Econ Midterm 1st %40 Questions
Armand's accountant tells him that he made a profit of $21,300 running a pottery studio in Boston. Armand's wife, an economist, claims Armand lost $21,300 running his pottery studio. This means his wife is claiming that he incurred _______ in _______ costs. a. $42,600; implicit b. $21,300; implicit c. $21,300; explicit d. $42,600; explicit
a. $42,600; implicit
(Table: City Sanitation in Winnetka) Use Table: City Sanitation in Winnetka. Increasing the number of street cleanings per month from ________ would yield a marginal social benefit (for Edwin and Geraldine together) equal to $15. a. 1 to 2 b. 2 to 3 c. 3 to 4 d. 4 to 5
a. 1 to 2
Nardelli owns Nardelli's Grinder Shoppe in Connecticut and can produce 300 sandwiches per day with two workers and 400 sandwiches per day with three workers. The marginal product of the third worker is__________ sandwiches a. 100 b. 300 c. 1,300 d. 2,300
a. 100
(Figure: The Production Possibility Frontiers for Kansas and Wisconsin) Use Figure: The Production Possibility Frontiers for Kansas and Wisconsin. In autarky, Kansas produces and consumes 30 gallons of milk and 80 bushels of corn, while Wisconsin produces and consumes 80 gallons of milk and 60 bushels of corn. Assume that each state specializes in the good in which it has a comparative advantage and that the price of 1 gallon of milk is 2 bushels of corn. If Kansas exports 120 bushels of corn to Wisconsin, then the new consumption point for Wisconsin after trade is ________ bushels of corn and ______ gallons of milk. a. 120; 140 b. 120; 60 c. 60; 120 d. 400; 200
a. 120; 140
(Table: The Production Possilities for Large Tractors and Petroleum) Use Table: The Production Possibilities for Large Tractors and Petroleum. In Venezuela, the opportunity cost of producing 150,00 barrels of petroleum is ________ tractors. a. 50 b. 70 c. 90 d. 160
a. 50
(Figure: The Market for iPads) Use Figure: The Market for iPads. Assume that PA is the autarky price, PW is the world price, and D and S represent domestic demand and supply, respectively. The loss of producer surplus when the market moves form autarky to free trade equals the area: a. B b. B + C + D + E c. B + C + D d. E
a. B
For a perfectly competitive firm in the short run, if the firm produces the quantity at which ______, the firm is earning ________. a. P > ATC; economic profits b. P < ATC; Zero profit c. P = ATC; economic losses d. P < ATC; economic profits
a. P > ATC; economic profits
For a perfectly competitive firm in the short run, if the firm produces the quantity at which _______, the firm is earning ________. a. P > ATC; economic profits b. P < ATC; zero profit c. P = ATC; economic losses d. P < ATC; economic profits
a. P > ATC; economic profits
To be binding, a price ceiling must be set at a price _____ the equilibrium price. a. below b. above c. at d. Any price ceiling is binding.
a. below
Josephine's budget line reflects the _______ available to Josephine if she spends _________ of her income. a. consumption bundles; all b. consumption bundles; part c. utility; all d. utility; part
a. consumption bundles; all
Gabriella's company produces wet suits for scuba divers. The long-run average total cost of producing 250 wet suits is $56, while the long-run average total cost of producing 270 wet suits is $36. These numbers suggest that between output levels of 250 and 270 wet suits, Gabriella is experiencing: a. economics of scale b. diseconomics of scale c. constant returns to scale d. diminishing returns
a. economics of scale
An emissions tax: a. ensures that the marginal benefit of pollution is equal across all pollution sources. b. enables the government to manage emission standards in the presence of external costs. c. force all polluters to fully internalize the external costs of their emissions d. is equivalent to the Coase solution in cases where market participants have full information
a. ensures that the marginal benefit of pollution is equal across all pollution sources.
Prices are important economic signals because they convey information about: a. how much consumers are willing to pay for a good and how much it costs sellers to produce a good. b. the excess of consumer surplus over producer surplus. c. possible inflationary trends. d. the state of the economy.
a. how much consumers are willing to pay for a good and how much it costs sellers to produce a good.
(Figure: The Market for Apple AirPods) Use Figure: The Market for Apple AirPods. Assume that Sd represents the domestic supply curve, and Dd represents the domestic demand curve. If the world price equals $100, and there is free trade, domestic consumer surplus _____ and domestic producer surplus _____ compared with autarky. Figure: The Market for Apple AirPods) Use Figure: The Market for Apple AirPods. Assume that Sd represents the domestic supply curve, and Dd represents the domestic demand curve. If the world price equals $100, and there is free trade, domestic consumer surplus _____ and domestic producer surplus _____ compared with autarky. a. increases; decreases b. increases; increases c. decreases; increases d. decreases; decreases
a. increases; decreases
(Figure: The Market for Apple Airpods) Use Figure: The Market for Apple Airpods. Assume that Sd represents the domestic supply curve, and Dd represents the domestic demand curve. If the world price equals $100, and there is free trade, domestic consumer surplus ______ and domestic producer surplus ________ compared with autarky. a. increases; decreases b. increases; increases c. decreases; increases d. decreases; increases
a. increases; decreases
The price elasticity of demand for canned fruit is calculated as 0.75. Given this, demand is: a. inelastic b. elastic c. unit-elastic d. positively sloped
a. inelastic
3. (Figure: Apple cider and Soybeans) Use Figure: Apple Cider and Soybeans. If this economy is producing 12 tons of soybeans and 9,000 bottles of apple cider, we know that the economy: a. is using its resources efficiently. b. is using its resources inefficiently. c. is producing at an unattainable point. d. has unemployment.
a. is using its resources efficiently.
