Micro All tests

Suppose you have a box that has a height of 40 inches and a width of 10 inches. What is its area? a) 10 square inches b) 40 square inches c) 400 square inches d) 4,000 square inches

c) 400 square inches

You increase production at your ice cream factory by 50 gallons per day. This requires you to pay an additional $100 in costs for cream, natural and artificial flavoring, sugar, guar gum, and tapioca starch. What is the marginal cost of this increase in production?

2

A $1 per pound tax is imposed on cucumbers. The own-price elasticity of demand for cucumbers is 1.5, and the elasticity of supply for cucumbers is 0.7. Which of the following is correct? a) The burden of the tax will fall mostly on consumers .b) The burden of the tax will fall mostly on producers. c) The burden of the tax will fall equally on consumers and producers. d) The burden of the tax will be zero.

.b) The burden of the tax will fall mostly on producers.

Jack and Taylor each operate guitar-oriented businesses. Jack is a "busker", which means he plays guitar and sings on street corners and subways for tips. Taylor plays guitar and sings in her high-tech recording studio, with lots of electronics, several guitars, and walls coated with expensive acoustic insulation. Which of the following is likely to be true? A) The long run is the same for both businesses. B) The long run is longer for Jack than it is for Taylor. C) The long run is shorter for Jack than it is for Taylor. D) Jack depends more on fixed inputs than Taylor.

C) The long run is shorter for Jack than it is for Taylor.

A hurricane blows through Tallahassee, knocking out power lines and water treatment plants. The increased demand for generators, bottled water, and gasoline drives up their prices, but the city government imposes anti-price-gouging laws, preventing prices for these goods from rising. You ride with your friend to buy some gasoline, and he says he's glad that the price gouging was stopped, because without the laws keeping prices down he wouldn't be able to buy gasoline. Knowing what you now know about price ceilings, what problems would you warn him to expect to encounter at the gas station? Explain at least two.

1. The quality of the gasoline might be worse 2. Shortage of supply, If prices are lower people will buy more than just what they need. 1) A shortage is likely to occur, so there may be no gasoline available. 2) There may be a long line at the gas station resulting in hours of wasted time. 3) The quality of the gasoline maybe lower, perhaps with reduced additives. 4) Fights might break out over the limited gasoline available, and/or police may be present to prevent this.

Suppose I buy a nice dinner for $15. I was willing to pay $25 for it, and the restaurant would have been willing to sell it for as little as $11. What is the total gain to both sides?

14

If the opportunity cost of watching one episode of your favorite show on Netflix is the $5 you would have earned from working for half an hour, then the opportunity cost of working for an hour is...watching ______ episodes of your favorite show on Netflix.

2

If you are willing to pay $40 for Top Hat access, but a guy in an alley sells you a black market access code for $3, your consumer surplus is...

20

Suppose you're a monopolist. You currently sell 4 units of output every month. You want to sell 8 per month. To do this, you will have to lower the price from $15 to $10, and this lower price will apply to every unit you sell. What is your Marginal Revenue? That is, what is Marginal Revenue when output goes from 4 units to 8 units?

5

In your spare time you drive for Uber. You pick up a passenger and take her to Madison Social, for which you are paid $15. You would have been willing to drive her there for $9. Your producer surplus is...

6

A monopoly internet search engine business sells advertising. It lowers the price of an advertisement from $4 to 3, and finds that the number of advertisements sold rises from 1 million per week to 2 million per week. The monopoly's marginal revenue is... A) $2. B) $2 million. C)$4 million. D) $6 million.

A) $2.

Your bakery produces 100 additional loaves of bread. Your fixed costs are $10,000. Total costs rise from $15,000 to $15,500. What is the marginal cost of producing an additional loaf of bread? A) $5 B) $15 C) $500 D) $550

A) $5

A monopoly cable television company sells access to cable television channels. It lowers the price of a subscription from $100 to $80, and finds that the number of subscriptions sold rises from 1 million per month to 2 million per month. The monopoly's marginal revenue is... A) $60 B) $600,000 C)$10 million D) $16 million

A) $60

Each semester you buy new mechanical pencils and graphite (though you would consider using a pen or a wood pencil if mechanical pencils became too expensive). The price of a mechanical pencil goes from $2 to $3, and the quantity of graphite that you buy goes from 4 units per semester to 1 unit per semester. What is the Arc Cross-Price Elasticity of Demand? A) -3 B) 3 C) -1.5 D) 1.5

A) -3

The price of onions rises from $1 per pound to $2 per pound, and the quantity of onions consumed falls from 20 million pounds per year to 4 million pounds per year. What is the Arc Own-Price Elasticity of Demand? A) 2 B) -2 C) 0.8 D) 1

A) 2

The price of onions rises from $1 per pound to $2 per pound, and the quantity of onions consumed falls from 20 million pounds per year to 4 million pounds per year. What is the Arc Own-Price Elasticity of Demand? A) 2 B) -2 C) 0.8 D) 1

A) 2

Match the term with its definition. Deadweight Loss Law of Demand Producer Surplus Consumer Surplus A) The difference between what consumers are willing to pay, and what they actually pay. B) The difference between the price of a good and the marginal cost of producing it. C) Loss of total surplus, which indicates that the current allocation of goods and resources is not efficient. D) As the price of a good rises, the quantity demanded falls.

A) Consumer Surplus B) Producer Surplus C) Deadweight Loss D) Law of Demand

When Apple announces the details of their new iPhone, and it is even better than the last model than everyone expected, the price of a used iPhone goes down, even though the new one is not out yet. This is probably because... A) Consumer demand for the used iPhone falls due to changes in expectations about the future. B) Consumer demand for the used iPhone rises due to changes in expectations about the future. C) Sellers of used iPhones expect demand to increase when the expensive new iPhone is released. D) The supply of older iPhones falls when production ends.

A) Consumer demand for the used iPhone falls due to changes in expectations about the future.

The Own-Price Elasticity of Demand for coffee is 0.6. Based on this, which of the following best describes the demand for coffee? A) Demand for coffee is inelastic. B) Demand for coffee is elastic. C) Coffee is a substitute good. D) Coffee is an inferior good.

A) Demand for coffee is inelastic.

Board games and video games are substitutes. If the price of board games falls, ceteris paribus, which of the following will happen in the market for video games? A) Demand for video games will fall, price will fall, and quantity will fall. B) Demand for video games will rise, price will rise, and quantity will rise. C) The Supply of video games will fall, price will rise, and quantity will fall. D) The supply of video games will rise, price will fall, and quantity will rise.

