Econ

An individual consumes only two goods, X and Y. Which of the following expressions represents the utility maximizing choice? a. MRSxy is at a maximum. b. Px/Py = money income. c. MRSxy = money income. d. MRSxy = Px/Py.

d. MRSxy = Px/Py.

Which of the following is incorrect? a. In the short run, TC = TFC + TVC. b. SMC = rate of change of short-run TVC with respect to output. c. SMC = rate of change of short-run TC with respect to output. d. AFC = TFC/q. e. AVC = TVC/q. f. None of the above.

f. None of the above.

Microeconomics is the study of: (a) the overall level of unemployment, output, and inflation in an economy. (b) how to increase our scarce resources. (c) how firms and individuals make economic choices and how those choices create markets (d) both b and c (e) both a and c

how firms and individuals make economic choices and how those choices create markets

The demand curve for a good will shift outward whenever (a) the price of the good falls. (b) consumers wish to purchase more of the good at any given price. (c) firms experience an increase in their marginal costs of production. (d) both a and b

(b) consumers wish to purchase more of the good at any given price.

What provided the "invisible hand" that Adam Smith viewed as directing resources into their most valuable uses? (a) the government (b) prices (c) firm managers (d) none of the above

(b) prices

A simultaneous increase in supply of and demand for corn in a competitive corn market must result in (a) a price increase. (b) a price decrease. (c) an increase in quantity. (d) a decrease in quantity.

(c) an increase in quantity.

The problem of scarcity (a) arises only in poor countries. (b) exists because the price of goods is too high. (c) exists because of limited resources. (d) will eventually be solved by better planning.

(c) exists because of limited resources.

Which of the following would not cause a rightward shift in the demand for taxi service in a city? (a) bus fares increase after a strike by bus drivers. (b) the population of the city increases. (c) taxi drivers must pass a competency test, and a third fail. (d) half the downtown parking lots are converted to office buildings.

(c) taxi drivers must pass a competency test, and a third fail.

Which of the following statements is a normative statement? (a) Rent controls lead to a reduction in the quality of rental housing. (b) The dairy price support program gives rise to large surpluses of milk. (c) Import quotas reduce overall economic welfare. (d) The government should increase taxes on vice goods such as alcohol and cigarettes.

(d) The government should increase taxes on vice goods such as alcohol and cigarettes.

If the prevailing price in a market were BELOW the market equilibrium price, (a) a surplus would exist. (b) the market is in equilibrium. (c) excess supply would exist. (d) a shortage would exist. (e) none of the above

(d) a shortage would exist.

The model of supply and demand developed by Alfred Marshall recognizes that price determination is dependent upon (a) production costs. (b) the willingness of consumers to pay for firms' production. (c) a central planner. (d) both a and b

(d) both a and b

When a market is in equilibrium, I. no surplus or shortage exists II. the quantity of output consumers are willing to purchase is equal to the quantity producers are willing to supply III. there is no tendency for the price or output level to change, other things being equal (a) I only (b) I and II only (c) I and III only (d) II and III only (e) I, II, and III

(e) I, II, and III

Each firm in a cartel has an incentive to chisel because market price exceeds a) marginal cost. b) average cost. c) average variable cost. d) average fixed cost.

a) marginal cost.

A widget company firm hires labor and rents machines to produce its output. The hourly wage rate is $10, and the rental rate of machines is $50. In equilibrium, the marginal product of labor is 300 units of output per period. The marginal product of machines is a. 1500 units of output per period. b. 500 units of output per period. c. 750 units of output per period. d. 1200 units of output per period.

a. 1500 units of output per period.

Which one of the following statements is false? a. AFC = MC - AVC. b. Increasing returns to scale prevail when output increases by a proportion that is greater than the proportion by which all inputs increase. c. Given q= 20(KL)1/2 as a firm's long-run production function, the short-run production function becomes q= 40L^1/2 d. TC = TFC + TVC.

a. AFC = MC - AVC.

Which of the following statements is false? a. As long as marginal cost is below average cost, average cost will be rising. b. TC = wL + vK. c. If the price of an input changes, there will be a new expansion path. d. An improvement in production technology will lower the average costs of production. e. If labor is a very important part of a firm's costs and input substitution is difficult, the production cost will rise when wage rates rise.

a. As long as marginal cost is below average cost, average cost will be rising.

