final review
Given the information in the table below, the average revenue earned by the firm from four units of output is: a. $3. b. −$4. c. $12. d. $4. e. $0.
a
If all resources are used efficiently to produce goods and services, a nation will find itself producing a. inside its production possibilities frontier b. somewhere on its production possibilities frontier c. outside of its production possibilities frontier d. at one extreme end of its production possibilities frontier e. more of one product with no decrease in the production of any other product
b.
A 10 percent increase in the price of root beer causes a 5 percent increase in the quantity demanded of orange soda. This means that: a. the cross-price elasticity of demand is equal to 2. b. root beer and orange soda are complements. c. root beer and orange soda are substitutes. d. the cross-price elasticity of demand is equal to −2. e. the cross-price elasticity of demand is 1.
c
A government-imposed price floor above the market price of milk would increase consumers' expenditures on milk only if _____. a. demand falls b. supply is inelastic c. demand is inelastic d. supply is unit elastic e. demand is elastic
c
One group of people uses the New York City subways only during rush hour to travel to and from work. Another group uses them only at midday for leisure activity. If New York City wants to increase transit fares with the smallest possible reduction in revenue, for which group should it increase the fare? a. It doesn't matter because both groups have the same elasticity of demand. b. The rush-hour group because its demand for subway service is more elastic than that of the midday group. c. The rush-hour group because its demand for subway service is less elastic than that of the midday group. d. The midday group because its demand for subway service is more elastic than that of the rush-hour group. e. The midday group because its demand for subway service is less elastic than that of the rush hour group.
c
A public good, such as a community's emergency warning sirens, typically: a. imposes benefits on only a few individuals but imposes costs on many people. b. imposes benefits on many individuals but imposes costs on relatively few people. c. imposes both benefits and costs on many individuals. d. imposes costs on individuals only when logrolling is prevalent in the government. e. imposes both benefits and costs on relatively few individuals.
c.
An oligopoly consists of: 1. a. a few independent firms. b. many independent firms. c. a few interdependent firms. d. many interdependent firms. e. only one firm.
c.
A college dean has a _____ opportunity cost of _____ than a college student working in a minimum-wage job. a. lower; nonmarket work b. higher; market work c. lower; market work d. higher; nonmarket work e. lower; leisure
d
A decline in market demand in a competitive industry will result in a(n): a. economic profit for all firms in the industry. b. increase in the equilibrium price. c. decrease in the number of firms in the industry in the short run. d. decrease in the equilibrium quantity. e. rightward shift of the market supply curve in the short run.
d
If Helen can paint one room in the time it takes her to bake 40 cakes and Josh can paint one room in the time it takes him to bake 60 cakes, Josh's opportunity cost of baking one cake is: a. painting one room. b. painting 1/40 of a room. c. painting 3/2 of a room. d. painting 1/60 of a room. e. painting 2/3 of a room.
d
The Hound Dog Bus Company contemplates expanding its Virginia operations by offering services from Fairfax to Arlington. The total cost of the trip would be $120, of which $50 is the fixed cost, which it has already paid. The firm expects to earn an additional $60 in revenue from the trip. The Hound Dog Bus Company should: a. offer this service because it will earn a positive economic profit. b. offer this service because total revenue exceeds fixed cost. c. offer this service because the added revenue exceeds the added cost of this service. d. not offer this service because the marginal revenue is less than the marginal cost. e. not offer this service because total cost exceeds total revenue.
d
Which of the following is the best example of a public good? a. A restaurant meal b. An iPad c. Trash removal d. Food stamps e. Police services
e
Which of the following is true of marginal product? a. When marginal product is positive and decreasing, total product is decreasing. b. When marginal product is negative, total product is increasing. c. When marginal product is positive and decreasing, total product is increasing by increasing amounts. d. When marginal product is increasing, total product is decreasing. e. When marginal product is increasing, total product is increasing by increasing amounts
e
Dale is willing to pay $300 for a pair of rollerblades, and he purchases them on sale for $200. His consumer surplus is valued at: a. $1.5. b. $200. c. $300. d. $0. e. $100.
e.
Any movement along the production possibilities frontier involves the production of a. more of both goods b. more of one good and less of the other c. less of both goods d. more resources e. better technology
b.
Arnold is a utility-maximizing consumer. If he thinks his last dollar spent on playing golf yields less satisfaction than the last dollar spent on movies, he should: a. spend less on movies so that the marginal satisfaction of a movie increases. b. play less golf and spend more on movies. c. not play golf at all. d. play more golf because it costs less. e. play more golf so that the total satisfaction derived from golf increases
b.
