AGECON exam 3

Marginal propensity to consume is the slope of the aggregate consumption function and tells us how much consumption will change if consumer disposable income changes.

true

Suppose your friends take you out for dinner on your birthday and you have a much better time than you would have had doing anything else. There is still an opportunity cost, even though they will not let you pay for anything

true

The marginal value product for labor is equal to the marginal physical product for labor times the product price

true

The price of the product and marginal revenue are identical under conditions of perfect competition.

true

Suppose that when the price of aspirin rises from $2 to $3 per bottle, the quantity demanded falls from 800 bottles per day to 700 bottles per day. Over this range, the demand for aspirin is

elastic unitary elastic perfectly elastic Correct inelastic perfectly inelastic

Given the environment illustrated in Figure below, The profit-maximizing price for the firm in Figure above is

$165 Correct $150 less than $150, but more than $100 irrelevant because the firm should shut down immediately less than $100.

The profit-maximizing price for the firm in Figure above is

$165 Correct $150 less than $150, but more than $100 irrelevant because the firm should shut down immediately less than $100.

Use the following graph to answer the question. Note that this graph is not drawn to scale. Which line is drawn tangent to the curve i at point B?

i Correct ii iii

Figure below shows the payoff matrix for the only two auto dealerships in a community, Jim's Autos and Tim's Autos. The matrix shows the profits that each firm would earn from choosing either a low price or a high price.

$250,000 Correct $100,000 $200,000 -$50,000 $150,000

Figure below shows the payoff matrix for the only two auto dealerships in a community, Jim's Autos and Tim's Autos. The matrix shows the profits that each firm would earn from choosing either a low price or a high price. The equilibrium level of profit for Jim's Autos would be

$250,000 Correct $100,000 $200,000 -$50,000 $150,000

Consider the firm in Figure below. Total Total Output Revenue Cost 0 0 $100 1 $ 90 $150 2 $160 $190 3 $210 $215 4 $240 $250 5 $250 $300 The marginal cost of producing the fifth unit of output is

$300 $1,500 Correct $50 $40 $60

Its price and output will be

$300 and 175 $50 and 125 Correct $250 and 125 $180 and 160 none of these since the firm should immediately shut down in the short run

The firm in Figure below does not practice price discrimination. Its price and output will be

$300 and 175 $50 and 125 Correct $250 and 125 $180 and 160 none of these since the firm should immediately shut down in the short run

Carl is considering attending a concert with a ticket price of $35. He estimates that the cost of driving to the concert and parking there will total an additional $20. In order to attend the concert, Carl will have to take time off from his part-time job. He estimates that he will lose 5 hours of work, at a wage of $6 per hour. Carl's opportunity cost of attending the concert equals

$35 $55 $30 $65 Correct $85

The following information supposedly collected on a particular country by the CIA.

$4,900 million Correct $5,200 million $5,600 million $6,000 million

The following information supposedly collected on a particular country by the CIA. Consumption Expenditures $3,600 million Imports $1,200 million Depreciation $300 million Government Expenditures $1,000 million Gross Private Domestic Investment $1,000 million Tax Revenues $700 million Exports $800 million Implicit GDP Deflator 2.00 (1996 = 1.00) Nominal GDP is equal to:

$4,900 million Correct $5,200 million $5,600 million $6,000 million

When individuals come together to buy and sell goods and services, they form a(n)

economy Correct market production possibilities frontier supply curve demand curve

A group of buyers and sellers with the potential to trade with each other is known as a(n)

trading bloc cartel Correct market industry sector

A major difference between monopolistic competition and perfect competition is the degree of product differentiation. Pure competition has none and differentiation always exists in monopolistic competition.

true

A price elasticity of demand of 2 for a specific cola means that if the price increases 1 percent, the quantity demanded of the cola will decrease by 2 percent.

true

A profit-maximizing, single-price monopoly must lower its price in order to sell more output.

true

Alwite is a perfectly competitive firm that produces white t-shirts. The market for white t-shirts is perfectly competitive and the market price of a t-shirt is $10.True or False: Alwite's marginal revenue is the same for all levels of production.

true

An example of average physical product in agriculture is the yield or number of bushels of corn produced per acre

true

Demand for goods in broader category definitions, such as "beverages", is usually less elastic than demand for more narrowly defined goods, such as "diet colas."

true

Given the figure below, The graph above illustrates the use of set asides to remove land from production for specific commodities.

true

If a 10 percent rise in the price of bananas leads to a 20 percent reduction in the quantity of bananas demanded, then the price elasticity of demand is 2.00.

true

If both the demand and supply curves for computers shift to the right, the price of computers may rise, fall, or remain unchanged.

true

Given the graph below Producer surplus is

$150 $250 Correct $50 Can't tell

Suppose that a firm produces 9 units at a price of $13 and 12 units at a price of $12. Then marginal revenue is:

$0 Correct $9 $27 can't tell; insufficient information.

If the perfectly competitive firm pictured in Figure 9-20 is maximizing profits, it is currently selling output at a price of

$0. $5. $7. Correct $10.

If government spending is $1,000 and tax revenue collected by the government is $900, the nation's national debt would be equal to:

$100. $1,900. 10%. Correct Need more information.

Brittany provides manicures at the only salon in town. Her marginal cost is constant at $5 per client, her fixed cost is $25 per day, and she is able to do 8 manicures per day. On a given day, half of her clients are willing to pay $15 for a manicure; half are willing to pay only $10. If she charges all of her clients $10, then her maximum daily profit equals

$15

Figure below illustrates the trade-off for a particular student between time spent studying per week and income per week from working part-time. What is the opportunity cost for this person of moving from point a to point b?

$5 of income per week Correct $10 of income per week two hours of studying per week $10 per hour of studying per week $20 of income per week

The following information supposedly collected on a particular country by the CIA.

$5,200 million $2,600 million $2,450 million Correct can't tell; insufficient information.

The following information supposedly collected on a particular country by the CIA. Consumption Expenditures $3,600 million Imports $1,200 million Depreciation $300 million Government Expenditures $1,000 million Gross Private Domestic Investment $1,000 million Tax Revenues $700 million Exports $800 million Implicit GDP Deflator 2.00 (1996 = 1.00) Real per capita GDP is equal to:

$5,200 million $2,600 million $2,450 million Correct can't tell; insufficient information.

Assuming no price discrimination, the firm represented by Figure above will have a per unit profit of

$50

Carl is considering attending a concert with a ticket price of $35. He estimates that the cost of driving to the concert and parking there will total an additional $20. In order to attend the concert, Carl will have to take time off from his part-time job or forgo studying for an exam scheduled for the next morning. He estimates that he will lose 5 hours of work, at a wage of $6 per hour or 5 hours of study time. If Carl considers studying the best alternative use of his time, his opportunity cost of attending the concert equals

$55 Correct $85 plus the value of the highest exam grade he could earn by studying for 5 hours $55 plus the value of the highest exam grade he could earn by studying for 5 hours $85 minus the value of the highest exam grade he could earn by studying for 5 hours $55 minus the value of the highest exam grade he could earn by studying for 5 hours

When the market price is $2 per pound, the consumer surplus is:

$55,000. Correct $24.500. $25,500. $12,500.

When the market price is $3 per pound, the consumer surplus is:

$55,000. $30,000. $25,000. Correct $12,500.

Consider the firm in Figure below. Total Total Output Revenue Cost 0 0 $100 1 $ 90 $150 2 $160 $190 3 $210 $215 4 $240 $250 5 $250 $300 If the firm sells five units of output, then the price must equal

$60 $10 $250 $90 Correct $50

Use the following table to answer the question: Cash receipts from farm marketing $750,000 Receipts of government payments $150,000 Other income from farm sources $100,000 Production expenses $400,000 Value of real estate assets $10 million Value of non-real estate assets $2 million Financial assets $4 million Liabilities $9 million The equity for this operation is:

$600,000 $1 million Correct $7 million $ 25 million

Brittany provides manicures at the only salon in town. Her marginal cost is constant at $5 per client, her fixed cost is $25 per day, and she is able to do 8 manicures per day. On a given day, half of her clients are willing to pay $15 for a manicure; half are willing to pay only $10. If she charges all of her clients $10, then her maximum daily profit equals

$80 Correct $15 $40 $55 $50

To maximize profits or minimize losses in the short run, the firm should produce an output of

0 1 2 Correct 3 4

The change in producer surplus is given by (Hint: New Surplus-Old Surplus):

- B-C Correct B - E E - B can't tell; insufficient information

The following graph depicts a leftward shift in the supply curve. Each letter represents the area of the shape. The change in producer surplus is given by (Hint: New Surplus-Old Surplus):

- B-C Correct B - E E - B can't tell; insufficient information

The following graph depicts a leftward shift in the supply curve. Each letter represents the area of the shape. The change in producer surplus is given by (Hint: New Surplus-Old Surplus):

- B-C Correct B - E E - B can't tell; insufficient information

Bill's Office Furniture sells office chairs and desks. Bill's has changed the price per chair by $10 in each of four successive weeks. Figure below shows the four prices along with the corresponding sales of desks. Price Per Chair Quantity of Desks Demanded $ 45 210 $ 55 190 $ 65 150 $ 75 120 What is the cross-price elasticity of demand of desks with respect to chairs when the price of a chair changes in the $45 to $55 range?

