Economics Test Study Questions:
22. If the government removes a binding price ceiling from a market, then the price received by sellers will a. decrease, and the quantity sold in the market will decrease. b. decrease, and the quantity sold in the market will increase. c. increase, and the quantity sold in the market will decrease. d. increase, and the quantity sold in the market will increase.
D.
33. Which of the following will cause a decrease in consumer surplus? a. an increase in the number of sellers of the good b. a decrease in the production cost of the good c. sellers expect the price of the good to be lower next month d. the imposition of a binding price floor in the market
D.
102. During Thanksgiving you participated in a pumpkin-pie eating contest since you love pumpkin pie. You really enjoyed the first two pies, the third one was OK, but as soon as you ate the 4th one you became ill and lost the contest. Your total utility _______with each pie you ate up to the 3rd pie. A. increased B. decreased C. stayed the same D. first increased than decreased
A.
105. Which of the following policies maintains efficiency in the housing market while assisting the poor with their housing needs? A. A price floor. B. A price ceiling. C. A free market with subsidies to landlords. D. A free market with subsidies to the poor.
A.
112. Which of the following statements best characterizes the inefficiency caused by a price floor? A. Consumers are encouraged to consume too much. B. Trades that benefit both the buyer and the seller are available at prices less than the price floor. C. Producers are encouraged to produce too little. D. The enforcement of the price floor is extremely costly.
A.
13. On a downward-sloping linear demand curve, total revenue reaches its maximum value at the a. midpoint of the demand curve. b. lower end of the demand curve. c. upper end of the demand curve. d. It is impossible to tell without knowing prices and quantities demanded.
A.
14. If the price elasticity of demand for apples is 0.8, then a 2.4% increase in the price of apples will decrease the quantity demanded of apples by a. 1.92%, and apples sellers' total revenue will increase as a result. b. 1.92%, and apples sellers' total revenue will decrease as a result. c. 3%, and apples sellers' total revenue will increase as a result. d. 3%, and apples sellers' total revenue will decrease as a result.
A.
16. Which of the following statements is valid when supply is perfectly elastic at a price of $4? a. The elasticity of supply approaches infinity. b. The supply curve is vertical. c. At a price below $4, quantity supplied is infinite. d. At a price above $4, quantity supplied is zero.
A.
2. Saddle shoes are not popular right now, so very few are being produced. If saddle shoes become popular, then how will this affect the market for saddle shoes? a. The supply curve for saddle shoes will shift right, which will create a shortage at the current price. Price will increase, which will decrease quantity demanded and increase quantity supplied. The new market equilibrium will be at a higher price and higher quantity. b. The supply curve for saddle shoes will shift right, which will create a surplus at the current price. Price will decrease, which will increase quantity demanded and decrease quantity supplied. The new market equilibrium will be at a lower price and higher quantity. c. The demand curve for saddle shoes will shift right, which will create a shortage at the current price. Price will increase, which will decrease quantity demanded and increase quantity supplied. The new market equilibrium will be at a higher price and higher quantity. d. The demand curve for saddle shoes will shift right, which will create a surplus at the current price. Price will decrease, which will increase quantity demanded and decrease quantity supplied. The new market equilibrium will be at a lower price and higher quantity.
A.
20. An increase in the price of cheese crackers from $2.25 to $2.45 per box causes suppliers of cheese crackers to increase their quantity supplied from 125 boxes per minute to 145 boxes per minute. Using the midpoint method, supply is a. elastic, and the price elasticity of supply is 1.74. b. elastic, and the price elasticity of supply is 0.57. c. inelastic, and the price elasticity of supply is 1.74. d. inelastic, and the price elasticity of supply is 0.57.
A.
29. The price paid by buyers in a market will increase if the government (i) increases a binding price floor in that market. (ii) increases a binding price ceiling in that market. (iii) decreases a tax on the good sold in that market. a. (ii) only b. (iii) only c. (i) and (ii) only d. (i), (ii), and (iii)
A.