A) Demand for video games will fall, price will fall, and quantity will fall.

If Leon County has a comparative advantage in producing education, and Key West has a comparative advantage in producing relaxing vacations, which of the following is correct? A) If Leon County specializes in education, and Key West specializes in relaxing vacations, they can trade and each have more of both goods. B) Leon County can produce more of both because it is larger. C) Leon County would benefit from trade barriers so that it can produce both relaxing vacations and education inside the county, instead of outsourcing its relaxing vacations. D) All of these answers are correct.

A) If Leon County specializes in education, and Key West specializes in relaxing vacations, they can trade and each have more of both goods.

Which of the following is an example of variable inputs? A) Joe's Pizza Parlor orders more cheese due to an increase in orders. B) Tesla Motors has a giant factory for producing batteries for electric cars. C) Joe's Pizza Parlor is housed in a 1,500 square foot building with good ventilation. D) FSU uses large classroom buildings, such as HCB, to allow one instructor to teach many students. (The input of interest here is the building, not the instructor.)

A) Joe's Pizza Parlor orders more cheese due to an increase in orders.

Monopolistic Competition is different from Perfect Competition in that... A) Monopolistically Competitive firms produce differentiated products, whereas Perfectly Competitive firms produce identical goods. B) Monopolistic Competition has high entry barriers, whereas Perfect Competition has low entry barriers. C) Monopolistic Competition has only few firms, whereas Perfect Competition has many firms. D) Monopolistically Competitive firms face horizontal demand, whereas Perfectly Competitive firms face downward-sloping demand.

A) Monopolistically Competitive firms produce differentiated products, whereas Perfectly Competitive firms produce identical goods.

The market for computer printers is in equilibrium. Two things happen at the same time: The price of ink cartridges (sold separately) for the printers goes down, and there is an increase in the cost of the materials used to make printers. What happens to the price and quantity of printers? A) Price rises, quantity is indeterminate. B) Price rises, quantity falls. C) Price is indeterminate, quantity rises. D) Price falls, quantity is indeterminate.

A) Price rises, quantity is indeterminate.

The market for mangoes is in equilibrium, and then two things happen at the same time. First, the FDA releases a new study showing that eating mangoes will reduce your chances of getting heart disease significantly. Second, a new fertilizer makes it possible to grow mangoes in cooler climates than was previously possible. Which of the following will occur in the market for mangoes? A) Quantity rises, price is indeterminate B) Quantity falls, price is indeterminate C) Quantity is indeterminate, price rises D) Quantity is indeterminate, price falls

A) Quantity rises, price is indeterminate

Which of the following would shift the demand for peanuts to the right? A) The price of cashews, a substitute for peanuts, rises. B) People begin to develop peanut allergies. C) The price of peanuts falls. D) The price of fertilizer for peanuts rises.

A) The price of cashews, a substitute for peanuts, rises.

Suppose the market for onions is in equilibrium. Bad weather damages the onion crop. Which of the following is likely to happen? A) The price of onions rises and the quantity falls. B) The price of onions falls and the quantity rises. C) The price of onions falls and the quantity falls. D) The price of onions rises and the quantity rises.

A) The price of onions rises and the quantity falls.

Suppose the market for potatoes is a constant cost industry, and is in equilibrium with zero profit. The demand for potatoes rises. What happens? A) The price of potatoes rises, causing profits to become positive. This lures new firms into the industry, shifting supply to the right. This pushes the price back down until zero profit is restored. B) The price of potatoes falls, causing profits to become negative. This causes firms to exit the industry, shifting supply to the left. This pushes the price back up until zero profit is restored. C)Price rises, then falls, causing firms to shift supply left, then right, until zero profit becomes positive. D) Firms enter until differentiated products are introduced.

A) The price of potatoes rises, causing profits to become positive. This lures new firms into the industry, shifting supply to the right. This pushes the price back down until zero profit is restored.

A $10 per month tax is imposed on apartments. The supply of apartments is inelastic, and the demand is elastic. Which of the following is correct? A) The producers will bear most of the burden of the tax. B) The consumers will bear most of the burden of the tax. C) Consumers and producers will share the tax burden equally. D) Neither consumers nor producers will bear any tax burden; instead, the government will experience a loss of revenue.

A) The producers will bear most of the burden of the tax.

Your new startup produces mobile phones for dogs (your dog can press a big red button on it, and the phone calls you so that your dog can hear your voice when the dog misses you). Your current revenue is $3 million, and your total accounting cost is $2.7 million. After doing some research, you determine that you could probably make an accounting profit of $1 million if you were to make mobile phones for humans instead. Which of the following is correct? A) Your accounting profit is $300,000, and your economic profit is -$700,000, so you should switch to making mobile phones for humans. B) Your accounting profit is $300,000, and your economic profit is -$700,000, so you should continue making mobile phones for dogs. C) Your accounting profit is $300,000, and your economic profit is $1 million, so you should continue making mobile phones for dogs. D) Your accounting profit is $1 million, and your economic profit is $300,000, so you should switch to making mobile phones for humans.

A) Your accounting profit is $300,000, and your economic profit is -$700,000, so you should switch to making mobile phones for humans.

The market pricing system corrects a shortage by... A) raising the product price and increasing producer profits. B) raising the product price and decreasing producer profits. C) lowering the product price and decreasing producer profits. D) lowering the product price and increasing producer profits.

A) raising the product price and increasing producer profits.

The Law of Diminishing Returns... A) states that as a firm uses more of a variable input, while the amount of a fixed input stays the same, marginal product will eventually start to fall. B) states that as a price-searching firm reduces its price, its marginal revenue declines quickly because it must cut the price on all units in order to sell additional units. C) implies that when marginal product is falling, marginal cost must be falling. D) implies that marginal profits fall as a firm reduces its output.

A) states that as a firm uses more of a variable input, while the amount of a fixed input stays the same, marginal product will eventually start to fall.

Under rent control, landlords cease to be responsive to tenants' concerns about the quality of the housing because A) with shortages and waiting lists, they have no incentive to maintain and improve their property. B) they become resigned to the fact that many of their apartments are going to be vacant at any given time. C) with rent control the government guarantees landlords a minimal level of profit. D) with rent control it becomes the government's responsibility to maintain rental housing.

A) with shortages and waiting lists, they have no incentive to maintain and improve their property.

Which of the following would you prefer? (This is a survey question with no right or wrong answer.) a) Really cheap hardware and software for phones and computers, but very little improvement over time. b) Really expensive hardware and software for phones and computers, but rapid improvement over time. c) Something in between.