-2.0 2.0 0.5 Correct -0.5 1.0

Suppose that Trey spends all of his income on vacation trips and textbooks. If the price of a trip is $200 and the price of a textbook is $50, then the slope of his budget line (assuming vacation trips are measured on the vertical axis) would be

-4 4 0.25 -1.75 Correct -0.25

What is the slope of the line given in the graph?

-5 0.5 2 -0.5 Correct -2

Figure below shows the demand schedule for hockey pucks. Price Quantity Demanded $ 1 100 $ 2 80 $ 3 60 $ 4 40 $ 5 20 What is the price elasticity of demand when the price changes from $4 per puck to $5 per puck?

0.33 1.00 1.15 Correct 3.00 none of these

Figure below shows the demand curve for chicken. Between points L and M, the price elasticity of demand is

0.44, and demand is elastic Correct 0.44, and demand is inelastic 2.25, and demand is elastic 2.25, and demand is inelastic 0.028, and demand is inelastic

Daniel's consumption of pizzas drops from 6 per week to 4 per week when the price rises from $9 to $11. His price elasticity of demand for pizza equals

0.5 1 Correct 2 0.08 1.7

Given the Table below, Price Quantity Total Cost $100 1 $150 $ 90 2 $180 $ 80 3 $220 $ 70 4 $300 $ 60 5 $400 $ 50 6 $550 What is the profit-maximizing level of output for the non-discriminating monopolist in Figure below?

1 unit 2 units Correct 3 units 4 units 5 units

The marginal utility associated with drinking one more soda is: Total Utility Cans of Soda 20 2 35 5

1/5 Correct 5 15 3 Can't tell; insufficient information

Stanley receives the following marginal utilities from the first four car washes that he buys each year, respectively: 20, 15, 10, and 5. If each car wash sells for $10, then the marginal utility per dollar spent on the third car wash is

10 4.5 Correct 1 45 5

In the following table, "I" stands for the amount of a particular variable input. Assume the model of perfect competition. I Output TFC TVC TC MC 100 1000 200 1000 x — t 1100 w z y 5 What is the value of w?

100 Correct 200 1,000 none of the above

In the following table, "I" stands for the amount of a particular variable input. Assume the model of perfect competition. I Output TFC TVC TC MC 4 10 100 200 x — 7.6 16 w z y 30 What is the value of x?

100 Correct 300 1,000 2,000

Individual demand schedule for three consumers, A, B and C, from the local HEB store in the purchases of ice cream are given bellow: Customer A B C Price/Quart Quarts/Week Quarts/Week Quarts/Week $1.50 5 12 8 $1.75 4 11 7 $2.00 2 9 5 What is the market demand for ice cream at the price of $1.75 assuming that the only consumers in this market are customers A, B, and C?

11 16 25 Correct 22 Can't tell; insufficient information

At point A, which of the following statements is (are) false?

12 tacos and 16 wings are the optimal levels of consumption. Correct the MRS = -4/3 or 4/3 after taking the absolute value. none of the above.

The table below shows the marginal utility Kate receives from buying tacos and pizzas, assuming she buys only these two goods. Each taco sells for $5 and each pizza sells for $4. Quantity of Tacos Marginal Utility per Taco Quantity of Pizza Marginal Utility per Pizza 1 30 1 18 2 25 2 16 3 20 3 14 4 15 4 12 5 10 5 10 What is the marginal utility per dollar spent on the fourth taco?

15 4 Correct 3 20 12

Alwite is a perfectly competitive firm that produces white t-shirts. The market for white t-shirts is perfectly competitive and the market price of a t-shirt is $10. What will be Alwite's total revenue if it sells 20 t-shirts?

150 100 Correct 200 30

Individual demand schedule for three consumers, A, B and C, from the local HEB store in the purchases of ice cream are given bellow: Customer A B C Price/Quart Quarts/Week Quarts/Week Quarts/Week $1.50 5 12 8 $1.75 4 11 7 $2.00 2 9 5 What is the market demand for ice cream at the price of $1.50 assuming that the only consumers in this market are customers B, and C?

16 11 25 Correct 20 Can't tell; insufficient information

Individual demand schedules for three customers from the local H-E-B store in the purchase of ice cream are given What is the quantity demanded of ice cream at a price of $1.60 assuming that the only consumers in this market are customers A, B, and C?

16 22 Correct 25 can't tell; insufficient information

Individual demand schedules for three customers from the local H-E-B store in the purchase of ice cream are given below: What is the quantity demanded of ice cream at a price of $1.60 assuming that the only consumers in this market are customers A, B, and C?

16 22 Correct 25 can't tell; insufficient information

If the price of food falls by 10 percent and the quantity sold increases by 5 percent, then the price elasticity of demand in that range equals

2, and demand is elastic 0.5, and demand is elastic 2, and demand is inelastic Correct 0.5, and demand is inelastic 15, and demand is elastic

Anita consumes both pizza and Pepsi. The following tables show the amount of utility she obtained from different amounts of these two goods. Suppose Pepsi costs $0.5 per can, pizza costs $1 per slice and Anita has $9 to spend on food and drinks. MU is Marginal Utility and MU/P is Marginal Utility per dollar. Pizza Pepsi Quantity Utility MU MU/P Quantity Utility MU MU/P 4 slices 115 5 cans 63 5 slices 135 6 cans 75 6 slices 154 7 cans 86 7 slices 171 8 cans 96 Find Marginal Utility (MU) of the 7th slice of pizza?

20 19 Correct 17 0

Anita consumes both pizza and Pepsi. The following tables show the amount of utility she obtained from different amounts of these two goods. Suppose Pepsi costs $0.5 per can, pizza costs $1 per slice and Anita has $9 to spend on food and drinks. MU is Marginal Utility and MU/P is Marginal Utility per dollar. Pizza Pepsi Quantity Utility MU MU/P Quantity Utility MU MU/P 4 slices 115 5 cans 63 5 slices 135 6 cans 75 6 slices 154 7 cans 86 7 slices 171 8 cans 96 Find Marginal Utility (MU) of the 7th slice of pizza?

20 19 Correct 17 0 Cannot calculate from the given information

Based on the graph, which of the following is true?

3 units of environmental quality and 6 units of power offer the same level of satisfaction as 4 units of environmental quality and 10 units of power. 5 units of environmental quality and 4 units of power offer the same level of satisfaction as 4 units of environmental quality and 10 units of power. Correct 5 units of environmental quality and 8 units of power offer the same level of satisfaction as 4 units of environmental quality and 10 units of power. none the above.

Based on the graph, which of the following is true?

3 units of environmental quality and 6 units of power offer the same level of satisfaction as 4 units of environmental quality and 10 units of power. 5 units of environmental quality and 4 units of power offer the same level of satisfaction as 4 units of environmental quality and 10 units of power. 5 units of environmental quality and 8 units of power offer the same level of satisfaction as 1 units of environmental quality and 12 units of power. Correct none the above.

In the following table, "I" stands for the amount of a particular variable input. Assume the model of perfect competition. I Output TFC TVC TC MC 4 10 100 200 x — 7.6 16 w z y 30 What is the value of y?

300 Correct 480 1,000 can't say; insufficient information

If the market price reduces from $7 to $5, then what is the consumer surplus?

320 1500 Correct 1725 1925 3450

What is the slope of the curve above at point A?

4 -0.25 -4 0.25 Correct Cannot identify

Anita consumes both pizza and Pepsi. The following tables show the amount of utility she obtained from different amounts of these two goods. Suppose Pepsi costs $0.5 per can, pizza costs $1 per slice and Anita has $9 to spend on food and drinks. MU is Marginal Utility and MU/P is Marginal Utility per dollar. Pizza Pepsi Quantity Utility MU MU/P Quantity Utility MU MU/P 4 slices 115 5 cans 63 5 slices 135 6 cans 75 6 slices 154 7 cans 86 7 slices 171 8 cans 96 What combination of pizza and Pepsi will maximize Anita's utility?

4 slices and 5 cans Correct 5 slices and 8 cans 6 slices and 7 cans 7 slices and 8 cans

Anita consumes both pizza and Pepsi. The following tables show the amount of utility she obtained from different amounts of these two goods. Suppose Pepsi costs $0.5 per can, pizza costs $1 per slice and Anita has $9 to spend on food and drinks. MU is Marginal Utility and MU/P is Marginal Utility per dollar.

4 slices and 5 cans Correct 5 slices and 8 cans 6 slices and 7 cans 7 slices and 8 cans None

If bread costs $1 and meat costs $4 per pound, a consumer whose marginal utility of meat equals to 80 utils per pound is maximized only if the marginal utility per pound of bread equals

4 utils 5 utils 10 utils 20 utils Correct 80 utils

Use the following graph to answer the question. Note that this graph is not drawn to scale. What is the y-intercept of line iii?

40 20 10 30 Correct 5

If the market price reduces from $7 to $5 what is the loss in consumer surplus?

480 850 425 Correct 0 200

If the market price reduces from $50 to $20 what is the gain in consumer surplus?

6075 Correct 2400 3675 1000 5425

If the market price is $7, then what is consumer surplus?

700 Correct 1300 1500 1000 2600

A family on a trip budgets $800 for sit-down restaurant meals and fast food. If the price of a fast food meal for the family is $20, how many such meals can the family buy if they do not eat at restaurants?

8 15 20 Correct 40 160

For the monopolist in Figure below, Which point corresponds to the profit-maximizing level of output?