30. The quantity sold in a market will increase if the government a. decreases a binding price floor in that market. b. decreases a binding price ceiling in that market. c. increases a tax on the good sold in that market. d. More than one of the above is correct.
A.
37. Which of the following will cause a decrease in producer surplus? a. the imposition of a binding price ceiling in the market b. an increase in the number of buyers of the good c. income increases and buyers consider the good to be normal d. the price of a complement decreases
A.
56. Walter used to work as a high school teacher for $40,000 per year but quit in order to start his own painting business. To invest in his painting business, he withdrew $20,000 from his savings, which paid 3 percent interest, and borrowed $30,000 from his uncle, whom he pays 3 percent interest per year. Last year Walter paid $25,000 for supplies and had revenue of $60,000. Walter asked Tyler the accountant and Greg the economist to calculate his painting business's costs. a. Tyler says his costs are $25,900, and Greg says his costs are $66,500. b. Tyler says his costs are $25,000, and Greg says his costs are $65,000. c. Tyler says his costs are $66,500, and Greg says his costs are $66,500. d. Tyler says his costs are $75,000, and Greg says his costs are $41,500.
A.
6. Which of the following sets of events must cause an increase in the price of a new house? a. higher wages for carpenters, higher wood prices, increases in consumer incomes, higher apartment rents, increases in population, and expectations of higher house prices in the future b. lower wages for carpenters, lower wood prices, increases in consumer incomes, higher apartment rents, increases in population and expectations of higher house prices in the future c. lower wages for carpenters, higher wood prices, decreases in consumer incomes, higher apartment rents, decreases in population and expectations of higher house prices in the future d. higher wages for carpenters, lower wood prices, decreases in consumer incomes, lower apartment rents, decreases in population and expectations of lower house prices in the future
A.
62. If Franco's Pizza Parlor knows that the marginal cost of the 500th pizza is $3.50 and that the average total cost of making 499 pizzas is $3.30, then a. average total costs are rising at Q = 500. b. average total costs are falling at Q = 500. c. total costs are falling at Q = 500. d. average variable costs must be falling.
A.
63. When marginal cost is rising, average variable cost a. must be rising. b. must be falling. c. must be constant. d. could be rising or falling.
A.
79. The average benefit per hour studied for the Economics tests was ________ and the average benefit per hour studied for the Math tests was _______ . A. 15; 13 B. 5; 10 C. 13; 15 D. 10; 5
A.
80. Sean's marginal benefit from the seventh hour spent studying Economics is A. 5 B. 10 C. 15 D. 45
A.
83. If a market is in equilibrium and demand increases while supply decreases, the change in the equilibrium price is ________ and the change in the equilibrium quantity is _________. A. positive; positive B. positive; negative C. positive; indeterminate D. indeterminate; positive
A.
86. When the equilibrium quantity maximizes total economic surplus, it follows that A. Marginal Cost = Marginal Benefit B. Marginal Cost > Marginal Benefit C. Marginal Cost < Marginal Benefit D. sellers are always better off than buyers
A.
87. You can spend $5 for lunch and you would like to have two Double Cheeseburgers. When you get to the restaurant you, find out the price for Double Cheeseburger has increased from $2.50 to $2.99. You decide to have two single Cheeseburgers for lunch. This is best described as a(n) A. substitution effect. B. income effect. C. buyer's reservation price. D. seller's reservation price.
A.
88. The quantity of Revlon nail polish demanded by Jen decreased after the price of Revlon nail polish increased. Jen decides to find a cheaper brand of nail polish. This is called a(n) A. substitution effect of a price change. B. income effect of a price change. C. decrease in buyer's reservation price. D. increase in buyer's reservation price.
A.
89. As the price of a good rises, A. firms earn larger profits. B. more firms can cover their opportunity costs of producing the good. C. firms find they can raise price by even more. D. government regulation becomes more justified.
A.
90. Pepsi One is a close substitute for Diet Coke. When Pepsi introduced Pepsi One, the price elasticity of demand for Diet Coke ______ and Coke's ability to raise revenues through price increases _________. A. increased; was reduced B. increased; increased C. decreased; was reduced D. had no effect; was reduced
A.