_____________ benefit(s) from free trade. Which word best completes the sentence? a. Consumers b. Domestic producers c. No one d. Both consumers and domestic producers

a. Consumers

Given that the price elasticity of demand for cigarettes in the United States was estimated to be-0.35, an increase in cigarette price will cause the total spending (price times quantity) on cigarettes to a. Rise b. fall c. Remain unchanged d. rise or fall

a. Rise

Butter and margarine are called substitutes since a. an increase in the price of butter causes more margarine to be bought. b. an increase in the price of butter causes less margarine to be bought. c. an increase in the price of butter causes less butter to be bought. d. an increase in the price of margarine causes less margarine to be bought. e. an increase in income causes more of both butter and margarine to be bought.

a. an increase in the price of butter causes more margarine to be bought.

Electricity and natural gas are called substitutes since a. an increase in the price of electricity causes more natural gas to be bought. b. an increase in the price of electricity causes less natural gas to be bought. c. an increase in the price of natural gas causes less natural gas to be bought. d. an increase in income causes more of both electricity and natural gas to be bought.

a. an increase in the price of electricity causes more natural gas to be bought.

An individual consumer's marginal rate of substitution of softdrink for beer is 1/2. That is, at the current consumption choice the consumer is willing to give up half bottle of beer to get one extra can of softdrink. Suppose also that softdrink costs 75 cents per can and beer costs $2 per bottle. Then in order to maximize utility the consumer should a. buy more softdrink and less beer. b. but more beer and less softdrink. c. continue with current consumption.

a. buy more softdrink and less beer.

The demand curve facing a price-making firm is a. downward sloping to the right. b. horizontal at all output rates for the firm. c. upward sloping and then downward sloping as output is increased. d. decreasing and then increasing.

a. downward sloping to the right.

The price elasticity of demand for a linear demand curve follows the pattern (moving from high prices to low prices) a. elastic, unit elastic, inelastic. b. unit elastic, inelastic, elastic. c. inelastic, unit elastic, elastic. d. elastic, inelastic, unit elastic.

a. elastic, unit elastic, inelastic.

Everything else equal, given an upward sloping supply curve, if the market demand curve were to shift outward, producer surplus a. increases b. decreases c. does not change d. either increases or decreases.

a. increases

The deadweight loss represents a. losses in consumer and/or producer surplus that are not transferred to anyone else. b. losses in consumer and/or producer surplus that are transferred to politicians. c. transfers of consumer surplus to producers. d. transfers of producer surplus to consumers.

a. losses in consumer and/or producer surplus that are not transferred to anyone else.

When the airfare of a transatlantic air travel increases, total expenditures for the transatlantic air travel decrease. This implies that a. market demand for transatlantic air travels is elastic. b. market demand for transatlantic air travels is inelastic c. transatlantic air travel is a "normal good." d. transatlantic air travel is an "inferior good." e. none of the above .

a. market demand for transatlantic air travels is elastic.

For the case of an increasing-cost industry, supply is a. more elastic in the long run than in the short run. b. more elastic in the short run than in the long run. c. more elastic the lower the input prices. d. more inelastic in the long run than in the short run

a. more elastic in the long run than in the short run.

In an increasing cost industry, as firms enter the industry, firms' costs ____________ and as firms exit the industry, firms' costs _____________. a. rise, fall b. fall, rise c. remain constant, fall

a. rise, fall

Along the long-run supply curve of an increasing-cost industry that is characterized by perfect competition, all of the following can vary except a. the level of profits. b. the number of firms in the industry. c. input prices. d. the level of input usage.

a. the level of profits.

A price-taking firm's short-run supply curve is a. the portion of its marginal cost curve above the average variable cost curve. b. its average total cost curve. c. its average variable cost curve. d. its entire marginal cost curve. e. none of the above.

a. the portion of its marginal cost curve above the average variable cost curve.

In regulating a natural monopoly, the problem with a marginal-cost-pricing policy is that: a. the regulated firm will earn negative profits. b. the regulated firm will earn zero profits. c. the regulated firm will still earn positive profits. d. none of the above

a. the regulated firm will earn negative profits.

In the VERY short run, _____________ is/are fixed and______________ adjusts to clear the market. a. price, quantity supplied b. quantity supplied, price c. both price and quantity supplied, demand d. quantity demanded, quantity supplied

b. quantity supplied, price

Which of the following statements is false? a. In a competitive market, if the prevailing price exceeds equilibrium price, there is a tendency for the b. The slope of a market demand curve equals the price elasticity of the demand curve. c. The cross-price elasticity of demand for two complements (e.g., automobiles and gasoline) is negative. d. An increase in an individual's income without changing relative prices will shift the budget constraint

b. The slope of a market demand curve equals the price elasticity of the demand curve.

