a price of $12, what is the income elasticity of demand when income rises from $5,000 to $10,000? 1. 0.00 2. 0.41 3. 1.00 4. 2.45

3.

Refer to Table 5-7.Using the midpoint method, at a price of $16, what is the income elasticity of demand when income rises from $5,000 to $10,000? 1. 0.00 2. 0.50 3. 1.00 4. 1.50

3.

Refer to Table 7-1. If price of the product is $135, then the total consumer surplus is 1. $-50. 2. $-35. 3. $15. 4. $150.

3.

Refer to Table 7-1. If the price of the product is $110, then who would be willing to purchase the product? 1. Calvin 2. Calvin and Sam 3. Calvin, Sam, and Andrew 4. Calvin, Sam, Andrew, and Lori

3.

Suppose good X has a negative income elasticity of demand. This implies that good X is 1. a normal good. 2. a necessity. 3. an inferior good. 4. a luxury.

3.

Suppose good X has a positive income elasticity of demand. This implies that good X could be (i)a normal good. (ii)a necessity. (iii)an inferior good. (iv)a luxury. 1. (i)only 2. (i) and (ii) only 3. (i), (ii), and (iv) only 4. (iii) only

3.

Susan quit her job as a teacher, which paid her $36,000 per year, in order to start her own catering business. She spent $12,000 of her savings, which had been earning 10 percent interest per year, on equipment for her business. She also borrowed $12,000 from her bank at 10 percent interest, which she also spent on equipment. For the past several months she has spent $1,000 per month on ingredients and other variable costs. Also for the past several months she has earned $4,500 in monthly revenue. In the short run, Susan should 1. shut down her business, and in the long run she should exit the industry. 2. continue to operate her business, but in the long run she should exit the industry. 3. continue to operate her business, but in the long run she will probably face competition from newly entering firms. 4. continue to operate her business, and she is also in long-run equilibrium.

3.

The federal government is concerned about obesity in the United States. Congress is considering two plans. One will ban the production and sale of "junk food." The other will increase nutrition-education programs and include substantial advertising campaigns to encourage healthy eating habits. The junk-food ban program 1. and the education program willreduce the quantity of junk food sold and raise the price. 2. and the education program will reduce the quantity of junk food sold and lower the price. 3. will reduce the quantity of junk food sold and raise the price. The education program will reduce the quantity of junk food sold and lower the price. 4. will reduce the quantity of junk food sold and lower the price. The education program will reduce the quantity of junk food sold and raise the price.

3.

The long-run market supply curve in a competitive market will 1. always be horizontal. 2. be the portion of the MC that lies above the minimum of AVC for the marginal firm. 3. typically be more elastic than the short-run supply curve. 4. be above the competitive firm's efficient scale.

3.

The marginal revenue curve for a monopoly firm starts at the same point on the vertical axis as the (i)average revenue curve. (ii)marginal cost curve. (iii)demand curve. 1. (i) only 2. (i) and (ii) only 3. (i) and (iii) only 4. (iii) only

3.

The monopolist has fixed costs of $1,000 and has a constant marginal cost of $2 per unit. If the monopolist were able to perfectly price discriminate, how many units would it sell? 1. 400 2. 500 3. 900 4. 4,200

3.

Total surplus is represented by the area below the 1. demand curve and above the price. 2. price and up to the point of equilibrium. 3. demand curve and above the supply curve, up to the equilibrium quantity. 4. demand curve and above the horizontal axis, up to the equilibrium quantity.

3.

Victor is the recipient of $1 million from a lawsuit. Victor decides to use the money to purchase a small business in Florida. His business operates in a perfectly competitive industry. If Victor would have invested the $1 million in a risk-free bond fund, he could have earned $100,000 each year. After he bought the small business, Victor quit his job as a market analyst with Research, Inc., where he used to earn $75,000 per year.Refer to Scenario 14-4. At the end of the first year of operating his new business, Victor's accountant reported an accounting profit of $150,000. What was Victor's economic profit? 1. -$150,000 2. -$50,000 3. -$25,000 4. $25,000

3.

Victor is the recipient of $1 million from a lawsuit. Victor decides to use the money to purchase a small business in Florida. His business operates in a perfectly competitive industry. If Victor would have invested the $1 million in a risk-free bond fund, he could have earned $100,000 each year. After he bought the small business, Victor quit his job as a market analyst with Research, Inc., where he usedto earn $75,000 per year.Refer to Scenario 14-4. How large would Victor's accounting profits need to be to allow him to attain zero economic profit? 1. $100,000 2. $125,000 3. $175,000 4. $225,000

3.