The percentage of an increase in a taxpayer's income that is taxed away is the ___________ rate. a. marginal tax b. tax c. total tax d. average tax
a. marginal tax
When a market begins to engage in international trade: a. producers in the exporting industry may be better off. b. consumers of the imported good may be worse off. c. consumers of the exported good may be better off. d. producers in the importing industry may be better off
a. producers in the exporting industry may be better off.
Eliza has annual earnings of $100,000, and Isabella has annual earnings of $50,000. Each consumer goes to the mall and purchases a sculpture for $100, and each pays an additional 12%, or $12, in sales tax. This tax is: a. regressive b. a wealth tax c. progressive d. a property tax
a. regressive
(Table: Production Possibilities for the United States and Brazil) Use Table: Production Possibilities for the United States and Brazil. Both nations can produce automobiles and sugar. In _____, the opportunity cost of _____ automobiles is _____ pounds of sugar. a. the United States; 1 million; 1 million b. the United States; 10 million; 1 million c. Brazil; 1 million; 12 million d. Brazil; 1 million; 166,000
a. the United States; 1 million; 1 million
13. A persistent shortage may occur if: a. the government imposes a price ceiling below the equilibrium price. b. the government imposes a price floor below the equilibrium price. c. demand is less than supply. d. supply increases.
a. the government imposes a price ceiling below the equilibrium price.
(Table: Positive Externalities from State Parks) Use: Table: Positive Externalities from State Parks. The table shows the marginal social benefit and marginal social cost of preserving various amounts of land for state parks. Suppose that state parks yield benefits for the general public that the marginal benefit that any one individual receives from state parks is close to zero. If 5 acres are dedicated to state parks, the parks are _________ from a social perspective. a. too large b. the socially optimum size c. too small d. the efficient size
a. too large
The demand for tacos is very inelastic compared to the supply of tacos, so if a tax is imposed on producers of tacos, the tax incidence: a. will fall on consumers more than producers. b. will fall on producers more than consumers. c. will fall equally on consumers and producers. d. cannot be determined without more information.
a. will fall on consumers more than producers.
(Figure: Short-Run Costs for Wallets) Use Figure: Short-Run Costs for Wallets. At 6 wallets, average variable cost is approximately: a. $100. b. $115. c. $200. d. $170.
b. $115.
(Table: Marginal Benefit from Additional Traffic Lights) Use Table: Marginal Benefit from Additional Traffic Lights. Suppose that the marginal cost of installing a traffic light is $6. What is the maximum that Donatello would be willing to pay to have one traffic light installed in the neighborhood? a. $20 b. $15 c. $35 d. $5
b. $15
(Table: Total Cost and Output for All-Natural Frozen Yogurt) Use Table: Total Cost and Output for All-Natural Frozen Yogurt, which describes Sasha's total costs for his perfectly competitve all-natural frozen yogurt firm. If the market price of a tub of frozen yogurt is $67.50, how much is Sasha's total cost at the profit-maximizing output? a. $270.00 b. $170.00 c. $135.00 d. 67.50
b. $170.00
(Table: Sydney's Tutoring Service) Use Table: Sydney's Tutoring Service. Sydney tutors five students in the introductory business class. The second column of the table shows each student's willingness to pay for a one-hour session. Sydney's estimated costs of providing tutoring hours (with no sunk costs) appear in the final column. If she can charge all students their willingness to pay, at the optimal number of hours of tutoring, Sydney's total profit will be: a. $60 b. $50 c. $30 d. $15
b. $50
(Figure: The Environmental Monopolist) Use Figure: The Environmental Monopolist. The deadweight loss associated with this monopoly can be measured as the area. a. 0.5 (P1 - P2)(Q2 - Q1) b. 0.5 (P2 - P4)(Q4 - Q2) c. 0.5 (P1 - P3)Q3 d. 0.5 (P1 - P3)Q2
b. 0.5 (P2 - P4)(Q4 - Q2)
(Table: Daniella's Consumption of Sparkling Water and Sushi) Use Table: Daniella's Consumption of Sparkling Water and Sushi. When Daniella maximizes her utility, her marginal utility per dollar spent (not price, but total cost of the sushi) on sushi equals _____ utils per dollar. a. 0.6 b. 0.8 c. 0.5 d. 1.6
b. 0.8
(Table: Production Possibilities Schedule I) Use Table: Production Possibilities Schedule I. If the economy produces 10 trains per period, it also can produce, at most, _____ planes per period. a. 5 b. 4 c. 3 d. 2
b. 4
(Table: Variable Costs for Garden Maintenance) Use Table: Variable Costs for Garden Maintenance. During the summer, Enna runs a gardening service in a perfectly competitive industry. Assume that costs are constant in each interval; so, for example, the marginal cost of clearing weeds from each of the gardens 1 through 10 is $20. Also assume that she can only tend to the number of gardens given in the table (and not numbers in between). Her only fixed vost is $1,000 for a weeding machine. Her variable costs include fule, her time, and hot coffee. If the price to clear a garden is $20, how many lots should Emma clear? a. 50 b. 40 c. 30 d. 0
b. 40
(Table: Total Cost for Peter's Plum Pantry) Use Table: Total Cost for Peter's Plum Pantry. Peter is the largest producer of plums in California. He is also a price-taking profit maximizer. If the market price of plums is $3.50 per unit, the profit-maximizing output is _____ units. a. 5 b. 7 c. 8 d. 9
b. 7
Which statement concerning monopoly is TRUE? a. Monopoly firms are always larger than perfectly competitive firms are . b. A monopoly has no rivals, as it is the single producer of a good c. Other firms may enter a monopolistic market, as there are no barriers to entry to prevent other firms from entering the industry. d. Monopolists produce the same amount of output as a competitive market with the same demand and cost structure.