In the quasi-competitive (or competitive) model of oligopoly a) firms believe that price increases result in a very elastic demand, while price decreases result in an inelastic demand for their product. b) each firm acts as a price taker even when there are few firms in an industry. c) one dominant firm takes the reactions of all other firms into account in its output and pricing decisions. d) firms coordinate their decisions to act as a multiplant monopoly.

b) each firm acts as a price taker even when there are few firms in an industry.

In the Cournot model of duopoly, each firm assumes that its rival will _______________ its output when the firm adjusts its own output. Which word best completes the sentence? a) increase b) not change c) decrease

b) not change

A firm's total cost of producing 50 units of output is $10,000. At this output level, average fixed costs are equal to $50. It follows that the firm's average variable costs are equal to a. $120. b. $150. c. $160. d. $200. e. $250.

b. $150.

BMI company hires labor and rents machines to produce widgets. The hourly wage rate is $10, and the rental rate of machines is $15. In production equilibrium, the marginal productivity of labor is 150 units of output per period. The marginal productivity of machines is a. 200 units of output per period. b. 225 units of output per period. c. 250 units of output per period. d. 300 units of output per period.

b. 225 units of output per period.

A manufacturer of lasers reports that the marginal product of labor is 60 units of output per hour of labor and that the marginal rate of technical substitution of labor for capital is 3/2. The marginal product of capital is a. 30 units of output per hour of machine. b. 40 units of output per hour of machine. c. 60 units of output per hour of machine. d. 80 units of output per hour of machine.

b. 40 units of output per hour of machine.

Which of the following statements is false? a. A linear market demand curve has a constant slope. b. In a competitive market for mountain bikes, if the prevailing price exceeds market equilibrium price, there is tendency for the quantity demanded for mountain bikes to go down. c. A decrease in an individual's income without changing relative prices will shift the budget constraint inward in a parallel way. d. An individual's demand curve represents the various quantities that a consumer is willing to purchase of a good at various price levels. e. Market demand curve for wheat is the horizontal summation of individuals' demand curves for wheat.

b. In a competitive market for mountain bikes, if the prevailing price exceeds market equilibrium price, there is tendency for the quantity demanded for mountain bikes to go down.

A firm's production function is given by q = 4KL, where q is output per week and K and L are the quantities of capital and labor employed per week. Which of the following combination pairs of K and L lie on the same isoquant? a. K = 2, L = 6 and K = 4, L = 4 b. K = 3, L = 4 and K = 6, L = 2 c. K = 5, L = 2 and K = 1, L = 9 d. all of the above

b. K = 3, L = 4 and K = 6, L = 2 [q=4(3)(4) =12, q=4(6)(2)=12]

Which of the following statements is false? a. Proportionate changes in all prices and income will not affected consumption choices. b. The cross-price elasticity of demand for coffee and tea is negative. c. By examining the income elasticity of demand for a good, one can determine whether the good is inferior or normal. d. The slope of a consumer's indifference curve measures the rate at which the consumer is willing to substitute one good for another.

b. The cross-price elasticity of demand for coffee and tea is negative.

A simultaneous decrease in the supply and demand of cauliflower must result in a. an increase in quantity. b. a decrease in quantity. c. an increase in price. d. a decrease in price.

b. a decrease in quantity.

Automobiles and gasoline are called complements since a. an increase in the price of automobiles causes more gasoline to be bought. b. an increase in the price of automobiles causes less gasoline to be bought. c. and increase in the price of gasoline causes less gasoline to be bought. d. an increase in income cause more of both automobiles and gasoline to be bought.

b. an increase in the price of automobiles causes less gasoline to be bought.

To minimize losses, a competitive firm should shut down if the price is less than a. average cost. b. average variable cost. c. total cost. d. marginal cost. e. average total fixed cost.

b. average variable cost.

Suppose an individual's MRS of steak for beer is 3:1. That is, at the current consumption choices he or she is willing to give up 3 beers to get an extra steak. Suppose also that the price of a steak is $12 and a beer is $3. Then in order to increase utility the individual should a. buy more steak and less beer. b. but more beer and less steak. c. continue with current consumption.

b. but more beer and less steak.