When calculating a firm's profit, an economist will subtract only 1. explicit costs from total revenue because these are the only costs that can be measured explicitly. 2. implicit costs from total revenue because these include both the costs that can be directly measured as well as the costs that can be indirectly measured. 3. the opportunity costs from total revenue because these include both the implicit and explicit costs of the firm. 4. the marginal cost because the cost of the next unit is the only relevant cost.

3.

Which of the following is a characteristic of a competitive market? 1. There are many buyers but few sellers. 2. Many firms have market power because they own patents. 3. Buyers and sellers are price takers. 4. Firms sell differentiated products.

3.

Which of the following is not a characteristic of a monopoly? 1. the seller has market power 2. one seller 3. free entry and exit 4. a product without close substitutes

3.

Which of the following statements helps to explain why government drug interdiction increases drug-related crime? 1. The direct impact is on buyers, not sellers. 2. Successful drug interdiction policies reduce the demand for illegal drugs. 3. Drug addicts will have an even greater need for quick cash to support their habits. 4. In the short run, both equilibrium quantities and prices will fall in the markets for illegal drugs.

3.

Which of the following statements is correct? 1. Opportunity costs equal explicit minus implicit costs. 2. Economists consider opportunity costs to be included in a firm's total revenues. 3. Economists consider opportunity costs to be included in a firm's costs of production. 4. All of the above are correct.

3.

Which of these assumptions is often realistic for a firm in the short run? 1. The firm can vary both the size of its factory and the number of workers it employs. 2. The firm can vary the size of its factory but not the number of workers it employs. 3. The firm can vary the number of workers it employs but not the size of its factory. 4. The firm can vary neither the size of its factory nor the number of workers it employs.

3.

Refer to Figure 5-1. Between point A and point B, price elasticity of demand is equal to 1. 0.33. 2. 0.67. 3. 1.5 4. 2.67.

3. 1.5

Demand is said to be inelastic if 1. buyers respond substantially to changes in the price of the good. 2. demand shifts only slightly when the price of the good changes. 3. the quantity demanded changes only slightly when the price of the good changes. 4. the price of the good responds only slightly to changes in demand.

3. the quantity demanded changes only slightly when the price of the good changes.

A benefit of a monopoly is 1. lower prices. 2. a wide variety of similar products. 3. decreasing long-run average total costs. 4. greater creativity by authors who can copyright their novels.

4.

A legal maximum on the price at which a good can be sold is called a 1. price floor. 2. subsidy. 3. support. 4. ceiling.

4.

Bill created a new software program he is willing to sell for $200. He sells his first copy and enjoys a producer surplus of $150. What is the price paid for the software? 1. $50. 2. $150. 3. $200. 4. $350.

4.

Caroline sharpens knives in her spare time for extra income. Buyers of her service are willing to pay $2.95 per knife for as many knives as Caroline is willing to sharpen. On a particular day, she is willing to sharpen the first knife for $2.00, the second knife for $2.25, the third knife for $2.75, and the fourth knife for $3.50. Assume Caroline is rational in deciding how many knives to sharpen. Her producer surplus is 1. $0.95. 2. $1.15. 3. $1.30. 4. $1.85.

4.

Cindy's Car Wash has average variable costs of $2 and average fixed costs of $3 when it produces 100 units of output (car washes). The firm's total cost is 1. 100 2. 200 3. 300 4. 500

4.

Fixed costs can be defined as costs that 1. vary inversely with production. 2. vary in proportion with production. 3. are incurred only when production is large enough. 4. are incurred even if nothing is produced.

4.

For a construction company that builds houses, which of the following costs would be a fixed cost? 1. the $50,000 per year salary paid to a construction foreman 2. the $30,000 per year salary paid to the company's bookkeeper 3. the $10,000 per year premium paid to an insurance company 4. All of the above are correct.

4.

If marijuana were legalized, it is likely that there would be an increase in the supply of marijuana. Advocates of marijuana legalization argue that this would significantly reduce the amount of revenue going to the criminal organizations that currently supply marijuana. These advocates believe that the 1. supply for marijuana is elastic. 2. demand for marijuana is elastic. 3. supply for marijuana is inelastic. 4. demand for marijuana is inelastic.