A B Correct C D E

Which point corresponds to the profit-maximizing level of output?

A B Correct C D E

The stage of production where the total physical product curve begins to decline corresponds to:

APP < 0 MPP< 0 Correct Stage 3 (b) and (c)

The problem of scarcity occurs under

All economic systems

Given the following equation where DPI represents disposable personal income: C = 1,500 + 0.85(DPI) If disposable personal income is $5,000, consumer spending would be equal to

Answers: $4,250. $5,250 Correct $5,750

Given the graph below, which of the following statements is false?

Answers: Consumer spending of $1,500 shown here is referred to as autonomous consumption. Consumer spending is equal to $4,300 if disposable personal income is equal to $4,000. Correct Consumers are dis-saving by $300 at a disposable income of $3,000. This curve will shift upward if disposable personal income increases.

Aggregate demand in the economy is equal to

Answers: consumption, investment and net exports. full employment output. consumption, investment and government spending. Correct none of the above

Of the following, which is true of the relationship between the quantity of a good supplied and its price?

As price increases, the quantity supplied usually decreases. Correct As price increases, the quantity supplied usually increases. As price increases, supply increases. When demand increases, so will supply. They always meet at the point of equilibrium in the market.

Brian and Matt own the only two bicycle repair shops in town. Each must choose between a low price for repair work and a high price. The yearly economic profits from each strategy are indicated in Figure bellow. The upper right side of each rectangle shows Brian's profits; the lower left side shows Matt's profits.

Brian's dominant strategy is to charge a high price. Correct Matt's dominant strategy is to charge a low price. The dominant strategy for both Brian and Matt is to charge a low price. Matt's dominant strategy is to charge a high price. Neither Brian nor Matt has a dominant strategy.

Brian and Matt own the only two bicycle repair shops in town. Each must choose between a low price for repair work and a high price. The yearly economic profits from each strategy are indicated in Figure bellow. The upper right side of each rectangle shows Brian's profits; the lower left side shows Matt's profits. Which of the following statements is correct?

Brian's dominant strategy is to charge a high price. Correct Matt's dominant strategy is to charge a low price. The dominant strategy for both Brian and Matt is to charge a low price. Matt's dominant strategy is to charge a high price. Neither Brian nor Matt has a dominant strategy.

The Federal Open Market Committee, or FOMC, sets the policy for:

Buying government bonds. Selling government bonds. Increase government spending. Correct Buying government bonds and selling government bonds.

Given the graph below, which of the following statements is false?

Consumer spending of $1,500 shown here is referred to as autonomous consumption. Consumer spending is equal to $4,300 if disposable personal income is equal to $4,000. Correct Consumers are dis-saving by $300 at a disposable income of $3,000. This curve will shift upward if disposable personal income increases.

In Figure below, using the supply and demand curves denoted S1 and D1, respectively,

Correct $100 and 50,000 $100 and 100,000 $120 and 50,000 $120 and 75,000 $120 and 100,000

If a price ceiling of $4 per pair is imposed by the government, the number of pairs actually purchased will be

Correct 4 pairs 8 pairs 5 pairs 1 pair 6 pairs

If the resource prices faced by a firm rise, the result is a(n)

Correct decrease in supply increase in supply decrease in demand increase in quantity demanded decrease in quantity supplied

When a market is in equilibrium,

Correct quantity demanded equals quantity supplied quantity demanded exceeds quantity supplied the demand curve is identical to the supply curve the economy must be at a point along the production possibilities frontier the law of demand is equivalent to the law of supply

In a competitive market, excess demand for a good exists whenever

Correct the current price is below the equilibrium price resources are scarce the quantity supplied at the current price exceeds the quantity demanded sellers are subject to the constraints imposed by input prices and technology the current price is above the equilibrium price

If an excise tax is imposed on a good or service,

Correct the supply curve shifts upward the supply curve shifts downward the price paid by consumers decreases the net price received by sellers increases the quantity produced and sold increases

At the profit-maximizing, or loss-minimizing, level of output for the firm in Figure above, total revenue is approximately

Correct $10,500 $11,000 $5,600 $8,250 zero because the firm should shut down immediately

Given the environment illustrated in Figure below, At the profit-maximizing, or loss-minimizing, level of output for the firm in Figure above, total revenue is approximately

Correct $10,500 $11,000 $5,600 $8,250 zero because the firm should shut down immediately

Given the environment illustrated in Figure below, At the profit-maximizing, or loss-minimizing, level of output for the firm in Figure above, total revenue is approximately

Correct $10,500 $11,000 $5,600 $8,250 zero because the firm should shut down immediately

Given the graph below Total economic surplus is

Correct $100 $110 $550 Can't tell

In Figure below, using the supply and demand curves denoted S1 and D1, respectively,

Correct $100 and 50,000 $100 and 100,000 $120 and 50,000 $120 and 75,000 $120 and 100,000

In Figure below, using the supply and demand curves denoted S1 and D1, respectively, the equilibrium price and quantity are

Correct $100 and 50,000 $100 and 100,000 $120 and 50,000 $120 and 75,000 $120 and 100,000

Jordan wants to sell her wedding gown for $250, but her cousin Jessica offered her $375 for it. If the gown is sold for $375, what is Jordan's producer's surplus

Correct $125 $25 $625 $373 $250

Given the environment illustrated in Figure below, At the profit-maximizing, or loss-minimizing, level of output in Figure above, the firm's total cost is approximately

Correct $14,000 $12,750 $9,100 $16,185 $8,400

Given the environment illustrated in Figure below, At the profit-maximizing, or loss-minimizing, level of output in Figure above, the firm's total cost is approximately

Correct $14,000 $12,750 $9,100 $16,185 $8,400

Carl is considering attending a concert with a ticket price of $35. He estimates that the cost of driving to the concert and parking there will total an additional $20. In order to attend the concert, Carl will have to take time off from his part-time job or forgo studying for an exam scheduled for the next morning. He estimates that he will lose 5 hours of work, at a wage of $6 per hour or 5 hours of study time. If Carl considers studying the best alternative use of his time, his opportunity cost of attending the concert equals

Correct $85 plus the value of the highest exam grade he could earn by studying for 5 hours $55 plus the value of the highest exam grade he could earn by studying for 5 hours $85 minus the value of the highest exam grade he could earn by studying for 5 hours $55 minus the value of the highest exam grade he could earn by studying for 5 hours

The marginal rate of substitution between points C and D is:

Correct -1.5 -4 -6 -0.67

Alwite is a perfectly competitive firm that produces white t-shirts. The market for white t-shirts is perfectly competitive and the market price of a t-shirt is $10. What is Alwite's marginal revenue when it increases production from 20 to 21 white t-shirts?

Correct 10 20 16 8

Alwite is a perfectly competitive firm that produces white t-shirts. The market for white t-shirts is perfectly competitive and the market price of a t-shirt is $10. What is Alwite's marginal revenue when it increases production from 20 to 21 white t-shirts?

Correct 10 20 16 8

If the price elasticity of demand for Cheer detergent is 3.0, then a

Correct 12 percent drop in price leads to a 36 percent rise in the quantity demanded 12 percent drop in price leads to a 4 percent rise in the quantity demanded $1,000 drop in price leads to a 3,000-unit rise in the quantity demanded $1,000 drop in price leads to a 333-unit rise in the quantity demanded 12 percent rise in price leads to a 36 percent rise in the quantity demanded

The functions of money include:

a medium of exchange. a store of value. a unit of accounting. Correct all of the above

Individual demand schedule for three consumers, A, B and C, from the local HEB store in the purchases of ice cream are given bellow: Customer A B C Price/Quart Quarts/Week Quarts/Week Quarts/Week $1.50 5 12 8 $1.75 4 11 7 $2.00 2 9 5 What is the market demand for ice cream at the price of $2.00 assuming that the only consumers in this market are customers A, B, and C?

Correct 16 11 25 22 Can't tell; insufficient information

Figure below shows the supply and demand for socks. Price Per Pair Quantity Demanded Quantity Supplied $ 2 18 3 $ 4 14 4 $ 6 10 5 $ 8 6 6 $10 2 8 If a price floor of $10 per pair is imposed by the government, the number of pairs actually purchased will be

Correct 2 pairs 8 pairs 5 pairs 1 pair 6 pairs

What is the slope of the curve above at point A?

Correct 4 -0.25 -4 0.25 Cannot identify

Figure below shows the supply and demand for socks. Price Per Pair Quantity Demanded Quantity Supplied $ 2 18 3 $ 4 14 4 $ 6 10 5 $ 8 6 6 $10 2 8 If a price ceiling of $4 per pair is imposed by the government, the number of pairs actually purchased will be

Correct 4 pairs 8 pairs 5 pairs 1 pair 6 pairs

Given the indifference curves in the graph above, which combination of wings and hamburgers yields the highest level of satisfaction?

Correct 6 wings, 7 hamburgers 8 wings, 1 hamburger 2 wings, 8 hamburgers 8 wings, 4 hamburgers

Figure below shows cost curves for Penny's Parasols, a perfectly competitive firm. At which of the points would Penny's Parasols be certain to close down?

Correct A B C D E

Which of the following statements about demand is correct?

Correct A change in the price of bicycles will not lead to a shift of the demand curve for bicycles. A change in the price of automobiles will lead to a shift of the demand curve for motorcycles. A change in demand is equivalent to a movement along a given demand curve. When price falls, so does the quantity demanded. When the demand curve shifts to the right, so will the supply curve.