b. A monopoly has no rivals, as it is the single producer of a good
__________ illustrates a positive relationship between price and quantity. a. A demand curve b. A supply curve c. A production possibility frontier d. Equilibrium
b. A supply curve
(Figure: The Market for Tea in India) Use Figure: The Market for Tea in India. With trade, the price is PW, consumer surplus equals _____, and producer surplus equals _____. a. F + G + H + I; J + K b. F; G + H + I + J + K c. F + I; J + K d. F + G + H; J + K
b. F; G + H + I + J + K
(Figure: Producer Surplus ion the Market for Baseballs) Consider the figure Producer Surplus in the Market for Baseballs. If the price rises from P1 to P2, the producer surplus will increase by the area: a. P2, M, 0 b. P2, P1, K, M c. L, M, K d. P1, K, 0
b. P2, P1, K, M
A firm is deciding how many workers to higher. The manager, Maggi, took some economics courses at college and remembers that firms should follow a rule to choose the optimal number of workers. She asks for your help and you tell her that she should hire workers if: a. Wage < Value of MPL. b. Wage = Value of MPL. c. Wage < MPL. d. Wage = MPL
b. Wage = Value of MPL.
If the price of M&M peanut candies increases, and the demand for cherry-flavored soft drinks decreases, these two goods are _____ goods. a. unrelated b. complementary c. inferior d. substitute
b. complementary
In the short run, variable costs will _______ at any given level of output when a firm adds capital. a. increase b. decreasse c. remain the same d. increase at first and then decrease
b. decrease
The cross-price elasticity of demand between Fanta and Dr. Pepper has been estimated at 0.61. If the price of Dr. Pepper falls by 10%, the quantity demanded of Fanta will: a. decrease by less than 6.1%. b. decrease by 6.1% c. not change because many people prefer Fanta to Dr. Pepper. d. increase
b. decrease by 6.1%
(Table: Pollution and Water Table Damage from Cobalt Mining) Use Table: Pollution and Water Table Damage from Cobalt Mining. The table shows the marginal social benefit and marginal social cost of various amounts of pollution emitted into the air and water from a cobalt mine. At the efficient quantity of pollution, the marginal social cost of pollution is _______ the marginal social benefit of pollution. a. greater than b. equal to c. less than d. unrelated to
b. equal to
In monopolistic competition, each firm: a. cannot influence the price of the good b. has some ability to set the price of its differentiated good. c. will follow a marginal cost pricing rule in the long run. d. can produce a quantity of output whereby marginal revenue is greater than price.
b. has some ability to set the price of its differentiated good.
If the price of peanut butter were to decrease, the demand for jam, a complementary good, would probably ________. a. decrease b. increase c. not change d. randomly fluctuate
b. increase
If a monopolistically competitive firm produces a quantity at which MC < MR, then profit can be _______ by ________. a. increased; decreasing production b. increased; increasing production c. increased; increasing the price d. maximized; decreasing production
b. increased; increasing production
Suppose that Wendy gets 15 units of utility from one muffin and 23 units of utility from two muffins. The principle of diminishing marginal utility implies that Wendy's total utility from three muffins will be _____ units of utility. a. exactly 8 b. less than 31 c. less than 8 d. more than 31
b. less than 31
With perfectly elastic supply and a downward-sloping demand curve: a. producers will bear the entire burden of a tax. b. producers will not bear any of the burden of a tax. c. consumers and producers will split the burden of a tax in half. d. consumers will not bear any of the burden of a tax.
b. producers will not bear any of the burden of a tax.