Which of the following is true of special-interest legislation? a. The resources used by special-interest groups to persuade elected officials to create legislation to increase their wealth are productive to society because they increase real output. b. The resources used by special-interest groups to persuade elected officials to create legislation to increase their wealth are unproductive to society because they do not increase real output. c. Special-interest legislation confers concentrated benefits on one group by imposing concentrated costs on another group. d. Special-interest legislation increases inefficiency by bidding up the price of specialized resources. e. Special-interest legislation created through rent seeking usually creates widespread benefits for the rest of society.
b.
When you throw trash out of your car window, you are creating: a. a positive externality. b. a private good. c. a negative externality. d. both a private and a public good. e. a public good.
c
The figure below shows the cost and revenue curves for a monopolist. The maximum profit earned by the non-discriminating monopolist is: a. $53,200. b. $95,200. c. $84,000. d. $22,400. e. $42,000.
d
In moving from point f to point g in Exhibit 2-5, the a. production of B increases without a change in the production of A b. production of A increases without a change in the production of B c. production of both A and B increase d. production of both A and B decrease e. production of B increases and production of A decreases
e
A country has an absolute advantage in the production of a good if that country: a. can produce the good using fewer resources than another country would require. b. has the lowest opportunity cost of producing the good, regardless of whether it is produced using the fewest resources. c. has the greatest opportunity cost of producing the good and can sell it at the highest price. d. has the lowest opportunity cost of producing the good and can sell it at the highest price. e. has the greatest opportunity cost of producing the good, regardless of whether it is produced using the fewest resources.
a
A firm facing a downward-sloping demand curve sells 50 units of output at $10 each. Which of the following can be concluded about the firm's marginal revenue for this output level? a. Marginal revenue is less than $10 but more than zero. b. Marginal revenue is zero. c. Marginal revenue is equal to $500. d. Marginal revenue is equal to $10. e. Marginal revenue is more than $10
a
A limit on special-interest contributions to national political campaigns: a. would reduce the extent of rent seeking. b. would give challengers an edge over incumbents. c. would involve widespread costs and concentrated benefits. d. is an example of competing-interest legislation. e. is usually supported by special-interest groups as a way of saving money.
a
A major fruit juice manufacturer fails in its attempt to engage in price discrimination between students and all other consumers of fruit juice. Which of the following explanations is most likely to account for this failure? a. The students resold the juice to other consumers. b. The market for fruit juice was monopolistically competitive. c. The students preferred to purchase juice from other small juice manufacturers. d. The cost of producing the fruit juice was extremely high. e. The price elasticity of demand for fruit juice was different for each group
a
A perfectly competitive firm sells 200 units at a market price of $40 per unit. Its marginal cost is $50, and it incurs a variable cost of $10,000. To improve its profit or loss situation, this firm should _____. a. shut down b. continue to produce the present level of output c. reduce output but not to zero d. increase output sold to 300 units e. raise the price to $45 pr unit
a
Figure 5.8 shows a horizontal line. The curve shown in the figure below could represent a.perfectly elastic demand or supply curve b. perfectly inelastic supply curve or a perfectly elastic demand curve. c. perfectly inelastic supply curve or a unit-elastic demand curve. d. perfectly inelastic supply or demand curve. e. perfectly elastic supply curve or a perfectly inelastic demand curve.
a
In many cities, garbage collectors earn more than social workers. What could explain this wage differential? a. There is a lesser supply of trash collectors. b. Collecting garbage requires less skill. c. There is a greater demand for social workers. d. Social work requires more education than garbage collecting does. e. Social work is a less prestigious profession
a
In the case of a normal good, an increase in consumers' income would shift the: a. demand curve rightward. b. demand curve leftward. c. supply curve rightward. d. supply and demand curves leftward. e. supply curve leftward.
a
Individuals achieve maximum utility in the allocation of their time when: a. any change in their use of time reduces their total satisfaction. b. they consciously and carefully weigh the expected marginal utilities per unit. c. the expected average utility of each activity is equal. d. they consciously and carefully weigh the actual marginal utilities per unit of time spent in each activity. e. people make a concerted effort to measure satisfaction.