Flora's Flowers operates in a perfectly competitive market. At the point where marginal cost equals marginal revenue, ATC = $10, AVC = $5, and the price per unit is $15. In this situation,

Correct Flora earns positive profits in the short run Flora will shut down in the short run Flora's supply curve will shift to the left Flora's supply curve will shift to the right the market price will rise in the long run

Oil and Natural Gas can each be used as a source of energy and are, for many purposes interchangeable. Which of the following best explains the increase in the price of natural gas that accompanied the increase in the price of oil during the 1990-1991 Persian Gulf War?

Correct Increased oil prices raised demand for natural gas, a substitute good. Increased oil prices raised the quantity demanded of natural gas by movement along the natural gas demand curve. Increased oil prices reduced supply of natural gas, a substitute good. Increased oil prices reduced supply of natural gas, an alternate good. Increased oil prices raised supply of natural gas, a substitute good.

Given the graph below, which monetary policy actions by the Federal Reserve would lower the interest rate from the current 10 percent level?

Correct Lower the fractional required reserve ratio. Sell government bonds. Raise the discount rate. None of the above.

Which of the following is the study of "what should be" rather than the study of "what is"?

Correct Normative economics Answers: Positive economics Law and economics Microeconomics Development economics

Given the figure below,The quantity producers would have supplied at the target price is

Correct QF QG Cannot identify total revenue minus total cost

For which of the following items is demand likely to be the most price elastic?

Correct Tide liquid laundry detergent laundry detergent in general powdered laundry detergent liquid laundry detergent

Which of the following would cause a leftward shift of the supply curve for computers?

Correct an increase in the price of printed circuit boards used to build computers a decrease in the price of electricity an increase in incomes of consumers a decrease in the price of computers a decrease in the size of the population

If the budget for this consumer is $96, then

Correct at point A, the consumer is said to be in equilibrium. the price per taco is $3. the price per wing is $4. all of the above.

If the budget for the consumer is $48, then

Correct at point C, the consumer is said to be in equilibrium. the price per glass of Kool-Aid is $3. the price per glass of tea is $4. all of the above.

Which of the following items is most likely to be an inferior good?

Correct bus tickets airline tickets housing stereo equipment home computers

If the demand curve is a horizontal line,

Correct demand is perfectly elastic demand is perfectly inelastic demand is unitary elastic demand is relatively inelastic total expenditure is maximized

The demand curve for a particular good indicates the various quantities

Correct demanded at various prices, other things equal demanded at different income levels, other things equal actually purchased at various prices, other things equal actually purchased at different income levels, other things equal demanded at various prices and income levels, other things equal

Assuming no price discrimination, the firm represented by Figure above will have a(n)

Correct economic profit of approximately $7,500 economic profit of approximately $4,375 economic profit of approximately $2,500 economic loss of approximately $15,625 break-even situation with neither economic profit nor economic loss

The U.S. Postal Service

Correct has its monopoly status guaranteed by government franchise enforces copyrights and patents in the United States. owes its monopoly status to network externalities is a monopoly because it controls a scarce resource has a horizontal average total cost curve

If the quantity of higher education demanded rises by 5 percent when incomes rise by 10 percent,

Correct higher education is a normal good higher education is an inferior good the demand for higher education is price elastic the law of demand applies to higher education the demand for higher education is price inelastic

Federal subsidies to higher education have the effect of

Correct increasing the demand for higher education increasing the supply of higher education decreasing the demand for higher education decreasing the supply of higher education

The change in total utility arising from a one-unit increase in consumption of a good is referred to as

Correct marginal utility Answers: average utility the principle of diminishing marginal utility real income Correct marginal utility

Suppose that a monopoly is earning economic profits in the short run. As a result,

Correct no new firms will enter the industry because of barriers to entry the monopolist will increase its price and lower its output the market supply curve will shift to the right profits will fall as new firms enter the market the market demand curve will shift to the left

Which budget constraint panel in Figure below shows the effect of an increase in the price of apples, other things constant?

Correct panel a panel b panel c panel d panel e

Perfect planting and harvesting weather results in a record high crop of wheat. If wheat growers experience an increase in total sales revenue, then the demand for wheat must be

Correct price-inelastic unitary elastic perfectly inelastic price-elastic perfectly elastic

The All-the-Rage microbrewery is represented in Figure below. If the market price is $4.50 per pint, then in the short run, the microbrewery will

Correct produce in the short-run and earn an economic profit produce in the short-run and suffer an economic loss be indifferent between shutting down and producing in the short-run shut-down in the short-run and earn an economic profit shut-down in the short-run and suffer an economic loss

The All-the-Rage microbrewery is represented in Figure below. If the market price is $4.50 per pint, then in the short run, the microbrewery will

Correct produce in the short-run and earn an economic profit produce in the short-run and suffer an economic loss be indifferent between shutting down and producing in the short-run shut-down in the short-run and earn an economic profit shut-down in the short-run and suffer an economic loss

When a market is in equilibrium,

Correct quantity demanded equals quantity supplied quantity demanded exceeds quantity supplied the demand curve is identical to the supply curve the economy must be at a point along the production possibilities frontier the law of demand is equivalent to the law of supply

Given the graph below, one historical approach to supporting major crop prices involved the Commodity Credit Corporation (CCC):

Correct required the CCC to acquire the excess supply that would occur at the desired price PG. resulted in a gain in consumer surplus equal to areas 3+4. caused producer surplus to increase by area 2+3. All of the above

The Jones family is going to Disney World and has set a budget of $2000 for food and souvenirs. If Mr. Jones finds a $50 bill on the ground during their trip and uses it to purchase additional souvenirs, then

Correct souvenirs are a normal good food is an inferior good the budget line has shifted to the left the slope of the budget line has changed souvenirs are a inferior good

Patents grant

Correct temporary monopoly status to creators of scientific inventions temporary monopoly status to creators of any intellectual property permanent monopoly status to natural monopolies

In a competitive market, excess demand for a good exists whenever

Correct the current price is below the equilibrium price resources are scarce the quantity supplied at the current price exceeds the quantity demanded sellers are subject to the constraints imposed by input prices and technology the current price is above the equilibrium price

If demand is perfectly inelastic,

Correct the percent change in quantity demanded divided by the percent change in price is zero the demand curve is a horizontal line supply is perfectly inelastic too consumers have power over prices the percentage change in price divided by the percentage change in quantity demanded is zero

If demand is elastic, then

Correct the percentage change in quantity demanded is larger in absolute value than the percentage change in price supply is inelastic prices can neither rise nor fall the percentage change in quantity demanded is smaller in absolute value than the percentage change in price supply is elastic

If an excise tax is imposed on a good or service,

Correct the supply curve shifts upward the supply curve shifts downward the price paid by consumers decreases the net price received by sellers increases the quantity produced and sold increases

Automatic fiscal policy instruments include:

Correct unemployment compensation. regressive income tax rate schedule. new government program. none of the above

Celia buys 24 gallons of gasoline per month when the price is $2 per gallon, but only 16 gallons if the price rises to $3 per gallon. Within this range, her demand for gasoline is

Correct unitary elastic perfectly inelastic perfectly elastic inelastic elastic

Figure below shows cost curves for Penny's Parasols, a perfectly competitive firm. At which point(s) would Penny's Parasols endure economic losses, but continue to produce in the short run?

D F A Correct C E

All combinations of Coca-Cola and potato chips that make Jose equally well off lie along a particular curve

Demand curve Marginal utility curve Budget curve Income-consumption curve Correct Indifference curve

Producers are better off, gaining area 6 while giving up areas 2 and 3.

FALSE

If the price of a good increases from $20 to $25 and the quantity demanded declines from 15 to 10 units of the good, the price elasticity of demand is 5.

False

In Promaine Flats, Nevada there are two restaurants: Sal Monella and Road Kill Café. Current profit is $7,000 each. Cleaning will attract more customers, but profit will reduce to $5,000 each. If Sal Monella cleans up and Road Kill Café doesn't then profit will be $4,500 for Sal Monella and $3,000 Road Kill, and if Road Kill Café cleans up and Sal Monella doesn't then profit will be $4,500 and $3,000, respectively.

False

Macroeconomics focuses on the behavior of economic agents such as the consumer, a business firm or a specific market

False

Marginal revenue, average revenue, and price are all equal for a monopolist.

False

Normal goods are goods for which consumption falls (rises) when income increases (decreases).

False

Producers are better off, gaining area 6 while giving up areas 2 and 3.

False

U.S. farms tend to be diversified rather than specialized.

False

f a 5 percent increase in income leads to a 15 percent increase in the quantity demanded of a service, then the income elasticity of demand for that service equals 0.33.

False

Given the graph below, what effect would expansionary monetary policy shifting the aggregate demand curve from AD1 to AD2 have on the economy?

GDP in the economy would increase. Inflation would increase. Unemployment would decline. Correct GDP in the economy would increase and unemployment would decline.

Use the table below to answer question dealing with the output and price of corn for 2011 and 2012. Year Output (in bushels) Price/Bushel 2011 10,000 $4.00 2012 12,000 $5.00 Relative to 2011, the price of corn for 2012 was:

Higher by 20% Lower by 25% Lower by 20% Correct Higher by 25%

Which of the following will shift the demand curve rightward?