92. Suppose two demand curves have a point in common. With respect to price at that point, demand shown by the steeper curve will be _______ than the less steep curve. A. more elastic than B. less elastic than C. as elastic as D. more likely to be unitary than
A.
93. On a given linear demand curve, at high prices demand is ______ than at low prices. A. more price elastic. B. more price inelastic C. more negative. D. more volatile.
A.
98. A change in consumers' income levels A. changes demand. B. changes supply. C. changes price. D. creates cross-price elasticity.
A.
Sven's vacation convinced him that A. even for activities he really enjoys, diminishing marginal utility eventually sets in. B. blueberry picking yields higher total utility than does water skiing. C. even for activities he really enjoys, total utility declines each time he engages in it. D. economic theory applies only to things you buy, not recreation.
A.
1. Equilibrium price must increase when demand. a. increases and supply does not change, when demand does not change and supply decreases, and when demand decreases and supply increases simultaneously. b. increases and supply does not change, when demand does not change and supply decreases, and when demand increases and supply decreases simultaneously. c. decreases and supply does not change, when demand does not change and supply increases, and when demand decreases and supply increases simultaneously. d. decreases and supply does not change, when demand does not change and supply increases, and when demand increases and supply decreases simultaneously.
B.
26. Suppose there is currently a tax of $50 per ticket on airline tickets. Buyers of airline tickets are required to pay the tax to the government. If the tax is reduced from $50 per ticket to $30 per ticket, then the a. demand curve will shift upward by $20, and the effective price received by sellers will increase by $20. b. demand curve will shift upward by $20, and the effective price received by sellers will increase by less than $20. c. supply curve will shift downward by $20, and the price paid by buyers will decrease by $20. d. supply curve will shift downward by $20, and the price paid by buyers will decrease by less than $20.
B.
31. 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.
4. Which of the following might cause the supply curve for an inferior good to shift to the right? a. an increase in input prices b. a decrease in consumer income c. an improvement in production technology that makes production of the good more profitable d. a decrease in the number of sellers in the market
B.
40. PlayStations and PlayStation games are complementary goods. A technological advance in the production of PlayStations will a. increase consumer surplus in the market for PlayStations and decrease producer surplus in the market for PlayStation games. b. increase consumer surplus in the market for PlayStations and increase producer surplus in the market for PlayStation games. c. decrease consumer surplus in the market for PlayStations and increase producer surplus in the market for PlayStation games. d. decrease consumer surplus in the market for PlayStations and decrease producer surplus in the market for PlayStation games.
B.
34. Motor oil and gasoline are complements. If the price of motor oil increases, consumer surplus in the gasoline market a. decreases. b. is unchanged. c. increases. d. may increase, decrease, or remain unchanged.
A.
46. Which of the following statements is correct regarding the imposition of a tax on gasoline? a. The incidence of the tax depends upon whether the buyers or the sellers are required to remit tax payments to the government. b. The incidence of the tax depends upon the price elasticities of demand and supply. c. The amount of tax revenue raised by the tax depends upon whether the buyers or the sellers are required to remit tax payments to the government. d. The amount of tax revenue raised by the tax does not depend upon the amount of the tax per unit.
B.
72. In the short run, a market consists of 100 identical firms. The market price is $8, and the total cost to each firm of producing various levels of output is given in the table below. What will total quantity supplied be in the market? Quantity Total Costs 0 $1 1 $7 2 $14 3 $22 4 $31 5 $41 a. 200 units b. 300 units c. 400 units d. 500 units
B.
111. Suppose the government fines the firm an amount equal to the damage imposed on the fish. This government action A. reduces efficiency in the market. B. increases dead weight loss. C. increases efficiency in the market. D. violates Pareto efficiency.
C.
115. Suppose you quit your job to start a business. In the first month, your total revenue was $6,000. You paid $1,000 in monthly rent for office space. $ 200 in monthly rent for equipment. $3,000 to your workers in wages for the month. $1,000 for the supplies you used that month. You determine that your true profit that month was negative $200. Why? A. You did the math incorrectly. B. You accounted for lost salary of $200. C. You accounted for lost salary of $1000. D. Your equipment rent is an implicit cost.