ANY

The opportunity cost for Vietnam to produce 1 unit of broadcasting equipment is 3 units of integrated circuits. The opportunity cost for South Korea to produce 1 unit of broadcasting equipment is 1 unit of integrated circuits. Which of the following terms of trade would benefit both sides? A) 1 unit of broadcasting equipment for 1 unit of integrated circuits. B) 1 unit of broadcasting equipment for 2 units of integrated circuits. C) 1 unit of broadcasting equipment for 3 units of integrated circuits. D) 1 unit of broadcasting equipment for 4 units of integrated circuits.

B) 1 unit of broadcasting equipment for 2 units of integrated circuits.

Which of the following is a likely side effect of a binding price ceiling on bananas? A) A surplus of bananas B) A reduction in the quality of bananas C) An increase in the production of bananas D) A price floor on strawberries

B) A reduction in the quality of bananas

A firm that wants to maximize profit will choose to... I. produce where marginal revenue equals marginal cost. II. produce where the difference between total revenue and total cost is maximized. III. produce where marginal cost is between average total cost and average variable cost. Which of these items can correctly complete the sentence? A) I. B) I. and II. C) I. and III. D) I., II., and III.

B) I. and II.

Average Total Cost is: I. AFC + AVC II. (Total Cost) / Output III. Explicit Costs + Implicit Costs A) I. B) I. and II. C) I., II., and III. D) I. and III.

B) I. and II.

Suppose the market for coffee is in equilibrium. The price of tea rises. What happens in the market for coffee? A) Price rises, quantity falls. B) Price rises, quantity rises C) Price falls, quantity falls. D) Price falls, quantity is indeterminatev

B) Price rises, quantity rises

The market for wired earbuds is in equilibrium, and then two things happen at the same time. First, smartphone manufacturers begin producing phones without headphone jacks (so that wired earbuds can no longer be used with the phone). Second, the price of magnets (an input for producing earbuds) rises. Which of the following will occur in the market for wired earbuds? A) Quantity rises, price is indeterminate B) Quantity falls, price is indeterminate C) Quantity is indeterminate, price rises D) Price falls, quantity falls

B) Quantity falls, price is indeterminate

Suppose that a tax is placed on a particular good. If the sellers end up bearing most of the tax burden, this indicates that the A) demand is more inelastic than supply. B) Supply is more inelastic than demand. C) government has required that buyers remit the tax payments. D) government has required that sellers remit the tax payments.

B) Supply is more inelastic than demand.

Marginal Revenue falls faster than Demand for a monopoly because... A) Governments tax some of the revenue away from monopolies. B) To get consumers to buy more output, the monopolist must cut the price on not only the additional units sold, but also the units that would have been sold under the higher price. C) Price discrimination allows the monopolist to sell more output at a lower price. D) The Law of Diminishing Returns says that cutting the price of a good helps at first, but because some inputs are fixed, total revenue eventually starts to fall.

B) To get consumers to buy more output, the monopolist must cut the price on not only the additional units sold, but also the units that would have been sold under the higher price.

When a law is passed that requires businesses to obtain permission from government officials in order to enter a market, this is an example of A) price-control legislation B) a barrier to entry C) antitrust legislation. D) the invisible hand principle.

B) a barrier to entry

"There is no such thing as a free lunch." This statement best reflects the fact that A) consumers are unwilling to pay for a good unless it provides them with value. B) an opportunity cost is always present when scarce resources are used to produce a good. C) it generally requires enormous effort to search out the best place to eat lunch. D) the value of a good to consumers will decrease as they have more of it.

B) an opportunity cost is always present when scarce resources are used to produce a good.

Suppose the own-price elasticity of demand for coffee is 0.6, and the price elasticity of supply for coffee is 1.2. If a $0.50 per cup tax is placed on sellers of coffee, tax revenue and deadweight loss will mostly harm... A) producers. B) consumers. C) Producers and consumers will be harmed equally. D) There is not enough information to answer this.

B) consumers.

When new firms have an incentive to enter a competitive price-taker market, their entry will A) increase the price of the product. B) drive down profits of existing firms in the market. C) shift the market supply curve to the left. D) increase demand for the product.

B) drive down profits of existing firms in the market.

If long-run equilibrium is present in a competitive market, the typical firm in the market will be A) making economic losses. B) making zero economic profit. C) making economic profit. D) making a rate of return that is higher than the rate earned in other industries. E) Both C & D are correct

B) making zero economic profit.

The market for dry-erase markers is in equilibrium, but then the cost of dry-erase ink (which is used to produce the markers) rises. What happens in the market for dry-erase markers? A) price rises, quantity rises. B) price rises, quantity falls. C) price falls, quantity falls. D) price falls, quantity rises.

B) price rises, quantity falls.

7-11 convenience stores will sell you a 20 ounce beverage (known as a "Gulp") for $2.00. For $2.50, they will sell you a 30 ounce beverage (a "Big Gulp"). This is an example of... A) first degree price discrimination. B) second degree price discrimination. C) third degree price discrimination. D) deadweight gain.

B) second degree price discrimination.

For most people, "feature phones" (also called "dumbphones") are an inferior good. Suppose that, as a result of the government shutdown, millions of people experience a reduction of their income. Demand for feature phones... A) shifts to the left. B) shifts to the right. C) stays the same. D) none of the above.

B) shifts to the right.

In a price-taker market, economic losses indicate that A) some firms are using unfair tactics to harm others. B) some firms have miscalculated, producing goods that are less valuable than the resources used to make them. C) the situation is normal and firms need to make no adjustments. D) the firms in the industry are not minimizing their cost; they should expand output in order to fully realize the economies of scale in the industry.

B) some firms have miscalculated, producing goods that are less valuable than the resources used to make them.

Which of the following most closely approximates the conditions of a monopolistic competition? A) the market for Grade A eggs, which is characterized by a large number of firms producing a homogeneous product B) the restaurant industry, which is characterized by firms producing a differentiated product in a market with low entry barriers C) local cable television service, where a licensed supplier competes with firms offering satellite service D) the market for jumbo aircraft, where one major domestic firm competes with one major foreign firm

B) the restaurant industry, which is characterized by firms producing a differentiated product in a market with low entry barriers

When economists assume that people are rationally self interested... A) they do so because people are always rational, and are always self-interested. B) they mean that people tend to make choices that they think will make themselves happier, and they tend to choose the correct means to achieve that objective. C) they mean that people are very good at calculating costs and benefits precisely. D) they mean that people do not give to charities or make mistakes.