Increase in the price of the good itself Decrease in the price of the good itself Correct Increase in the price of substitutes, expected prices, population and decrease in the price of complements Decrease in income or wealth Decrease in the price of substitutes, expected prices, population and increase in the price of complements

The distinction between positive and normative economics

Is that positive economics applies only to microeconomic problems Is that normative economics applies only to microeconomic problems Is the difference between an assumption and a conclusion Correct Helps us understand why economists sometimes disagree with one another Explains why economics is not a social science

The law of diminishing marginal utility

Is valid only after basic necessities (such as food and shelter) have been obtained Correct Says that marginal utility decreases as more of a good is consumed Implies that spending on a good will decrease as more of that good is consumed Says that marginal utility decreases as income increases Implies that spending on a good decreases as income increases

Which of the following goods would be most likely to be produced by a monopoly?

Lotso-Sugar brand cereal Pepsi margarine Correct electricity Ford automobiles

Which of the following is true?

MPP = APP, when APP is a maximum MC = AVC, when AVC is a minimum MC = ATC, when ATC is a minimum Correct all of the above

If a consumer allocates her income between two goods, x and y, then she will be happies when

MUx/Px = MUy/Py and she is below her budget constraint MUx = MUy and she has spent all of her income MUx/MUy > Px/Py and all of her income is spent Correct MUx/Px = MUy/Py and all of her income is spent MUx = MUy and she is below her budget constraint

The study of how consumers and producers interact in individual markets is

Macroeconomics Labor economics Correct Microeconomics Econometrics Development economics

According to the graph below, which of the following statement(s) is (are) true? (Note: D0 is the original relationship and D1 is the new relationship)

New medical research indicates that eating macaroni and cheese leads to a degenerate nervous disorder. Assuming macaroni and cheese is an inferior good, income available to the consumer rose. There is a change in demand for macaroni and cheese. Correct All of the above

A monopolist that does not price discriminate will set the output level where

P = MC P = MR TR = TC Correct MR = MC P = ATC

Among points A, B, C and D, which combination of goods yields the lowest level of satisfaction?

Point A Correct Point B Point C Point D None of the above

Which of the following is the study of "what should be" rather than the study of "what is"?

Positive economics Law and economics Microeconomics Development economics Correct Normative economics

Figure below shows the cost and demand curves facing a monopolist whose marginal cost is constant.

Q** units and charge price P' Correct Q* units and charge price P between Q* and Q** units while charging a price between P and P' between 0 and Q* units while charging price P Q* units and charge price P'

Figure below shows the cost and demand curves facing a monopolist whose marginal cost is constant. The firm has no fixed costs. If it does not discriminate, it will produce

Q** units and charge price P' Correct Q* units and charge price P between Q* and Q** units while charging a price between P and P' between 0 and Q* units while charging price P Q* units and charge price P'

The firm has no fixed costs. If it does not discriminate, it will produce

Q** units and charge price P' Correct Q* units and charge price P between Q* and Q** units while charging a price between P and P' between 0 and Q* units while charging price P Q* units and charge price P'

Given the figure below, The quantity producers would have supplied at the target price is

QD Correct QF QG Cannot identify total revenue minus total cost

In Promaine Flats, Nevada there are two restaurants: Sal Monella and Road Kill Café. Current profit is $7,000 each. Cleaning will attract more customers, but profit will reduce to $5,000 each. If Sal Monella cleans up and Road Kill Café doesn't then profit will be $4,500 for Sal Monella and $3,000 Road Kill, and if Road Kill Café cleans up and Sal Monella doesn't then profit will be $4,500 and $3,000, respectively. For the figure above which of the following statements is correct?

Road Kill Café's dominant strategy is "not clean up". Sal Monella has a dominant strategy. The dominant strategy for both Sal Monella and Road Kill Café is "not clean up". Road Kill Café has a dominant strategy. Correct Neither Sal Monella nor Road Kill Café has a dominant strategy.

The basic problem addressed in economics is

Scarce resources and unlimited wants

Demand for goods in broader category definitions, such as "beverages", is usually less elastic than demand for more narrowly defined goods, such as "diet colas."

TRUE

If both the demand and supply curves for computers shift to the right, the price of computers may rise, fall, or remain unchanged.

TRUE

If the government wants to manipulate the equilibrium price, it will normally create a price floor or price ceiling; if the government want to manipulate the equilibrium quantity, it will normally impose taxes or award subsidies.

TRUE

If the price of leather (an input for leather shoes) increases, the equilibrium price of leather shoes will increase and the equilibrium quantity of leather shoes will decrease.

TRUE

Based on the graph below, which of the following statement(s) is (are) true?

The MRS from point A to point B is -1, and if we take the absolute value then it is 1. We cannot compute the MRS from point A to point E. The curves depicted in in the graph are indifference or iso-utility curves. Correct All of the above.

Given the diagram depicted to the right, which of the following statements is true?

The MRS from point A to point B must be lower (in absolute value) than the MRS from point B to point C. The level of satisfaction associated with point A is greater than the level of satisfaction associated with either points B or C. Correct The MRS from point A to point B must be greater (in absolute value) than the MRS from point B to point C. This consumer prefers environmental quality over energy.

When Better Beds produces 40 beds per day, its average variable cost is $600 and its average total cost is $800. The marginal cost of producing the 40th bed is $700. Now consider the average total cost. When Better Beds increased production from 39 to 40 beds per day:

The average total cost remained at $800 per day. The average total cost rose. There is no way to know how the average total cost changed. Correct The average total cost fell.

For desert Mac has the choice between cheesecake and apple pie. The cheesecake has a marginal utility of 50 and a price of $5 and the apple pie has a marginal utility of 30 and a price of $3. Therefore, Mac should buy

The cheesecake since the marginal utility is greater The apple pie because its price is lower Two servings of apple pie and no cheesecake Four servings of cheesecake Correct Either the apple pie or cheesecake, it makes no difference

After graduating from high school, Steve had three choices, listed in order of preference: (1) matriculate at our campus, (2) work in a printing circuit board company, or (3) attend a rival college. His opportunity cost of going to college here includes which of the following?

The cost of books and supplies at the rival college Correct The income he could have earned at the printed circuit board factory plus the direct cost of attending college here (tuition, textbooks, etc.) The benefits he could have received from going to the rival college Only the tuition and fees paid for taking classes here Cannot be determined from the given information

Assume the curves depict the aggregate demand (AD) and aggregate supply (AS) curves for a particular economy. Let $14 trillion correspond to the full employment level of aggregate output (the targeted or desired level) for this particular economy

The depression range of the aggregate supply curve is given by CD. Correct The potential GDP for the country is $20 trillion. The classical range of the aggregate supply curve is given by AB. All of the above.

Assume the curves depict the aggregate demand (AD) and aggregate supply (AS) curves for a particular economy. Let $14 trillion correspond to the full employment level of aggregate output (the targeted or desired level) for this particular economy. Which of the following statement(s) is (are) true:

The depression range of the aggregate supply curve is given by CD. Correct The potential GDP for the country is $20 trillion. The classical range of the aggregate supply curve is given by AB. All of the above.

Assume the curves depict the aggregate demand (AD) and aggregate supply (AS) curves for a particular economy. Let $14 trillion correspond to the full employment level of aggregate output (the targeted or desired level) for this particular economy.Which of the following statement(s) is (are) true:

The depression range of the aggregate supply curve is given by CD. Correct The potential GDP for the country is $20 trillion. The classical range of the aggregate supply curve is given by AB. All of the above.

Given the graph below, which of the following statements is false?

The economy is operating at full employment. Answers: The economy is operating at full employment. The economy is in the depression or Keynesian range. Correct The economy is experiencing a recessionary gap. None of the above.

Given the graph below, which of the following statements is false?

The economy is operating at full employment. The economy is in the depression or Keynesian range. Correct The economy is experiencing a recessionary gap. None of the above.

Which of the following is the best example of physical capital used to produce a textbook?

The expertise and writing ability of the authors The ink used in the printing press Correct The printing press The property on which the publisher's office is located The time spent by editors reviewing the textbook

A single-price monopolist is producing 8,000 units of output. At that level, price equals $10, average total cost equals $12, and average variable cost equals $8. In addition, both marginal cost and marginal revenue equal $6. Which of the following statements is correct in the short run?

The firm is earning total revenues equal to $96,000. The firm could reduce its loss by shutting down. The firm has a loss per unit equal to $4. Correct The firm is minimizing its economic loss at $16,000. The firm is earning an economic profit equal to $16,000.

Given the graph below, which of the following statements is true?

The labor market is at full employment. The wage rate would increase if the income tax rate was increased. The economy is experiencing an inflationary gap. Correct None of the above.

Given the graph below, which of the following statements is true? (graph has red,blue, and green lines with one big green dot)

The labor market is at full employment. The wage rate would increase if the income tax rate was increased. The economy is experiencing an inflationary gap. Correct None of the above.

Consider the diagram provided below. At point C, which of the following statement(s) is (are) true?

The optimal purchase for this consumer is 8 glasses of Kool-Aid and 6 glasses of tea. Correct The marginal rate of substitution is 3/4 and without taking the absolute value is -3/4. All of the above.

