Econ Final - All Review Questions
Looking at the figure, the socially optimal price and quantity are: a) $3.00 and 60 units, respectively. b) $2.80 and 48 units, respectively. c) $2.07 and 76 units, respectively. d)$1.50 and 100 units, respectively
b) $2.80 and 48 units, respectively.
Nathan makes candles. If he charges $20 for each candle, his total revenue will be a) $1,000 if he sells 100 candles. b) $500 if he sells 25 candles. c) $20 regardless of how many candles he sells. d) $2,000 if he sells 5 candles.
b) $500 if he sells 25 candles.
Looking at the table below, over which range of output is average revenue equal to price? Price (Dollars per unit) Quantity Demanded (Units) 15 0 15 2 15 4 15 6 15 8 15 10 15 12 15 14 15 16 15 18 a. 2 to 10 units b. 6 to 14 units c. 10 to 18 units d. Average revenue is equal to price over the entire range of output.
a. 2 to 10 units
Labor (Number of workers) Output (Units) Marginal Product (Units) 0 0 - 1 300 2 500 3 600 4 650 Looking at the table above, what is the marginal product of the first worker? a) 300 units b) 200 units c) 100 units d) 50 units
a) 300 units
Labor (Number of workers) Output (Units) 0 Marginal Product (Units) 0 1 - 300 2 500 3 600 4 650 2. Looking at the table above, what is the marginal product of the first worker? a) 300 units b) 200 units c) 100 units d) 50 units
a) 300 units
Ashlyn installed a wooden sculpture in her front yard. A positive externality arises if the sculpture a) Increases the value of other properties in the neighborhood. b) Increases the value of Ashlyn's home. c) Is visually unappealing to Ashlyn's neighbors. d) Creates a safety hazard for neighborhood children.
a) Increases the value of other properties in the neighborhood.
Total revenue equals a) price × quantity. b) price/quantity. c) (price × quantity) − total cost. d) output − input.
a) price × quantity.
Looking at the figure, at Q3 a) the marginal consumer values this product less than the social cost of producing it. b) every consumer values this product less than the social cost of producing it. c) the cost to society is equal to the value to society. d) the marginal consumer values this product more than the private cost.
a) the marginal consumer values this product less than the social cost of producing it.
Suppose a tax of $5 per unit is imposed on a good, and the tax causes the equilibrium quantity of the good to decrease from 200 units to 100 units. The tax decreases consumer surplus by $450 and decreases producer surplus by $300. The deadweight loss from the tax is a. $250. b. $500. c. $750. d. $1,000.
a. $250.
Look at the figure below: If the supply curve is S, the demand curve is D, and the equilibrium price is $100, what is the producer surplus? a. $625 b. $1250 c. $2500 d. $5000
a. $625
Assume that Zimbabwe and Portugal can switch between producing toothbrushes and producing hairbrushes at a constant rate Labor minutes needed to make 1 Toothbrush Hairbrush Zimbabwe 3 10 Portugal 5 6 Which of the following combinations of toothbrushes and hairbrushes could Zimbabwe not produce in 120 minutes? a. 5 toothbrushes and 11 hairbrushes b. 10 toothbrushes and 9 hairbrushes c. 20 toothbrushes and 6 hairbrushes d. 30 toothbrushes and 3 hairbrushes
a. 5 toothbrushes and 11 hairbrushes
If the government imposes a binding price ceiling on a market, then the price paid by buyers will a. Decrease, and the quantity sold in the market will decrease b. Increase, and the quantity sold in the market will increase c. Increase, and the quantity sold in the market will decrease d. Decrease, and the quantity sold in the market will increase
a. Decrease, and the quantity sold in the market will decrease
Which of the following is true about a monopolistically competitive firm? a. It can earn an economic profit in the short run, but not the long run. b. It can earn an economic profit in the short run and the long run. c. It can earn an economic profit in the long run, but not the short run. d. It cannot earn a economic profit in either the short or long run.
a. It can earn an economic profit in the short run, but not the long run.
Which of the following statements is correct? a. Monopolistic competition is similar to monopoly because both market structures are characterized by firms being price makers rather than price takers. b. Monopolistic competition is similar to perfect competition because both market structures are characterized by differentiated products. c. Monopolistic competition is similar to oligopoly because both market structures are characterized by strategic interaction between firms in the market. d. Monopolistic competition is similar to perfect competition because both market structures are characterized by perfectly elastic demand curves facing each firm.
a. Monopolistic competition is similar to monopoly because both market structures are characterized by firms being price makers rather than price takers.