B) they mean that people tend to make choices that they think will make themselves happier, and they tend to choose the correct means to achieve that objective.

A price-searching firm's own-price elasticity of demand is 1.5. If this firm lowers its price, which of the following will happen? A) total revenue will fall B) total revenue will rise C) marginal revenue will rise D) total cost will stay constant

B) total revenue will rise

International Fruitcakes makes holiday fruitcakes. Their total revenue is $20 million, and their accounting costs (or explicit costs) are $18 million. If they were to switch to making spongecake, they could earn $4 million in accounting profit. What is the firm's economic profit? A) $2 million B) $22 million C) -$2 million D) -$6 million

C) -$2 million

The price of a fancy meal out with your significant other drops from $87 to $75, and as a result you increase number of fancy meals from 20 per year to 25 per year. What is the Arc Own-Price Elasticity of Demand for fancy meals out with your significant other? A) -1.8125 B) -1.5 C) 1.5 D) 1.8125

C) 1.5

Suppose that all the firms in the tablet computer industry are experiencing economies of scale, and that many of the firms supplying inputs to them are also experiencing economies of scale. Which of the following sorts of industries do you think the tablet computer industry is likely to be? A) An increasing cost industry. B) A constant cost industry. C) A decreasing cost industry. D) None of the above/we have insufficient information to determine this.

C) A decreasing cost industry.

Which of the following would shift demand to the left? A) An increase in product quality B) An decrease in the price of a complement C) An decrease in the price of a substitute D) An increase in the number of consumers

C) An decrease in the price of a substitute

Diocletian and Maximian are Roman Co-emperors. They each have two things they can do: Stop rampaging barbarian armies, and stop internal rebellions. If Diocletian puts all his effort into stopping barbarians, he can stop 1 barbarian army. If he puts all his effort into stopping rebellions, he can stop 4 rebellions. If Maximian puts all his effort into stopping barbarians, he can stop 4 barbarian armies. If he puts all his effort into stopping rebellions, he can stop 1 rebellion. Which of the statements below are correct? A) Maximian's opportunity cost of stopping 1 barbarian army is stopping 0.5 rebellions. B) Diocletian's opportunity cost of stopping 1 rebellion is stopping 4 barbarian armies. C) Maximian has a comparative advantage in stopping barbarians. D) Diocletian has a comparative advantage in stopping barbarians.

C) Maximian has a comparative advantage in stopping barbarians.

Suppose the market for eyeglasses is in equilibrium, and then two things happen at the same time. First, new firms with new technology for producing custom eyeglasses enter the market. Second, contact lenses are invented, providing an alternative to eyeglasses. Which of the following occurs in the market for eyeglasses? A) Price falls, quantity rises. B) Price falls, quantity falls. C) Price falls, quantity is indeterminate. D) Price is indeterminate, quantity falls.

C) Price falls, quantity is indeterminate.

The market for computers is in equilibrium, but then two things happen at the same time. First, smartphones become so popular that many people use them instead of a computer. Second, computer producers find new and cheaper ways to produce computers. What will happen in the market for computers? A) Price falls, quantity falls. B) Price rises, quantity rises. C) Price falls, quantity is indeterminate. D) Price is indeterminate, quantity rises.

C) Price falls, quantity is indeterminate.

Which of the following statements is correct? A) When Marginal Product is falling, Average Total Cost is rising. When Marginal Product is rising, Average Total Cost is rising. B) When Marginal Product is falling, Average Variable Cost is rising. When Marginal Product is rising, Average Variable Cost is rising. C) When Marginal Product is falling, Marginal Cost is rising. When Marginal Product is rising, Marginal Cost is falling. D) When Marginal Product is falling, Average Fixed Costs are falling. When Marginal Product is rising, Average Fixed Costs are rising.

C) When Marginal Product is falling, Marginal Cost is rising. When Marginal Product is rising, Marginal Cost is falling.

Your new startup produces banana cases (they're like phone cases that protect your phone, but instead they prevent the banana in your lunchbox from being bruised). Your current revenue is $90,000, and your total accounting cost is $80,000. After doing some research, you determine that you could probably make an accounting profit of $30,000 if you were to make phone cases instead. Which of the following is correct? A) Your accounting profit is $10,000, and your economic profit is $30,000, so you should continue making banana cases. B) Your accounting profit is $10,000, and your economic profit is -$20,000, so you should continue making banana cases. C) Your accounting profit is $10,000, and your economic profit is -$20,000, so you should switch to making phone cases. D) Your accounting profit is -$20,000, and your economic profit is -$20,000, so you should switch to making banana cases.

C) Your accounting profit is $10,000, and your economic profit is -$20,000, so you should switch to making phone cases.

Consider the demand for blue jeans. According to the Law of Demand, if the price of blue jeans rises from $60 to $90, the result will be... A) a decrease in quantity supplied. B) a decrease in supply. C) a decrease in quantity demanded. D) a decrease in demand.

C) a decrease in quantity demanded.

If a competitive price-taker firm is currently producing a level of output at which marginal cost exceeds marginal revenue, then A) average revenue exceeds marginal cost. B) the firm is earning a positive profit. C) a one-unit decrease in output would increase the firm's profit. D) All of the above are correct.

C) a one-unit decrease in output would increase the firm's profit.

The imposition of price ceilings on a market often results in A) an increase in investment in the industry. B) a persistent surplus in the market. C) an increase in expenditures in the black-market. D) lower prices being offered on the black market.

C) an increase in expenditures in the black-market.

As new firms enter a monopolistically competitive market, profits of existing firms A) rise and product diversity in the market increases. B) rise and product diversity in the market decreases. C) decline and product diversity in the market increases. D) decline and product diversity in the market decreases.

C) decline and product diversity in the market increases.

When economists say that equilibrium is efficient, they mean that... A) everyone participating in the market is satisfied and happy. B) government intervention will remove deadweight loss. C) each unit produced and consumed has a marginal benefit greater than or equal to marginal cost. D) the distribution of income in the market is fair.

C) each unit produced and consumed has a marginal benefit greater than or equal to marginal cost.

The height of the supply curve is... A) the marginal profit from producing an additional unit of output. B) total cost divided by output. C) the marginal cost of producing an additional unit of output. D) the marginal benefit of consuming an additional unit of output.

C) the marginal cost of producing an additional unit of output.

Which of the following is not correct? A) The height of the demand curve represents the consumers' willingness to pay, or the value they place upon a unit of the good. B) The height of the supply curve represents the minimum price the producer would accept in order to be persuaded to produce the output. C)The vertical distance between the the supply curve and the demand curve represents profit. D) The vertical axis represents the price at which a single unit of the good will be sold.