This question pertains to the following table that gives the output produced (in bushels) and price of corn received ($/bushel) for Farmer Smith over the period 2008 to 2010. Assume that the only source of income for Farmer Smith is from the production of corn. Also assume that all production costs are zero. Year Output Price CPI 2008 6,000 $2.00 1.00 2009 8,000 $2.60 1.10 2010 10,000 $2.50 1.40 You are to compute output indices for 2008 and 2010 for Farmer Smith with the base year of 2009. Which of the following statement(s) is (are) true?

The output index for 2008 is 0.75. The output index for 2009 is 0.80. The output index for 2010 is 1.25. Correct (a) and (c)

Use the table below to answer question dealing with the output and price of corn for 2011 and 2012. Year Output (in bushels) Price/Bushel 2011 10,000 $4.00 2012 12,000 $5.00 Which of the following statements is true? (Let 2011 be the base year.)

The output index for 2011 is less than 1. The output index for 2012 is 1.25. Correct The output index for 2012 is 1.20. The output index for 2012 is 0.83.

Studies show that the supply curve for bananas has shifted. All of the following could be possible explanations for the shift, except one. Which is the exception?

The price of land for growing bananas has risen. Weather conditions in banana-growing countries have worsened. The price of apples has fallen. Correct The price of bananas has risen. The salaries paid to banana growers has risen.

A consumer's budget line shows

The utility that an individual would receive from consuming various combinations of two goods Correct The combination of two goods that an individual is able to purchase, given prices and income How income is influenced by prices of goods How changes in income affect utility The relationship between prices and income

All of the following, except one, are characteristics of monopolistic competition. Which is the exception?

There is a large number of sellers. Correct Each seller faces a horizontal demand curve for its product. There are no significant barriers to entry or exit. Sellers produce differentiated products. There is a large number of buyers.

Assume the curves depict the aggregate demand (AD) and aggregate supply (AS) curves for a particular economy. Let $14 trillion correspond to the full employment level of aggregate output (the targeted or desired level) for this particular economy. (graph is only black and white, line AD with points ABC, on x axis 12,14,20)

This economy is: Selected Answer: Incorrect experiencing an inflationary gap of $6 trillion. Correct experiencing an recessionary gap of $2 trillion.

Average variable costs is equal to the firm's total variable costs divided by its total output

True

Copyrights and patents are examples of barriers to entry.

True

Given the figure below, The graph above illustrates the use of set asides to remove land from production for specific commodities.

True

If both the demand and supply curves for computers shift to the right, the price of computers may rise, fall, or remain unchanged.

True

If the government wants to manipulate the equilibrium price, it will normally create a price floor or price ceiling; if the government want to manipulate the equilibrium quantity, it will normally impose taxes or award subsidies.

True

If the price of film increases, the demand for film processing would decrease; moreover, the equilibrium price and quantity of film processing should also decrease.

True

If the price of leather (an input for leather shoes) increases, the equilibrium price of leather shoes will increase and the equilibrium quantity of leather shoes will decrease.

True

Marginal propensity to consume is the slope of the aggregate consumption function and tells us how much consumption will change if consumer disposable income changes.

True

The combination of two goods at which total utility is maximized lie somewhere on the consumer's budget line.

True

The consumer is at equilibrium when the marginal rate of substitution is equal to the slope of the budget line

True

The graph above illustrates the use of set asides to remove land from production for specific commodities.

True

The law of demand says that as the price of a good rises, the quantity demanded of the good tends to fall.

True

The marginal value product for labor is equal to the marginal physical product for labor times the product price

True

The value of any index for the reference or base year is always 1.

True

The rise in the market price from $2 to $3 corresponds to:

a change in quantity demanded. the law of demand. Correct (a) and (b). change in demand.

The economy's aggregate supply curve includes:

a classical range. a normal range. a Keynesian or depression range. Correct all of the above.

Monopolies are characterized by all of the following, except one. Which is the exception?

a downward-sloping demand curve potential for long-run profits Correct a perfectly elastic demand curve barriers to entry no close substitutes for the good produced

If the government thinks the price that a consumer has to pay for a good is too high, then which of the following would solve this problem?

a price ceiling or an excise tax a price floor or an excise tax Correct a price ceiling or a subsidy a price floor or a subsidy none of the above will lower the price a consumer has to pay for a good

A decrease in the price of a particular good, with all other variables constant, causes

a shift to a different demand schedule with higher quantities demanded a shift to a different demand schedule with lower quantities demanded a movement along a given demand curve to a lower quantity demanded Correct a movement along a given demand curve to a higher quantity demanded no movement along a given demand curve unless supply also changes

An increase in demand causes

a surplus excess supply an increase in supply Correct an increase in equilibrium price and equilibrium quantity an improvement in technology

A single-price monopolist is

able to use price discrimination to increase profits protected from competition by patents and copyright laws Correct one that charges the same price for all units of output illegal in the United States less efficient than a multi-price monopoly

An inflationary gap occurs in the economy when:

aggregate demand is in the Keynesian or depression range of the aggregate supply curve. Correct aggregate demand is greater than full employment output. aggregate demand is perfectly elastic. none of the above.

The economy's aggregate supply curve includes:

all of the above (classical range, normal range and keynesian/depression)

In Figure below, at a temporary price of $4,

all of the following occur Correct a surplus occurs the supply curve will shift leftward the demand curve will shift rightward equilibrium will eventually occur at approximately $3.50

Figure below shows the payoff matrix for the only two auto dealerships in a community, Jim's Autos and Tim's Autos. The matrix shows the profits that each firm would earn from choosing either a low price or a high price.

both firms would be best off if they charged a low price, which is not the outcome of the game there is no equilibrium to the market Correct both firms would be best off if they charged a high price, which is not the outcome of the game both firms will go out of business in the long run no solution

If buyers' tastes and preferences shift in favor of a good, the result is

an increase in quantity demanded Correct an increase in demand an increase in quantity demanded and an increase in supply a decline in supply an increase in supply

A substitute good is one that

appeals to a wide spectrum of consumers is used together with another good is exchanged on the black market is produced by the same firm as another good Correct can be used in place of another good, fulfilling the same basic purpose

If the budget for the consumer is $48, then

at point C, the consumer is said to be in equilibrium. the price per glass of Kool-Aid is $4. the price per glass of tea is $3. Correct all of the above.

The change in total revenue obtained by selling an additional unit of output is

average revenue business revenue Correct marginal revenue overhead revenue profit margin

The change in total utility arising from a one-unit increase in consumption of a good is referred to as

average utility the principle of diminishing marginal utility real income Correct marginal utility

The change in total utility arising from a one-unit increase in consumption of a good is referred to as

average utility the principle of diminishing marginal utility real income Correct marginal utility price

The demand curve for apples slopes downward

because supply and demand are equal in equilibrium since producers supply more when consumers demand more because people are assumed to be basically greedy Correct because the law of demand holds in the market for apples because apples are preferred to all other goods

Betsy graduates from college, where she earned $3,000 a year working part-time, and takes a job as a third grade teacher, where she now earns $30,000 per year. About the same time she received her first paycheck, her bicycle was stolen. With her old income she would have purchased a new bike but with her new income she purchased a new car. Therefore,

bicycles are a normal good for Betsy automobiles are an inferior good for Betsy Correct automobiles are a normal good for Betsy Betsy's supply curve for automobiles is upward-sloping bicycles and automobiles are complementary goods for Betsy

The fact that travel on buses fell as incomes increased in many cities suggests that

bus travel is a luxury the law of demand does not apply to bus travel Correct bus travel is an inferior good bus travel is a necessity there are no good substitute goods for bus travel

The fact that travel on buses fell as incomes increased in many cities suggests that

bus travel is a luxury the law of demand does not apply to bus travel bus travel is a normal good bus travel is a necessity Correct none of the above

The cross-price elasticity of demand is measured by the

change in quantity demanded of one good divided by the change in price of another good percentage change in quantity demanded of one good divided by the percentage change in its price percentage change in demand for one good divided by the percentage change in income percentage change in quantity supplied of one good divided by the percentage change in the price of another good Correct percentage change in quantity demanded of one good divided by the percentage change in price of another good

Investment expenditures consists of:

construction of new roads and bridges. Correct construction of office buildings. purchase of farmland. all of the above

When the market price rises from $2 to $3 per pound:

consumers are better off by $12,000. Correct consumers are worse off by $12,000. consumers are better off by $24,000. consumers are worse off by $24,000.

Given the equation C = $1,500 + .70($3,000)

consumption is equal to $3,600. Answers: consumption is equal to $3,600. marginal propensity to save is .30. autonomous consumption is $1,500. Correct All of the above

Given the equation C = $1,500 + .70($3,000):

consumption is equal to $3,600. marginal propensity to save is .30. autonomous consumption is $1,500. Correct All of the above

Aggregate demand in the economy is equal to:

consumption, investment and net exports. full employment output. consumption, investment and government spending. Correct none of the above

U.S. farms tend to be diversified rather than specialized.

correct answer is false

A price floor on corn would have the effect of

creating a surplus regardless of the level at which the price floor is set Correct creating a surplus supply when the floor is above the equilibrium price creating a shortage when the price floor is set below the equilibrium price creating a shortage regardless of where the price floor is set ensuring a more equitable distribution of the good among consumers

The best outcome the firm illustrated in Figure above can achieve is a(n)

economic loss equal to its fixed cost Correct economic loss of $3,500 economic loss of slightly more than $7,000 economic loss of approximately $4,000 profit per unit of output approximately equal to $40.