Which of the following conditions is characteristic of a monopolistically competitive firm in both the short run and the long run? a. P > MC b. MC = ATC c. P < MR d. P = ATC
a. P > MC
Suppose the state of Rhode Island passes a law that increases the tax on beer. As a result, beer consumers who live in Rhode Island start purchasing their beer in surrounding states. Which of the following principles does this best illustrate? a. People respond to incentives. b. Rational people think at the margin. c. Trade can make everyone better off. d. Markets are usually a good way to organize economic activity.
a. People respond to incentives.
Look at the figure below: Suppose the government imposes a tax of (P'-P'''). The area measured by K+L represents a. Tax revenue b. Consumer surplus before the tax c. Producer surplus after the tax d. Total surplus before the tax
a. Tax revenue
Suppose that we are analyzing the market for pancakes. What will happen with the equilibrium price and quantity of pancakes if the price of syrup, a complement, decreases? a. The equilibrium price of pancakes will increase, the equilibrium quantity will increase b. The equilibrium price of pancakes will decrease, the equilibrium quantity will increase c. The equilibrium price of pancakes will increase, the equilibrium quantity will decrease d. The equilibrium price of pancakes will decrease, the equilibrium quantity will decrease
a. The equilibrium price of pancakes will increase, the equilibrium quantity will increase
Which of the following is a disadvantage of government provision of a public good? a. The government lacks information about the value people place on the good. b. The government does not provide enough of any public good. c. The private sector can provide all public goods at a lower cost. d. There are no disadvantages of government provision of a public good.
a. The government lacks information about the value people place on the good.
Assume that Celia and John can switch between producing bread and wine at a constant rate. Labor hours needed to make 1 Bottle of wine Loaf of bread Celia 2 1.5 John 3 1 Assume that Celia and John each work 24 hours. What happens to total production if instead of each person spending 12 hours producing each good, Celia spends 18 hours producing wine and 6 hours producing bread and John spends 6 hours producing wine and 18 hours producing bread? a. The total production of bread and wine each rise. b. The total production of bread rises and the total production of wine falls. c. The total production of bread falls and the total production of wine rises. d. The total production of bread and wine each fall
a. The total production of bread and wine each rise.
Dee is an accomplished actress and a homeowner who pays a landscaper to maintain her lawn rather than do it herself. Dee has determined that she can earn more in the hour it would take her to work on her lawn than she must pay her landscaper. This scenario is an example of which principle of economics? a. Trade can make everyone better off. b. Markets are usually a good way to organize economic activity. c. Governments can sometimes improve market outcomes. d. Prices rise when the government prints too much money.
a. Trade can make everyone better off.
An economic model is: a. a simplified representation of some aspect of the economy. b. a computer program that predicts the future of the economy. c. a mechanical machine that replicates the functioning of the economy. d. a fully detailed, realistic description of the economy.
a. a simplified representation of some aspect of the economy.
In the figure above, the vertical distance between points E and F represents a tax in the market. The imposition of the tax causes the price paid by buyers to a. decrease by $3. b. increase by $3. c. decrease by $2. d. increase by $2.
a. decrease by $3.
The circular-flow diagram illustrates that, in markets for the factors of production, a. households are sellers, and firms are buyers. b. households are buyers, and firms are sellers. c. households and firms are both buyers. d. households and firms are both sellers.
a. households are sellers, and firms are buyers.
