ECON 1101 Final

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(SEE CH 3 PP 15) (Figure: The Market for Candy) Look at the figure The Market for Candy. A surplus of the good will exist at a price of: A) P1. B) P2. C) P3. D) There are no surpluses in this market.

(SEE CH 3 PP 19) (Table: Supply of Lemonade) Look at the table Supply of Lemonade. When the price of lemonade is $1 per cup, the quantity of lemonade supplied by Eli will be: A) 40 cups. B) 90 cups. C) 10 cups. D) 25 cups.

(SEE CH 3 PP 9) (Figure: Shifts in Demand and Supply III) Look at the figure Shifts in Demand and Supply III. The figure shows how supply and demand might shift in response to specific events. Suppose the technology for producing snowboards improves. Which panel best describes how this will affect the market for winter parkas, a complement of snowboards? A) panel A B) panel B C) panel C D) panel D

The two theoretical extremes of the market structure spectrum are occupied on one end by perfect competition and on the other end by: A) monopoly. B) duopoly. C) oligopoly. D) monopolistic competition.

When most cars sold in the United States were produced by the Big Three auto companies, General Motors would announce its prices for the new model year first and then the other companies would match it. This practice was an example of: A) price leadership. B) noncooperative behavior. C) a kinked demand model. D) a cartel.

Which are the two markets represented in the circular-flow diagram? A) The market for goods and services and the market for factors. B) The markets for households and firms. C) The market for money and the market for goods and services. D) The market for factors and the market for money.

Which of the following curves is not affected by the existence of diminishing returns? A) the average fixed cost curve B) the average variable cost curve C) the average total cost curve D) the marginal cost curve

Which of the following influences does not shift the supply curve? A) people deciding that they want to buy more of the product B) a decrease in the price firms expect to receive in the future C) a rise in the wages paid to workers D) the development of a new production technology

Which of the following is an example of a black market? A) a tenant in a rent controlled apartment subletting at a higher rent B) the purchase of an inferior radio at a department store C) waiting in line during the oil shortages of the 1970s D) none of the above

Which of the following is true? A) A monopoly firm is a price-maker. B) MR = P if the demand curve is downward-sloping. C) MR = MC is a profit-maximizing rule for firms in perfect competition only. D) Monopolies tend to charge lower prices than perfectly competitive firms.

You like to read Vogue and Sports Illustrated. You have only $5 to spend, so you only buy Sports Illustrated. This statement best represents this economic concept: A) Resources are scarce. B) The real cost of something is what you must give up to get it. C) "How much" is a decision at the margin. D) There are gains from trade.

Your neighbor is mowing her yard one afternoon when she stops to have some lemonade. She drinks one glass and is considering having a second glass. This is an example of: A) marginal analysis. B) benefit analysis. C) cost analysis. D) equilibrium analysis.

Which of the following would not cause the supply curve to shift? A) a change in the technology of production B) a change in factor costs C) a change in the price of the good D) a change in suppliers' expectations of future prices

Market equilibrium occurs when: A) there is no incentive for prices to change in the market. B) quantity demanded equals quantity supplied. C) the market clears. D) there is no incentive for prices to change in the market, quantity demanded equals quantity supplied, and the market clears.

(SEE CH 3 PP 14) (Figure: The Supply of DVD Rentals) Look at the figure The Supply of DVD Rentals. A decrease in the price of DVDs sold by movie producers to rental stores would result in a change illustrated by the move from: A) n to o in panel A. B) p to q in panel B. C) s to t in panel C. D) u to v in panel D.

(SEE CH 10 PP 11) (Figure: The Market for Gas Stations) The figure shows curves facing a typical gas station in a large town. Assume that the market is characterized by many firms, differentiated products, easy entry, and easy exit. If the gas station shown here were to raise its price above the profit-maximizing price, it would experience: A) a reduction in total revenue. B) an increase in total revenue. C) no change in total revenue. D) Not enough information is given to answer the question.

(SEE CH 10 PP 13) (Figure: Monopolistic Competition IV) The monopolistic competitor in the figure is producing at the output level that maximizes profits (minimizes losses). The shaded rectangle depicts the level of: A) profit. B) loss. C) fixed cost. D) variable cost.

(SEE CH 10 PP 18) (Figure: Firms in Monopolistic Competition) Economic profit is earned if the profit-maximizing price is price ________ in panel ________. A) F; A B) G; A C) H; B D) I; C

(SEE CH 10(2) PP 23) (Figure: Payoff Matrix for the United States and the EU) Given the payoff matrix in the figure, the Nash equilibrium combination is for: A) both the United States and the EU to use 2 fleets. B) the United States to use 1 fleet and for the EU to use 2 fleets. C) both the United States and the EU to use 1 fleet. D) the EU to use 1 fleet and for the United States to use 2 fleets.

(SEE CH 10(2) PP 24) (Figure: Pricing Strategy in Cable TV Market II) The Nash equilibrium in the cable TV market is when: A) both firms set a low price and each earns $90,000 per month. B) both firms set a high price and each earns $100,000 per month. C) CableNorth sets a high price and earns $80,000 per month, while CableSouth sets a low price and earns $130,000 per month. D) CableNorth sets a low price and earns $130,000 per month, while CableSouth sets a high price and earns $80,000 per month.

(SEE CH 10(2) PP 37) (Figure: Monopoly Through Collusion) Given the industry illustrated in the figure, the efficient solution is found at which price is ________ and quantity is ________. A) P1; Q4 B) P2; Q2 C) P2; Q1 D) P3; Q1

(SEE CH 10(2) PP 8) (Figure: Payoff Matrix for Gehrig and Gabriel) The figure shows the payoff matrix for two producers, Gehrig and Gabriel, who sell handmade Davy Crockett figurines in San Antonio. Both Gehrig and Gabriel have two strategies available to them: to produce 5,000 figurines each month or to produce 7,000 figurines each month. If both follow a tit-for-tat strategy, equilibrium will be reached when: A) they each produce 5,000 figurines. B) they each produce 7,000 figurines. C) Gehrig produces 7,000 figurines and Gabriel produces 5,000 figurines. D) Gehrig produces 5,000 figurines and Gabriel produces 7,000 figurines.

(SEE CH 2 PP 10) (Scenario: Linear Production Possibility Frontier) Look at the scenario Linear Production Possibility Frontier. What is the maximum number of socks Largetown can produce? A) 40 socks B) 20 socks C) 2 socks D) 4 socks

(SEE CH 2 PP 13) (Figure: Wine and Wheat) Look at the figure Wine and Wheat. If this economy is producing on the production possibility frontier, what would allow it to produce at point C? A) an improvement in technology B) a decrease in resources C) a decrease in production D) the elimination of unemployment

(SEE CH 2 PP 20) (Figure: Guns and Butter) Look at the figure Guns and Butter. This production possibility frontier is: A) bowed out from the origin because of increasing opportunity costs. B) bowed in toward the origin because of increasing opportunity costs. C) bowed in toward the origin because of constant costs of guns and butter. D) linear because of constant costs

(SEE CH 2 PP 3) (Figure: Wine and Wheat) Look at the figure Wine and Wheat. What is the opportunity cost of moving from only producing wheat to producing at point D? A) 3 tons of wheat B) 6 tons of wheat C) 9 tons of wheat D) 15 tons of wheat

(SEE CH 2 PP 31) (Figure: Consumer and Capital Goods) Look at the figure Consumer and Capital Goods. Point Z: A) is unattainable, all other things unchanged. B) is attainable if the economy is able to reach full employment. C) is attainable if the quantity and/or quality of factors decreases. D) will be attained as soon as the economy becomes efficient and moves to curve 2.

(SEE CH 4 PP 8) (Figure and Table: Market for Taxi Rides) This figure represents a competitive market for taxi rides. If the government now imposes an excise tax of $1 per ride (causing the supply curve to up-shift by that amount), then the government will collect tax revenues of __________ which might be used for worthwhile purposes ... but there will be an excess burden (or deadweight loss) to society of __________ caused by this tax. A) $9 million; 1 million rides B) $16 million; 2 million rides C) $21 million; 3 million rides D) $24 million; 4 million rides

(SEE CH 6 PP 15) (Figure and Table: Variable, Fixed, and Total Costs) In the accompanying figure, when 51 bushels of wheat are produced, average fixed cost is ______, average variable cost is ______, and average total cost is ______. A) $7.84; $11.76; $19.60 B) $133.33; $200; $333.33 C) $400; $600; $1,000 D) $5.33; $13.33; $18.67

(SEE CH 6 PP 18) (Table: Labor and Output) Referring to the accompanying table, the average product when 4 workers are employed is: A) 9. B) 36. C) 10. D) 6.

(SEE CH 6 PP 19) (Figure: Average Total Cost Curve) In the accompanying figure, the total cost of producing 5 pairs of boots is approximately: A) $408. B) $82. C) $108. D) $17.

(SEE CH 6 PP 2) (Figure: Marginal Product of Labor) Using the marginal product of labor curve in the accompanying figure, the total product of labor for 3 workers is: A) 51 bushels. B) 45 bushels. C) 39 bushels. D) 15 bushels.

(SEE CH 6 PP 25) (Table: Output and Costs) Using the information in the accompanying table, when quantity equals 4, total variable cost equals: A) 48. B) 38. C) 58. D) 28.

(SEE CH 6 PP 26) (Table: Workers and Output) After graduation you achieve your dream of opening your own art shop that specializes in selling mud statues. You pay $10 per day on a loan from your uncle, and you pay $10 per day to each of your workers (who make the mud statues). After careful study, you determine the information in the accompanying table. How many workers should you hire to minimize your marginal costs? A) 2 B) 3 C) 4 D) 5

(SEE CH 8 PP 10) (Figure: Marginal Revenue, Costs, and Profits) In the accompanying figure, if market price increases to $20, marginal revenue ______ and profit-maximizing output ______. A) increases; increases B) increases; decreases C) decreases; increases D) decreases; decreases

(SEE CH 8 PP 17) (Figure: Cost Curves and Profits) The market for corn is perfectly competitive, and an individual corn farmer faces the cost curves shown in the accompanying figure. If the price of a bushel of corn in the market is $14, then the farmer will produce ______ of corn and earn an economic ______ equal to ______. A) 4 bushels; profit; $0. B) 4 bushels; profit; just less than $80 per bushel C) 2 bushels; profit; $0 D) 2 bushels; loss; just more than $80 per bushel

(SEE CH 8 PP 3) (Figure: Revenues, Costs, and Profits) In the accompanying figure, if the market price is $9, the profit-maximizing quantity of output is: A) 0. B) 1. C) 2. D) 3.