a
Mark's marginal utility of a third waffle is 10 units, and his marginal utility of a second slice of ham is 30 units. If Mark eats the third waffle, which of the following statements is true? a. The price of a waffle is less than one-third the price of a slice of ham. b. The price of a waffle is four times more than the price of a slice of ham. c. The price of a waffle is less than one-fourth the price of a slice of ham. d. The price of a waffle is three times more than the price of a slice of ham. e. The price of a waffle is five times more than the price of a slice of ham
a
Suppose Sally allocates her budget between two goods, A and B. She spends her entire income on a combination of A and B, for which the ratio of the marginal utility of good A to its price exceeds the ratio of the marginal utility of good B to its price. She can increase her total utility by buying: a. more A and less B. b. more B and less A. c. less B without changing her consumption of A. d. more B and more A. e. more A without changing her consumption
a
Suppose a monopolistically competitive firm is earning an economic profit. The marginal revenue from selling an additional unit is $30, and the marginal cost of producing that additional unit is $23. The firm should: a. reduce its price and increase its output level. b. change neither its price nor its output level. c. reduce both its price and its output level. d. increase both its price and its output level. e. increase its price and reduce its output level
a
Suppose a perfectly competitive firm and industry is in long-run equilibrium. A rightward shift of the market demand curve is likely to: a. shift the demand curve facing the firm upward and increase quantity supplied in the market. b. shift the demand curve facing the firm downward and increase the quantity supplied in the market. c. shift the demand curve facing the firm downward and not cause any change in the quantity supplied in the market. d. shift the demand curve facing the firm upward and not cause any change in the quantity supplied in the market. e. shift the demand curve facing the firm downward and decrease the quantity supplied in the market.
a
Fred truthfully tells a car dealer that the maximum amount he is willing to pay for a Ford Mustang is $20,000. The dealer says, "You're lucky; we have only one left on the lot for $20,000." Which of the following statements is true? a. Fred gets no consumer surplus. b. Fred and the dealer get a consumer surplus of $10,000 each. c. The dealer earns a consumer surplus of $20,000. d. Fred gets a consumer surplus of $20,000. e. Fred gets a consumer surplus of $15,000.
a.
A firm facing a downward-sloping demand curve sells 50 units of output at $10 each. The firm's average revenue is: a. zero. b. $10. c. more than $10 but less than $500. d. less than $10 but more than zero. e. $500
b
A new cattle feed has been found to increase the amount of milk each cow produces. Which of the following is likely to be the impact on the market for milk if this cattle feed is used by most dairies? a. An increase in the price of milk b. A rightward shift of the supply curve of milk c. An increase in the demand for milk d. A decrease in the quantity demanded of milk e. A leftward shift of the supply curve of milk
b
Suppose the government of Marina decides to pay for public radio by taxing people on the basis of the number of hours they listen to it. In order to determine the tax, it decides to conduct a survey. However, if the survey is based on voluntary self-reporting, which of the following is likely to happen? a. In order to evade taxes, individuals may shift from the formal, reported economy to an underground, "off the books" economy. b. Many individuals may understate the number of hours they listen to public radio to government in order to reduce their tax bill. c. Many individuals may overstate the number of hours they listen to public radio to government in order to receive a lower tax bill. d. People who report many hours of listening may pay a small proportion of their income in public radio tax. e. Individuals with higher incomes may pay lower taxes than individuals with lower incomes
b
The figure given below shows the demand and the cost curves of a perfectly competitive firm. The market price equals _____. a. $24 b. $28 c. $40 d. $12 e. $20
b
Two workers are employed in the same job by the same firm. However, they are paid different wage rates. This could be explained by differences in: a. their marginal products due to differences in the risk faced. b. their marginal products due to differences in ability. c. the income effect. d. working conditions at the workplace. e. the price of the firm's output
b
Which of the following is not a condition for price discrimination? a. The presence of some amount of market power with a producer b. The presence of strong diseconomies of scale c. A downward-sloping demand curve for products d. The presence of different groups of buyers with different price elasticity of demand e. The absence of a scope for reselling a product
b
A common feature of monopolistic competition, pure monopoly, and perfect competition is that _____. a. entry is free in each market structure b. the profit-maximizing condition in each market is the same c. producers in each market structure earn economic profit in the long run d. producers in each market structure sell differentiated products e. firms in these market structures act as price takers
b.
A consumer might buy from a high-priced local hardware store instead of going to a big discount store several miles away because: a. the local hardware store is a bargain for people who earn low hourly wages. b. the time cost of going to the local store is equal to going to the discount store. c. the local hardware store is a bargain for people who value time highly. d. the time cost of going to the discount store is less than going to the local hardware store. e. the local store will still have lower money prices.
c.
Figure 5.10 shows two upward-sloping linear supply curves that pass through the origin. The price elasticity of supply between $20 and $40 on the supply curve S' is _____. a. infinity b. 10 c. 1 d. 0 e. 2
c.