For a large firm that produces and sells automobiles, which of the following costs would be a variable cost? a) The $20 million payment that the firm pays each year for accounting services b) The cost of the steel that is used in producing automobiles c) The rent that the firm pays for office space in a suburb of St. Louis d) The cost of internet advertising incurred each year
b) The cost of the steel that is used in producing automobiles
You are offered a free ticket to see the Chicago Cubs play the Chicago White Sox at Wrigley Field. Assume the ticket has no resale value. Willie Nelson is performing on the same night, and his concert is your next-best alternative activity. Tickets to see Willie Nelson cost $40. On any given day, you would be willing to pay up to $50 to see and hear Willie Nelson perform. Assume there are no other costs of seeing either event. Based on this information, at a minimum, how much would you have to value seeing the Cubs play the White Sox to accept the ticket and go to the game? a. $0 b. $10 c. $40 d. $50
b. $10
Consider Miray's decision to go to college. If she goes to college, he will spend $24,000 on tuition, $12,000 on room and board, and $1,900 on books. If she does not go to college, she will earn $16,000 working in a store and spend $8,000 on room and board. Miray's cost of going to college is: a. $37,900 b. $45,900 c. $53,900 d. $61,900
b. $45,900
The Occupational Safety and Health Administration (OSHA) has determined that the probability of a worker dying from exposure to a hazardous chemical used in the production of fertilizer is 0.008. The cost of imposing a regulation that would ban the chemical is $31 million. If the value of a human life is equal to $8 million, how many people must the policy affect in order for the benefits to exceed the costs? a. 248 b. 485 c. 3,101 d. 3,876
b. 485
Which of the following demonstrates the law of demand? a. After Roberto got a raise at work, he bought more pretzels at $1.50 per pretzel than he did before his raise. b. Benjamin buys fewer muffins at $0.75 per muffin than at $1 per muffin, other things equal. c. Ashlyn buys more donut holes at $0.25 per donut hole than at $0.50 per donut hole, other things equal. d. Tiana buys fewer Snickers at $0.60 per candy bar after the price of M&Ms falls to $0.50 per bag.
b. Benjamin buys fewer muffins at $0.75 per muffin than at $1 per muffin, other things equal.
The Pennsylvania Turnpike is a tolled freeway running through the state of Pennsylvania. Motorists must pay tolls at various points along the Turnpike based on the distance they traveled on the freeway. Suppose that despite the tolls, many motorists in the urban areas use the Turnpike causing traffic to slow during peak times. What type of good would the Turnpike be classified as in this case? a. Private good b. Club good c. Common resource d. Public good
b. Club good
Look at the figure below: When the price falls from P2 to P1, producer surplus a. Decreases by an amount equal to C b. Decreases by an amount equal to A+B c. Decreases by an amount equal to A+C d. Increases by an amount equal to A+B
b. Decreases by an amount equal to A+B
Which of the following graphs illustrates the demand curve most likely faced by a firm in a monopolistically competitive market? a. Graph (a) b. Graph (b) c. Graph (c) d. Graph (d)
b. Graph (b)
Look at the figure below The price ceiling shown a. Causes a shortage of 60 units of the good b. Makes it necessary for sellers to ration the good using a mechanism other than price c. Is not binding because it is set below the equilibrium price d. Causes a shortage of 30 units of the good
b. Makes it necessary for sellers to ration the good using a mechanism other than price
When a tax is placed on the sellers of a product, buyers pay a. More, and sellers receive more than they did before the tax. b. More, and sellers receive less than they did before the tax. c. Less, and sellers receive more than they did before the tax. d. Less, and sellers receive less than they did before the tax.
b. More, and sellers receive less than they did before the tax.
A likely example of substitute goods for most people would be: a. Tennis balls and tennis rackets b. Televisions and subscriptions to streaming services c. Coffee and sugar d. Iced tea and lemonade
b. Televisions and subscriptions to streaming services
Suppose oil producers get new information telling them the future price of oil is likely to be lower than they originally thought. What will happen to the equilibrium price and quantity in the current market for oil? a. The equilibrium price of oil will increase, the equilibrium quantity will increase b. The equilibrium price of oil will decrease, the equilibrium quantity will increase c. The equilibrium price of oil will increase, the equilibrium quantity will decrease d. The equilibrium price of oil will decrease, the equilibrium quantity will decrease
b. The equilibrium price of oil will decrease, the equilibrium quantity will increase
Which of the following is not a typical solution to the "Tragedy of the Commons?" a. Taxing the use of the common resource b. Turning the common resource into a club good c. Turning the common resource into a private good d. Regulating the use of the common resource
b. Turning the common resource into a club good
If a competitive firm is currently producing a level of output at which marginal cost exceeds marginal revenue, then a. a one-unit increase in output will increase the firm's profit. b. a one-unit decrease in output will increase the firm's profit. c. total revenue exceeds total cost. d. total cost exceeds total revenue.
b. a one-unit decrease in output will increase the firm's profit.