After vandals break into Vanessa's book store one night, police investigate the crime. The police investigation is BEST describes as a(n): a. private good b. public good c. artificially scarce good d. common resource
b. public good
17. Public policy toward monopoly in the United States often consists of: a. laws that ban monopolies b. regulation of natural monopolies c. nationalization in cases where market power is substantial d. forcing monopolized industries to become perfectly competitive
b. regulation of natural monopolies
Suppose the equilibrium price of yoghurt is $10, and the equilibrium quantity is 12 units. If the price of yoghurt is $12: a. there will be a shortage of yoghurt b. there will be an excess supply of yoghurt c. the market will be in equilibrium d. the quantity demanded of yoghurt will be greater than 12 units
b. there will be an excess supply of yoghurt
(Table: Total Cost and Total Individual Benefit Received from Sanitation Workers) Use Table: Total Cost and Total Individual Benefit Received from Sanitation Workers. If there are 1,000 residents who each enjoy the same individual beneift of sanitation services, shown in the table, what is the marginal social benefit of the fourth sanitation worker? a. $10 b. $9,000 c. $10,000 d. $90,000
c. $10,000
(Figure: The Lobster Market) Use Figure: The Lobster Market. If the government wants to limit lobster sales to 250 pounds, it can impose a ________ excise tax on consumers, and the total tax revenue generated will be _________. a. $5; $2,500 b. $7.50; $7,500 c. $10; $2,500 d. The answer cannot be determined from the information provided
c. $10; $2,500
7. (Table: Marginal Cost of Sweaters) Use Table: Marginal Cost of Sweaters. The marginal cost of the second sweater is: a. $9 b. $20 c. $11 d. $29
c. $11
Suppose the government imposes a $15 per month tax on Internet service. If the demand curve for Internet service is perfectly inelastic, and the supply curve is upward-sloping, the monthly price for Internet service will increase by: a. $5 b. less than $15 c. $15 d. $0
c. $15
(Figure: Demand and Marginal Revenue for Google Cloud Service Upgrades) Use Figure: Demand and Marginal Revenue for Google Cloud Service Upgrades. The figure reflects a software upgrade by Google Cloud Service. Google incurred a fixed cost of $10 million in producing the upgrade; the marginal cost of allowing consumers to download the upgrade is zero. What is the deadweight loss associated with the profit maximizing price and quantity of the upgrade? a. $0 b. $1.25 million c. $3.125 million d. $6.25 million
c. $3.125 million
(Scenario: Accounting and Economic Profit) Use Scenario: Accounting and Economic Profit. Casey recently inherited $100,000 from her grandmother. Rather than invest the money in a mutual fund that earns 5% per year, she quit her job as a translator for the United Nations, which paid $60,000 per year, and started Casey's Coffee Crush, a small café in Tribeca. The location she rented cost $20,000 for the year. The equipment, café furniture, and coffee machines cost another $60,000. Staff, sales help, and advertising cost yet another $40,000. In her first year, her recvenue was $150,000. the implicit cost of capital of Casey's Coffee Crush is: a. $0 b. $2,000 c. $5,000 d. $50,000
c. $5,000
(Table: Labor and Output for Cappuccionos) Use Table: Labor and Output for Cappuccinos. The marginal product of the second worker is: a. 9 b. 36 c. 10 d. 6
c. 10
(Table: Barbara's Production Function for Hockey Jerseys) Use Table: Barbara's Production Function for Hockey Jerseys. The marginal product of labor of the second worker is _____ hockey jerseys. a. 150 b. 25 c. 75 d. 50
c. 75
(Table: Output and Cost Curves for Buckwheat Farm) Use Table: Output and Cost Curves for Buckwheat Farm. At what quantity of production is the farm earning zero profit? a. 6 b. 7 c. 8 d. 9
c. 8
(Table: Optimal Choice of Yogurt and Cheese). The price of yogurt is $2 per unit, and the price of cheese is $4 per pound. Hailey's income is $16. If she spends all of her income on yogurt, the most she can buy is ______ yogurt(s), and her total utility will be _________. a. 4; 104 b. 6; 12 c. 8; 144 d. 8; 4
c. 8; 144
(Figure: Estimating Price Elasticity in the Market for Garden Gnomes) Use Figure: Estimating Price Elasticity in the Market for Garden Gnomes. Which demand curve is most elastic? a. D1 b. D2 c. D3 d. D4
c. D3
(Figure: Computing Monopoly Profits for Exxon Mobile Gas) Use Figure: Computing Monopoly Profits for Exxon Mobile Gas. At the profit-maximizing price is _________, and total economic profit is ____________. a. P2; EF b. P3; the rectangle P1, P2, F, G c. P3; the rectangle P2, P3, E, F d. P3; E, F
c. P3; the rectangle P2, P3, E, F
When deciding how much to work you must decide how much you value your leisure time and how much you want to consume (have to make money to buy things). The __________ effect says that if you get paid more you'll work more because your time is more valuable and the ___________ effect says if you get paid more you'll work less because you are now wealthier so leisure is more attractive. a. Wage, Income b. Income, Substitution c. Substitution, Income d. Wage, Substitution
c. Substitution, Income
Which factor would NOT cause a supply curve to shift? a. an improvement in the technology used to produce a good b. an increase in the wages of employees c. an increase in the price of a good d. expectations that the price of a good will change
c. an increase in the price of a good