C)The vertical distance between the the supply curve and the demand curve represents profit.

You could spend the next eight hours studying for your economics exam and increase your grade by around 20 points, or you could work an 8 hour shift at your job and earn $80. Assuming a constant linear relationship, the opportunity cost of earning a point on your exam would be... A) $80 B) $40 C) $10 D) $4

D) $4

A lawn-maintenance company tends to 50 lawns each week. It has Average Variable Cost of $40, and Average Fixed Cost of $60. Total Cost (note that I didn't say average Total Cost) is... A) $100 B) $2,000 C) $3,000 D) $5,000

D) $5,000

When two countries specialize according to comparative advantage and open up to trade with each other... A) Both countries are able to consume more than they could without trade. B) Consumers will be able to consume a larger variety of goods. C) Consumers will benefit from increased competition between producers in different countries. D) All of the above.

D) All of the above.

Which of the following is correct? A) Marginal Cost falls as output rises until diminishing returns occur; after that, marginal cost rises. B) Marginal Cost passes through the minimum point of Average Variable Cost. C) Marginal Cost passes through the minimum point of Average Total Cost. D) All of the above.

D) All of the above.

Which of the following do not create deadweight loss? A) A tax on producers or consumers of internet service. B) A binding price ceiling on internet service. C) A monopoly on internet service. D) All of these create deadweight loss.

D) All of these create deadweight loss.

Students have used printed textbooks for years, but then e-books are invented. Many students prefer e-books, and stop buying printed textbooks. What happens in the market for printed textbooks? A) Supply rises, driving prices down and quantities up. B) Supply falls, driving prices down and quantities up. C) Demand rises, driving prices up and quantities up. D) Demand falls, driving prices down and quantities down.

D) Demand falls, driving prices down and quantities down.

Suppose demand decreases and supply increases at the same time. Which of the following will happen? A) Equilibrium price will be indeterminate, while equilibrium quantity will decrease. B) Equilibrium price will be indeterminate, while equilibrium quantity will increase. C) Equilibrium quantity will be indeterminate, and equilibrium price will increase. D) Equilibrium quantity will be indeterminate, while equilibrium price will decrease. E) The change in equilibrium price and quantity cannot be determined.

D) Equilibrium quantity will be indeterminate, while equilibrium price will decrease.

Which of the following is not an example of a barrier to entry? A) A patent that prevents competitors from using a technology. B) Occupational licensing laws that force new entrants to go through lengthy training in order to enter an industry. C) Tariffs on foreign goods, which make it more difficult for foreign firms to sell their goods in our market. D) Low transportation costs which make it easy to move goods to new markets.

D) Low transportation costs which make it easy to move goods to new markets.

Which of the following is a characteristic of Monopolistic Competition? A) Monopolistic Competition has only one firm. B) Monopolistically Competitive firms all produce the same good. C) Monopolistically Competitive firms are price takers. D) Monopolistically Competitive firms earn zero profit in the long run.

D) Monopolistically Competitive firms earn zero profit in the long run.

Which of the following statements about price discrimination and efficiency is correct? A) Price discrimination is generally inefficient because it means firms are price searchers. B) Price discrimination is generally efficient because it allows firms to maximize profits. C) Price discrimination is generally inefficient because it creates deadweight loss. D) Price discrimination is generally efficient because it allows more consumers to buy the product than would be possible if everyone paid the same price.

D) Price discrimination is generally efficient because it allows more consumers to buy the product than would be possible if everyone paid the same price.

Suppose the markets for pizza and beer (usually consumed together) are in equilibrium. A sickness that affects cows leads to a decrease in the supply of milk, which is used to make mozzarella cheese (which is used on pizza). Which of the following is likely to happen? A) Quantity of pizza rises, price of pizza rises, price of beer falls, quantity of beer rises. B) Quantity of pizza falls, price of pizza rises, price of beer falls, quantity of beer rises. C) Quantity of pizza rises, price of pizza falls, price of beer rises, quantity of beer falls. D) Quantity of pizza falls, price of pizza rises, price of beer falls, quantity of beer falls.

D) Quantity of pizza falls, price of pizza rises, price of beer falls, quantity of beer falls.

Suppose the market for computer memory is in equilibrium, and then two things happen at the same time. First, an increase in the popularity of smartphones results in a greater need for memory (because now it can be used both in computers and in smartphones). Second, new production technology makes memory cheaper to produce. Which of the following describes what will happen to price and quantity? A) Price falls, quantity is indeterminate B) Price rises, quantity is indeterminate C) Quantity falls, price is indeterminate D) Quantity rises, price is indeterminate

D) Quantity rises, price is indeterminate

15.3% of your income is paid to the federal government in payroll taxes (which pay for Social Security and Medicare). Legally speaking, half the tax is paid by you, and half is paid by your employer. Which of the following is correct? A) The burden of the tax will be split in half, i.e., you pay 7.65%, and your employer pays 7.65%. B) The burden of the tax will be entirely borne by you, the worker, as the employer passes the tax on to you in the form of lower wages. C) The burden of the tax will be entirely borne by the employer, as the worker passes the tax on to the employer in the form of higher wages. D) The burden of the tax will be determined by the relatively elasticities of supply and demand, regardless of the legal assignment.

D) The burden of the tax will be determined by the relatively elasticities of supply and demand, regardless of the legal assignment.

The market for incandescent flashlights is in equilibrium, and incandescent flashlights are an inferior good. LED flashlights are a normal good. Everyone's income falls. What happens? A) The demand for incandescent flashlights falls, and the demand for LED flashlights rises. B) The demand for incandescent flashlights falls, and the demand for LED flashlights falls. C) The demand for incandescent flashlights rises, and the demand for LED flashlights rises. D) The demand for incandescent flashlights rises, and the demand for LED flashlights falls.

D) The demand for incandescent flashlights rises, and the demand for LED flashlights falls.

Suppose the government imposed a $200 price ceiling on mobile phones. Which of the following would probably not occur? (To be clear, your iPhone or Android phone probably costs much more than $200. You may not realize that because you are paying $25 per month for your phone, hidden in your phone bill, over a two year period. You can assume that this price control makes it illegal to pay more than $200 for a phone over any time period). A) A shortage of mobile phones will occur. B) Black markets in phones would appear, and some people would even smuggle in expensive phones from outside the country. C) Some mobile phone companies will try to get around this price control by selling you a nice phone for $200, but charging $400 for mandatory warranty coverage, or $400 for a mandatory shock-resistant case. D) The quality of smartphones available for sale would increase, resulting in faster phones with bigger, better screens.