In monopolistically competitive markets, free entry and exit suggests that a. the market structure will eventually be characterized by perfect competition in the long run. b. all firms earn zero economic profits in the long run. c. some firms will be able to earn economic profits in the long run. d. some firms will be forced to incur economic losses in the long run.
b. all firms earn zero economic profits in the long run.
For a monopolistically competitive firm, a. marginal revenue and price are the same. b. at the profit-maximizing quantity of output, marginal revenue equals marginal cost. c. at the profit-maximizing quantity of output, price equals marginal cost. d. at the profit-maximizing quantity of output, price equals the minimum of average total cost.
b. at the profit-maximizing quantity of output, marginal revenue equals marginal cost.
Suppose that in a particular market, the supply curve is highly inelastic and the demand curve is highly elastic. If a tax is imposed in this market, then the a. sellers will bear a greater burden of the tax than the buyers. b. buyers will bear a greater burden of the tax than the sellers. c. buyers and sellers are likely to share the burden of the tax equally. d. buyers and sellers will not share the burden equally, but it is impossible to determine who will bear the greater burden of the tax without more information.
b. buyers will bear a greater burden of the tax than the sellers.
In addition to tax payments, the two other primary costs that a tax system inevitably imposes on taxpayers are: a. deadweight losses and frustration with the political system. b. deadweight losses and administrative burdens. c. administrative burdens and tax-preparation costs. d. administrative burdens and the risk of punishment for failure to comply with tax laws.
b. deadweight losses and administrative burdens.
A point inside the production possibilities frontier is: a. efficient but not feasible. b. feasible but not efficient. c. both efficient and feasible. d. neither efficient nor feasible.
b. feasible but not efficient.
For any competitive market, the supply curve is closely related to the a. preferences of consumers who purchase products in that market. b. firms' costs of production in that market. c. income tax rates of consumers in that market. d. interest rates on government bonds.
b. firms' costs of production in that market.
A firm cannot price discriminate if a. it has declining marginal revenue. b. it operates in a competitive market. c. buyers only reveal the price they are willing to pay for the product. d. it has a constant marginal cost.
b. it operates in a competitive market.
On hot summer days, electricity-generating capacity is sometimes stretched to the limit. At these times, electric companies may ask people to voluntarily cut back on their use of electricity. An economist would suggest that a. every electric customer has an incentive to prevent the system from overloading, so this voluntary approach is the most efficient. b. it would be more efficient if the electric company raised its rates for electricity at peak times. c. it would be more efficient to have a lottery to decide who had to cut back their use of electricity at peak times. d. it would be more efficient to force everyone to cut their usage of electricity by the same amount.
b. it would be more efficient if the electric company raised its rates for electricity at peak times.
A public television broadcast is an example of a good that is a. private. b. not rival in consumption. c. social. d. excludable.
b. not rival in consumption.
A free rider is a person who a. will only purchase a product on sale. b. receives the benefit of a good but avoids paying for it. c. can produce a good at no cost. d. rides public transit regularly.
b. receives the benefit of a good but avoids paying for it.
A monopoly is a market with one a. seller, and that seller is a price taker. b. seller, and that seller sets the price. c. buyer, and that buyer is a price taker. d. buyer, and that buyer sets the price.
b. seller, and that seller sets the price.
Ryzard decides to open his own business and earns $60,000 in accounting profit the first year. When deciding to open his own business, he withdrew $20,000 from his savings, which earned 6 percent interest. He also turned down three separate job offers with annual salaries of $30,000, $40,000, and $45,000. What is Ryzard's economic profit from running his own business? a) $18,800 b) $58,800 c) $13,800 d) $28,800
c) $13,800
A firm's opportunity costs of production are equal to its a) explicit costs only. b) implicit costs only. c) explicit costs + implicit costs. d) explicit costs + implicit costs + total revenue.
c) explicit costs + implicit costs.
The demand curve for gasoline slopes downward and the supply curve for gasoline slopes upward. The production of the 200th gallon of gasoline entails the following: • a private cost of $3.03; • a social cost of $3.23; • a value to consumers of $3.39. The production of the 200th gallon of gasoline entails an: a) external cost of $0.16. b) external cost of $0.20. c) external benefit of $0.16. d) external benefit of $0.20.
c) external benefit of $0.16.