(SEE CH 9 PP 11) (Figure: Demand, Revenue, and Cost Curves) The figure shows the demand, marginal revenue, marginal cost, and average total cost curves for Figglenuts-R-Us, a monopolist in the figglenut market. If the government wanted to regulate Figglenuts-R-Us such that the entire deadweight loss would be eliminated, it would impose a price ceiling of ________ in the market. A) $40 B) $46 C) $50 D) $65

A competitive firm operating in the short run is producing at the output level at which ATC is at a minimum. If ATC = $8 and MR = $9, in order to maximize profits (or minimize losses), this firm should: A) increase output. B) reduce output. C) shut down. D) do nothing; the firm is already maximizing profits.

A decrease in supply is caused by: A) an increase in the price of goods that are used in production. B) suppliers' expectations of lower prices in the future. C) an advancement in the technology for producing the good. D) an increase in the number of producers.

A monopolist or an imperfectly competitive firm practices price discrimination primarily to: A) increase profits. B) expand plant size. C) lower total costs. D) reduce marginal costs

A monopolistically competitive firm has excess capacity in the long run. This means that it: A) produces less than the output at which average total costs are minimized. B) produces less than the output at which price and marginal cost are equal. C) could produce more by moving to a larger plant size. D) doesn't maximize profits.

A negative relationship between the quantity demanded and price is called the law of: A) demand. B) increasing returns. C) market clearing. D) supply.

A newspaper story recently reported that the price of new cars has decreased and the quantity of new cars sold has dropped. The new price and quantity could have been caused by: A) a decrease in buyers' incomes. B) an increase in buyers' incomes. C) an increase in production costs. D) a decrease in production costs.

A shift of a demand curve to the right, all other things unchanged, will: A) increase equilibrium price and quantity. B) decrease equilibrium price and quantity. C) decrease equilibrium quantity and increase equilibrium price. D) increase equilibrium quantity and decrease equilibrium price.

A situation in which a player has an incentive to cheat regardless of what the other player does, and in which, if both players act in this manner, both players will be worse off, is referred to as: A) prisoners' dilemma. B) tit-for-tat strategy. C) price leadership model. D) kinked demand curve model.

A(n) ___________ market is a market in which goods or services are bought and sold illegally. A) black B) uncontrolled C) unregulated D) unproductive

The persistent unwanted surplus that results from a price floor creates inefficiencies that include all of the following except: A) inefficiently low quality. B) inefficient allocation of sales among sellers. C) wasted resources. D) the temptation to break the law by selling below the legal price.

Abe starts exercising regularly, and after a few months he can do twice as much of everything—in a single day Abe can now make 10 hamburgers or 8 milkshakes rather than the 5 hamburgers and 4 milkshakes he made in the past. We now know that Abe's production possibility frontier: A) has shifted right, but his opportunity costs of making milkshakes are unchanged. B) has shifted right, but his opportunity costs of making milkshakes have decreased. C) has not changed, but his opportunity costs of making milkshakes have increased. D) has not changed, but his opportunity costs of making milkshakes have decreased.

An increase in demand, all other things unchanged, will result in ________ in equilibrium price and ________ in equilibrium quantity. A) an increase; an increase B) a decrease; a decrease C) a decrease; an increase D) an increase; a decrease

Conditions that prevent the entry of new firms in a monopoly market are: A) barriers to entry. B) terms of sale. C) labor market stipulations. D) production controls.

Darren runs a barbershop with average fixed costs equal to $60 per day and a total output of 50 haircuts per day. What is his weekly total fixed cost if he is open six days per week? A) $18,000 B) $3,000 C) $60 D) The answer cannot be determined with information available.

Economists define an efficient use of resources as a situation where: A) one person can be made better off but only by making another person worse off. B) all persons can be made better off without making anyone worse off. C) all persons receive an equal share of the resources. D) all persons are made worse off when one person is made better off.

For Heidi, the marginal cost of producing one additional photograph equals the ______ divided by ______. A) change in total cost; the change in the number of photographs B) change in marginal cost; the change in the number of photographs C) change in total cost; the change in the marginal product of photographs D) change in average cost; the change in the number of photographs

Gary's Gas and Frank's Fuel are the only two providers of gasoline in Smalltown. Gary and Frank decide to form a cartel. Later, Gary summarizes his pricing strategy as, "I'll cheat on the cartel because regardless of what Frank does, cheating gives me the best payoff." This is an example of: A) a dominant strategy. B) a tit-for-tat strategy. C) an irrational strategy. D) product differentiation.

Good X and good Y are related goods. If the price of good X increases and the demand for good Y shifts left, these goods are: A) complements. B) substitutes. C) inferior. D) normal

If Farmer Sam MacDonald can produce 200 pounds of cabbages and no potatoes or no cabbages and 100 pounds of potatoes and if he faces a linear production possibility frontier for his farm, the opportunity cost of producing an additional pound of cabbage is ________ pound(s) of potatoes. A) 1/2 B) 2 C) 100 D) 200

If every individual were required to be self-sufficient: A) living standards would fall. B) living standards for some individuals would fall, but for others they would rise. C) living standards would rise. D) it's impossible to say how living standards would change.

If the Herfindahl-Hirschman Index (HHI) for an industry is 900, this market is considered: A) a strongly competitive market. B) a somewhat competitive market. C) oligopolistic. D) monopolistic.

If the only two firms in an industry openly agree to fix the price at a given level, then this is an example of: A) overt collusion. B) price leadership. C) contestability. D) tacit collusion

If they spend all night writing computer programs, Laurence can write 10 programs while Carrie Anne can write 5. If they spend all night making sunglasses, Laurence can make 6 while Carrie Anne can make 4. We know that: A) Laurence has a comparative advantage in programs. B) Laurence has a comparative advantage in both programs and sunglasses. C) Carrie Anne has a comparative advantage in programs. D) Carrie Anne has a comparative advantage in both programs and sunglasses.

If your farm has the only known source of a rare cocoa bean needed to make chocolate-covered peanuts, your monopoly would result from: A) control of a scarce resource or input. B) technological superiority. C) increasing returns to scale. D) government-created barriers.

In general, oligopolists find it easier to engage in collusive behavior when the industry is characterized by ________ behavior. A) Cournot B) Bertrand C) noncooperative D) interdependent

In monopolistic competition: A) there is free entry and exit in the long run. B) each firm produces a standardized product. C) there are few producers. D) there are barriers to entry.

In perfect competition, the assumption of easy entry and exit implies that: A) in the long run all firms in the industry will earn zero economic profits. B) in the short run all firms in the industry will earn positive economic profits. C) in the short run all firms in the industry will earn zero economic profits. D) a and b are correct.

Intel finds it difficult to hire enough skilled computer engineers. This statement best represents this economic concept: A) Resources are scarce. B) People usually exploit opportunities to make themselves better off. C) There are gains from trade. D) One person's spending is another person's income.

Kaile Cakes is currently producing 10 cakes per day. The marginal cost of the 10th cake is $24, and average total cost of 10 cakes is $6. The average total cost of 9 cakes is: A) $4. B) $5. C) $6. D) $8.

Milk is an important ingredient in the production of ice cream. If the price of milk increases, then one would expect, holding all other things constant: A) the supply curve for ice cream to shift left. B) the supply curve for ice cream to shift right. C) no change in the supply curve for ice cream. D) a movement along the supply curve for ice cream curve, resulting in more ice cream supplied.

Mr. Freezee operates a fleet of ice cream trucks that drive around neighborhoods selling ice cream. He is trying to decide whether he should buy another ice cream truck to add to his fleet. He determines that one more truck will add $750 to his revenue but that the truck will also increase his costs by $1,000. Based on marginal analysis, Mr. Freezee decides: A) that he should not purchase the truck, since the costs outweigh the benefits. B) that he should purchase the truck, since the benefits outweigh the costs. C) that he should purchase the truck, since his profits will rise by $250. D) to purchase several trucks with the same costs and benefits.

One day, Martha wakes up and in frustration yells, "Decisions, decisions, decisions! Why do I have to make decisions about everything?" Martha's frustrations stem from the fact that: A) like all economic beings, she faces constraints and cannot have everything she wants. B) she doesn't realize she can have everything she wants. C) she is the only one who faces constraints in life. D) she really doesn't want anything.

One of the major differences between a monopolist and a purely competitive firm is that the monopolist has a ________ demand curve, while the purely competitive firm has a ________ demand curve. A) downward-sloping; perfectly elastic B) perfectly inelastic; perfectly elastic C) downward-sloping; perfectly inelastic D) perfectly elastic; downward-sloping

Perfect competitors and monopolistic competitors both earn ________ economic profit in the long run, but perfect competitors produce at the ________ of the ATC curve, while monopolistic competitors produce ________ of the ATC curve. A) zero; minimum point; on the downward-sloping portion B) positive; minimum point; on the upward-sloping portion C) negative; minimum point; at the minimum point D) zero; downward-sloping portion; at the minimum point

Price leadership occurs if: A) smaller firms in an industry silently agree to charge the same price as the largest firm. B) two or more firms in an industry agree to fix the price at a given level. C) competition among a large number of small firms generates a stable market price. D) competition among a large number of small firms generates similar, but slightly different, prices.

Rebecca knows that Becca Furniture's marginal cost curve is above the average total cost curve. This means Becca Furniture's average total cost curve: A) must be rising. B) must be flat. C) must be falling. D) may be rising, falling, or flat depending on other things.

Recent research suggests that certain plastic containers may have cancer-causing elements in them. As a result of this research, one would expect that: A) the demand for such containers would decrease. B) the quantity demanded for such containers might increase. C) no impact would be observed in this market. D) the price of the containers would change due to a movement along the demand curve

Scenario: Payoff Matrix for Two Firms The following table provides the payoff matrix for two firms, Firm A and Firm B. They are the only two firms in the industry and can either compete or cooperate with each other with the following profit results reflecting their actions. (Scenario: Payoff Matrix for Two Firms) If both firms pursue their dominant strategies, they will find that: A) their joint profits are maximized. B) their joint profits will not be maximized. C) their joint profits will reflect an equal sharing of the total profits. D) neither will be able to attain their largest possible profits since there are two dominant strategies for each firm.

Situations in which the more users of a product there are, the more useful the product becomes are called: A) network effects. B) monopolies. C) conglomerates. D) exclusive franchises.

Suppose Cyd knows the average cost of producing 9 scones is $5, while the average cost of producing 10 scones is $5.20. What is the marginal cost of the 10th unit? A) The marginal cost is $7. B) The marginal cost is $5.20. C) The marginal cost is $0.20. D) None of the above is correct.

Suppose a monopolistically competitive firm is in long-run equilibrium. Then: A) price equals average total cost. B) price equals marginal cost. C) marginal revenue equals price. D) price is greater than average total cost.

Suppose that a profit-maximizing monopoly firm experiences a substantial technological change that reduces its marginal and average total costs by $40. If in response to its reduction in cost the firm changes its price in a profit-maximizing way, then we can predict that its total output will: A) rise. B) fall. C) remain unchanged. D) It is not possible to make a determination from the information given.