An increase in the price of a good results in a(n)

decrease in demand increase in demand increase in quantity demanded Correct decrease in quantity demanded increase in supply

If the same dairy can produce either whole milk or skim milk, an increase in the profitability of whole milk results in a(n)

decrease in the quantity supplied of whole milk increase in the supply of whole milk Correct decrease in the supply of skim milk increase in the supply of skim milk decrease in the quantity supplied of skim milk

If automobiles are like most goods and the price of automobiles rises, then holding all else constant, the

demand for automobiles will rise Correct quantity demanded of automobiles will fall demand for automobiles will fall quantity demanded of automobiles will rise supply of automobiles will fall

A local store noticed that when it increased the price of milk from $2.50 to $3.50 per gallon, it sold 33% less milk. Since everything else remained the same, we would say the

demand for milk is perfectly elastic demand for milk is elastic demand for milk is perfectly inelastic Correct demand for milk is unitary elastic law of supply does not apply in this situation

If the demand curve is a vertical line, then

demand is perfectly elastic Correct demand is perfectly inelastic demand is unit elastic demand is determined by supply supply is a horizontal line

Price floors and price ceilings

ead to the same prices and quantities that would be found in a competitive market lead to technical efficiency cause the demand curve to shift to the left Correct usually result from government intervention

Figure below shows the marginal cost and average total cost curves for a perfectly competitive firm. This firm will

earn an economic profit suffer an economic loss in this long-run situation suffer an economic loss in the short run and close break even if it expands to 180 units of output Correct suffer an economic loss and continue producing in the short run

Assume the curves depict the aggregate demand (AD) and aggregate supply (AS) curves for a particular economy. Let $14 trillion correspond to the full employment level of aggregate output (the targeted or desired level) for this particular economy.This economy is:

experiencing an inflationary gap of $2 trillion. Correct experiencing an recessionary gap of $2 trillion. experiencing an recessionary gap of $6 trillion. experiencing an inflationary gap of $6 trillion.

For which of the following medical services is the income elasticity of demand likely to be the smallest?

face-lifts plastic surgery manicures Correct emergency services after a car accident hair transplants

A government-imposed price ceiling set below the market's equilibrium price will create an excess demand for a product. As a result of the excess demand, either the demand curve will tend to shift to the left or the supply curve will shift to the right-or both.

false

Charging different customers different prices is always illegal in the United States.

false

Given the figure below, Producers are better off, gaining area 6 while giving up areas 2 and 3.

false

Given the figure below, Consumers would be worse off economically under this form of supply control by area 4 plus area 6.

false

How retail gasoline stations behave in a local market is an example of a macroeconomic issue

false

If a 5 percent increase in income leads to a 15 percent increase in the quantity demanded of a service, then the income elasticity of demand for that service equals 0.33.

false

If the price of a good increases from $20 to $25 and the quantity demanded declines from 15 to 10 units of the good, the price elasticity of demand is 5.

false

In Promaine Flats, Nevada there are two restaurants: Sal Monella and Road Kill Café. Current profit is $7,000 each. Cleaning will attract more customers, but profit will reduce to $5,000 each. If Sal Monella cleans up and Road Kill Café doesn't then profit will be $4,500 for Sal Monella and $3,000 Road Kill, and if Road Kill Café cleans up and Sal Monella doesn't then profit will be $4,500 and $3,000, respectively.The outcome of this game is to "clean up"

false

In economics, a market is a specific location where buying and selling take place: a supermarket, a flea market, etc.

false

Indifference curves may intersect.

false

Macroeconomics focuses on the behavior of economic agents such as the consumer, a business firm or a specific market

false

Marginal revenue, average revenue, and price are all equal for a monopolist.

false

Normal goods are goods for which consumption falls (rises) when income increases (decreases).

false

U.S. farms tend to be diversified rather than specialized.

false

Most firms are not monopolies in the real world because

firms usually face downward-sloping demand curves supply curves slope upward price is usually set equal to marginal cost by firms monopolies are not efficient Correct there are substitutes for most goods

Whether an excise tax is imposed on a demander or supplier is irrelevant because

in either case the price that the demander has to pay will decrease; while the price the supplier receives will increase Correct in either case the price that the demander has to pay will increase; while the price the supplier receives will decrease either situation will create excess demand either situation will create excess supply none of these are correct

Disposable income in the economy reflects:

income before taxes. net income from illegal activity. Correct personal income after taxes. none of the above

A decrease in demand, with supply constant, results in a(n)

increase in equilibrium price and a decrease in equilibrium quantity Correct decrease in equilibrium price and a decrease in equilibrium quantity increase in equilibrium price and an increase in equilibrium quantity increase in equilibrium price and an ambiguous effect on equilibrium quantity decrease in supply

The concept of elasticity is used to

indicate the economy's ability to rebound from a recession measure the robustness of a variable Correct measure the sensitivity of one variable to changes in another measure price changes measure income changes

Which of the following goods is likely to have the most elastic demand over the relevant range of prices?

insulin eggs milk Correct Pepsi Cola gasoline

Suppose that for a monopolist, MR = MC = $10 and P = $15 at the profit-maximizing level of output. At this level of output, the firm

is earning a profit Correct will shut down if AVC > $15 is making $5 profit on each unit sold will shut down if ATC > $15 is losing $5 per unit produced

The demand curve that a monopolist faces

is steeper than the market demand curve is the same as its marginal revenue curve is controlled by the government does not exist Correct is the same as the market demand curve

A monopoly is a

large number of producers each with a small share of the total market output Correct single seller of a product that typically has no close substitutes small group of producers with similar products single buyer of an input into production group of firms with incentives to cooperate

The more available substitutes there are for a good, the

larger the number of consumers smaller the number of consumers smaller the supply side response Correct more elastic the demand for that good less elastic the demand for that good

Price floors and price ceilings

lead to the same prices and quantities that would be found in a competitive market lead to technical efficiency cause the demand curve to shift to the left Correct usually result from government intervention cause the supply curve to shift to the right

When Brenda was in college, she worked part-time delivering pizzas and she ate five boxes of macaroni and cheese per week. After graduation, she became a high school teacher and ate only two boxes of macaroni and cheese per week. From this information,

macaroni and cheese is a normal good for Brenda the law of demand applies to macaroni and cheese for Brenda macaroni and cheese are substitute goods Correct macaroni and cheese is an inferior good for Brenda Brenda's income elasticity of demand for macaroni and cheese is positive

When a firm incurs losses in the short run, the most important consideration in determining whether to continue producing is whether

marginal cost equals marginal revenue average total cost is at its minimum average variable cost is at its minimum Correct revenues cover some of its fixed costs and all of its variable cost total revenue exceeds total cost

For a monopoly, profit per unit of output is

marginal revenue minus marginal cost Correct price minus average total cost average total cost minus marginal revenue price minus marginal revenue total revenue minus total cost

Which budget constraint panel in Figure below shows the effect of a decrease in the price of oranges, other things constant?

panel a panel b panel c Correct panel d panel e

Which budget constraint panel in Figure below shows the effect of an increase in income, other things constant?

panel a panel b panel c Correct panel e none of the above

Which budget constraint panel in Figure below shows the combined effects of an increase in the price of oranges and a decrease in the price of apples?

panel a panel b panel c panel e Correct none of the above

The price elasticity of demand is the

percentage change in price divided by the percentage change in quantity demanded average change in price divided by the average change in quantity demanded Correct percentage change in quantity demanded divided by the percentage change in price average change in price divided by the average change in quantity demanded percentage change in quantity demanded divided by the average change in price

For which of the following goods is the income elasticity of demand likely to be largest?

poultry products Correct meals at restaurants lemonade used books paperback mystery novels

As a result of heavy spring rains in the Midwest, the corn crop declined sharply. If corn growers experienced an increase in sales revenue, the demand for corn must be

price elastic Correct price inelastic unitary elastic perfectly inelastic perfectly elastic

Which of the following will decrease the amount of a good that is traded in the market?

price floors and price ceilings excise taxes, price floors, and subsidies excise taxes subsidies Correct price floors, price ceilings, and excise taxes

A monopoly is a

price taker single buyer of an input into production firm facing a perfectly elastic demand curve group of firms controlling the price and output for an industry Correct price setter

Price ceilings are primarily targeted to help __________, while price floors generally benefit __________.

producers; no one increase tax revenue for governments; producers increase tax revenue for governments; consumers producers; consumers Correct consumers; producers

If a firm is producing the level of output at which the total cost curve intersects the total revenue curve,

profit is positive profit is maximized Correct profit is zero costs are minimized average revenue is maximized

What is the total profit (or loss) for the (single-price) monopolist shown in Figure above?

profit of cbgf loss of fcbg profit of egbd loss of edcf Correct profit of edcf

Consumption expenditures includes:

purchases of airline tickets. purchases of new automobiles. purchases of food. Correct all of the above.