Bubba is a shrimp fisherman who could earn $5,000 as a fishing tour guide. Instead, he is a full-time shrimp fisherman. In calculating the economic profit of his shrimp business, the $5,000 that Bubba gave up is counted as part of the shrimp business's a) total revenue. b) explicit costs. c) implicit costs. d) marginal costs.
c) implicit costs.
Suppose that a "doggie day care" firm uses only two inputs: hourly workers (labor) and a building (capital). In the short run, the firm most likely considers a) both labor and capital to be fixed. b) both labor and capital to be variable. c) labor to be variable and capital to be fixed. d) capital to be variable and labor to be fixed.
c) labor to be variable and capital to be fixed.
If a sawmill creates too much noise for local residents, a) noise restrictions will force residents to move out of the area. b) a sense of social responsibility will cause owners of the mill to reduce noise levels. c) the government can raise economic well-being through noise-control regulations. d) the government should avoid intervening because the market will always allocate resources efficiently.
c) the government can raise economic well-being through noise-control regulations.
Leonard, Sheldon, Raj, and Penny each like to attend comic-book conventions. The price of a ticket to a convention is $50. Leonard values a ticket at $70, Sheldon at $65, Raj at $60, and Penny at $55. Suppose that if the government taxes tickets at $5 each, the price will rise to $55. A consequence of the tax is that consumer surplus shrinks by a. $50 and tax revenues increase by $20, so there is a deadweight loss of $30. b. $30 and tax revenues increase by $20, so there is a deadweight loss of $10. c. $20 and tax revenues increase by $20, so there is no deadweight loss. d. $50 and tax revenues increase by $20, so there is no deadweight loss.
c. $20 and tax revenues increase by $20, so there is no deadweight loss.
The figure below depicts a situation in a monopolistically competitive market. How much profit will the monopolistically competitive firm earn in this situation? a. $0 b. $2,100 c. $600 d. $900
c. $600
Look at the table below: Price (dollars per unit) Quantity demanded (unit) 15 100 20 Q1 If the law of demand applies to this good, then Q1 could not be: a. 80 b. 90 c. 120 d. 50
c. 120
Consider the town of Springfield with only three residents, Sophia, Amber, and Cedric. The three residents are trying to determine how large, in acres, they should build the public park. The following table shows each resident's willingness to pay for each acre of the park. Acres Willingness to pay (dollars) Sophia Amber Cedric 1 10 24 6 2 8 18 5 3 6 14 4 4 3 8 3 5 1 6 2 6 0 4 1 7 0 2 0 Suppose the cost to build the park is $24 per acre and that the residents have agreed to split the cost of building the park equally. If the residents vote to determine the size of park to build, basing their decision solely on their own willingness to pay (and trying to maximize their own surplus), what is the largest park size for which the majority of residents would vote "yes?" a. 0 acres b. 1 acre c. 2 acres d. 3 acres
c. 2 acres
Suppose a monopolist faces the following demand curve: Price (Dollars per unit) Quantity (Units) 8 300 7 400 6 500 5 600 4 700 3 800 2 900 1 1,000 The monopolist has fixed costs of $1,000 and has a constant marginal cost of $2 per unit. If the monopolist were able to perfectly price discriminate, how many units would it sell? a. 400 b. 500 c. 900 d. 4,200
c. 900
Suppose that the government wants to encourage Americans to exercise more, so it imposes a binding price ceiling on the market for in-home treadmills. As a result, a. The demand for treadmills will increase b. The supply of treadmills will decrease c. A shortage of treadmills will develop d. A surplus of treadmills will develop
c. A shortage of treadmills will develop
Which of the following is not an argument made by critics of advertising? a. Advertising manipulates people's tastes. b. Advertising impedes competition. c. Advertising promotes economies of scale. d. Advertising increases the perception of product differentiation.
c. Advertising promotes economies of scale.
Look at the figure above. Suppose a tax of $2 per unit is imposed on this market. What will be the new equilibrium quantity in this market? a. Less than 60 units b. 60 units c. Between 60 units and 100 units d. Greater than 100 units
c. Between 60 units and 100 units
Which of the following statements is correct? a. Equity is more important than efficiency as a goal of the tax system. b. Efficiency is more important than equity as a goal of the tax system. c. Both equity and efficiency are important goals of the tax system. d. Neither equity nor efficiency is an important goal of the tax system.
c. Both equity and efficiency are important goals of the tax system.