(Figure: The Cost Curves for Charlie's Cookie Confections) Use Figure: The Cost Curves for Charlie's Cookie Confections. The curve labeled Y represents the firm's ________ cost curve. a. marginal b. average total c. average fixed d. average variable
c. average fixed
(Figure: Price Controls in the Market for Strawberries) Use Figure: Price Controls in the Market for Strawberries. The consumer surplus lost to a price floor at point b is equal to the area: a. a, b, e b. e, g, h c. b, c, g, e d. b, c, k, e
c. b, c, g, e
Suppose the GoLogos logo monopoly is broken up and the logo industry becomes perfectly competitive. We would expect _______ surplus to increase and __________ surplus to decrease after the breakup. a. producer; consumer and total b. consumer; producer and total c. consumer and total; producer d. producer and total; consumer
c. consumer and total; producer
Consumer surplus will _______ when a monopolist goes from single-price monopoly to perfect price discrimination. a. remain the same b. increase c. decrease d. initially increase and then return to its original level
c. decrease
Certain activities, such as companies polluting or dumping toxic waste, generate external costs that will likely be carried out at levels that ______ those would be efficient. a. are equal to b. are less than c. exceed d. compete with
c. exceed
When the Dairy Farmers of America (an agricultural coop) restricts the supply of milk to increase the profits of dairy farmers, the milk market: a. achieves an efficient outcome because profits increase. b. achieves an equitable outcome because farmers with greater resources receive profits commensurate with those resources. c. fails because there is no longer an efficient allocation of resources. d. fails because there is no longer an equitable allocation of resources.
c. fails because there is no longer an efficient allocation of resources.
When a monopolistically competitive industry incurs economic losses, the result is usually that: a. the price of the product increases to the monopoly level b. the price of the product quickly reaches the perfectly competitive level c. firms that remain in the industry gain market share d. firms that remain in the industry lose market share
c. firms that remain in the industry gain market share
Because the marginal social cost of a common resource is ________ than the private marginal cost, consumption of the resource is inefficiently ________. a. less; high b. less; low c. greater; high d. greater; low
c. greater; high
When making a profit-maximizing "how much" decision, if the marginal benefit of a good or activity is greater than the marginal cost of that good or activity, then the individual can be made better off by: a. decreasing the quantity as long as the marginal benefit of one more unit exceeds the marginal cost. b. increasing the amount of money spent on the good or activity until the marginal benefit of one more unit is less than the marginal cost. c. increasing the quantity as long as the marginal benefit of one more unit exceeds the marginal cost d. changing the way marginal values are computed.
c. increasing the quantity as long as the marginal benefit of one more unit exceeds the marginal cost
For a nonexcludable good like police services, the private market yields _______. a. inefficiently high production b. inefficiently high consumption c. inefficiently low production d. the efficient level of production
c. inefficiently low production
Total profit is maximized when marginal benefit _____ marginal cost. a. is more than b. is less than c. is equal to d. approaches
c. is equal to
Jacob owns a bed and breakfast in Napa Valley. He pays $32,000 per year for insurance, $408,000 in wages, and $23,000 for supplies. He forgoes $32,000 per year he could make as a police officer. His total revenue last year equaled $460,000. That means his economic _____ equaled _____. a. profit; $3,000 b. losses; $3,000 c. losses; $35,000 d. profit; $35,000
c. losses; $35,000
Jacob owns a bed and breakfast in Napa Valley. He pays $32,000 per year for insurance, $408,000 in wages, and $23,000 for supplies. He forgoes $32,000 per year he could make as a police officer. His total revenue last year equaled $460,000. That means his economic ___________ equaled ___________. a. profit; $3,000 b. losses: $3,000 c. losses; $35,000 d. profit; $35,000
c. losses; $35,000
Most large public transit systems charge lower rider fares to senior citizens, students, and children. If this pricing strategy increases the profits of the transit system, we can conclude that individuals in the reduced fare categories have a ________ demand for public transit service than other passengers have. a. greater b. lower c. more elastice d. less elastic
c. more elastic
20. The purpose of behavioral economics is to determine why: a. people maximize utility. b. firms maximize profit and minimize costs. c. people make decisions that appear to be irrational. d. markets usually behave in an efficient manner.
c. people make decisions that appear to be irrational.
If marginal cost is GREATER than average total cost, then average total cost is: a. at its maximium b. at its minimum c. rising d. failing
c. rising
India exports shirts, which are labor-intensive, to the United States. The likely source of India's comparative advantage in shirts is: a. a hotter climate, which makes it possible to produce shirts outdoors, eliminating the need for factory buildings and hence reducing costs. b. superior production technology. c. that, in comparison with the United States, India is a labor-abundant country. d. higher labor productivity in India.
c. that, in comparison with the United States, India is a labor-abundant country.