D) The quality of smartphones available for sale would increase, resulting in faster phones with bigger, better screens.

Which of the following will most likely result from a destruction of half of the Florida orange crop due to a hard freeze? A) a decrease in the demand for oranges B) an increase in the supply of oranges C) an increase in the quantity of oranges bought and sold D) an increase in the price of oranges

D) an increase in the price of oranges

The equilibrium price of crude oil is currently $70 per gallon. If the U.S. government imposes a price floor of $40 per gallon, the immediate result will be... A) a surplus of oil. B) a shortage of oil. C) substitution toward crude oil, away from alternative fuels. D) nothing.

D) nothing.

The value of the best thing you give up to get something is.. A) marginal cost. B) sunk cost. C) fixed cost. D) opportunity cost.

D) opportunity cost.

For most people, ramen noodles are an inferior good. Suppose the market for ramen noodles is in equilibrium, and then two things happen at the same time. First, the incomes of consumers rise. Second, a technological improvement at noodle factories allows them to produce more noodles at a lower cost. What happens to the price and quantity of noodles? A) price and quantity are both indeterminate B) price is indeterminate, quantity falls C) price falls, quantity rises D) price falls, quantity is indeterminate

D) price falls, quantity is indeterminate

The deadweight loss of a tax refers to the A) increase in product price as a result of the tax. B) growth in government funded programs as a result of the revenue generated by the tax. C) loss of disposable income consumers suffer from the tax. D) reduction in gains from mutually beneficial exchanges that are eliminated as a result of the tax.

D) reduction in gains from mutually beneficial exchanges that are eliminated as a result of the tax.

The opportunity cost of an action is A) objective and will be the same for all individuals. B) a measure of the undesirable aspects involved in the action. C) applicable only to choices involving material goods like commodities. D) the highest valued alternative forgone as the result of choosing an option.

D) the highest valued alternative forgone as the result of choosing an option.

Firms sometimes collude to raise prices, but this often falls apart because... A) governments always stop anticompetitive behavior or regulate prices. B) it is difficult for different businesses to communicate with each other. C) entry barriers are low for all industries. D) there is an incentive for each firm to earn extra profits by cheating and selling more output.

D) there is an incentive for each firm to earn extra profits by cheating and selling more output.

Livia and Drusilla both run track. Livia can run a mile in 4 minutes and 45 seconds. Drusilla can run a mile in 5 minutes and 15 seconds. Which one should be a professional track athlete? A) Both of them. B) Neither of them. C) Livia D) Drusilla E) We can't determine that without their opportunity costs. F) We can't determine that without information about their health.

E) We can't determine that without their opportunity costs.

If a competitive price-taking firm is operating in long-run equilibrium and market demand suddenly falls, the short-run result will be A) greater economic profit. B) a normal profit. C) lower average total cost. D) lower average variable cost. E) economic losses.

E) economic losses.

Your friend is working for a well-known internet-related company. This company is the only firm selling advertising on the internet, and many people have complained about its monopoly status. Your friend says "I don't understand why everyone is complaining. The company is maximizing profit, just like any other company, producing where MC=MR. If it's maximizing profit, how can it be inefficient?" Explain how a firm can be following the equimarginal principle and still be producing an inefficient quantity of output.

MC=MR does result in maximum profit, but profit is not the same as efficiency. Efficiency is determined from society's point of view, using all the costs and benefits faced by society. The monopoly cares about costs, but only cares about some of the benefits (the profits it earns). Because it is a price searcher, it is able to raise the price, reducing output, and enjoying positive profits. The reduced output (compared to the efficient level of output) results in deadweight loss. To put it succinctly, a monopoly doesn't produce the efficient level of output because it's more profitable to produce less, raising the price. MC=MR maximizes profit, but MC=Demand is the efficient level of output.

Your accountant says that your firm is getting a large profit of $2 million, and is delighted with the outcome, saying "keep it up, boss!". Your economist friend, however, says that if you want to know whether you are doing well, you are looking at the wrong number. What does your economist friend mean, and how would the correct number differ? Explain your answer.

The friend means you should look at economic profit which takes into account how much you could be making if you were doing something else. The correct number would typically be a negative/ lower number. Economic profit is the correct way to determine if you are producing the right product in the right way, because it considers the alternatives you could do instead. Accounting profits do not take opportunity costs into account.

Mexico produces a widget at an opportunity cost of 4 gadgets. The U.S. produces a widget at an opportunity cost of 1 gadget. Suppose the U.S. specializes in producing widgets and Mexico specializes in producing gadgets, and they then trade at a rate of 1 widget for 6 gadgets. Will this benefit both countries? Why or why not? (Note that you could answer this by pointing out some math, but to get full points you need to explain your answer using words. (You should be able to answer this using just a sentence or two. Don't write a long essay; you'll probably say something wrong, and we'll have to take off points!)

These terms of trade will not benefit both countries. The short, mathematical answer is that 1:6 is not between the ratios of 1:4 and 1:1. The good answer is that these terms of trade are bad for Mexico. Mexico could already get a widget by giving up 4 gadgets; these terms of trade would quire them to give up 6 gadgets to get a widget, which is much more costly!

(This is the extra credit question) Suppose the price of gasoline is $2.00 per gallon and people buy 150 billion gallons of gasoline per year. A price ceiling of $1.80 is imposed on gasoline, reducing the price by 10%. Suppose the arc own-price elasticity of demand is 0.2 and the arc price elasticity of supply is 0.3.

This is probably easier than you think. In equilibrium (at a price of $2 per gallon) quantity supplied equals quantity demanded at 150 billion gallons per year. The price then falls by 10%. If the elasticity of demand is 0.2, this means a 1% decrease in price causes quantity demanded to rise by 0.2%. In this case, however, price falls by 10%, so quantity demanded rises by 2%. 2% of 150 is 3. If the elasticity of supply is 0.3, this means a 1% increase in price causes quantity supplied to fall by 0.3%. In this case, however, price falls by 10%, so quantity supplied falls by 3%. 3% of 150 is 4.5. If quantity demanded rises 3 and quantity supplied falls by 4.5, then there is a shortage of 7.5 units. To put it another way, quantity demanded went up to 153 billion gallons per year, and quantity supplied went down to 145.5 billion gallons per year, so there is a gap of 7.5 billion gallons per year.