Look at the table below Buyer Willingness to pay (dollars) Calvin 150 Sam 135 Andrew 115 Sasha 100 If the price of the product is $110, then who would be willing to purchase the product? a. Calvin b. Calvin and Sam c. Calvin, Sam, and Andrew d. Calvin, Sam, Andrew, and Sasha
c. Calvin, Sam, and Andrew
If the government removes a binding price floor from a market, then the price paid by buyers will a. Increase, and the quantity sold in the market will increase b. Increase, and the quantity sold in the market will decrease c. Decrease, and the quantity sold in the market will increase d. Decrease, and the quantity sold in the market will decrease
c. Decrease, and the quantity sold in the market will increase
For each of the three potential buyers of apples, the table displays the willingness to pay for Bob, Sasha, and Ava, who are the only three buyers of apples. Willingness to pay (dollars) First apple Second apple Third apple Bob 2.00 1.50 0.75 Sasha 1.50 1.00 0.60 Ava 0.75 0.25 0.00 If the market price of an apple increases from $0.80 to $1.05, then consumer surplus a. Increases by $0.75 b. Decreases by $0.95 c. Decreases by $0.75 d. Decreases by $1.00
c. Decreases by $0.75
Which of the following is usually true about government-provided goods? a. These goods have a zero opportunity cost. b. These goods are not scarce. c. People do not have to pay an explicit fee to enjoy these goods. d. The invisible hand is at work to ensure these goods are provided in the market
c. People do not have to pay an explicit fee to enjoy these goods.
Which of the following is not held constant in a demand schedule? a. Income b. Tastes c. Price d. Expectations
c. Price
Which of the following is an example of a positive, as opposed to normative, statement? a. If welfare payments increase, the world will be a better place. b. The income tax rate should be increased to offset the budget deficit. c. Prices rise when the government prints too much money. d. Antitrust laws should be used to prevent further concentration in the wireless telephone service market.
c. Prices rise when the government prints too much money.
Suppose the equilibrium price of a stick of deodorant is $4, and the government imposes a price floor of $5 per stick. As a result of this price floor, the a. Demand curve for deodorant shifts to the left b. Supply curve for deodorant shifts to the right c. Quantity demanded of deodorant decreases, and the quantity of deodorant that firms want to supply increases d. Quantity supplied of deodorant stays the same
c. Quantity demanded of deodorant decreases, and the quantity of deodorant that firms want to supply increases
Which of the following will cause a decrease in consumer surplus? a. An increase in the number of sellers of the good b. A technological improvement in the production of the good c. A decrease in the production cost of the good d. The imposition of a binding price floor in the market
d. The imposition of a binding price floor in the market
Assume Ren buys coffee beans in a competitive market. It follows that: a. Ren has a limited number of sellers from which to buy coffee beans. b. Ren will negotiate with sellers whenever she buys coffee beans. c. Ren cannot influence the price of coffee beans even if she buys a large quantity of them. d. Ren might have trouble finding coffee beans at her local store.
c. Ren cannot influence the price of coffee beans even if she buys a large quantity of them.
Suppose there is currently a tax of $80 per ticket on airline tickets. Sellers of airline tickets are required to pay the tax to the government. If the tax is reduced from $80 per ticket to $64 per ticket, then the a. Demand curve will shift upward by $16, and the price paid by buyers will decrease by less than $16. b. Demand curve will shift upward by $16, and the price paid by buyers will decrease by $16. c. Supply curve will shift downward by $16, and the effective price received by sellers will increase by less than $16. d. Supply curve will shift downward by $16, and the effective price received by sellers will increase by $16.
c. Supply curve will shift downward by $16, and the effective price received by sellers will increase by less than $16.
Suppose the government imposes a 20-cent tax on the sellers of artificially sweetened beverages. The tax would shift a. Demand, raising both the equilibrium price and quantity in the market for artificially sweetened beverages. b. Demand, lowering the equilibrium price and raising the equilibrium quantity in the market for artificially sweetened beverages. c. Supply, raising the equilibrium price and lowering the equilibrium quantity in the market for artificially sweetened beverages. d. Supply, lowering the equilibrium price and raising the equilibrium quantity in the market for artificially sweetened beverages.
c. Supply, raising the equilibrium price and lowering the equilibrium quantity in the market for artificially sweetened beverages.