4.

If the government removes a $1 tax on sellers of gasoline and imposes the same $1 tax on buyers of gasoline, then the price paid by buyers will 1. increase, and the price received by sellers will increase. 2. increase, and the price received by sellers will not change. 3. not change, and the price received by sellers will increase. 4. not change, and the price received by sellers will not change.

4.

In the long-run equilibrium of a market with free entry and exit, if all firms have the same cost structure, then 1. marginal cost exceeds average total cost. 2. the price of the good exceeds average total cost. 3. average total cost exceeds the price of the good. 4. firms are operating at their efficient scale.

4.

Kate is a florist. Kate can arrange 20 bouquets per day. She is considering hiring her husband William to work for her. Together Kate and William can arrange 35 bouquets per day. What is William's marginal product? 1. 55 bouquets 2. 35 bouquets 3. 22.5 bouquets 4. 15 bouquets

4.

Land of Many Lakes (LML) sells butter to a broker in Albert Lea, Minnesota. Because the market for butter is generally considered to be competitive, LML does not 1. choose the quantity of butter to produce. 2. set marginal revenue equal to marginal cost to maximize profit. 3. have any fixed costs of production. 4. choose the price at which it sells its butter.

4.

Opponents of the minimum wage point out that the minimum wage 1. encourages teenagers to drop out of school. 2. prevents some workers from getting needed on-the-job training. 3. contributes to the problem of unemployment. 4. all of the above are correct

4.

Patents, copyrights, and trademarks 1. are examples of government-created monopolies. 2. are examples of barriers to entry. 3. allow their owners to charge higher prices. 4. All of the above are correct.

4.

Refer to Figure 14-7. LetQrepresent the quantity of output and suppose the price of the good is $125. Then marginal revenue is 1. $80 atQ= 270. 2. $100 atQ= 322. 3. $175 atQ= 515. 4. None of the above are correct.

4.

Refer to Figure 14-7. Suppose AVC = $113 when the firm produces 515 units of output. Then the firm's fixed cost amounts to 1. $5,500, and its profit amounts to $20,375. 2. $5,750, and its profit amounts to $20,375 3. $5,980, and its profit amounts to $25,750. 4. $6,180, and its profit amounts to $25,750.

4.

Refer to Figure 14-9. If at a market price of $1.75, 52,500 units of output are supplied to this market, how many identical firms are participating in this market? 1. 75 2. 100 3. 250 4. 300

4.

Refer to Figure 15-7.A profit-maximizing monopolist would earn total revenues of 1. $81. 2. $144. 3. $225. 4. $240.

4.

Refer to Figure 6-16.In this market, a minimumwage of $2.75 is 1. binding and creates a labor shortage. 2. binding and creates unemployment. 3. non binding and creates a labor shortage. 4. non binding and creates neither a labor shortage nor unemployment.

4.

Refer to Figure 6-5.If the horizontal line on the graph represents a price ceiling, then the price ceiling is 1. binding and creates a surplus of 60 units of the good. 2. binding and creates a surplus of 20 units of the good. 3. not binding but creates a surplus of 40 units of the good. 4. not binding, and there will be no surplus or shortage of the good.

4.

Refer to Figure 7-10. When the price rises from P1 to P2, which area represents the increase in producer surplus toexisting producers? 1. BCG 2. ACH 3. DGH 4. ABGD

4.

Refer to Figure 7-2. If the price of the good is $80, then consumer surplus amounts to 1. $110. 2. $135. 3. $160. 4. $185.

4.

Refer to Figure 7-2. If the price ofthe good is $100, then consumer surplus amounts to 1. $50. 2. $75. 3. $100. 4. $125.

4.

Refer to Figure 7-22. Assume demand increases, which causes the equilibrium price to increase from $50 to $70. The increase in producer surplus to producers already in the market would be 1. $1,600. 2. $600. 3. $800. 4. $1,200.

4.

Refer to Scenario 5-2.Using the midpoint method, if the price of good X is constant at $10 and the price of good Y decreases from $10 to $8, the cross price elasticity of demand is about 1. 0.57, and X and Y are substitutes. 2. -0.22, and X and Y are complements. 3. -0.80, and X and Y are complements. 4. -2.57, and X and Y are complements.

4.