12. Sri Lanka, which is labor-abundant, has a comparative advantage in t-shirt poroduction, which is labor-intensive. Which model explains this pattern of comparative advantage? a. the Ricardian Model b. the pauper labor model c. the Heckscher-Ohlin model d. a model of autarky
c. the Heckscher-Ohlin model
Which statement BEST describes the principle of diminishing marginal utility? As an individual consumes more of a good: a. the total utility will always rise b. the additional utility obtained from an additional unit will always be increasing and positve. c. the addition to total utility obtained from the nth unit of the good will be less than that obtained from the n - 1th unit of the good. d. the marginal utility will eventually become negative
c. the addition to total utility obtained from the nth unit of the good will be less than that obtained from the n - 1th unit of the good.
Assume that a monopoly firm is currently earning economic profits. If a permanent change in fixed cost raises average total cost above the demand curve: a. price will fall and output will rise b. more firms will enter the industry c. the monopoly will go out of business in the absence of government intervention d. marginal cost will be greater than marginal revenue
c. the monopoly will go out of business in the absence of government intervention
(Table: Kombucha Market) There are two consumers, Archie and Mandeep, in the market for kombucha. Their willingness to pay for each kombucha is shown in the table Kombucha Market. There are two producers of kombucha, Carla and Davina, and their costs are also shown. The equilibrium price of kombucha is $8, and the equilibrium quantity is 5. At the equilibrium price and quantity, Davina sells _____ kombucha(s), and her producer surplus is _____. a. four; $11 b. three; $8 c. two; $6 d. one; $4
c. two; $6
(Figure: Pay Per View Movies on Xfinity Cable II) Use Figure: Pay Per View Movies on Xfinity Cable. The figure shows the demand and marginal revenue curves for on-demand movie rentals on Xfinity Cable. Assume that marginal cost and average cost are constant at $30. If the cable company practices perfect price discrimination, deadweight loss will be: a. $180 b. $100 c. $40 d. $0
d. $0
Two consumers, Ariel and Abbie, like to download movies to their iPhones. The table Movie Downloads show their willingness to pay for each downloaded movie. If an individual movie can be downloaded for $1, what is the total consumer surplus recieved by these consumers? a. $19.25 b. $18 c. $10 d. $11
d. $11
(Table: Costs of Wedding Cakes) Use Table: Costs of Wedding Cakes. Assume that fixed costs are $10. What is the average variable cost of 2 wedding cakes? a. $40.00 b. $35.00 c. $25.00 d. $12.50
d. $12.50
(Figure and Table: Variable, Fixed, and Total Costs for Buckwheat) Use Figure and Table: Variable, Fixed, and Total Costs for Buckwheat. The marginal cost of increasing production from 64-75 bushels of buckwheat is: a. $16.00 b. $15.38 c. $12.50 d. $18.18
d. $18.18
(Figure: Monthly Supply of Lattes) The figure Monthly Supply of Lattes represents the monthly supply of lattes at a local cafe. At $3 per latte, the cafe produces 120 lattes per month. The producer surplus received by this bakery is equal to: a. $120. b. $60. c. $360. d. $180.
d. $180.
Suppose the demand equation is given by P = 100 - 2Q, and the supply equation is given by P = 20 + 2Q. If the quantity bought and sold under a price floor is Q = 10, what is the deadweight loss associated with this quantity control? a. $400 b. $800 c. $1,200 d. $200
d. $200
(Figure and Table: Variable, Fixed, and Total Costs for Buckwheat) Use Figure and Table: Variable, Fixed, and Total Costs for Buckwheat. The marginal cost of increasing production from 75 to 84 bushels of buckwheat is: a. $16.00. b. $15.38. c. $12.50. d. $22.22.
d. $22.22.