What happens to the total surplus in a market when the government imposes a tax? a. Total surplus increases by the amount of the tax. b. Total surplus increases but by less than the amount of the tax. c. Total surplus decreases. d. Total surplus is unaffected by the tax.
c. Total surplus decreases.
Governments can improve market outcomes for a. public goods but not common resources. b. common resources but not public goods. c. both public goods and common resources. d. neither public goods nor common resources.
c. both public goods and common resources.
The product-variety externality is associated with the a. producer surplus that accrues to incumbent firms in a monopolistically competitive industry. b. loss of consumer surplus from exposure to additional advertising. c. consumer surplus that is generated from the introduction of a new product. d. opportunity cost of firms exiting a monopolistically competitive industry.
c. consumer surplus that is generated from the introduction of a new product.
If a firm in a competitive market doubles its number of units sold, total revenue for the firm will a. more than double. b. increase but by less than double. c. double. d. may increase or decrease depending on the price elasticity of demand.
c. double.
A monopolist's profits with price discrimination will be a. lower than if the firm charged a single, profit-maximizing price. b. the same as if the firm charged a single, profit-maximizing price. c. higher than if the firm charged just one price because the firm will capture more consumer surplus. d. higher than if the firm charged a single price because the costs of selling the good will be lower.
c. higher than if the firm charged just one price because the firm will capture more consumer surplus.
The U.S. tax burden is a. about the same as most European countries. b. higher than most European countries. c. lower than most European countries. d. higher than all European countries.
c. lower than most European countries.
One tax system is less efficient than another if it a. places a lower tax burden on lower-income families than on higher-income families. b. places a higher tax burden on lower-income families than on higher-income families. c. raises the same amount of revenue at a higher cost to taxpayers. d. raises less revenue at a lower cost to taxpayers.
c. raises the same amount of revenue at a higher cost to taxpayers.
Resources are a. scarce for households but plentiful for economies. b. plentiful for households but scarce for economies. c. scarce for households and scarce for economies. d. plentiful for households and plentiful for economies.
c. scarce for households and scarce for economies.
All of the following topics fall within the study of microeconomics EXCEPT: a. the role of Microsoft's market power in the pricing of software. b. the effectiveness of antipoverty programs in reducing homelessness. c. the influence of the government budget deficit on economic growth. d. the impact of cigarette taxes on the smoking behavior of teenagers.
c. the influence of the government budget deficit on economic growth.
Zaid's Tent Company has total fixed costs of $300,000 per year. The firm's average variable cost is $65 for 10,000 tents. At that level of output, the firm's average total costs equal a) $65 b) $75 c) $85 d) $95
d) $95
As Bubba's Bubble Gum Company adds workers while using the same amount of machinery, some workers may be underutilized because they have little work to do while waiting in line to use the machinery. When this occurs, Bubba's Bubble Gum Company encounters a) economies of scale. b) diseconomies of scale. c) increasing marginal product. d) diminishing marginal product.
d) diminishing marginal product.
Which of the following is not an example of price discrimination? a. A zoo charges a lower price for a child's ticket than for an adult's ticket. b. A design school rebates part of the cost of tuition in the form of financial aid for underprivileged students. c. A local supermarket chain offers a "buy three get one free" deal. d. A bakery charges a higher price for brownies than for cookies.
d. A bakery charges a higher price for brownies than for cookies.
Which of the following statements best represents the principle represented by the adage, "There ain't no such thing as a free lunch"? a. Bo can go swimming only if he takes his brother with him. b. Jada is starving and homeless. c. Alivia must put gas in her truck before she can drive to school. d. Benjamin must decide between going to Florida or Brazil for summer vacation.
d. Benjamin must decide between going to Florida or Brazil for summer vacation.
In the absence of taxes, Carlos would prefer to purchase a large fishing boat with a 75 hp motor. The government has recently decided to place a tax on boats with 75 hp motors or higher. If Carlos decides to purchase a smaller boat with a 50 hp motor as a result of the tax, which of the following statements is correct? a. Other people who choose to purchase large boats will incur the cost of the deadweight loss of the tax. b. There are no deadweight losses as long as some people still choose to purchase large boats. c. The deadweight loss will decrease as a result of an increases in Carlos's consumer surplus. d. Carlos is worse off, and his loss of welfare is part of the deadweight loss of the tax.
d. Carlos is worse off, and his loss of welfare is part of the deadweight loss of the tax.