Suppose that each of two prisoners has the independent choice of confessing to a crime or not confessing. Note that they cannot communicate with each other. If neither confesses, they spend 4 years in jail; if both confess, they spend 6 years in jail; and if one confesses while the other does not, the confessor gets off with 2 years in jail while the other gets 10 years in jail. According to game theory, the likely strategy by the prisoners is: A) both will confess. B) neither will confess. C) one will confess and the other will not. D) both may or may not confess.

The De Beers company is described as a monopolist in the production of: A) diamonds. B) software. C) oil. D) beer.

The ________ illustrates the trade-offs facing an economy that produces only two goods. A) production possibility frontier B) circular-flow diagram C) all else equal assumption D) income distribution

The cable TV market has only two firms, CableNorth and CableSouth. Through tacit collusion, they each arrive at an equilibrium price and quantity and see their demand curve as kinked. CableNorth will be reluctant to raise its price because it sees that portion of the demand curve as ________ and if it raised its price, total revenue would ________. A) price-elastic; fall B) price-inelastic; fall C) price-elastic; rise D) price-inelastic, rise

The existence of a buyer with significant buying power in an industry would make a tacit agreement: A) more difficult to achieve. B) easier to achieve. C) have no effect on tacit agreement negotiations. D) result in a kinked demand curve.

The most important source of oligopoly is: A) economies of scale. B) government-created barriers. C) technological superiority. D) ownership of resources

Zoe's Bakery determines that P < ATC and P > AVC. Zoe should: A) continue to operate even though she is enduring an economic loss. B) continue to operate as she is making an economic profit. C) shut down immediately as she is enduring an economic loss. D) raise the price until she has maximized her profits.

Why do many clothing stores have big after-Christmas sales on their merchandise?

After the holidays, demand for clothing (and all items that make for good gifts) falls. At the pre-Christmas price, there is now a surplus of clothing. Whenever there is a surplus in any market, you see suppliers (or retailers in this case) with unsold inventory. In order to clear the surplus, the price is lowered. More shoppers are enticed by the lower price and the surplus is eliminated.

(SEE CH 10 PP 19) (Figure: Profit Maximization in Monopolistic Competition) A firm in monopolistic competition will maximize profits by producing the level of output at which: A) P = MC. B) MR = MC. C) P = MR. D) price minus ATC (i.e., economic profit per unit) is the largest.

(SEE CH 10 PP 35) (Figure: Firms in Monopolistic Competition) In panel A, economic profit per unit is amount: A) KL. B) LM. C) MN. D) NO

(SEE CH 10 PP 9) (Figure: The Market for Gas Stations) Assume that the market for gas stations is characterized by many firms, differentiated products, easy entry, and easy exit. For the typical gas station shown in the figure, the profit-maximizing price would be: A) P1. B) P2. C) P3. D) Not enough information is given to answer the question.

(SEE CH 10(2) PP 13) (Table: Demand for Wooden Stakes) The table shows the demand for wooden stakes in the town of Sunnyvale. Suppose the marginal cost of producing stakes is zero. The only two firms producing wooden stakes, Spike Inc. and Buffy Co., agree to produce only 50 stakes, with each firm producing only 25. What is Buffy's quantity effect if she cheats on the agreement and produces 30 stakes? A) $10 B) $45 C) $20 D) $9

(SEE CH 10(2) PP 30) (Figure: Pricing Strategy in Cable TV Market II) The dominant strategy for CableSouth: A) is to charge a high price. B) is to charge a low price. C) is to charge what CableNorth does. D) does not exist.

(SEE CH 10(2) PP 35) (Scenario: Payoff Matrix for Firms X and Y) If Firm Y were to choose its dominant strategy, it would: A) choose a low price. B) choose a high price. C) encounter a dilemma since there are two dominant strategies. D) allow Firm X to dominate the industry.

(SEE CH 10(2) PP 9) (Figure: Payoff Matrix I for Blue Spring and Purple Rain) The figure shows the payoff matrix for two producers of bottled water, Blue Spring and Purple Rain. The Nash equilibrium in the figure is reached when: A) both firms charge a high price. B) both firms charge a low price. C) Blue Spring charges a high price and Purple Rain charges a low price. D) Purple Rain charges a high price and Blue Spring charges a low price.

(SEE CH 2 PP 18) (Figure: Tom's Production Possibilities) Look at the figure Tom's Production Possibilities. In the figure, the opportunity cost for Tom to move from point B on the curve to point A is: A) 10 coconuts. B) 10 fish. C) 5 coconuts. D) 5 fish.

(SEE CH 2 PP 28) (Table: Production Possibilities Schedule I) Look at the table Production Possibilities Schedule I. If the economy produces 10 units of capital goods per period, it also can produce at most ________ units of consumer goods per period. A) 5 B) 4 C) 3 D) 2

(SEE CH 2 PP 29) (Figure: Comparative Advantage) Look at the figure Comparative Advantage. Westland has a comparative advantage in producing: A) oranges only. B) peaches only. C) both oranges and peaches. D) neither oranges nor peaches.

(SEE CH 2 PP 30) (Figure: Production Possibility Frontier for Tealand) Look at the figure Production Possibility Frontier for Tealand. In the figure, if Tealand is producing 10 million scones and 10 million cups of tea (point A), we know that the economy: A) is using its resources efficiently. B) is using its resources inefficiently. C) is fully employing its resources. D) has found new resources.

(SEE CH 2 PP 35) (Table: Comparative Advantage I) Look at the table Comparative Advantage I. Sweden has an absolute advantage in producing: A) cell phones only. B) herring only. C) both cell phones and herring. D) neither cell phones nor herring.

(SEE CH 3 PP 23) (Figure: Shifts in Demand and Supply IV) Look at the figure Shifts in Demand and Supply IV. The figure shows how supply and demand might shift in response to specific events. Suppose consumer incomes increase. Which panel best describes how this will affect the market for big-screen televisions, a normal good? A) panel A B) panel B C) panel C D) panel D

(SEE CH 3 PP 39) (Figure: Shifts in Demand and Supply II) Look at the figure Shifts in Demand and Supply II. The graph shows how supply and demand might shift in response to specific events. Suppose scientists discover that eating pomegranates causes aging. Which panel best describes how this will affect the market for pomegranates? A) panel A B) panel B C) panel C D) panel D

(SEE CH 3 PP 6) (Figure: The Demand and Supply of Wheat) Look at the figure The Demand and Supply of Wheat. If a price of $8 temporarily exists in this market: A) a shortage of 2,000 bushels will result. B) a surplus of 4,000 bushels will result. C) a shortage of 4,000 bushels will result. D) a surplus of 6,000 bushels will result.

(SEE CH 4 PP 3) (Table: Market for Fried Twinkies) If the government imposes a quota on the fried Twinkie market of 5,000, using this table, the quota rent (per fried Twinkie) collected by the fried Twinkie producers will be: A) $1.20. B) $0.30. C) $1.50. D) $1.00.

(SEE CH 6 PP 10) (Figure and Table: Variable, Fixed, and Total Costs) In the accompanying figure, marginal cost of increasing production from 51 to 64 bushels of wheat is: A) $16. B) $15.38. C) $12.50. D) $18.75.

(SEE CH 8 PP 1) (Figure: Prices, Cost Curves, and Profits) In the accompanying figure, if the price is P2, then the maximum profit the firm can earn is: A) (fg) x Q3. B) (de) x Q2. C) (fg) x Q2. D) (de) x P2 .

(SEE CH 8 PP 27) (Table: Variable Costs for Lots) During the winter, Alexa runs a snow-clearing service, and snow-clearing service is a perfectly competitive industry. Her only fixed cost is $1,000 for a tractor. Her variable costs per cleared lot, shown in the accompanying table, include fuel and hot coffee. What is Alexa's shutdown price? A) $0 B) $15 C) $50 D) $42

(SEE CH 8 PP 30) (Figure: Revenues, Costs, and Profits) In the accompanying figure, if market price is $12, this firm will: A) minimize its losses by shutting down. B) minimize its losses by continuing to produce. C) break even. D) earn an economic profit.

(SEE CH 8 PP 7) (Figure: Cost Curves and Profits) The market for corn is perfectly competitive, and an individual corn farmer faces the cost curves shown in the accompanying figure. If the price of a bushel of corn in the market is $4, then the farmer will produce ______ of corn and earn an economic ______ equal to ______. A) 0 bushels; loss; average fixed costs B) 0 bushels; loss; total fixed costs C) 3 bushels; loss; $30 per bushel D) none of the above

. (SEE CH 2 PP 4) (Table: Production Possibilities Schedule II) Look at the table Production Possibilities Schedule II. If the economy is producing at alternative X, the opportunity cost of producing at Y instead of X is ________ units of consumer goods per period. A) 0 B)6 C)8 D)14

A kinked demand curve model shows how oligopolists may choose not to adjust their output and price in order to avoid a breakdown in tacit collusion if: A) they operate under a Bertrand setting. B) they face unique changes in marginal costs within a certain range. C) they are engaged in an arms race. D) a prisoners' dilemma is present.

A perfectly competitive firm is definitely earning an economic profit when: A) MR > MC. B) P > ATC. C) P > MC. D) P > AVC

A wheat farmer operating in the short run produces 100 bushels of wheat. Her average total cost per bushel is $1.75, total revenue is $450, and (total) fixed costs are equal to $100. Then: A) average fixed cost is equal to $1.50. B) profit per bushel is equal to $2.75. C) average variable cost is equal to $1.25. D) economic profit is equal to $250.

Assume an industry is dominated by a few firms. Each of these firms acknowledges that its own choices affect the choices of its rivals. Each firm also recognizes that its rivals' choices affect the decisions it makes. This industry is an example of a(n): A) monopoly. B) oligopoly. C) monopolistic competition. D) perfect competition

Assuming identical production functions and cost curves, the long-run equilibrium of a monopolistically competitive firm, as compared with that of a perfectly competitive firm, is such that, for the former, price is: A) higher and output is greater. B) higher and output is smaller. C) lower and output is greater. D) lower and output is smaller.

Attempts by the federal government to prevent the exercise of monopoly power in the United States are called ________ policy. A) stabilization B) antitrust C) fiscal D) government

Because tourist demand for airline flights is relatively ________, small ________ in price will result in relatively ________ in additional tourists. A) inelastic; reductions; small increases B) elastic; reductions; large increases C) inelastic; increases; small decreases D) elastic; increases; small increases

Buffalo Aircraft doubles the amount of all the inputs it uses—the factory doubles in size, and twice as many workers are hired. After this expansion, the number of aircraft produced triples. This means that Buffalo Aircraft is experiencing: A) decreasing marginal cost. B) economies of scale. C) decreasing marginal cost. D) decreasing average variable cost.

Cindy operates Birds-R-Us, a small store manufacturing and selling 100 bird feeders per month. Cindy's monthly totals fixed cost are $500, and her monthly total variable costs are $2,500. If for some reason Cindy's fixed cost fell to $400, then her: A) average fixed costs would increase. B) average total costs would decrease. C) marginal costs would decrease. D) average variable costs would decrease.