Your company produces 5000 doodads at a total cost of $2 million. It sells them for $600 each. What is your company's profit? a) $1 million b) $2 million c) $3 million d) $5 million

a) $1 million

Your company produces 5000 doodads at a total accounting cost of $2 million. It sells them for $600 each. If you changed your business to produce thingies instead, you would earn a $5 million accounting profit. What is your company's economic profit? a) -$4 million b) $0 c) $1 million d) $2 million

a) -$4 million

Here's a typical exam question: Suppose the market for wheat is in equilibrium, with firms earning zero economic profit. Scientists discover that eating lots of carbohydrates is actually good for you, and everyone begins eating a lot more bread. Which of the following will occur? a) Demand for wheat rises, driving the price up, and causing firms to enjoy positive economic profits. b) Demand for wheat falls, driving the price down, and causing firms to suffer negative economic profits. c) The supply of wheat falls as firms exit the wheat market, driving the price down, and causing profits to fall. d) The marginal cost curve for wheat farms shifts upward.

a) Demand for wheat rises, driving the price up, and causing firms to enjoy positive economic profits.

Suppose the market for smartphones is in equilibrium. A new battery technology is invented which makes phones last a week without needing to be recharged. What happens in the market for smartphones? a) Demand shifts to the right, price rises, quantity rises .b) Demand shifts to the left, price falls, quantity falls. c) Supply shifts to the right, price falls, quantity rises. d) Supply shifts to the left, price falls, quantity rises.

a) Demand shifts to the right, price rises, quantity rises

Which of these jobs is likely to pay the highest salary? a) Offshore oil platform engineer, which requires a bachelor's degree and a master's degree, as well as working offshore for months at a time, in a dangerous environment, producing extremely valuable oil b) Economics professor, which requires a difficult-to-obtain doctoral degree, but then allows years of comfortable, safe indoor work, producing research that almost no one reads and teaching material that almost no one cares about c) Elementary school teacher, which requires four years of college and teaching certification, and allows a person to obtain a safe, (mostly) indoor job with summers (mostly) off d) Recycling sorter at a waste disposal facility, which requires a high school degree and passing a simple test

a) Offshore oil platform engineer, which requires a bachelor's degree and a master's degree, as well as working offshore for months at a time, in a dangerous environment, producing extremely valuable oil

Producer Surplus is... a) The area above the supply curve and below the price. b) The area above the demand curve and below the price. c) The difference between the demand and supply. d) The difference between what consumers are willing to pay and what they actually pay.

a) The area above the supply curve and below the price.

Your income rises by 10%, and the quantity of raisins that you purchase falls by 5%. Which of the following is correct? a) The income elasticity of demand for raisins is -0.5, and raisins are an inferior good. b) The income elasticity of demand for raisins is 0.5, and raisins are a normal good. c) The income elasticity of demand for raisins is -2, and raisins are an inferior good. d) The income elasticity of demand for raisins is 2, and raisins are a normal good.

a) The income elasticity of demand for raisins is -0.5, and raisins are an inferior good.

(Another example of an exam question): Suppose the market for onions is perfectly competitive, and it's an increasing cost industry. Also suppose that right now, firms are making positive economic profits. When this market reaches a long run equilibrium, will the price be higher or lower than it is right now?a) The price will be lower. b) The price will be higher. c) The price will be the same. d) There is not enough information to determine this.

a) The price will be lower.

Suppose the administration of FSU decides to fire all advisors and administrators, leaving only faculty, cleaning staff, and support staff, and by doing so it manages to cut costs significantly. The price of one year's tuition at FSU falls from $6,500 to $4,000. Which of the following will occur, ceteris paribus? a) The quantity of students who choose to attend FSU will rise. b) The quantity of students who choose to attend FSU will fall. c) Other universities will lower their tuition. d) Cars will become more fuel efficient.

a) The quantity of students who choose to attend FSU will rise.

Which of the following is an example of moral hazard? a) When businesses know that the government will bail them out if they suffer large losses, businesses start taking bigger risks. b) When the government passes a law that says people with pre-existing conditions cannot be denied health insurance, a large number of smokers with lung cancer sign up for insurance. c) When your employer's business becomes more successful, you are more likely to steal from it. d) When people can produce pollution without any taxes or fines, they produce more pollution.

a) When businesses know that the government will bail them out if they suffer large losses, businesses start taking bigger risks.

For every hour you spend studying for your economics exam, you will improve your grade by 3 points. For every hour you spend studying for your Physics exam, you will improve your grade by 4 points. For every hour your friend Albert spends studying for his economics exam, his grade will improve by 8 points. For every hour he spends studying for his physics exam, his grade will improve by 16 points. Which of the following is correct? a) Your opportunity cost of studying enough to improve your grade on your economics exam by 1 point is 1 1/3 points on your physics exam, and you have a comparative advantage in economics. b) Albert's opportunity cost of studying enough to improve his grade on his economics exam by 1 point is 2 points on his physicsexam, and he has a comparative advantage in economics. c) You have an absolute advantage in studying for physics. d) You can both benefit by specializing according to comparative advantage and trading points.

a) Your opportunity cost of studying enough to improve your grade on your economics exam by 1 point is 1 1/3 points on your physics exam, and you have a comparative advantage in economics.

Of the following goods, which is likely to have the most elastic demand? a) candy b) heroine c) antiretroviral drugs for treating HIV d) gasoline

a) candy

If a person's income goes up, and that person buys more chicken sandwiches, then we can conclude that for this person... a) chicken sandwiches are a normal good. b) chicken sandwiches are an inferior good. c) chicken sandwiches are substitutes. d) chicken sandwiches are complements.

a) chicken sandwiches are a normal good.

When profit is positive, price must be... a) greater than average total cost b) equal to average total cost c) less than average total cost d) it depends

a) greater than average total cost

A country with a comparative advantage in producing a good... a) has the lowest opportunity cost of production. b) has the highest opportunity cost of production. c) can produce more of the good than any other country. d) will be poorer as a result of trading with its neighbors for other goods.

a) has the lowest opportunity cost of production.

Here's a question straight off of an old exam: In a decreasing cost industry, as firms exit the industry and industry output decreases, costs will... a) rise. b) stay the same. c) fall. d) rise, then fall. e) fall, then rise

a) rise.

Consider the supply curve for sour cream. If the price of sour cream falls, then... a) the quantity supplied will fall. b) the quantity supplied will rise. c) the supply will rise. d) none of the above.

a) the quantity supplied will fall.