C.
82. Chris has a one-hour break between classes every Wednesday. Chris can either stay at the library and study or go to the gym and work out. This is A. not an economic problem, because neither one costs money. B. not an economic problem, because it's an hour that is wasted no matter what Chris does. C. an economic problem because the tuition Chris pays covers both the gym and the library. D. an economic problem, because the one-hour time limit means Chris must make a choice.
D.
5. The market for diamond rings is closely linked to the market for high-quality diamonds. If a large quantity of high-quality diamonds enters the market, then the a. supply curve for diamond rings will shift right, which will create a shortage at the current price. Price will increase, which will decrease quantity demanded and increase quantity supplied. The new market equilibrium will be at a higher price and higher quantity. b. supply curve for diamond rings will shift right, which will create a surplus at the current price. Price will decrease, which will increase quantity demanded and decrease quantity supplied. The new market equilibrium will be at a lower price and higher quantity. c. demand curve for diamond rings will shift right, which will create a shortage at the current price. Price will increase, which will decrease quantity demanded and increase quantity supplied. The new market equilibrium will be at a higher price and higher quantity. d. demand curve for diamond rings will shift right, which will create a surplus at the current price. Price will decrease, which will increase quantity demanded and decrease quantity supplied. The new market equilibrium will be at a lower price and higher quantity.
B.
69. Consider a competitive market with 50 identical firms. Suppose the market demand is given by the equation QD = 200 - 10P and the market supply is given by the equation QS = 10P. In addition, suppose the following table shows the marginal cost of production for various levels of output for firms in this market. Output Marginal Cost 0 -- 1 $5 2 $10 3 $15 4 $20 5 $25 How many units should a firm in this market produce to maximize profit? a. 1 unit b. 2 units c. 3 units d. 4 units
B.
71. In the short run, there are 500 identical firms in a competitive market. The firms do not use any resources that are available in limited quantities, and each of them has the following cost structure: Output Total Cost 0 $0 1 $10 2 $12 3 $15 4 $24 5 $35 The long-run supply curve for this market is a. positively sloped for all prices above $10. b. horizontal at a price of $5. c. horizontal at a price of $6. d. horizontal at a price of $7.
B.
73. A competitive market is in long-run equilibrium. If demand increases, we can be certain that price will a. rise in the short run. Some firms will enter the industry. Price will then rise to reach the new long-run equilibrium. b. rise in the short run. Some firms will enter the industry. Price will then fall to reach the new long-run equilibrium. c. fall in the short run. All, some, or no firms will shut down, and some of them will exit the industry. Price will then rise to reach the new long-run equilibrium. d. not rise in the short run because firms will enter to maintain the price.
B.
8. New cars are normal goods. What will happen to the equilibrium price of new cars if the price of gasoline rises, the price of steel falls, public transportation becomes cheaper and more comfortable, auto-workers accept lower wages, and automobile insurance becomes more expensive? a. Price will rise. b. Price will fall. c. Price will stay exactly the same. d. The price change will be ambiguous.
B.
84. If both supply and demand decrease simultaneously, the new equilibrium price is ___________ and the new equilibrium quantity is _________________. A. lower; lower B. lower; indeterminate C. indeterminate; higher D. indeterminate; lower
B.
99. During recessions, when workers lose their jobs and have lower incomes, sales of durable goods (goods with a life expectancy of 3 years or more) decline. Apparently, durables are A. substitutes. B. normal goods. C. complements. D. inferior goods.
B.
Scenario 5-4 . Milk has an inelastic demand, and beef has an elastic demand. Suppose that a mysterious increase in bovine infertility decreases both the population of dairy cows and the population of beef cattle by 50 percent. 18. Refer to Scenario 5-4. Total consumer spending on milk will a. increase, and total consumer spending on beef will increase. b. increase, and total consumer spending on beef will decrease. c. decrease, and total consumer spending on beef will increase. d. decrease, and total consumer spending on beef will decrease.