Dr. Colgate is a dentist who employs an assistant, Ms. Crest. If Dr. Colgate worked all day at the front desk, she could answer 40 phone calls. If she worked all day with patients, she could clean the teeth of 40 patients. If Ms. Crest worked all day at the front desk, she could answer 60 phone calls. If she worked all day with patients, she could clean the teeth of 20 patients. Which of the following is true? A) Dr. Colgate has an absolute advantage in answering phones. B) Ms. Crest has a comparative advantage in answering phones. C) Ms. Crest has an absolute advantage in cleaning patients' teeth. D) Dr. Colgate has a comparative advantage in answering phones.

Marginal cost can be calculated as: A) TC/Q, where TC is total cost and Q is output. B) VC/Q, where VC is variable cost and Q is output. C) the slope of the total cost curve. D) all of the above

Gary's Gas and Frank's Fuel are the only two providers of gasoline in Smalltown. Gary believes he faces a kinked demand curve. This means Gary thinks the demand curve above the kink is: A) less elastic than the demand curve below the kink. B) more elastic than the demand curve below the kink. C) below the MR curve. D) less elastic than the MR curve.

If Benjamin considers sushi to be a normal good and if his income increases by 20%, his purchases of sushi will: A) decrease by 20%. B) increase. C) decrease. D) not change

If Farmer Sam MacDonald can produce 200 pounds of cabbages and no potatoes or no cabbages and 100 pounds of potatoes and if he faces a linear production possibility frontier for his farm, the opportunity cost of producing an additional pound of potatoes is ________ pound(s) of cabbage. A) 1/2 B) 2 C) 100 D) 200

If a local California avocado stand operates in a perfectly competitive market, that stand owner will be a price: A) maker. B) taker. C) discriminator. D) maximizer.

If chicken and beef are substitutes, then a fall in the price of chicken will bring about: A) an increase in the demand for beef. B) a decrease in the demand for beef. C) a decrease in the quantity demanded of beef. D) no change in the demand for beef.

If the government only allowed one airline to serve the entire U.S. market, there would be a ________ loss associated with ________ efficiency in the airline industry. A) marginal; reduced B) deadweight; reduced C) total; increased D) deadweight; increased

If the market for buffalo meat is in equilibrium, the price of buffalo meat will probably ________ in the near future. A) increase B) not change C) decrease D) increase considerably

If the price of a commodity increases, you would expect the: A) supply to increase. B) quantity supplied to increase. C) quantity supplied to decrease. D) supply curve to shift to the right.

If the price of gasoline falls and stays low for an extended period, we expect people to: A) reduce their reliance on gasoline-powered cars. B) buy larger and less fuel-efficient cars. C) use more public transportation. D) ride bicycles.

If the state government gives you the exclusive right to sell cement to municipalities, your monopoly would result from: A) sunk costs. B) government restrictions. C) economies of scale. D) location

In a single day, Sarah can produce 10 hamburgers while Abe can produce 5 hamburgers. We then know that: A) Sarah has a comparative advantage in making hamburgers. B) Sarah has an absolute advantage in making hamburgers. C) Abe has a comparative advantage in making hamburgers. D) Abe has an absolute advantage in making hamburgers.

In many cities you can stay at a Holiday Inn in the downtown area, in a suburban community, or near the airport. These Holiday Inn establishments are examples of product differentiation by: A) type. B) location. C) quality. D) style.

In perfectly competitive long-run equilibrium: A) all firms make positive economic profits. B) all firms produce at the minimum point of their average total cost curves. C) the industry supply curve must be upward sloping. D) all firms face the same price, but the value of marginal cost will vary directly with firm size.

In the long run, monopolistically competitive firms tend to experience: A) high economic profits. B) zero economic profits. C) negative economic profits. D) substantial economic losses.

In the market for wheat, what would happen if the price of ethanol (which is made from corn) increases dramatically? A) an increase in supply of wheat B) a decrease in supply of wheat C) an increase in demand for wheat D) a decrease in demand for wheat

In the short run, a monopoly will stop producing if: A) P < ATC. B) P < AVC. C) P > MR. D) P > ATC

Marginal analysis studies how individuals decide: A) whether to live on the margin of society. B) whether to do a bit more activity versus a bit less activity. C) whether to go to college. D) how much down payment to make when buying stocks.

Nate and Dylan are brothers. They have to mow the lawn and clean their rooms before they can go to the high school football game. Nate mows the lawn and Dylan picks up the rooms, and they make it to the football game on time. This statement best represents this economic concept: A) People usually exploit opportunities to make themselves better off. B) There are gains from trade. C) Markets usually lead to efficiency. D) One person's spending is another person's income.

Scenario: Small-Town Monopolist A monopolist sells its good in a small town and finds that it can sell 100 units when the price is $15 and an additional 75 units when the price is $10. The MC for the provision of the good is $5. (Scenario: Small-Town Monopolist) Deadweight loss: A) increases when this monopolist price-discriminates. B) decreases when this monopolist price-discriminates. C) stays the same when this monopolist price-discriminates. D) is equal to zero.

Some baseball fans leave the game in the seventh or eighth inning to avoid the post-game traffic. The fans are: A) not considering they have already paid the cost of their tickets. B) making marginal decisions by comparing the cost of leaving early to the benefit of leaving early. C) thinking only about the benefits of avoiding traffic. D) underestimating the value of staying for the rest of the game.

Substitutes in production suggest that a producer with a fixed set of resources initially will need to reduce production of one good when the producer: A) produces less of the other good. B) produces more of the other good. C) experiences an increase in resources. D) produces more of the other good and when the producer experiences an increase in resources.

Suppose that the Yankee Company is a profit-maximizing firm that has a monopoly in the production of baseball caps. The firm sells its baseball caps for $25 each. For this information, we can assume that the Yankee Company is producing a level of output at which: A) marginal revenue equals $25. B) marginal cost equals marginal revenue. C) average total cost equals $25. D) average total cost is greater than $25

Suppose the dry-cleaning market is monopolistically competitive and economically profitable this year. In the long run, the demand for any one firm's dry-cleaning services will ________ as more firms enter the industry, causing profits to ________. A) decrease; become economic losses B) decrease; fall to zero C) not change; fall D) increase; increase

The NFL wants to give the "common fan" the opportunity to attend the Super Bowl, so it sets Super Bowl prices "low"-- tickets for a regular seat at Super Bowl XXXVII cost just $400. Scalpers, however, were selling tickets for $1,500 or more. The true cost to the "common fan" of a regular ticket to Super Bowl XXXVII was at least: A) $400. B) $1,500. C) the monetary price paid to obtain the ticket. D) $1,100 less than the opportunity cost of a ticket.

The U.S. production possibility frontier will ________ if there is a large influx of immigrants. A) shift in B) shift out C) not change D) cannot be determined from the information provided

The cost of leaving a championship soccer match before it ends is ________, while the cost of staying for the entire match is ________. A) the opportunity cost of not seeing the winning goal with two minutes to go; zero—the ticket to the match is already paid so there is no cost B) the opportunity cost of not seeing the winning goal with two minutes to go; the opportunity cost of what else you could have done during that time C) zero—you don't have to pay to leave; zero—the ticket to the match is already paid so there is no cost D) the cost of the ticket; also the cost of the ticket

The demand curve for a perfectly competitive firm is: A) perfectly inelastic. B) perfectly elastic. C) downward sloping. D) relatively but not perfectly elastic.

The economy that has the lowest cost for producing a particular good is said to have: A) a technological advantage. B) a comparative advantage. C) a production possibility frontier. D) an increasing opportunity cost.

The effect of an increase in productive inputs such as labor and capital can be shown by: A) a point inside of the production possibility frontier. B) an outward shift of the production possibility frontier. C) a movement from one point to another along the production possibility frontier. D) an inward shift of the production possibility frontier.

The largest HHI possible is in the case of ________ and the index is ________ . A) monopoly; 10 B) monopoly; 10,000 C) monopoly; 100,000 D) oligopoly; 100,000

The local Taco Hut charges the same price for everything on its menu: $3 will buy a taco, a burrito, or nachos. You buy the taco and think that if you had not purchased the taco, you would have purchased the burrito. The opportunity cost of the taco is: A) the $3. B) your enjoyment of the burrito. C) the $3 and your enjoyment of the burrito. D) the $3, your enjoyment of the burrito, and your enjoyment of the nachos.

The phrase "gains from trade" refers to the: A) profits obtained from sales of a good or service. B) increase in total output that is realized when individuals specialize in particular tasks and trade with each other. C) gains that one obtains by taking advantage of an uninformed buyer and selling at a higher than average price. D) gains that one obtains by taking advantage of a temporary discount or "sale" price.

The student center on campus has burritos, bagels, or burgers for lunch, and they all cost the same. You decide to have a burger today, but if they were out of burgers, you would have bought a bagel. Your opportunity cost is: A) your enjoyment of the burger. B) your enjoyment of the bagel. C) your enjoyment of the burrito. D) your enjoyment of the bagel and burrito.

The total product curve: A) shows the relation between output and the quantity of a variable input for varying levels of the fixed input. B) will become flatter as output increases, if there are diminishing returns to the variable input. C) will be downward sloping, if there are diminishing returns to the variable input. D) will become horizontal, when the marginal product of the variable input is constant.

There are diminishing returns to an input set in when: A) all inputs are fixed. B) some inputs are fixed and some are variable. C) when all inputs are variable. D) only in the long run.

Trade can be beneficial to an economy because: A) it results in a more efficient use of the combined resources of some of the trading countries, even though it reduces efficiency in others. B) more goods and services can be obtained at lower opportunity cost. C) it prevents specialization in those activities in which countries have a comparative advantage. D) it prevents unemployment.

Unemployment decreased to its lowest level in 10 years last month. This statement is an example of: A) an absolute (dis)advantage. B) a positive economic statement. C) a normative economic statement. D) a value judgment.

When Aishe's Bar-B-Que produces 10 pork sandwiches, the total cost is $5.00. When 11 pork sandwiches are produced, the total cost rises to $6.00. From this we know that: A) the marginal cost of the 11th pork sandwich is equal to the average cost of 11 pork sandwiches. B) the marginal cost of the 11th pork sandwich is greater than the average cost of 11 pork sandwiches. C) the marginal cost of the 11th pork sandwich is less than the average cost of 11 pork sandwiches. D) we do not have enough information to compare the marginal cost to the average cost.

When the price of gas goes down and the demand for tires goes up, a likely possibility is that tires and gas are: A) substitutes. B) complements. C) both expensive. D) both inexpensive.

When the price of lamps increases, the: A) supply increases. B) quantity supplied increases. C) supply decreases. D) quantity supplied decreases.