A budget line depicts a. combinations of goods which provide the consumer the same marginal rate of substitution. b. combinations of goods which are affordable for the consumer. c. combinations of goods which provide the consumer the same utility. d. combinations of goods which provide the consumer the same marginal utility. e. none of the above

b. combinations of goods which are affordable for the consumer.

The price elasticity of demand for a commodity is -2. If the quantity demanded for the commodity increased by 10 percent, then the price a. increased by 5 percent. b. decreased by 5 percent. c. increased by 10 percent. d. decreased by 10 percent.

b. decreased by 5 percent.

Everything else equal, when the market supply curve shifts inward, consumer surplus a. increases. b. decreases. c. does not change. d. either increases or decreases.

b. decreases.

In a decreasing-cost industry, as firms enter the industry, firms' costs ____________ and as firms exit the industry, firms' costs _____________. a. rise, fall b. fall, rise c. remain constant, fall

b. fall, rise

If market demand for owner-occupied housing is elastic, an increase in price will cause the total spending (price times quantity) to a. rise. b. fall. c. remain unchanged. d. change in a way that cannot be determined.

b. fall.

Some studies showed cocaine is an inferior good. If income were to rise, ceteris paribus, the equilibrium price of cocaine would a. rise. b. fall. c. remain unchanged. d. a or c. e. b or c.

b. fall.

Increasing returns to scale in production means a. more than twice as much of all inputs would be required to double output. b. less than twice as much of all inputs would be required to double output. c. more than twice as much of only one input would be required to double output. d. isoquants must be linear. e. none of the above.

b. less than twice as much of all inputs would be required to double output.

The slope of the total product curve measures a. the marginal rate of technical substitution. b. marginal product. c. average product. d. the maximum average product. e. minimum product.

b. marginal product.

The marginal product of an input is defined to be: a. the additional output that can be produced by increasing all inputs by one unit. b. the additional output that can be produced by increasing the input by one unit, holding all other inputs constant. c. the total output produced divided by the number of units of the input. d. the additional revenue that is generated by increasing the input by one unit.

b. the additional output that can be produced by increasing the input by one unit, holding all other inputs constant.

If a firm is producing an output level for which marginal revenue is less than marginal cost, a. the firm can increase profits by producing and selling more output. b. the firm can increase profits by producing and selling less output. c. the firm is maximizing profits. d. whether or not the firm is maximizing profits cannot be determined.

b. the firm can increase profits by producing and selling less output.

The short-run market supply curve of a good in a perfectly competitive market is derived from: a. the horizontal summation of each firm's individual supply curve b. the horizontal summation of each firm's marginal cost curve above the shutdown price c. profit-maximizing output decisions by firms d. both a and c e. all of the above

b. the horizontal summation of each firm's marginal cost curve above the shutdown price

In a Nash equilibrium of Cournot duopoly each firm chooses an output level that a) maximizes joint profits. b) maximizes the price received. c) maximizes profits given what the other firm produces. d) maximizes revenue given what the other firm produces.

c) maximizes profits given what the other firm produces.

In the price leadership model of oligopoly, a) firms believe that price increases result in a very elastic demand, while price decreases result in an inelastic demand for their product. b) each firm acts as a price taker even when there are few firms in an industry. c) one dominant firm takes the reactions of all other firms into account in its output and pricing decisions. d) firms coordinate their decisions to act as a multiplant monopoly.

c) one dominant firm takes the reactions of all other firms into account in its output and pricing decisions.

All of the following are problems associated with maintaining a cartel except a) cartels are illegal. b) a large amount of information is needed to coordinate a cartel. c) profits are not maximized by a cartel so it will evolve into a monopoly. d) each member of the cartel has an incentive to "chisel" by expanding output.

c) profits are not maximized by a cartel so it will evolve into a monopoly.

The marginal product of labor in the production of computer chips is 50 chips per hour. The marginal product of capital is 100. The marginal rate of technical substitution of hours of labor for hours of machine capital is? a. 1. b. 2. c. 1/2 d. 50. e. 100. f. none of the above.

c. 1/2. (RTSL for K = MPL/MPK = 50/100 = 1/2)

A firm's production function is given by q = 2KL, where K is capital and L is labor. What is the marginal product of labor when 4 units of capital are employed? a. 4. b. 6. c. 8. d. none of the above.

c. 8. [ q = 2(4)L = 8L. MPL = The slope of the product function q=8L. Thus, MPL = 8.]