B.
Table 6-4 The following table contains the demand schedule and supply schedule for a market for a particular good. Suppose sellers of the good successfully lobby Congress to impose a price floor $3 above the equilibrium price in this market. Price Quantity Demanded Quantity Supplied $0 15 0 $1 13 3 $2 11 6 $3 9 9 $4 7 12 $5 5 15 $6 3 18 24. Refer to Table 6-4. Following the imposition of a price floor $3 above the equilibrium price, irate buyers convince Congress to repeal the price floor and to impose a price ceiling $1 below the former price floor. The resulting market price is a. $2. b. $3. c. $4. d. $5.
B.
10. What would happen to the equilibrium price and quantity of lattés if coffee shops began using a machine that reduced the amount of labor necessary to produce steamed milk, which is used to make lattés, and scientists discovered that lattés cause heart attacks? a. Both the equilibrium price and quantity would increase. b. Both the equilibrium price and quantity would decrease. c. The equilibrium price would decrease, and the effect on equilibrium quantity would be ambiguous. d. The equilibrium quantity would decrease, and the effect on equilibrium price would be ambiguous.
C.
103. Fred runs a fishing lodge, and has a very successful business during the summer. In the fall, the number of guests at the lodge starts to decline, and by November very few people stay at Fred's Lodge. Fred should A. keep the lodge open all year because his summer profits offset any losses he has in the winter. B. Keep the lodge open only during those months in which revenues exceed total costs. C. Keep the lodge open only during those months in which revenues exceed the fixed costs of the lodge. D. Keep the lodge open only during those months in which revenues exceed the variable costs of serving guests.
C.
15. When her income increased from $10,000 to $20,000, Heather's consumption of macaroni decreased from 10 pounds to 5 pounds and her consumption of soy-burgers increased from 2 pounds to 4 pounds. We can conclude that for Heather, macaroni a. and soy-burgers are both normal goods with income elasticities equal to 1. b. is an inferior good and soy-burgers are normal goods; both have income elasticities of 1. c. is an inferior good with an income elasticity of -1 and soy-burgers are normal goods with an income elasticity of 1. d. and soy-burgers are both inferior goods with income elasticities equal to -1.
C.
32. Suppose your own demand curve for tomatoes slopes downward. Suppose also that, for the last tomato you bought this week, you paid a price exactly equal to your willingness to pay. Then a. you should buy more tomatoes before the end of the week. b. you already have bought too many tomatoes this week. c. your consumer surplus on the last tomato you bought is zero. d. your consumer surplus on all of the tomatoes you have bought this week is zero.
C.
41. When the price of a good is measured in dollars, then the size of the deadweight loss that results from taxing that good is measured in a. units of the good that is being taxed. b. units of a related good that is not being taxed. c. dollars. d. percentage change.
C.
51. Suppose that the market for large, 64-ounce soft drinks in the town of Pudgyville is characterized by a typical, downward-sloping, linear demand curve and a typical, upward-sloping, linear supply curve. The market is initially in equilibrium with 1,000 soft drinks sold per day. The newly-elected Mayor of Pudgyville wants to tax 64-ounce soft drinks. She is considering either a $0.10 tax or a $0.30 tax. Her chief economic advisor estimates that the number of soft drinks sold after a $0.10 tax will be 900 and after a $0.30 tax will be 500. Which tax is better? a. The $0.10 tax is better because it raises more revenue and creates a lower deadweight loss than the $0.30 tax. b. The $0.30 tax is better because it raises more revenue and creates a lower deadweight loss than the $0.10 tax. c. It is not clear which tax is better because although the $0.30 tax raises more tax revenues, it creates a larger deadweight loss than the $0.10 tax. d. It is not clear which tax is better because although the $0.10 tax raises more tax revenues, it creates a larger deadweight loss than the $0.30 tax.
C.