Which of the following always results in an increase in price and quantity? A) an increase in supply and a decrease in demand B) an increase in demand with no change in supply C) an increase in supply with no change in demand D) a decrease in demand and supply

Which of the following choices is true of firms in both perfect competition and monopolistic competition? A) The long-run price is equal to marginal revenue, marginal cost, and average total cost. B) Long-run economic profits are equal to zero. C) The long-run level of output is at the point where average total cost is minimized. D) Price is equal to marginal cost, insuring the allocatively efficient level of output is produced.

Which of the following examples illustrates the law of demand? A) An increase in tuition encourages more students to enroll in college because the quality of education has risen. B) Consumers buy more personal computers because prices have fallen. C) Oil companies drill for new sources of oil because oil prices are higher. D) Fewer people play golf because incomes are lower.

Which of the following is most likely to be observed when firms engage mainly in non-price competition? A) actively encouraging the sale of generic, as opposed to brand-name, products B) advertising and product differentiation C) discounts offered through coupons D) low interest rates for financing the purchase of big-ticket items

Which of the following is not one of the four principles of individual choice? A) Resources are scarce. B) Unpaid volunteer work is irrational, since economic rationality dictates that individuals should only engage in work they are paid for. C) The real cost of something is its opportunity cost. D) People usually take advantage of opportunities to make themselves better off.

Which of the following is(are) correct about celebrity spokespersons advertising products? A) Celebrities are better informed about the relative merits of different products than the rest of us. B) Celebrity advertising signals consumers that the product is reliable, because the firm is willing to pay the high fees associated with hiring a celebrity. C) Consumers assume that the celebrity has researched the product and that the claims being made on his or her behalf are true. D) None of the statements are correct.

Which of the following statements is not true? A) Resource scarcity is a major economic concern in the rich countries of the world. B) Most opportunity costs are zero. C) An economic situation is in equilibrium when no individual would be better off taking a different action. D) Some very talented, skilled individuals who can do some things better than most people should specialize in doing that one thing.

You can spend $100 on either a new economics textbook or a new CD player. If you choose to buy the new economics textbook, the opportunity cost is: A) $100. B) your enjoyment of the new CD player. C) both the $100 and the your enjoyment of the new CD player. D) impossible to determine.

(SEE CH 10 PP 10) (Figure: The Restaurant Market) The figure shows curves facing a typical restaurant in a community. Assume that many firms, differentiated products, and easy entry and easy exit characterize the market. For the restaurant shown here, its profit per unit is: A) ae. B) fd. C) bf. D) bd.

(SEE CH 10 PP 8) (Figure: Firms in Monopolistic Competition) In panel A, the profit-maximizing quantity of output is generated by the intersection at point: A) K. B) P. C) N. D) O

(SEE CH 10(2) PP 10) (Figure: Pricing Strategy in Cable TV Market I) If both CableNorth and CableSouth advertise, then without any collusion: A) CableNorth will stop advertising to maximize profits. B) CableSouth will stop advertising to maximize profits. C) there will be no tendency for either CableNorth or CableSouth to stop advertising. D) there is a tendency for both CableNorth and CableSouth to stop advertising.

(SEE CH 10(2) PP 29) (Figure: Pricing Strategy in Cable TV Market II) If CableNorth followed a high-price strategy one month just to find it only earned $80,000 because CableSouth followed a low-price strategy, and CableNorth then decided to lower prices for the next month, we would say that they are following: A) a kinked demand model. B) a dominant strategy. C) a tit-for-tat strategy. D) a collusive strategy.

(SEE CH 2 PP 1) (Table: Trade-off of Study Time and Leisure Time) Look at the table Trade-off of Study Time and Leisure Time. A student sleeps 8 hours per day and divides the remaining time between study time and leisure time. The table shows the combinations of study and leisure time that can be produced in the 16 waking hours of each day. Suppose the student completes a speed-reading course that allows him to do the same amount of studying in half as many hours. Which of the following is now true of his opportunity costs? A) The opportunity cost of leisure has increased. B) The opportunity cost of studying has increased. C) The opportunity cost of leisure has decreased. D) There is no change in the opportunity costs.

(SEE CH 3 PP 3) (Figure: The Demand and Supply of Wheat) Look at the figure The Demand and Supply of Wheat. If a price of $10 temporarily exists in this market: A) a shortage of 10,000 bushels will result. B) a shortage of 8,000 bushels will result. C) a surplus of 8,000 bushels will result. D) a surplus of 4,000 bushels will result.

(SEE CH 3 PP 8) (Figure: Shifts in Demand and Supply) Look at the figure Shifts in Demand and Supply. The figure shows how supply and demand might shift in response to specific events. Suppose a fall frost destroys one-third of the nation's orange crop. Which panel best describes how this will affect the market for vitamin C tablets, which are a substitute for oranges? A) panel A B) panel B C) panel C D) panel D

(SEE CH 4 PP 1) (Table: Market for Fried Twinkies) Suppose the government decides to reduce fried Twinkie consumption as part of a "War on Obesity." After careful study, the government decides to limit production (i.e., the government imposes a quota on production) of fried Twinkies to 5,000 for the current calendar year. Using this table, what price will producers charge, if they obey the quota law? A) $1.20 B) $1.30 C) $1.50 D) The answer cannot be determined with this information.

(SEE CH 4 PP 10) (Figure and Table: Market for Apartments) This figure represents a competitive market for apartments. If a government price ceiling at $600 is now imposed on this market (in the name of fairness), then an inefficiency will result in the form of a: A) surplus of 0.6 million apartments. B) surplus of 0.8 million apartments. C) shortage of 0.8 million apartments. D) shortage of 0.6 million apartments.

(SEE CH 4 PP 14) (Table: Market for Fried Twinkies) From this table, as a result of the $0.30 tax per fried Twinkie, the government will receive total tax revenue of: A) $500. B) $1,000. C) $1,500. D) none of the above; the total is impossible to calculate.

(SEE CH 4 PP 17) (Figure: Supply and Demand) In the market shown in this figure, a binding price ceiling is represented by: A) the price P1. B) the price P2. C) the price P3. D) point C.

(SEE CH 4 PP 27) (Figure and Table: Market for Taxi Rides) This figure represents a competitive market for taxi rides. If the government now imposes an excise tax of $3 per ride (causing the supply curve to up-shift by that amount), then the government will collect tax revenues of __________ which might be used for worthwhile purposes, but there will be an excess burden (or deadweight loss) to society of __________ caused by this tax. A) $9 million; 1 million rides B) $16 million; 2 million rides C) $21 million; 3 million rides D) $24 million; 4 million rides

(SEE CH 4 PP 4) (Figure: Market for Clams) In this figure, the government wants to limit sales of clams to 1000 lbs. A quota or an excise tax may achieve this. If an excise tax is imposed on sellers, then the amount of the tax will be _______ and the total tax revenue generated will be ________. A) $5; $5,000 B) $7.50; $7,500 C) $2.50, $2,500 D) Insufficient information is provided to answer this question since the post-tax supply curve is not shown.

(SEE CH 6 PP 9) (Figure: Marginal Product of Labor) Using the marginal product of labor curve in the accompanying figure, the total product of labor for 8 workers is: A) 40 bushels. B) 35 bushels C) 96 bushels. D) 75 bushels.

(SEE CH 8 PP 11) (Figure: Prices, Cost Curves, and Profits) In the accompanying figure, if the price is P1, then the firm earns: A) a loss equal to (ba) x Q1. B) a loss equal to (ca) x Q1. C) a loss equal to (bc) x Q1. D) zero.

(SEE CH 8 PP 12) (Figure: Cost Curves and Profits) The market for corn is perfectly competitive, and an individual corn farmer faces the cost curves shown in the accompanying figure. If the price of a bushel of corn in the market is $10, then the farmer will produce ______ of corn and earn an economic ______ equal to ______. A) 0 bushels; loss; average fixed costs B) 0 bushels; loss; total variable costs C) 3 bushels; loss; total fixed costs D) 3 bushels, loss; $30 per bushel

(SEE CH 8 PP 29) (Figure: Revenues, Costs, and Profits) In the accompanying figure, if the market price is $14, the profit-maximizing quantity of output is: A) 2. B) 3. C) 4. D) 5.

(SEE CH 9 PP 19) (Figure: Monopolist) If this monopolist attempts to profit-maximize, it will produce: A) Q1 units and sell them at P1. B) Q2 units and sell them at P4. C) Q2 units and sell them at P2. D) Q3 units and sell them at P3.

(SEE CH 9 PP 22) (Figure: Monopolist) If this monopolist were forced to act like a perfect competitor, it would produce: A) Q1 units and sell it at P1. B) Q2 units and sell it at P2. C) Q3 units and sell it at P3. D) Q2 units and sell it at P4.

(SEE CH 9 PP 29) (Figure: Computing Monopoly Profit) The profit-maximizing price is ________ and will generate total economic profit of ________. A) P2; EF B) P3; the rectangle P1P2FG C) P3; the rectangle P2P3EF D) P3; EF

A Japanese steel firm sells steel in the United States and in Japan. Since the United States buys steel from a number of different sources, the U.S. demand for Japanese steel is more price-elastic than the Japanese demand for Japanese steel. If the Japanese steel firm wishes to maximize its profits it should: A) charge the same price in both countries (after adjusting for transportation costs). B) charge a higher price in the United States and a lower price in Japan; otherwise it would be accused of unfair trade practices. C) charge a lower price in the United States and a higher price in Japan. D) figure out which market is more profitable and sell only in that market.

A decrease in supply is caused by: A) a decrease in input prices. B) an increase in the number of sellers in the market. C) suppliers' expectations of higher prices in the future. D) an advancement in the technology for producing the good.

A market failure occurs when: A) some people are able to buy many more goods than other people are. B) the individual's pursuit of self-interest means some people will not be able to buy all of the goods they need. C) the individual's pursuit of self-interest makes the society worse off. D) while pursuing their self-interest, some people may make a mistake—for example, they may regret buying a particular car.

A monopoly responds to a decrease in marginal cost by ________ price and ________ output. A) increasing; decreasing B) increasing; increasing C) decreasing; increasing D) decreasing; decreasing

A perfectly competitive firm operating in the short run producing 100 units of output has ATC = $6 and AFC = $2. The market price is $3 and is equal to MC. In order to maximize profits (or minimize losses), this firm should: A) increase output. B) reduce output, but continue to produce a positive amount of output. C) shut down. D) do nothing; the firm is already maximizing profits.

A shift to the left of a supply curve is caused by: A) an increase in the number of sellers. B) a technological improvement in production. C) an increase in the cost of an input. D) an increase in the number of buyers.

A strategy that is the same regardless of the action of the other player in a game is said to be a: A) competitive strategy. B) trigger strategy. C) dominant strategy. D) tit-for-tat strategy.

According to the kinked demand model of oligopolies, oligopolistic firms often choose not to compete much on: A) advertising. B) quantity. C) price. D) product differentiation

Alison is offered two jobs: one pays a salary of $45,000 per year and offers three weeks of vacation, while the other offer provides two weeks of vacation and a salary of $54,000. What is the opportunity cost for Alison if she chooses the job offer of $54,000? A) $45,000 plus the three weeks of vacation B) $45,000 per year C) one week of vacation D) two weeks of vacation

An analytical approach through which strategic choices can be assessed is called: A) benefit-cost analysis. B) econometric theory. C) game theory. D) monopolistic competition.