A medium of exchange must be: a. easy to reproduce. b. used to eliminate the specialization and division of labor. c. different for different countries. d. universally acceptable in exchange for goods and services. e. used when a system of barter exists
d
A production possibilities frontier can shift outward for all of the following reasons except: a. an increase in population. b. a larger work force. c. a larger capital stock. d. a decrease in the size of the labor force. e. an improvement in technology.
d
The average workweek in the United States has declined to fewer than 40 hours even though wage rates have been increasing. The best explanation for this phenomenon is that: a. the labor demand curve shifted to the right. b. the substitution effect of rising wages outweighed the income effect. c. the labor supply curve shifted to the right. d. the income effect of rising wages outweighed the substitution effect. e. the labor supply curve is linear and upward sloping
d
The equilibrium wage: a. is the same in all labor markets. b. is irrelevant because of unions. c. occurs where the supply of labor curve begins to bend backward. d. is determined by the market demand for labor and the market supply of labor. e. cannot be calculated because there are so many labor markets
d
The long-run supply curve for a constant-cost perfectly competitive industry is _____. a. relatively inelastic b. perfectly inelastic c. a ray from the origin at a 45-degree angle d. perfectly elastic e. downward sloping
d
Which of the following is most likely to be an inferior good? a. Restaurant meals b. Airline travel c. Soft drinks d. Used clothing e. A subscription to the Wall Street Journal
d
Carvel advertises a football-shaped ice cream cake for $7; you can buy a second one for only $4. What does Carvel know about consumer preferences? a. Consumers value all cakes they eat at $4. b. Two cakes are worth less to a consumer than one. c. Consumers only value the first cake at $4. d. The marginal utility of ice cream cakes diminishes. e. Consumers would never buy a second ice cream cake
d.
Messitt and McNulty spend $50,000 each to form a law partnership. On the first day, someone trips over a potted plant in their lobby and sues them for $400,000. Which of the following is true? a. Each individual partner cannot be sued for more than $200,000. b. Messitt's liability is limited to $300,000 if she owns three-quarters of the firm. c. The partner who put the potted plant in the office is personally responsible for the damages. d. If a $400,000 judgment is passed against the partnership and if McNulty cannot afford to pay any of it, then Messitt is liable for $400,000. e. If a $400,000 judgment is passed against the partnership, then each partner will have to pay $50,000.
d.
The figure given below has four graphs that show the production possibilities frontier for capital goods and consumer goods. Which of the graphs given below best illustrates the impact on the production possibilities frontier of a decrease in unemployment? a. a b. b and d c. b d. d e. c
d.
A public good is one that is supplied to: a. only people who pay for it. b. only people who do not pay for it. c. foreign governments by the federal government. d. the government by private firms. e. all people, regardless of whether they pay for it or not
e
People who gain greater enjoyment from leisure activities: a. generally earn lower market wages. b. allocate more time to nonmarket work. c. allocate more time to market work. d. generally earn higher market wages. e. allocate more time to leisure.
e
Suppose Ripco owns the building from which it operates. If: a. the firm does not rent the building to anyone else, there is no opportunity cost. b. the firm can use the building for other things, there is no opportunity cost. c. the firm pays rent, there is an opportunity cost. d. the firm pays no rent, there is no opportunity cost. e. its usage of the building precludes it from renting to anyone else, there is an opportunity cost.
e
Truck drivers usually earn more than secretaries because: a. drivers require more education and training. b. secretaries have higher productivity than truckers. c. truckers have more flexibility in their daily activities. d. truckers are discriminated against. e. truckers face greater risks.
e
Which of the following is the effect of a decrease in the price of potato chips on the market for pretzels, a substitute good, that is initially in equilibrium? a. The equilibrium price of pretzels will fall, and the equilibrium quantity of pretzels will increase. b. The equilibrium price of pretzels will increase, and the equilibrium quantity of pretzels will fall. c. Both the equilibrium price and equilibrium quantity of pretzels will increase. d. The equilibrium price and equilibrium quantity of pretzels will remain unchanged. e. Both the equilibrium price and equilibrium quantity of pretzels will fall
e
Which of the following statements is not true of labor supply? a. Hayden's offer to work more hours as a result of a wage increase suggests that the substitution effect dominates the income effect. b. Bob's labor supply curve will not bend backward if the wage rate is never so high that the income effect outweighs the substitution effect. c. If there is a wage rate above which the income effect is at least as great as the substitution effect, the labor supply curve will be vertical or bend backward. d. Jerry's labor supply curve can bend backward if the income effect of a higher wage rate outweighs the substitution effect. e. The labor supply curve will slope upward if the income effect dominates the substitution effect..
e
Table 10.1 shows the output, price, and total cost for a monopolistic competitor. The profit-maximizing output for the monopolistic competitor is _____. a. 5 units b. 1 unit c. 0 units d. 2 units e. 3 units
e.
Table 5.2 shows the change in the quantity demanded for Good A and Good B as a result of the change in their price. Use the information in the table below to calculate the value of the price elasticity of demand for Good B a. -17/11 b. −1/6 c. −1/2 d. −2/3 e. −11/17
e.