Which of the following statements is incorrect for an inferior good? a. An inferior good may have an upward-sloping demand curve. b. The income elasticity of demand for an inferior good is negative. c. An inferior good is an economic "bad." d. All of the above.

c. An inferior good is an economic "bad."

Which of the following statements is false? a. In a competitive market, if the prevailing price is less than the equilibrium price, there is a tendency for the price to increase. b. An decrease in an individual's income without changing relative prices will shift the budget constraint inward (i.e., leftward) in a parallel way. c. For an acreage reduction program to effectively raise the aggregate income earned by corn farmers, the market demand for corn must be elastic.

c. For an acreage reduction program to effectively raise the aggregate income earned by corn farmers, the market demand for corn must be elastic.

Suppose a firm's production function is given by: q = 7KL, where q is output per week and K and L are the quantities of capital and labor employed per week. Which of the following combination pairs of K and L lie on the same isoquant? a. K = 2, L = 7 and K = 5, L = 4 b. K = 3, L = 7 and K = 8, L = 2 c. K = 4, L = 4 and K = 8, L = 2 d. all of the above

c. K = 4, L = 4 and K = 8, L = 2

Which of the following is the most accurate description of conditions that would exist in long-run equilibrium in a competitive industry? a. MC = MR > P = AC. b. MC = MR < AC = P. c. MC = MR = P = AC. d. MC < AC < P.

c. MC = MR = P = AC.

Which of the following statements is false? a. An individual's demand curve represents the various quantities that a consumer is willing to purchase of a good at various price levels of the good. b. The cross-price elasticity of demand for two substitutes (e.g., coffee and tea) is positive. c. The slope of the budget constraint depicts the rate at which the consumer is willing to substitute one good for another.

c. The slope of the budget constraint depicts the rate at which the consumer is willing to substitute one good for another.

The price elasticity of demand for imports is -0.50. What percentage change in price would bring about an increase in the demand for imports of 10 percent? a. a 10 percent decrease in the price of imports. b. a 10 percent increase in the price of imports. c. a 20 percent decrease in the price of imports. d. a 20 percent increase in the price of imports. e. a 5 percent increase in the price of imports.

c. a 20 percent decrease in the price of imports.

When average cost is falling, marginal cost is ____________ and when average cost is rising, marginal cost is _________________. a. falling, above average cost b. above average cost, below average cost c. below average cost, above average cost d. both a and c

c. below average cost, above average cost

If price is less than marginal cost of production at its current level of output per month, a price-taking firm striving to maximize profits must a. increase its price. b. increase its output. c. decrease its output. d. decrease its price.

c. decrease its output.

The ratio of total productivity to the total quantity of a variable input being used is a. equal to marginal physical productivity of the input. b. constant as employment levels of the input vary. c. equal to average physical productivity of the input. d. equal to the marginal rate of technical substitution.

c. equal to average physical productivity of the input.

The long-run total cost to Firm Beta of producing 100 units of output is $3000. If Firm Beta's production function is characterized by decreasing returns to scale, then firm Beta's long-run total cost of producing 200 units of output would be: a. equal to $6,000 b. less than $6,000 c. greater than $6,000 d. the relative cost of producing 200 units of output cannot be determined

c. greater than $6,000

The substitution effect of a price decrease will a. increase the consumption of normal goods only. b. decrease the consumption of normal goods only. c. increase the consumption of both normal and inferior goods. d. decrease the consumption of both normal and inferior goods. e. none of the above.

c. increase the consumption of both normal and inferior goods.

Suppose you are the owner of Doggie 'D', a dog grooming operation. Presently, 20 dogs are groomed daily, for which the only inputs required are scissors and groomers. If, upon doubling the number of scissors and groomers, you are able to groom 42 dogs daily, your dog grooming production function exhibits: a. increasing marginal productivity b. constant returns to scale c. increasing returns to scale d. decreasing returns to scale

c. increasing returns to scale

The price elasticity of demand for a linear demand curve follows the pattern (moving from low prices to high prices) a. elastic, unit elastic, inelastic. b. unit elastic, inelastic, elastic. c. inelastic, unit elastic, elastic. d. elastic, inelastic, unit elastic.

c. inelastic, unit elastic, elastic.