Absent an ability to price discriminate, if a monopoly wants to sell more output, it must

raise its price Correct lower its price increase barriers to entry obtain government permission negate its patent protection

A public university knows that demand from potential students is elastic. If the university wants to increase tuition revenue, it should

raise its tuition rate hold its tuition rate constant and increase faculty salaries increase its financial aid Correct lower its tuition rate increase its enrollment

If demand is price inelastic, a decrease in price

raises total revenue to the seller raises total expenditure on the good, but not total revenue to the seller Correct reduces total revenue to the seller leaves total revenue to the seller unchanged leaves total expenditure on the good unchanged

Suppose the index of prices received by farmers for 2000 was 1.02 and the base year of this index was 1995. Then:

relative to 1995, farm prices were 102% higher in 2000 relative to 2000, farm prices were 2% higher in 1995 relative to 2000, farm prices were 102% higher in 1995 Correct relative to 1995, farm prices were 2% higher in 2000

Suppose the index of prices received by farmers for 2012 was 1.70 and the base year of this index was 1996. Then:

relative to 1996, prices received by farmers were 70% lower in 2012. relative to 2012, prices received by farmers were 70% higher in 1996. Correct relative to 1996, prices received by farmers were 70% higher in 2012. relative to 2012, prices received by farmers were 70% lower in 1996.

The price elasticity of demand measures the

responsiveness of a good's price to a change in quantity demanded adaptability of suppliers when a change in demand alters the price of a good Correct responsiveness of quantity demanded to a change in a good's price adaptability of buyers when there is a change in demand responsiveness of quantity supplied to a change in quantity demanded

Economics is the study of

scarcity under conditions of democracy choice within a system of capitalism financial markets the role of government in a market system Correct choice under conditions of scarcity

A record level of crop production can lead to:

sharp declines in input use and cash receipts from sale of production. Correct sharp declines in farm product prices and cash receipts from sale of production. sharp declines in cash receipts from sale of production and higher interest rates. None of the above

A decrease in the fractional reserve requirement ratio will:

shift the money supply curve to the left. alter the slope of the money supply curve. will decrease the money multiplier. Correct none of the above

Which of the choices listed below is the best example of an inferior good?

steak Correct hamburger lobster prime rib

The law of supply says that

supply and income are inversely related supply follows demand quantity supplied equals quantity demanded price and quantity supplied are inversely related Correct price and quantity supplied are directly related

"Supply curves are upward sloping" is a graphical way of saying

supply equals demand price and quantity supplied are inversely related price and quantity demanded are directly related Correct price and quantity supplied are directly related price and quantity demanded are inversely related

If the percentage change in quantity demanded divided by the percentage change in price equals 1, then

supply is inelastic supply is elastic demand is elastic demand is inelastic Correct demand is unit elastic

The functions of the Federal Reserve System include:

supplying the economy with government bonds. supervising the U.S. Treasury. Correct regulating the money supply. none of the above

In Figure below, using the supply and demand curves denoted S1 and D1, respectively, if demand were to increase to D2 and the equilibrium price stayed the same there would be

surplus new equilibrium at 50,000 Correct shortage new equilibrium at 100,000 new equilibrium at 75,000

if demand were to increase to D2 and the equilibrium price stayed the same there would be

surplus new equilibrium at 50,000 Correct shortage new equilibrium at 100,000 new equilibrium at 75,000

The marginal propensity to save is equal to:

the change in savings with respect to the change in change in investment expenditures. Correct one minus the marginal propensity to consume. one plus the marginal propensity to consume. none of the above.

Marginal Input Cost (MIC) refers to:

the change in total cost when producing one more unit of output the change in total revenue when using one more unit of input Correct the change in total cost when using one more unit of input the change in total revenue when producing one more unit of output

Suppose that initially the market for DVDs is at point A on demand curve D2 in figure below. If the price of cassette tapes increase,

the demand curve will shift to D3 Correct equilibrium will move to point B on demand curve D2 equilibrium will move to point C on demand curve D2 there will be no change from point A the demand curve will shift to D1

Suppose that initially the market for DVDs is at point A on demand curve D2 in figure below. If the price of cassette tapes decreased,

the demand curve will shift to D3 equilibrium will move to point B on demand curve D2 Correct equilibrium will move to point C on demand curve D2 there will be no change from point A the demand curve will shift to D2

If the market for a good is initially in equilibrium and there is a rightward shift of the demand curve, then

the equilibrium price will fall Correct there will be a rightward movement along the supply curve the supply curve will also shift to the right the supply curve will shift to the left the demand curve will shift back as consumers react to the higher equilibrium price

Figure below shows the marginal cost and average total cost curves for a perfectly competitive firm. If the market price is $10, then

the firm earns $10 profit on each unit sold the firm earns $8 profit on each unit sold Correct marginal revenue equals $10 the firm is losing money in the short run marginal cost always equals marginal revenue

Figure below shows the marginal cost and average total cost curves for a perfectly competitive firm. If the market price is $10, and the firm produces more than 200

the firm earns less profit per unit than if it produced 200 but more total profit. the firm earns more profit per unit than if it produced 200 and more total profit. Correct the firm earns less profit per unit than if it produced 200 and less total profit. the firm earns more profit per unit than if it produced 200 but may make a loss. the firm will instantly go from making a profit to making a loss

Monopolies charge

the highest possible price a price determined by cost the price consistent with the output level where total revenue equals total cost Correct the price associated with the quantity at which marginal revenue equals marginal cost the price at which total revenue equals average total cost

Jim's Shoe Shine Shop operates in a perfectly competitive market. If its marginal revenue is $5 per shine, then

the next shine will bring in less than $5 in additional revenue the next shine will bring in more than $5 in additional revenue Correct the market price per shine is $5 price is less than $5 price is equal to total revenue at all output levels

An excess supply of rice in a competitive market would indicate that

the problem of scarcity has been solved in that market buyers want to purchase more rice at the current price than the sellers want to sell the market will not be able to approach equilibrium the entire supply curve must shift to the left in order to attain equilibrium Correct the current price exceeds the equilibrium price

Each point along the market demand curve shows

the quantity of the good that firms would be willing and able to supply at a specific price the relationship between the price of the good and total quantity demanded at a series of prices the opportunity cost of supplying a given quantity of goods to the market Correct the quantity of the good that consumers would be willing and able to purchase at a specific price how population changes affect the quantity demanded at a specific price

The sensitivity of one economic variable to changes in another variable is known as

the variability coefficient Correct elasticity the sensitivity coefficient the cross-variability coefficient the law of demand

Figure below depicts a monopoly that does not price discriminate. What are the equilibrium price and output?

there is no equilibrium under monopoly Correct P' and Q' P and Q P' and Q P and Q'

What are the equilibrium price and output?

there is no equilibrium under monopoly Correct P' and Q' P and Q P' and Q P and Q'

Figure below shows the supply and demand for socks. Price Per Pair Quantity Demanded Quantity Supplied $ 2 18 3 $ 4 14 4 $ 6 10 5 $ 8 6 6 $10 2 8 If a price ceiling of $4 per pair is imposed by the government

there will be a shortage of 14 pairs of socks Correct there will be a shortage of 10 pairs of socks there will be neither a shortage nor a surplus of socks there will be a surplus of 10 pairs of socks there will be a surplus of 14 pairs of socks

If a price ceiling of $4 per pair is imposed by the government

there will be a shortage of 14 pairs of socks Correct there will be a shortage of 10 pairs of socks there will be neither a shortage nor a surplus of socks there will be a surplus of 10 pairs of socks there will be a surplus of 14 pairs of socks

Figure below shows the supply and demand for socks. Price Per Pair Quantity Demanded Quantity Supplied $ 2 18 3 $ 4 14 4 $ 6 10 5 $ 8 6 6 $10 2 8 If a price floor of $10 per pair is imposed by the government

there will be a shortage of 14 pairs of socks there will be a shortage of 10 pairs of socks there will be neither a shortage nor a surplus of socks Correct there will be a surplus of 6 pairs of socks there will be a surplus of 14 pairs of socks

If a price floor of $10 per pair is imposed by the government

there will be a shortage of 14 pairs of socks there will be a shortage of 10 pairs of socks there will be neither a shortage nor a surplus of socks Correct there will be a surplus of 6 pairs of socks there will be a surplus of 14 pairs of socks

When the minimum wage is set above the equilibrium market wage,

there will be a shortage of labor at the minimum wage it will have no effect on the quantity of labor employed Correct the unemployment rate will rise the quality of the labor force will increase the unemployment rate will fall

High-income people will sometimes pay higher prices at convenience stores for goods that are available at discount stores. They do this because

they are irrational their opportunity cost of time is low Correct crowded and understaffed discount stores impose higher time costs they like to be seen paying more money they do not mind wasting time

A monopolist earns a profit whenever

total revenue equals total cost marginal revenue equals marginal cost price exceeds average variable cost marginal revenue is positive Correct price exceeds average total cost

A group of buyers and sellers with the potential to trade with each other is known as a(n)

trading bloc cartel Correct market industry

Rent control is an example of a price ceiling. Which of the following problems must be addressed under a rent control program?

what to do with the surplus of rental units how to subsidize renters so that they can afford to pay the higher rents how to decrease the quantity of rental units to the equilibrium level whether the opportunity cost of rental units equals the competitive market price Correct how to allocate scarce rental units

Expansionary monetary policy actions:

would likely increase farmers' fixed liabilities. Correct would likely increase farmers' total assets. would likely decrease farmers' profits. none of the above

Given the environment illustrated in Figure below, The profit-maximizing, or loss-minimizing, output for the firm in Figure above is

zero units 50 units Correct 70 units 75 units 83 units

The profit-maximizing, or loss-minimizing, output for the firm in Figure above is

zero units 50 units Correct 70 units 75 units 83 units