An industry with two firms producing is generally called: A) a monopoly. B) monopolistic competition. C) a duopoly. D) perfect competition.

Consider a perfectly competitive firm in the short run. Assume the firm is producing the profit-maximizing output and assume that it is earning economic profits. At the profit-maximizing output, all of the following are correct except: A) price is equal to marginal cost. B) price is equal to marginal revenue. C) price is equal to average total cost. D) marginal cost is greater than average total cost.

Consider two competing motorcycle manufacturers, Harley-Davidson and Honda. If Harley-Davidson raises the price of its motorcycles, we can expect: A) a shift to the right in the supply curve of Hondas and lower prices for Hondas. B) a shift to the left in the supply curve of Hondas and higher prices for Hondas. C) a shift to the right in the demand curve for Hondas and higher prices for Hondas. D) a shift to the left in the demand curve for Hondas and lower prices for Hondas.

Everyone benefits from street lighting, yet the marginal benefit to any one individual usually falls short of the marginal cost. This is an example of: A) individual actions whose side effects are not properly taken into account by the market. B) one party preventing mutually beneficial trades in an attempt to capture a greater share of resources for itself. C) the unsuitability of some goods for efficient management by markets. D) regulating self-interest.

Firm X is a typical firm in a market characterized by the model of monopolistic competition. Suppose that the market is initially in long-run equilibrium, and then there is an increase in demand for services. We can assume that in the long run, the economic profits of typical firms in the industry will be: A) typical of those earned by monopoly firms. B) positive but less than the level typically earned by monopoly firms. C) zero. D) negative

For large beer breweries, it is common for average total cost to decline as output increases. This indicates that many breweries achieve: A) diseconomies of scale. B) diminishing marginal returns. C) economies of scale. D) constant returns to scale.

Frances has a linear production possibility frontier when she produces tomatoes and green beans. If she uses all of her resources, she can produce 400 bushels of tomatoes or 800 bushels of green beans. Which of the following combinations is not efficient for Frances? A) 400 bushels of tomatoes and zero bushels of green beans B) 200 bushels of tomatoes and 400 bushels of green beans C) 200 bushels of tomatoes and 200 bushels of green beans D) 800 bushels of green beans and zero bushels of tomatoes

Game theory is commonly used to explain behavior in oligopolies, because oligopolies are characterized by: A) large profits in the long run. B) either homogeneous or heterogeneous products. C) interdependence. D) imperfect competition.

If New York City had no medallion system for taxicabs, the price of a taxicab ride would: A) increase because of the higher safety hazards. B) not change from its current level. C) decrease. D) increase, but only slightly.

If a monopolist is producing a quantity that generates MC > MR, then profit: A) is maximized. B) is maximized only if MC = P. C) can be increased by increasing price. D) can be increased by decreasing price

If all firms in an industry are price-takers, then: A) each firm can take the price that it wants to charge and sell at this price, provided it is not too different from the prices other firms are charging. B) each firm takes the market price as given for its current output level, recognizing that the price will change if it alters its output significantly. C) an individual firm cannot alter the market price even if it doubles its output. D) the market sets the price, and each firm can take it or leave it (by setting a different price).

If price is consistently below average variable cost, then in the short run a perfectly competitive firm should: A) raise price. B) sell more output. C) shut down. D) lower price to sell more.

In a perfectly competitive industry, the market demand curve is usually: A) perfectly inelastic. B) perfectly elastic. C) downward sloping. D) relatively elastic.

In long-run equilibrium, firms in a monopolistically competitive industry sell at a price ________. A) equal to marginal cost B) less than marginal cost C) greater than marginal cost D) less than marginal revenue

Which of the following will not cause an increase in demand for good X? A) a decrease in income if good X is an inferior good B) an increase in income if good X is a normal good C) a decrease in the price of good X D) an increase in consumers' taste for good X

In oligopoly, a firm must realize that: A) what it does has no effect on the other firms in the industry. B) it must pursue policies while always remembering those policies will be ignored by other firms in the industry. C) it is in an industry in which another major firm may dominate, and the firm will need to judge its actions accordingly. D) collusion was made legal in 2004.

In the market for corn tortilla chips, what would cause a price increase? A) Doctors tell their patients that tortilla chips are unhealthy. B) There is a technological advancement in the tortilla chip production process. C) A fungus kills much of the corn crop in Nebraska. D) The price of salsa triples.

In the short run: A) all inputs are fixed. B) all inputs are variable. C) some inputs are fixed and some inputs are variable. D) all costs are variable.

Industry Z is made up of five firms. Three of the firms make up 20% of the total market sales, one firm makes up 25% of the total market sales, and the remaining firm makes up 15% of the total market sales. What is the HHI for this industry? A) 100 B) 1,200 C) 2,050 D) 1,800

It is cheaper to produce corn in Kansas than in Death Valley, California because corn needs a lot of water and moderate temperatures. This statement best represents this economic concept: A) Resources are scarce. B) Markets move toward equilibrium. C) Resources should be used as efficiently as possible to achieve society's goals. D) Markets usually lead to efficiency.

Khalil is offered a free ticket to the opera. His opportunity cost of going to the opera is: A) zero—the tickets were free. B) the price listed on the ticket. C) whatever Khalil would have done had he not gone to the opera. D) the price listed on the ticket or whatever Khalil would have done had he not gone to the opera.

Long-run equilibrium in perfect competition and in monopolistic competition are similar because, in both, firms: A) produce at the minimum point of the average total cost curve. B) set price equal to marginal cost. C) make zero economic profits. D) have excess capacity.

Macroeconomics deals with: A) bits and pieces of the economy. B) the question of how a business unit should operate profitably. C) the working of the entire economy or large sectors of it. D) how individuals make decisions.

Mark and Julie are going to sell brownies and cookies for their third annual fundraiser bake sale. In one day, Mark can make 40 brownies or 20 cookies, and Julie can make 15 brownies or 15 cookies. With specialization, how many brownies and cookies will be made in one day for the bake sale? A) 15 brownies and 20 cookies B) 40 brownies and 20 cookies C) 40 brownies and 15 cookies D) 55 brownies and 35 cookies

Monopolistic competition is different from perfect competition due to the fact that within monopolistic competition: A) firms experience easy entry and exit. B) there are many firms. C) products are differentiated. D) to maximize profits, a firm will produce where MR = MC.

Over the past several years, consumers have had an increasing interest in getting a tattoo. This means that the ________ for tattoos has ________. A) quantity demanded; increased B) demand; decreased C) demand; increased D) quantity demanded; decreased

Product differentiation under monopolistic competition means that each firm: A) charges the same price. B) maximizes profit where MC = P. C) faces a downward-sloping demand curve. D) receives economic profits.

Quantity controls set below the equilibrium quantity cause all of the following except: A) incentives for illegal activities. B) missed opportunities in the form of mutually beneficial transactions that don't occur. C) the supply price of the quantity transacted to exceed the demand price of the quantity transacted. D) quota rents.

Scarcity exists when: A) making choices among two or more alternatives is not necessary. B) individuals can have more of any good. C) individuals can have more of one good but only at the expense of another. D) resources are unlimited.

Since a monopolistically competitive firm faces a downward-sloping demand curve for its product, its price will be: A) equal to marginal revenue. B) less than marginal revenue. C) greater than marginal revenue. D) equal to total revenue.

State governments place excise taxes on cigarettes because: A) they want to subsidize tobacco farming. B) they want to discourage cigarette smuggling. C) it is an easy way to raise tax revenue while discouraging smoking. D) of none of the above.

Suppose a perfectly competitive market is suddenly transformed into one that operates as a monopoly market. We would expect: A) price to rise, output to fall, consumer surplus to rise, producer surplus to rise, and deadweight loss to fall. B) price to rise, output to fall, consumer surplus to fall, producer surplus to fall, and deadweight loss to rise. C) price to rise, output to fall, consumer surplus to fall, producer surplus to rise, and deadweight loss to rise. D) price to fall, output to rise, consumer surplus to rise, producer surplus to fall, and deadweight loss to fall.

Suppose that a binding price floor is in place in a particular market. If the market is deregulated, and the price floor is removed, then which of the following effects could occur? A) The quantity demanded would decrease and the quantity supplied would increase. B) An excess demand would develop. C) There would be a decrease in the quality of the good supplied. D) There would be an increase in the quality of the good supplied.

Suppose that you build a high-speed, magnetically powered transportation system from New York to Los Angeles. High fixed costs resulting from the enormous quantity of capital used in this system enable decreasing average cost for any conceivable level of demand. Your monopoly would result from: A) control of a scarce resource or input. B) technological superiority. C) increasing returns to scale. D) government-created barriers.

Suppose that you build a new jumbo jet that can carry five times more passengers than any other competitor. You experience high fixed costs due to the quantity of capital used to build the jets. There's decreasing average cost for all levels of demand. In this case, your monopoly would result from which of the following? A) sunk costs B) location C) economies of scale D) government restrictions

Suppose the government imposes a $10 excise tax on the sale of sweaters by charging suppliers $10 for each sweater sold. Based on economic analysis, we would predict that A) the price of sweaters will increase by $10. B) consumers of sweaters will bear the entire burden of the tax. C) the price of sweaters will increase by less than $10. D) a and b are true.

Suppose the government of the oil-rich country of Oiland sets gasoline prices at $0.25 per gallon, when the market price is $1.50. The Oiland government's actions will: A) improve efficiency since the low prices will force producers to find cheaper production methods. B) result in gasoline surpluses even in an oil-rich country. C) cause gasoline shortages even in an oil-rich country. D) improve equality between rich and poor since the poor can now afford gasoline.

Suppose the local real estate market is in equilibrium. A recession causes local household incomes to decline. At the same time, construction of a large subdivision of new homes has just been completed. Given these two changes, we can predict the price of real estate will ________ and the quantity of real estate bought and sold will ________. A) fall; fall B) fall; rise C) fall; rise or fall D) rise; fall or rise

The HHI for ________ where ________ have (has) ________ of the market is ________ . A) monopolistic competition; four firms each; 25%; 10,000 B) oligopoly; three firms each; 50%; 5,000 C) oligopoly; two firms each; 50%; 5,000 D) monopoly; one firm; 100%; 100,000

The circular-flow diagram illustrates how firms ________ goods and services and ________ factors of production. A) buy; sell B) buy; buy C) sell; buy D) sell; sell

The government imposes a price ceiling below the equilibrium price. The price ceiling will cause: A) quantity demanded to decrease. B) quantity supplied to increase. C) a shortage of the good. D) an increase in the quality of the good.