Refer to Table 13-1. What is total output when 3 workers are hired? 1. 15 2. 60 3. 105 4. 135

4.

Refer to Table 14-2.This firm maximizes total revenue by producing 1. 1 units. 2. 3 units. 3. 5 units. 4. as many units as possible.

4.

Refer to Table 7-14.You and your best friend want to hire a professional photographer to take pictures of your two families. The table shows the costs of the four potential sellers in the local photography market. You and your friend agree to offer $500 for each session. Who accepts the offer, and what is the total producer surplus in the market? 1. LeBron and Kobe; $500 2. Kevin and Steve; $500 3. LeBron and Kobe; $300 4. Kevin and Steve; $150

4.

Refer to Table 7-14.You want to hire a professional photographer to take pictures ofyour family. The table shows the costs of the four potential sellers in the local photography market. You hire Kevin for a price of $500. What is his producer surplus? 1. $500 2. $150 3. $100 4. $50

4.

Refer to Table13-3.The marginal product of the third worker is 1. 230 units. 2. 100 units. 3. 77 units. 4. 60 units.

4.

Scenario 15-3A monopoly firm maximizes its profit by producing Q = 500 units of output. At that level of output, its marginal revenue is $30, its average revenue is $60, and its average total cost is $34.Refer to Scenario 15-3. At Q = 500, the firm's total revenue is 1. $13,000. 2. $15,000. 3. $17,000. 4. $30,000.

4.

Suppose the equilibrium price of a tube of toothpaste is $2, and the government imposes a price floor of $3 per tube. As a result of the price floor, 1. quantity demanded decreases. 2. quantity supplied increases. 3. there is a surplus. 4. All of the above are correct.

4.

The cross-price elasticity of demand can tell us whether goods are 1. normal or inferior. 2. elastic or inelastic. 3. luxuries or necessities. 4. complements or substitutes.

4.

The marginal product of any input is the 1. increase in total cost associated with a one-unit increase in production. 2. change in total output associated with a $1.00 increase in total cost. 3. increase in total cost resulting from the hiring of an additional worker. 4. increase in total output obtained from one additional unit of that input.

4.

The reason to regulate utilities instead of using antitrust laws to promote competition is that a utility is usually a 1. profit-maximizing monopoly. 2. producer of externalities. 3. revenue-maximizing monopoly. 4. natural monopoly.

4.

The supply curve for the monopolist 1. is horizontal. 2. is vertical. 3. is upward sloping. 4. does not exist.

4.

Victor is the recipient of $1 million from a lawsuit. Victor decides to use the money to purchase a small business in Florida. His business operates in a perfectly competitive industry. If Victor would have invested the $1 million in a risk-free bond fund, he could have earned $100,000 each year. After he bought the small business, Victor quit his job as a market analyst with Research, Inc., where he used to earn $75,000 per year.Refer to Scenario 14-4. What is Victor's opportunity costs of operating his new business? 1. $25,000 2. $75,000 3. $100,000 4. $175,000

4.

When a local grocery store offers discount coupons in the Sunday paper it is most likely trying to 1. reduce prices for all customers. 2. encourage literacy. 3. encourage arbitrage. 4. price discriminate.

4.

When economists refer to a production cost that has already been committed and cannot be recovered, they use the term 1. implicit cost. 2. explicit cost. 3. variable cost. 4. sunk cost.

4.

Which of the following industries is most likely to exhibit the characteristic of free entry? 1. electricity 2. satellite radio 3. mineral mining 4. tennis shoes

4.

Which of the following is an example of a barrier to entry? 1. Tom charges a higher price than his competitors for his golf lessons. 2. Dick charges a lower price than his competitors for his lawn-mowing services. 3. Harry offers free concerts on Sunday afternoons as a form of advertising. 4. Larry obtains a copyright for the new computer game that he invented.

4.

Why does a firm in a competitive industry charge the market price? 1. If a firm charges less than the market price, it loses potential revenue. 2. If a firm charges more than the market price, it loses all its customers to other firms. 3. The firm can sell as many units of output as it wants to at the market price. 4. All of the above are correct.

4.

In which of the following situations will total revenue increase? 1. Price elasticity of demand is 1.2, and the price of the good decreases. 2. Price elasticity of demand is 0.5, and the price of the good increases. 3. Price elasticity of demand is 3.0, and the price of the good decreases. 4. All of the above are correct.

4. All of the above are correct