(Table: Pollution and Water Table Damage from Cobalt Mining) Use Table: Pollution and Water Table Damage from Cobalt Mining. The table shows the marginal social benefit and marginal social cost of various amounts of pollution emitted into the air and water from a cobalt mine. At the efficient quantity of pollution, the marginal social cost of pollution is: a. $0 b. $100 c. $200 d. $400
d. $400
(Table: Total Cost and Output for All-Natural Frozen Yogurt) Use Table: Total Cost and Output for All-Natural Frozen Yogurt, which describes Sasha's total costs for his perfectly competitive all-natural frozen yogurt firm. If the market price of a tub of frozen yogurt is $20, how much is Sasha's profit at the optimal short-run output? a. $100 b. $0 c. -$5 d. -$10
d. -$10
A 10 percent increase in income increases the quantity demanded of online movie rentals by 3 percent. The income elasticity of demand for online movie rentals is ________, and online movie rentals are a(n) __________ good. a. -3.3; inferior b. 3.3; normal c. -0.3; inferior d. 0.3; normal
d. 0.3; normal
(Figure: Marginal Benefit from Consumption of a Public Good) Use Figure: Marginal Benefit from Consumption of a Public Good. Assume that two individuals will share consumption of a public good; each individual has the marginal benefit curve shown in the figure. If the marginal cost of the good is $8, how many units of the public good will maximize society's welfare? a. 0 b. 8 c. 12 d. 16
d. 16
The price of Cracker Jacks (a caramel-coated popcorn with peanuts) is $0.50 per box, and the price of macadamia nuts is $0.25 per bag. You have $10 to spend. You decide to purchase 8 bags of macadamia nuts. The maximum number of boxes of Cracker Jacks that you can purchase is: a. 4 b. 8 c. 10 d. 16
d. 16
Norman Love Confections in Ft. Myers, Florida, is the only producer of Golden Santa Christmas collections in the world. Norman recently expanded his production capacity from 1,000 to 1,500 boxes of chocolate candy per Christmas season. If the price elasticity of demand for Golden Santa boxes of chocolates is 2, by how much will the company have to reduce its price to sell the additional 500 boxes of chocolate (by the midpoint method)? a. 2.5% b. 25% c. 40% d. 20%
d. 20%
(Table: The Production Possibilities for Large Tractors and Petroleum) Use Table: The Production Possibilities for Large Tractors and Petroleum. In the United States, the opportunity cost of producing 40 tractors is ________ barrels of petroleum. a. 80,000 b. 60,000 c. 40,000 d. 20,000
d. 20,000
(Table: The Utility of California Rolls) Use Table: The Utility of California Rolls. The marginal utility of the fourth roll is: a. 35 b. 15 c. 10 d. 5
d. 5
Consider the figure Consumer Surplus in the Market for Garden Gnomes I. If the good is being given away for free, consumer surplus equals the area: a. ABP2. b. AFP1. c. BGF. d. AQ30.
d. AQ30.
Expenses associated with factors of production may be _______ costs. a. implicit b. opportunity c. explicit d. All of these are expenses associated with factors of production
d. All of these are expenses associated with factors of production
(Figure: Budget Lines for Bottled Water and Biscottie) Use Figure: Budget Lines for Bottle Water and Biscotti. For months now, Angela has had $20 per month to pend on bottled water and biscotti. The price of each cup of bottled water and each biscotti is $1. Which chart shows what will happen to her budget line if the price of a cup of bottled water falls to $0.50? a. A b. B c. C d. D
d. D
(Figure: The Market for Notebooks) Use Figure: The Market for Notebooks. Assume that S and D are the domestic supply and demand curves and that the world price is PW. Identify the area of deadweight loss when a tariff raises the domestic price from the world price to PT. a. A + B b. C + D + E + F c. D + E + F d. D + F
d. D + F
The utility-maximizing principle of marginal analysis implies that, if Katerina maximizes her utility by spending all of her income on Lakers tickets and Uber rides, with prices equal to PTickets and PRides , respectively, then it must be the case that: a. MUTickets/MURides > PTickets/PRides. b. MUTickets/MURides < PTickets/PRides. c. MUTickets/PRides = MURides /PTickets. d. MUTickets/PTicket = MURides /PRides.
d. MUTickets/PTicket = MURides /PRides.
The utility-maximizing principle of marginal analysis implies that, if Katerina maximizes her utility by spending all of her income on Lakers tickets and Uber rides, with prices equal to Ptickets and Prides, respectively, then it must be the case that: a. MUtickets/MUrides > Ptickets/Prides b. MUticktes/MUrides < Ptickets/Prides c. MUTickets/Prides = MUrides/Ptickets d. MUtickets/PTickets = MUrides/Prides
d. MUtickets/PTickets = MUrides/Prides
(Figure: The Market for Grapes in California) Use Figure: The Market for Grapes in California. In autarky, the price of Grapes in California is PA. When the economy is open to trade, the price falls to PW, and the change in consumer surplus will be given by the area __________. a. M b. M + N c. M + N + O d. N + O + P
d. N + O + P
Which of the following questions would NOT involve marginal analysis: a. How many minutes should I exercise? b. How many workers should I hire? c. What is an acceptable rate of negative side effects from a new medicine?. d. Should I attend college?
d. Should I attend college?
Which statement is normative? a. The number of women in the labor force increased markedly during the past 100 years. b. The federal minimum wage is higher today than it was 20 years ago. c. Children in the United States are mandated by law to attend school until they reach a certain age. d. The best way to encourage growth in the economy is through education
d. The best way to encourage growth in the economy is through education.
Suppose the government believes that the price of gasoline is too high and therefore intervenes in the market by setting a price ceiling that is below the equilibrium price. Which of the following scenarios would likely result? a. Some consumers would experience a decrease in consumer surplus. b. Producers would gain some producer surplus. c. The outcome would be efficient. d. Total surplus would decrease
d. Total surplus would decrease
Producers have an incentive to lower the quality of a good when the government imposes: a. any price control b. an excise tax c. a binding price floor d. a binding price ceiling
d. a binding price ceiling
An increase in price and an ambiguous change in quantity are MOST likely caused by: a. a shift to the left of the demand curve and no shift of the supply curve. b. a shift to the left of the supply curve and no shift of the demand curve. c. a shift to the right of the supply curve and a shift to the left in demand. d. a shift to the left of the supply curve and a shift to the right of the demand curve.
d. a shift to the left of the supply curve and a shift to the right of the demand curve.