The long-run average cost of producing 100 units of output is $4, while the long-run average cost of producing 110 units of output is $4. These numbers suggest that the firm producing this output is experiencing: A) economies of scale. B) diseconomies of scale. C) constant returns to scale. D) diminishing returns.

The marginal cost curve is the mirror image of the: A) total product curve. B) average product curve. C) marginal product curve. D) average total cost curve.

The market structure characterized by a few interdependent firms and in which there are barriers to entry is called: A) monopolistic competition. B) perfect competition. C) oligopoly. D) monopoly.

The model of monopolistic competition can characterize the market for plumbing services in a city. Suppose that the market is initially in long-run equilibrium, and then there is an increase in demand for plumbing services. We expect that in the long run, the economic profits of typical firms in the industry will be: A) typical of those earned by monopoly firms. B) negative. C) zero. D) positive, but less than the level typically earned by monopoly firms.

The pricing in monopoly prevents some mutually beneficial trades from taking place. The value of these unrealized mutually beneficial trades is called: A) sunk costs. B) opportunity costs. C) a deadweight loss. D) inequities

When individuals act in their own self-interest: A) efficiency is always achieved. B) equity is always achieved. C) society may be worse off in some cases. D) all opportunities have been taken to make some people better off without making other people worse off.

When markets don't achieve efficiency: A) they must achieve equity. B) government must be participating in the market. C) government may intervene to improve society's welfare. D) they should be closed.

Which of the following best describes the law of demand? A) As income taxes rise, fewer new cars are purchased. B) As the price of corn rises, more acres of corn are planted. C) As the price of a DVD rental rises, fewer DVDs are rented. D) As the population rises, more electricity is consumed.

Which of the following is a normative statement? A) International trade leads to expanded consumption opportunities. B) Higher expenditures on health care will reduce infant mortality rates. C) We would all be better off if we could reduce our dependence on oil imports. D) Increased defense spending will lead to higher budget deficits

Which of the following is false about the circular-flow diagram? A) Households are the primary demanders of goods and services. B) Firms are the primary suppliers of goods and services. C) Money flows from households to firms as households offer factors of production for sale. D) Money flows in the direction opposite to goods and services and factors of production

Which of the following is true? A) When choosing the profit-maximizing quantity, the short-run decision-making process for a firm in perfect competition and a firm in monopolistic competition is the same, since they produce the quantity where P > MC. B) In the long run in perfect competition, economic profits = 0, and in monopolistic competition in the long run, economic profits are very large. C) In perfect competition, P = MC, and in monopolistic competition, MR = MC, but P > MC and there is excess capacity. D) In both perfect competition and monopolistic competition, P equals minimum average total cost in the long run.

Which of the following statements is correct? A) Resource scarcity is not a major economic concern in the rich countries of the world. B) While opportunity costs usually exist, some opportunity costs are zero. C) An economic situation is in equilibrium when no individual would be better off taking a different action. D) Some very talented, skilled individuals who can do everything better than most people should not specialize in doing any one thing.

A monopoly is a market structure characterized by: A) a single buyer and several sellers. B) a product with many close substitutes. C) a large number of small firms. D) barriers to entry and exit.

(SEE CH 10 PP 2) (Figure: Monopolistic Competition I) Which of the panels in the figure shows a monopolistic competitor producing where price is greater than marginal revenue? A) Panel a B) Panel b C) Panel c D) All of the panels show a monopolistic competitor producing where price is greater than marginal revenue

(SEE CH 10(2) PP 33) (Figure: Prisoners' Dilemma for Thelma and Louise) Given the payoff matrix in the figure, the optimal combination is for: A) Thelma to confess and for Louise not to confess. B) both Thelma and Louise to confess. C) Louise to confess and for Thelma not to confess. D) neither Thelma nor Louise to confess.

(SEE CH 2 PP 34) (Table: Comparative Advantage I) Look at the table Comparative Advantage I. The opportunity cost of producing 1 box of herring for Sweden is: A) 10 boxes of cell phones. B) 0.5 box of cell phones. C) 5 boxes of cell phones. D) 0.1 box of cell phones.

(SEE CH 3 PP 1) (Table: The Market for Chocolate-Covered Peanuts) Look at the table The Market for Chocolate-Covered Peanuts. If the price of chocolate-covered peanuts is $0.50, there is: A) a surplus of 35 bags per month. B) a shortage of 35 bags per month. C) a surplus of 70 bags per month. D) a shortage of 70 bags per month.

(SEE CH 3 PP 17) (Figure: Demand for Coconuts) Look at the figure Demand for Coconuts. If coconuts are a normal good and consumers believe that the price of coconuts will rise significantly in the near future, it will be represented in the figure as a movement from: A) C to A. B) A to B. C) B to E. D) E to B.

(SEE CH 3 PP 37) (Figure: Supply of Coconuts) Look at the figure Supply of Coconuts. An expectation on the part of coconut suppliers that the price of coconuts will be significantly higher in the very near future would be represented in the figure as a movement from A) A to B. B) B to A. C) A to C. D) B to E.

(SEE CH 3 PP 40) (Table: The Lemonade Market) Look at the table The Lemonade Market. If the price of lemonade is $1.25 per cup, we would expect to see: A) a rising price to eliminate the shortage. B) a rising price to eliminate the surplus. C) a falling price to eliminate the shortage. D) a market in equilibrium.

(SEE CH 4 PP 11) (Figure: Supply and Demand) In the market shown in this figure, a price ceiling of P1 causes: A) a shortage equal to the distance AB. B) a surplus equal to the distance AB. C) a shortage equal to the distance DE. D) no change to the market.

(SEE CH 4 PP 22) (Table: Market for Butter) From this table, if the government imposes a price floor of $0.90 per lb. of butter, the quantity of butter actually purchased will be: A) 10.5 million lbs. B) 9.0 million lbs. C) 1.5 million lbs. D) 10.0 million lbs.

(SEE CH 6 PP 12) (Figure: Average Total Cost Curve) In the accompanying figure, the total cost of producing 3 pairs of boots is approximately: A) $24. B) $72. C) $75. D) $216.

(SEE CH 8 PP 23) (Figure: Revenues, Costs, and Profits) In the accompanying figure, if market price is $18, the profit-maximizing quantity of output is: A) 2. B) 3. C) 4. D) 5.

(SEE CH 8 PP 28) (Table: Short Run Supply Curve) The accompanying table below lists three supply points for an individual, perfectly competitive firm operating in the short run. If the industry is composed of 120 identical firms, which of the following will be a point on the short-run industry supply curve? A) Price = $5, Quantity = 1,650 B) Price = $1,200, Quantity = 40 C) Price = $960, Quantity = 3,840 D) Price = $10, Quantity = 4,800

(SEE CH 8 PP 4) (Figure: Marginal Revenue, Costs, and Profits) In the accompanying figure, if market price decreases to $16, marginal revenue ______ and profit-maximizing output ______. A) increases; decreases B) increases; increases C) decreases; increases D) decreases; decreases

(SEE CH 9 PP 20) (Figure: Monopoly Model) When the firm is in equilibrium (that is, maximizing its economic profit), its total revenue is the area of rectangle: A) SPDB. B) IPDH. C) 0SBJ. D) 0PDJ

A binding price floor causes: A) a shortage in the market. B) a surplus in the market. C) wasted resources. D) both b and c.

A monopolistic competitor is likely to engage in advertising to: A) create a greater perception of product differentiation in the minds of potential consumers. B) shift the demand curve for its product rightward. C) convey information about the product it is offering for sale. D) All of these answer choices are correct.

A monopolistically competitive industry such as baked goods and a perfectly competitive industry like wheat farming are alike in that: A) firms in both types of industries produce identical products. B) firms in both types of industries produce similar but not identical products. C) barriers to entry in both industries are large. D) there are many firms in each industry.

A monopoly can be temporary because of: A) high barriers to entry. B) a lack of substitutes for the monopolist's product. C) economies of scale. D) technological change.

A new wonder diet that results in a dramatic weight loss sweeps through America. The key to the diet is to eat unlimited amounts of red meat (beef) but no poultry or carbohydrate-rich foods. As millions of Americans switch to the new diet, we can expect: A) a decrease in the supply of poultry, leading to a shift to the left in the supply curve for poultry and higher poultry prices. B) an increase in the supply of poultry, leading to a shift to the right in the supply curve for poultry and higher poultry prices. C) a decrease in the demand for poultry, leading to a shift to the right in the demand curve for poultry and lower beef prices. D) a decrease in the demand for poultry, leading to a shift to the left in the demand curve for poultry and lower poultry prices.

Advertising is an economically productive activity and not a waste of resources because: A) advertisements increase profits. B) advertisements can convey information about the product. C) in a situation in which consumers don't have good information about a product, ads can serve as indirect signals about the provider. D) advertisements can convey information about the product, and because in a situation in which consumers don't have good information about a product, ads can serve as indirect signals about the provider.

After eating three slices of pizza, you decide to eat one more piece. Your decision is an example of the economic principle called: A) opportunity-cost decision. B) people responding to incentives. C) equity decision. D) marginal decision making.

Although most economists agree that price floors and ceilings lead to inefficiency, governments continue to impose such price controls. A possible reason for this is: A) some people do benefit from such price controls. B) people fear that prices will change dramatically if the price controls were removed. C) it is politically expedient to enact regulations that benefit influential voting groups. D) all of the above

An economy is said to have a comparative advantage in the production of a good if it can produce that good: A) with more resources than another economy. B) with a higher opportunity cost than another economy. C) outside its production possibilities curve. D) at a lower opportunity cost than another economy.

An economy is said to have a comparative advantage in the production of one good if it: A) can produce more of all goods than another economy. B) can produce less of all goods than another economy. C) has the highest opportunity cost for producing a particular good. D) has the lowest opportunity cost for producing a particular good.

An excise tax collected from the producers of a good: A) shifts the supply curve upward. B) creates a deadweight loss. C) has a similar effect as a quota. D) is all of the above.

An excise tax creates inefficiency in that the number of transactions in a market is reduced. Because the tax discourages mutually beneficial transactions, there is ______ from a tax. A) quota rent B) deadweight loss C) excess burden D) both deadweight loss and excess burden

Florida schools offered cash bonuses to students who scored high on the state's standardized exams. The cash bonuses are an example of which of the following basic economic principles? A) Resources are scarce. B) The real cost of something is what you must give up to get it. C) There are gains from trade. D) People usually take advantage of opportunities to make themselves better off.

If Jakob knows the marginal cost of producing the 7th sports jersey is $21, then the total cost of 7 sports jerseys is: A) $21. B) $60. C) $147. D) The answer cannot be determined from the above information.

If a monopolist is producing a quantity that generates MC = P, then profit: A) is maximized. B) is maximized only if MR = P. C) can be increased by increasing production. D) can be increased by decreasing production.

If an economy is producing a level of output that is on its production possibility frontier, the economy has: A) idle resources. B) idle resources but is using resources efficiently. C) no idle resources but is using resources inefficiently. D) no idle resources and is using resources efficiently.