Look at the figure below When a certain price control is imposed on this market, the resulting quantity of the good that is actually bought and sold is such that buyers are willing and able to pay a maximum of P1 dollars per unit for that quantity and sellers are willing and able to accept a minimum of P2 dollars per unit for that quantity. If P1 − P2 = $3, then the price control is a. Only a price ceiling of $3.00. b. Only a price ceiling of $6.00. c. Only a price floor of $6.00. d. Either a price ceiling of $3.00 or a price floor of $6.00.
d. Either a price ceiling of $3.00 or a price floor of $6.00.
Erin would be willing to pay as much as $100 per week to have her house cleaned. Ernesto's opportunity cost of cleaning Erin's house is $70 per week. Assume Erin is required to pay a tax of $40 when she hires someone to clean her house for a week. Which of the following is correct? a. Erin will now clean her own house b. Ernesto will continue to clean Erin's house, but his producer surplus will decline c. Total economic welfare (consumer surplus plus producer surplus plus tax revenue) will increase d. Erin will continue to hire Ernesto to clean her house, but her consumer surplus will decline
d. Erin will continue to hire Ernesto to clean her house, but her consumer surplus will decline
A decrease in the price of a good will a. Increase demand b. Decrease demand c. Decrease quantity demanded d. Increase quantity demanded
d. Increase quantity demanded
Consider two individuals, Tanek and Kalene each of whom knits sweaters and makes hotdogs, respectively. The gains from trade between Tanek and Kalene are most obvious in which of the following cases? a. Tanek is very good at knitting sweaters and at making hotdogs, but Kalene's skills in both of these activities are very poor. b. Tanek and Kalene both are very good at making hotdogs, but neither has the necessary skills to knit sweaters. c. Tanek's cooking and knitting skills are very poor, and Kalene's cooking and knitting skills are also very poor. d. Tanek's skills are such that he can only knit sweaters, and Kalene's skills are such that she can only make hotdogs.
d. Tanek's skills are such that he can only knit sweaters, and Kalene's skills are such that she can only make hotdogs.
There is good weather in California where they make wine. Californian wine is a substitute for French wine. What happens with the equilibrium price and quantity in the market for French wine? a. The equilibrium price of French wine will increase, the equilibrium quantity will increase b. The equilibrium price of French wine will decrease, the equilibrium quantity will increase c. The equilibrium price of French wine will increase, the equilibrium quantity will decrease d. The equilibrium price of French wine will decrease, the equilibrium quantity will decrease
d. The equilibrium price of French wine will decrease, the equilibrium quantity will decrease
If a price ceiling is not binding, then a. There will be a surplus in the market b. There will be a shortage in the market c. The market will be less efficient than it would without the price ceiling d. There will be no effect on the market price or quantity sold
d. There will be no effect on the market price or quantity sold
The maximum price that a buyer will pay for a good is called a. Consumer surplus b. Producer surplus c. Efficiency d. Willingness to pay
d. Willingness to pay
Price discrimination a. is illegal in the United States and Europe. b. can occur in both perfectly competitive and monopoly markets. c. is illogical because it does not maximize profits. d. can maximize profits if the seller can prevent the resale of goods between customers.
d. can maximize profits if the seller can prevent the resale of goods between customers.
Competitive markets are characterized by a. a small number of buyers and sellers. b. unique products. c. the interdependence of firms. d. free entry and exit by firms.
d. free entry and exit by firms.
A monopolistically competitive firm chooses a. the quantity of output to produce, but all firms in the market agree upon a single price. b. the price, but competition in the market determines the quantity. c. the price, but output is determined by a cartel production quota. d. the quantity of output to produce, but the price of its output is determined by demand.
d. the quantity of output to produce, but the price of its output is determined by demand.
Suppose there are only two people in the world. Each person's production possibilities frontier also represents his or her consumption possibilities when a. neither person faces trade-off. b. the frontiers are straight lines. c. the frontiers are bowed out. d. they choose not to trade with one another.
d. they choose not to trade with one another.