The short-run supply curve for a price-taking firm is given by: a. its entire short-run marginal cost curve. b. its short-run marginal cost curve above minimum average total cost. c. its short-run marginal cost curve above minimum average variable cost. d. the positively sloped portion of its average cost curve. e. its short-run marginal cost curve above average fixed cost.

c. its short-run marginal cost curve above minimum average variable cost.

Decreasing returns to scale imply that a. long-run average costs are constant. b. long-run average costs are falling. c. long-run average costs are increasing. d. long-run average costs are negative. e. none of the above.

c. long-run average costs are increasing.

A monopolist with multiple plants should allocate total production among plants so that a. average cost is the same in all plants. b. marginal revenue is the same in all plants. c. marginal cost is the same in all plants. d. output is the same in each plant.

c. marginal cost is the same in all plants.

A natural monopoly such as a local power company a. is a monopoly in the production of raw materials. b. is one result of a patent. c. occurs when one firm can supply the entire market more cheaply than can a number of firms. d. necessarily involves inefficient pricing.

c. occurs when one firm can supply the entire market more cheaply than can a number of firms.

Suppose that Mrs. Smith has a weekly income of $1,000 available to spend on goods X and Y. If Mrs. Smith's income and the prices of X and Y all increase by 20%, her budget constraint will a. shift outward by rotating about the X-intercept. b. shift outward by rotating about the Y-intercept. c. remain the same as before. d. shift outward in parallel fashion. e. shift inward in parallel fashion.

c. remain the same as before.

The excess burden of a tax refers to a. how much producers lose in surplus from the tax. b. how much consumers lose in surplus from the tax. c. the deadweight loss from the tax. d. both a and b

c. the deadweight loss from the tax.

When the price of sugar was "low," consumers in the United States spent a total of $3 billion annually on its consumption. When the price doubled, consumer expenditures actually increased to $4 billion annually. This indicates that a. sugar is a Giffen good. b. sugar prices violate the law of demand. c. the demand for sugar is inelastic. d. the demand curve for sugar is upward sloping.

c. the demand for sugar is inelastic.

An isoquant curve identifies a. the maximum output possible, given a fixed budget. b. the different combinations of goods the can be produced, given fixed amounts of inputs. c. the different combinations of inputs that can be used to produce a fixed rate of output. d. none of the above.

c. the different combinations of inputs that can be used to produce a fixed rate of output.

The market demand curve for tomatoes is a. independent of individuals' demand curves for tomatoes. b. the vertical summation of individuals' demand curves for tomatoes. c. the horizontal summation of individuals' demand curves for tomatoes. d. derived from the tomato farmers' demand curves for tomatoes.

c. the horizontal summation of individuals' demand curves for tomatoes.

To maximize profits, a price-taking (i.e., competitive) firm should produce its output up to the level where a. the market price of the firm's product is equal to its total variable cost. b. the market price of the firm's product is equal to its s total cost. c. the market price of the firm's product is equal to its marginal cost. d. marginal cost is equal to average cost. e. none of the above.

c. the market price of the firm's product is equal to its marginal cost.

In the long run, the greater burden of a specific tax will usually be absorbed by a. consumers. b. the party - consumers or producers - with the more elastic demand/supply curve. c. the party with the least elastic demand/supply curve. d. shareholders and employees of the firm in the form of reduced dividends and wages. e. none of the above.

c. the party with the least elastic demand/supply curve.

Given the prices of good X and Y, the (negative of the) slope of the budget constraint (i.e., - PX/PY) measures a. the amount of good Y the consumer is willing to forgo in order to consume one more unit of good X. b. the ratio of the consumer's income to the price of the X good. c. the quantity of the Y good that must be forgone in order to purchase one more unit of the X good. d. the quantity of the X good that must be forgone in order to purchase one more unit of the Y good.

c. the quantity of the Y good that must be forgone in order to purchase one more unit of the X good.

A consumer prefers commodity bundle A to commodity bundle B, and prefers commodity bundle B to commodity bundle C. Therefore, A is preferred to C. The assumption that leads to this conclusion is: a. all goods must be economic "goods." b. complete preferences. c. transitivity of preferences. d. diminishing marginal rate of substitution. e. normal goods.

c. transitivity of preferences.