61. Johnny is a sophomore in college and has a 1.5 cumulative grade point average (GPA). Johnny's cumulative GPA will be better next semester if he (i) performs better than he did last semester. (ii) performs better than his cumulative GPA. (iii) gives an average performance. a. (ii) only b. (iii) only c. (i) and (ii) d. (ii) and (iii)
C.
76. If the marginal costs of 1, 2, and 3 hours of talking on the phone are $50, $75, and $105, then the total costs are A. $50, $150, and $315. B. $50, $41.67, and $115. C. $50, $125, and $230. D. $50, $175, and $405.
C.
81. If Sean has already spent 5 hours studying Economics and 5 hours studying Math, he should spend the next hour A. Studying Math for half an hour and Economics for half an hour B. Studying only Economics C. Studying only Math D. Studying Economics for 45 minutes and Math for 15 minutes
C.
9. Refer to Figure 4-24. All else equal, the premature deaths of thousands of turkeys would cause a move from a. DA to DB. b. DB to DA. c. x to y. d. y to x.
C.
96. When the price of insulin was $10 consumers demanded 100 units, when the price was $15 consumers demanded 100 units, and when the price was $20 consumers demanded 100 units. Based on this information, insulin must have a(n) _______ demand curve. A. unitary elastic B. perfectly elastic C. perfectly inelastic D. elastic
C.
97. For which of the following products is income elasticity likely to be greatest? A. salt B. groceries C. airplane travel D. blue jeans
C.
101. Moe's reservation price for his economics textbook is $100. The week before the semester began, Moe found a copy of the required text online for $75. Moe's consumer surplus is A. $125 B. $100 C. $75 D. $25
D.
110. Suppose the market for coffee is in equilibrium at a price of $5 per pound. This means A. all producers who want to sell coffee earn a profit. B. all remaining producers require less than $5 to produce coffee. C. all consumers who want to buy coffee are satisfied. D. all remaining consumers value a pound of coffee at less than $5.
D.
25. Suppose buyers of vodka are required to send $5.00 to the government for every bottle of vodka they buy. Further, suppose this tax causes the effective price received by sellers of vodka to fall by $3.00 per bottle. Which of the following statements is correct? a. This tax causes the demand curve for vodka to shift downward by $5.00 at each quantity of vodka. b. The price paid by buyers is $2.00 per bottle more than it was before the tax. c. Sixty percent of the burden of the tax falls on sellers. d. All of the above are correct.
D.
36. Kristi and Rebecca sell lemonade on the corner for $0.50 per cup. It costs them $0.10 to make each cup. On a certain day, their producer surplus is $20. How many cups did Kristi and Rebecca sell? a. 40. b. 200. c. 8. d. 50.
D.
38. Total surplus in a market will increase when the government a. imposes a binding price floor or a binding price ceiling on that market. b. imposes a tax on that market. c. Both a and b are correct. d. Neither a nor b is correct.
D.
47. Suppose a tax of $1 per unit is imposed on a good. The more elastic the demand for the good, other things equal, a. the larger is the decrease in quantity demanded as a result of the tax. b. the smaller is the tax burden on buyers relative to the tax burden on sellers. c. the larger is the deadweight loss of the tax. d. All of the above are correct.
D.
48. Suppose a tax of $1 per unit is imposed on a good. The more elastic the supply of the good, other things equal, the a. smaller is the response of quantity supplied to the tax. b. larger is the tax burden on sellers relative to the tax burden on buyers. c. larger is the deadweight loss of the tax. d. All of the above are correct.
D.
66. A competitive firm has been selling its output for $20 per unit and has been maximizing its profit, which is positive. Then, the price rises to $25, and the firm makes whatever adjustments are necessary to maximize its profit at the now-higher price. Once the firm has adjusted, its a. quantity of output is higher than it was previously. b. average total cost is higher than it was previously. c. marginal revenue is higher than it was previously. d. All of the above are correct.
D.
67. A profit-maximizing firm in a competitive market is able to sell its product for $7. At its current level of output, the firm's average total cost is $10. The firm's marginal cost curve crosses its marginal revenue curve at an output level of 9 units. The firm experiences a a. profit of more than $27. b. profit of exactly $27. c. loss of more than $27. d. loss of exactly $27.