If baseball bats and furniture are substitutes in production (important word in question), then a rise in the price of baseball bats: a. increases the demand for furniture. b. decreases the demand for furniture. c. increases the supply of furniture. d. decreases the supply of furniture.
d. decreases the supply of furniture.
If all of the opportunities to make someone better off (without making someone else worse off) have been exploited, an economy is a. equitable. b. inefficient. c. marginally optimal. d. efficient
d. efficient
If an economy is in equilibrium, and no individual can improve her or his well-being by taking a different action, then the economy is: a. equitable b. inefficient c. marginally optimal d. efficient
d. efficient
Cap and trade is a system of: a. subsidies used to internalize pollution costs b. taxes in which consumers are charged for the use of common property resources c. limits on allowable emissions d. exchangeable licenses that enable a holder to pollute up to a specified amount during a given period.
d. exchangeable licenses that enable a holder to pollute up to a specified amount during a given period.
The marginal social benefit received from pollution is equal to its marginal social cost in the market for highly polished ceramic. In this situation: a. society's well-being can be improved if the quantity of pollution decreases b. firms in the market produce too much pollution c. a decrease in the quantity of pollution will improve society's well-being d. firms in the market produce the socially optimal level of pollution.
d. firms in the market produce the socially optimal level of pollution.
Suppose the price elasticity of demand for cappuccinos at the Cappuccino Barn is 1.71 for construction workers and .55 for office workers. A successful price discrimination strategy would feature ________ prices for office workers and ___________ prices for construction workers______________. a. lower; lower; in any circumstance b. lower; higher; in any circumstance c. lower; higher; as long as office workers can't resell drinks to construction workers d. higher; lower; as long as construction workers can't resell drinks to office workers.
d. higher; lower; as long as construction workers can't resell drinks to office workers.
Annual _____ taxes are based on the value of a home. a. income b. profits c. sales d. property
d. property
19. A(n) ______ decision maker is willing to sacrifice some economic payoff to avoid a potential loss. a. rational b. irrational c. boundedly rational d. risk averse
d. risk averse
For a good to be efficiently provided by the private market, it must be: a. rival in consumption and nonexcludable b. nonrival in consumption and excludable c. a common resource d. rival in consumption and excludable
d. rival in consumption and excludable
In one hour, the United States can produce 25 tons of platinum or 250 electric cars. In one hour, Canada can produce 30 tons of platinum or 275 electric cars. This information implies that: a. Canada has a comparative advantage in the production of electric cars. b. the United States has an absolute advantage in the production of platinum. c. Canada has a comparative advantage in the production of both goods. d. the United States has a comparative advantage in the production of electric cars.
d. the United States has a comparative advantage in the production of electric cars.
(Figure: Preserved Farmland in the State of New Jersey) Use Table Figure: Preserved Farmland in the State of New Jersey. The figure shows the marginal social benefit and the marginal social cost of preserving various amounts of land for farming purposes. In the figure, point Q1 represents: a. the market determined quantity of preserved farmland b. the optimal Pigouvian rebate on farmland and preservation c. the socially optimum point d. the marginal social cost of preserved farmland in the absence of a tax or subsidy.
d. the marginal social cost of preserved farmland in the absence of a tax or subsidy.
(Scenario: The Market for Travel Mugs) Use Scenario: The Market for Travel Mugs. If a $1 per unit tax is imposed, the per-unit tax incidence on consumers is equal to (round all calculations to two decimal places): a. $0.60. b. $0.40. c. $0.80. d. $1.00.
a. $0.60.
(Figure: The Market for Summer Sandals) Use Figure: The Market for Summer Sandals. The government recently levied a $10 tax on the producers of summer sandals. What is the tax revenue? a. $1,000 b. $500 c. $4,000 d. $5,000
a. $1,000
"The current trade deficit of $350 billion is too high" is a _____ statement. a. normative b. ceteris paribus c. positive d. marginal
a. normative
When a country exchanges goods with another country, in the short run: a. producers in the exporting industry may be better off. b. consumers of the imported good may be worse off. c. consumers of the exported good may be better off d. producers in the importing industry are better off.
a. producers in the exporting industry may be better off.
The income elasticity of demand for fresh winter vegetables has been estimated to be 0.6. If income grows by 10% in a given period, demand will: a. increase by more than 10%. b. increase by about 6%. c. decrease by more than 10%. d. decrease by less than 6%.
b. increase by about 6%.
The Market for Microeconomics Textbooks. Suppose the government believes that microeconomics textbooks are too expensive and wants to make them more affordable, ensuring that they are available to students. Given a price ceiling of $80, the market outcome would be a ______ of _______ textbooks. a. surplus; 30 b. surplus; 10 c. shortage; 30 d. shortage; 10
c. shortage; 30