The production function of a firm producing hockey sticks is given by Q = 8KL, where K is capital and L is labor. What is the average product of labor when 4 units of capital are employed? a. 12 b. 16 c. 24 d. 32 e. None of the above

d (Q=8KL=> Q=8(4)L=> Q=32L=> APl=Q/L=23L/L=32)

Under the price leadership model, a) most firms act independently of the leader. b) the leader's price is always lower than the other firms' prices. c) the leader's price is always higher than the other firms' prices. d) all firms adjust their prices to that chosen by the leader.

d) all firms adjust their prices to that chosen by the leader.

In the cartel model of oligopoly a) firms believe that price increases result in a very elastic demand, while price decreases result in an inelastic demand for their product. b) each firm acts as a price taker even when there are few firms in an industry. c) one dominant firm takes the reactions of all other firms into account in its output and pricing decisions. d) firms coordinate their decisions to act as a multiplant monopoly.

d) firms coordinate their decisions to act as a multiplant monopoly.

A firm's total cost of producing 40 units of output is $1,000. At this output level, average fixed costs are equal to $5. It follows that the firm's average variable costs are equal to a. $5. b. $10. c. $15 d. $20 e. $25 f. $30

d. $20

The marginal product of labor in the production of computer chips is 80 chips per hour. The marginal product of capital is 120. The marginal rate of technical substitution of hours of labor for hours of machine capital is? a. 80 b. 120 c. 1/2 d. 2/3 e. 3/2 f. None of the above

d. 2/3

Economists use indifference curves to characterize the preferences of a rational consumer. There are some plausible assumptions that lead to a set of "well-behaved" (i.e., downward-sloping and strictly convex) indifference curves. Which one of the following is NOT among the assumptions? a. All goods must be economic "goods." b. Preferences are complete. c. Preferences are transitive. d. All goods are normal goods.

d. All goods are normal goods.

Which one of the following statements is false? a. In the long run all production inputs are variable. b. Decreasing returns to scale prevail when output increases by a proportion that is smaller than the proportion by which all inputs increase. c. When marginal cost equals average variable cost, average variable cost is at its minimum. d. Average fixed cost curve can have a U-shape.

d. Average fixed cost curve can have a U-shape.

If a monopolist is able to price discriminate via market separation, then it will maximize its profits by producing where ________________ in each market, charging the group with the _______________ elastic demand a higher price. a. P = MC, less b. MR = MC, more c. MR = AC, less d. MR = MC, less

d. MR = MC, less

Which of the following is incorrect? a. For a firm facing a downward-sloping demand curve, marginal revenue will be less than price. b. In making output decisions, a firm should produce the output level for which marginal revenue equals marginal cost c. A price-taking firm will maximize profits by choosing that level of output for which price equals marginal cost d. The demand curve facing a price-taking firm is downward-sloping to the right.

d. The demand curve facing a price-taking firm is downward-sloping to the right.

An indifference curve depicts a. all combinations of goods which are just affordable for the consumer. b. all combinations of goods which provide the consumer the same marginal rate of substitution. c. all combinations of goods which are of equal cost to the consumer. d. all combinations of goods which provide the consumer the same utility.

d. all combinations of goods which provide the consumer the same utility.

If a firm is a price-taker, then a. marginal revenue is equal to price. b. the firm can sell as much output as it likes at the market-determined price. c. marginal revenue is equal to total revenue. d. both a and b

d. both a and b

The substitution effect of a price decrease will a. decrease the consumption of normal goods only. b. increase the consumption of normal goods only. c. decrease the consumption of both normal and inferior goods. d. increase the consumption of both normal and inferior goods.

d. increase the consumption of both normal and inferior goods.

If income doubles and the quantity demanded of automobiles more than doubles, then automobiles can be described as a a. substitute good. b. complement good. c. necessity. d. luxury.

d. luxury.

A price-discriminating monopolist should divide sales among markets so that a. price is the same in each market. b. output is the same in each market. c. average cost is less than revenue in each market. d. marginal revenue is the same in all markets.

d. marginal revenue is the same in all markets.

In a competitive market, an efficient allocation of resources is characterized by a. a price greater than the marginal cost of production. b. the possibility of further mutually beneficial transactions. c. a value of consumer surplus equal to that of producer surplus. d. the largest possible sum of consumer and producer surplus. e. none of the above.

d. the largest possible sum of consumer and producer surplus.

Short-run marginal cost is given by a. the slope of the TFC curve. b. the slope of the TVC curve but not by the slope of the TC curve. c. the slope of the TC curve but not by the slope of the TVC curve. d. the slope of the TC curve or the slope of the TVC curve.

d. the slope of the TC curve or the slope of the TVC curve.