D.
77. You had to pay $600 (non-refundable) for your meal plan for Fall semester which gives you up to150 meals. If you eat only 100 meals, your marginal cost for the 100th meal is A. $6 B. $4 C. $0.25 D. $0
D.
91. When Taylor raised the price of earrings at Taylor's Boutique, total revenue from earrings increased. This suggests that A. the demand for Taylor's earrings at the original price must be elastic. B. there are too many other boutiques competing with Taylor. C. there was excess demand for earrings at the original price. D. the demand for Taylor's earrings at the original price was inelastic.
D.
94. If consumers completely cease purchasing a product when its price increases by any amount, demand is classified as A. elastic. B. perfectly inelastic. C. unitary elastic. D. perfectly elastic.
D.
12. The flatter the demand curve through a given point, the a. greater the price elasticity of demand at that point. b. smaller the price elasticity of demand at that point. c. closer the price elasticity of demand will be to the slope of the curve. d. greater the absolute value of the change in total revenue when there is a movement from that point upward and to the left along the demand curve.
A.
57. Refer to Scenario 13-6. What is the total opportunity cost of the day that Farmer Ziva spent in the field planting lettuce? a. $130 b. $250 c. $300 d. $380
A.
7. Refer to Figure 4-25. All else equal, the return of college students to campus in the fall would cause a move from a. x to y. b. y to x. c. SA to SB. d. SB to SA.
A.
106. Your state legislature is considering increasing the sales tax on two different commodities: prescription drugs and restaurant meals. You estimate price elasticity of demand for prescription drugs to be -0.08 and price elasticity of demand for restaurant meals to be -2. If the legislature's primary goal in increasing taxes is to raise money most efficiently, it should tax A. both drugs and restaurant meals equally. B. drugs because demand is price inelastic. C. restaurant meals because they are not a necessity. D. only those prescription drugs that are not life-saving.
B.
74. If the profit-maximizing quantity of production for a competitive firm occurs at a point where the firm's average total cost of production is falling as production increases, then the firm a. will be earning positive economic profit at the profit-maximizing quantity. b. will have economic profit less than zero at the profit-maximizing quantity. c. will have zero economic profit at the profit-maximizing quantity. d. should increase the quantity of production to increase profit.
B.
78. Your scholarship depends on your maintaining a 3.5 cumulative GPA. Your GPA for last semester was 3.6, which brought your cumulative GPA down. What must be true? A. Your marginal grades (last semester's grades) were higher than your overall GPA. B. Your marginal grades were lower than your overall GPA. C. If this semester's grades are the same as last semester's, your overall GPA will stay the same. D. If this semester's grades are the same as last semester's, you might lose your scholarship.
B.
85. Suppose that the production of oranges reduces global warming by .1%. The equilibrium price of oranges is _______ because not all of the _________ are accounted for in the marketplace. A. too high; benefits B. too low; benefits C. too low; costs D. optimal; costs
B.
95. If the percent change in quantity demanded is zero for any percent change in the price, demand is classified as A. inelastic. B. perfectly inelastic. C. unit elastic. D. perfectly elastic.
B.
11. Studies indicate that the price elasticity of demand for beer is about 0.9. A government policy aimed at reducing beer consumption changed the price of a case of beer from $10 to $20. According to the midpoint method, the government policy should have reduced beer consumption by a. 30%. b. 40%. c. 60%. d. 74%.
C.
3. Which of the following might cause the demand curve for an inferior good to shift to the left? a. a decrease in income b. an increase in the price of a substitute c. an increase in the price of a complement d. None of the above is correct.
C.
39. Steak and chicken are substitutes. A sharp reduction in the supply of steak would a. increase consumer surplus in the market for steak and decrease producer surplus in the market for chicken. b. increase consumer surplus in the market for steak and increase producer surplus in the market for chicken. c. decrease consumer surplus in the market for steak and increase producer surplus in the market for chicken. d. decrease consumer surplus in the market for steak and decrease producer surplus in the market for chicken.
C.