If countries engage in international trade: A) they give up the ability to specialize in production. B) worldwide levels of production are lower. C) they will be consuming inside their production possibility frontiers. D) they will be consuming outside their production possibility frontiers.

If firms are making positive economic profits in the short run, then in the long run: A) the short-run industry supply curve will shift rightwards. B) firms will enter the industry. C) industry output will rise and price will fall D) all of the above will occur.

If monopolistically competitive firms are earning positive economic profits in the short run, then in the long run: A) firms will leave the industry. B) the demand curves faced by existing firms will move to the right. C) economic profits will increase. D) economic profits will be reduced to zero.

If price is consistently below average total cost, then in the short run a perfectly competitive firm should: A) shut down. B) continue to produce to minimize losses. C) raise price. D) There is not enough information given to answer this question.

In much of the country, homeowners choose to heat their houses with either natural gas or home heating oil. Which of the following would cause a change in the demand for natural gas? A) a change in the price of home heating oil B) a change in income C) an increase in consumer tastes for natural gas as an energy source D) all of the above

Malthus's predictions for disaster were humorously summarized in the anonymous verse: "To get land's fruit in quantity/ Takes jolts of labor ever more./ Hence food will grow like one, two, three.../ While numbers grow like one, two, four..." Population has in fact increased six-fold since Malthus's time, and land area in the world hasn't increased, so why haven't Malthus's gloomy forecasts been realized? A) Diminishing returns is a theoretical construct that is not applicable to actual farming conditions. B) Over most of the last two centuries, the average food intake per person has decreased at a steady rate. C) Enough people were killed during the two World Wars and in other twentieth-century conflicts to stave off world starvation temporarily. D) Technological improvements in farming have offset the effect of diminishing returns.

One consequence of equilibrium is that when trying to figure out which checkout line at the college bookstore is the fastest: A) choose the line nearest the door. B) choose the line farthest from the door. C) choose the middle line. D) randomly choose a line—if one line were truly faster, everyone would move to it and it would no longer be faster.

Price controls encourage black markets because: A) they restrict market activity. B) individuals can profit by illegal exchanges. C) they create inefficiency. D) all of the above.

Rent controls in New York City cause all of the following except: A) inefficiently low quality. B) wasted resources resulting from the opportunity cost of time associated with trying to find an apartment. C) black markets. D) an increase in the quantity supplied of rent-controlled apartments.

Sadia wants to practice price discrimination in her bakery. Which of the following techniques should Sadia not use? A) discounts for people who buy a large volume of bread B) higher prices for people who buy on the day bread is baked and lower prices for people who place advance orders C) creating an annual fee for customers who want to shop at a discount in her store D) charging all consumers the same price for freshly baked goods

Scenario: Monopolist The demand curve for a monopolist is as follows: P = 75 - 1/2Q and the monopolist has the following MC expressed as P = 2Q. Assume also that ATC at the profit-maximizing level of production is equal to $12.50. (Scenario: Monopolist) At the profit-maximizing level of production, the firm is earning a profit per unit equal to: A) $62.50. B) $0. C) $75. D) $50.

Scenario: Monopolist The demand curve for a monopolist is as follows: P = 75 - 1/2Q and the monopolist has the following MC expressed as P = 2Q. Assume also that ATC at the profit-maximizing level of production is equal to $12.50. (Scenario: Monopolist) For this monopolist, the profit-maximizing output is ________ and the profit-maximizing price is equal to ________. A) 25 units; $75 B) 20 units; $62.50 C) 25 units; $75.50 D) 25 units; $62.50

Sometimes the government spends more or less, depending on the needs of the country. This statement best represents this economic concept: A) Resources should be used as efficiently as possible to achieve society's goals. B) When markets don't achieve efficiency, government intervention can improve society's welfare. C) Overall spending sometimes gets out of line with the economy's productive capacity. D) Government policies can change spending.

Suppose the marginal cost curve in the short run first decreases, then reaches a minimum, and then increases. If we are at an output where marginal cost is increasing, then: A) marginal product must be increasing. B) average variable cost must be increasing. C) average total cost must be increasing. D) none of the above

The United States and the European Union impose price floors on many agricultural products. These price floors lead to an unwanted surplus. To deal with this surplus: A) the U.S. government typically pays farmers not to produce. B) in some cases, the U.S. government has destroyed the surplus production. C) the European Union pays farm exporters to sell products at a loss overseas. D) all of the above

The average total cost curve in the short run slopes upward due to: A) economies of scale. B) diseconomies of scale. C) increasing returns. D) diminishing returns.

The break-even price for a perfectly competitive firm is equal to: A) the minimum value of average variable cost. B) the marginal revenue, provided that marginal revenue is equal to marginal cost. C) the average fixed cost at the output level at which the firm is producing. D) the minimum value of average total cost.

The cable TV market has only two firms, CableNorth and CableSouth. Through tacit collusion, they each arrive at an equilibrium price and quantity and see their demand curve as kinked. Any decrease in marginal cost: A) will encourage both firms to produce more. B) may encourage both firms to produce less. C) will encourage both firms to charge a lower price. D) will most likely leave price and quantity unchanged at both firms.

The government decides to impose a price ceiling on a good, because it thinks the market-determined price is "too high." If the government imposes the price ceiling below the equilibrium price: A) consumers will respond to the lower price and therefore wish to purchase more of the good than at the equilibrium price. B) producers will respond to the lower price and therefore offer fewer units for sale. C) consumers will purchase less of the good after the price ceiling is imposed. D) all of the above will occur.

The law of demand states that other things equal: A) as the price increases, the quantity demanded will increase. B) as the price decreases, the demand curve will shift to the right. C) as the price increases, the demand will decrease. D) as the price increases, the quantity demanded will decrease.

The municipal swimming pool charges lower entrance fees to local residents than to nonresidents. Assuming that this pricing strategy increases the profits of the pool, we can conclude that nonresidents must have a ________ for swimming at the pool than residents. A) greater demand B) lower demand C) more elastic demand D) less elastic demand

The problem of scarcity is confronted by: A) industrialized societies only. B) preindustrialized societies only. C) societies governed by communist philosophies only. D) all societies.

The profit-maximizing rule MC = MR is followed by firms under: A) monopolistic competition, but not perfect competition. B) perfect competition, but not monopolistic competition. C) either monopolistic competition or perfect competition, depending on the costs of production. D) both monopolistic competition and perfect competition.

Two firms, Firm A and Firm B, have identical cost curves, yet Firm A operates in perfect competition and Firm B operates in monopolistic competition. In the long run, what can we say about the price and output that each firm charges? A) Firm A's price will be lower than Firm B's price, and Firm A's output will be lower than Firm B's output. B) Firm A's price will be greater than Firm B's price, and Firm A's output will be greater than Firm B's output. C) Firm A's price will be greater than Firm B's price, and Firm A's output will be lower than Firm B's output. D) Firm A's price will be lower than Firm B's price, and Firm A's output will be greater than Firm B's output.

Unwritten or unspoken understandings through which firms collude to restrict competition are called: A) cartelization. B) oligopolization. C) overt collusion. D) tacit collusion.

When marginal cost is rising: A) average variable cost must be rising. B) average total cost must be rising. C) both a and b must hold. D) both average variable cost and average total cost may be rising or falling.

When the government imposes a limit on sales of a good or service by a quota, it usually issues a license that gives the owner the right to sell a given quantity of the good. The market price of the license is equal to: A) the demand price of the good. B) the wedge that represents the difference between the demand price and the supply price. C) the quota rent. D) both b and c.

Which is not an example of a resource? A) land B) labor C) capital D) production

Which of the following is not a characteristic of monopolistic competition? A) product differentiation B) lack of barriers to entry and exit in the long run C) many competing producers D) tacit collusion

Which of the following is true? A) Oligopoly is a goal toward which an economy should strive. B) Monopolistic competition results in excess capacity, since in the long run MR = MC is to the right of the minimum of the ATC curve. C) One might characterize monopolistic competition as an industry, such as gasoline stations, which in the long run experience large economic profits. D) One might characterize monopolistic competition as an industry, such as fast-food restaurants, which in the longrun experience zero economic profits.

Which of the following statements about monopoly equilibrium and perfectly competitive equilibrium is incorrect? A) Price is greater than marginal cost in monopoly, and price equals marginal cost in perfect competition. B) When a monopoly exists, the consumer surplus is less than if the market were perfectly competitive. C) Monopoly output will be less than the output of a comparable perfectly competitive industry. D) In the long run, economic profits are driven to zero in both a monopoly and a perfect competitive market.

You have $1 to spend on a vending machine snack. A bag of chips will cost you $1 and the candy bar will also cost you $1. If you choose the bag of chips, the opportunity cost of buying the chips is: A) $1 plus the enjoyment you would have received from the candy bar. B) $2 minus the enjoyment you received from the bag of chips. C) $1. D) the enjoyment you would have received from the candy bar.

Zoe's Bakery operates in a perfectly competitive industry. The variable costs at Zoe's Bakery increase, so all the cost curves (with the exception of fixed cost) shift leftward. The demand for Zoe's pastries does not change, nor does the firm shut down. Hence, Zoe's Bakery will ______ its price and ______ its level of production. A) raise; increase B) decrease; increase C) raise; decrease D) not change; decrease

Why are economists so particular about the difference between an increase in "quantity demanded" and an increase in "demand"? Aren't they the same thing?

No, they are not the same thing. An increase in the quantity demanded implies a downward movement along a given demand curve. The price has fallen and the quantity demanded has increased. An increase in demand implies that the entire demand curve has shifted rightward. This means that at all prices the quantity demanded has increased.

You read that college tuition is rising every year, and yet more students attend college every year. Isn't this a violation of the law of demand?

Probably not. Rising tuition and rising college attendance can likely be explained by a series of rightward shifts in the demand curve for college education. If the supply curve is steady, shifting demand along the unchanged supply curve would explain this trend.

In August 2005, Hurricane Katrina damaged or destroyed oil platforms in the Gulf of Mexico, refineries along the Gulf coast, and the pipeline infrastructure that transports oil and gas to customers across the eastern United States. The winter of 2005 was also unusually cold in many parts of the country. How did these events affect the market for natural gas and heating oil?

The supply of natural gas was severely decreased by Katrina. When the cold winter came, demand for natural gas to heat homes sharply increased. The combination of supply falling and demand rising created a big increase in the equilibrium price of natural gas. The change in equilibrium quantity is uncertain because we don't know the relative size of each shift.

Suppose the supply curve for soap bubbles has a slope of +1 and intersects the vertical axis at a price of $2 per bottle. Interpret the meaning of both the y-intercept and the slope.

The y-intercept at $2 tells us that there will be zero bottles supplied at prices of $2 and below. In other words, the price must rise above $2 for any bottles to be supplied. The slope of +1 tells us that if the price rises $1, one more bottle of soap bubbles will be supplied.

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