The price of internet access rises from $50 per month to $70 per month. The quantity of streaming service subscriptions falls from 200 million to 175 million. What is the Arc Cross-Price Elasticity of Demand? a) 0.4 b) -0.4 c) -0.3125 d) 0.3333

b) -0.4

Your height is 60 inches, but you lose your shins in a tragic gardening accident. As a result, your new height is 48 inches. The percent change in your height is.. .a) -25% b) -20% c) -12% d) 12%

b) -20%

Suppose the equilibrium interest rate in the mortgage market is 6%. The government imposes a usury law, which declares that interest rates above 2% are illegal. What happens? a) The market failure is corrected, resulting in more lending taking place. b) A shortage of mortgage loans occurs. c) A surplus of mortgage loans occurs. d) The government collects tax revenue, and the burden of the usury law is determined by the relative elasticities of supply and demand.

b) A shortage of mortgage loans occurs.

The opportunity cost for you to prepare a decent meal is one hour of work, which would earn you $10. The opportunity cost for Chef Enzo to prepare a decent meal is five minutes of work, which would earn him $2. Which of the following terms of trade would benefit you and Chef Enzo? a) Chef Enzo prepares a meal for you for $1. b) Chef Enzo prepares a meal for you for $8. c) Chef Enzo prepares a meal for you for $20. d) You prepare a meal for Chef Enzo, who pays you $5.

b) Chef Enzo prepares a meal for you for $8.

Which of the following goods best fits the assumptions underlying perfect competition? a) Prescription eyeglasses b) Common wheat c) Pickup trucks d) Wine

b) Common wheat

Which of the following is an economically reasonable argument for health inspections of restaurants? a) Restaurants have no competition, and therefore no incentive to improve food safety and cleanliness. b) Customers cannot easily get information about which restaurants are safe, and restaurants have little incentive to tell customers about problems. c) Restaurant owners do not care if their customers get sick. d) Restaurants always want to produce goods of the lowest quality in order to minimize costs.

b) Customers cannot easily get information about which restaurants are safe, and restaurants have little incentive to tell customers about problems.

Which of the following is a disadvantage of having a dictator? a) Decision making takes a long time. b) Decisions made by the dictator do not take into account the preferences of many people. c) Reaching agreement on decisions is costly due to all the different groups that must be consulted. d) Decisions are often unclear or watered-down due to the compromises that must be made.

b) Decisions made by the dictator do not take into account the preferences of many people.

If the surgeon general announces that wearing shoes is bad for your posture, which of the following will occur? a) Demand for shoes will shift to the right. b) Demand for shoes will shift to the left. c) Quantity of shoes demanded will rise. d) The supply of shoes will fall.

b) Demand for shoes will shift to the left.

Suppose you are going to a movie. You're excited to go to this; you would have paid up to $30 to go to this movie, though you actually paid $12. For simplicity, assume you are going alone. Yes, it's sad, but you have unusual taste in movies, so no one wants to join you. While you are driving to the theater, you get a call from a friend, who excitedly tells you that your favorite musical artist is performing a surprise show at a local tavern. If you turn around right now, you can make it before the music starts. It will cost you $12 to get into the tavern. You would be willing to pay up to $120 to see this artist. What is the economically rational thing to do? In case it matters to you, you've already paid for your movie ticket, and can't get your money back. You can't scalp your tickets. a) Go to the movie. b) Go to the musical performance. c) Watch part of the movie, then leave and see part of the musical performance. d) Skip them both and go home.

b) Go to the musical performance.

Which of the following is the economists' view of government? a) A democratic government acts in such a way as to make its citizens better off; it effectively takes their preferences and translates them into beneficial policy action. b) Governments are made up of rationally self-interested individuals, operating within a system of rules. Their actions are determined by their preferences and the incentives created by the system of rules. c) Governments exist to mobilize society in preparation for armed conflict and to collectively direct economic resources, in order to achieve the goals set by the ruling party. d) Governments exist so that they can take control of private resources, and instead direct them for the benefit of all. The government should determine who produces what, and who gets to consume which goods and services.

b) Governments are made up of rationally self-interested individuals, operating within a system of rules. Their actions are determined by their preferences and the incentives created by the system of rules.

Which of the following goods (or services) is likely to have inelastic supply? a) Memory chips, which are produced in big factories that can also produce central processors and graphics processors b) Higher education, which requires instructors with a PhD (which usually take 4 to 6 years to complete) c) Bawdy stories in army barracks or a sports locker room d) Mass produced notebook paper

b) Higher education, which requires instructors with a PhD (which usually take 4 to 6 years to complete)

A reminder: What is the rule for profit maximization for a monopolist? a) Total Revenue = Total Cost b) Marginal Revenue = Marginal Cost c) Price > Average Variable Cost d) Produce at the minimum of Average Total Cost

b) Marginal Revenue = Marginal Cost

Social Security is a government program that transfers income from young, working people to retirees. It is not a savings program. The problem with this program is that the number of retirees is climbing rapidly as the number of young people paying for them rises very slowly. The result will be a significantly increased tax burden on younger workers. If the program had been altered twenty years ago to create actual savings to pay for future retirees, or if benefits had been altered, this problem could have been avoided, or at least reduced. Why didn't politicians act to take care of this problem earlier? a) The nature and magnitude of the demographic problem was not yet clear. b) Politicians have no incentive to address problems that will not appear until they have left office .c) Politicians are indebted to young voters who elected them and do not want taxes to go up. d) The elderly are rationally ignorant about the benefits of the Social Security program.

b) Politicians have no incentive to address problems that will not appear until they have left office

A monopoly produces at MC=MR, resulting in a price of $50, quantity of 1,000 units, ATC of $30, and AVC of $20. What should this firm do? a) Produce in the short run, but shut down in the long run. b) Produce in the short run and the long run. c) Shut down in the short run, but produce in the long run. d) Shut down in the short run and the long run.

b) Produce in the short run and the long run.

Which of the following is not an example of the Tragedy of the Commons? a) Rhinos live on public land, where it is illegal for anyone to own, use, kill, harm, or harass them. They are nonetheless being hunted to extinction. b) Raphael does not enjoy cleaning, so when his friends come over to visit, they find that his bathroom is very unpleasant to use. They stop visiting him. c) Many farmers are located next to a river (which is public property). Runoff from their farms results in so much fertilizer in the river that it kills all the fish and makes it unsafe to drink. d) We all share some resistance to bacterial infection, but when someone doesn't finish their dose of antibiotics, the bacteria mutate and become antibiotic resistant, making us all a bit more vulnerable to disease.

b) Raphael does not enjoy cleaning, so when his friends come over to visit, they find that his bathroom is very unpleasant to use. They stop visiting him.

If the price of chicken feed (which is fed to chickens) goes up, which of the following will happen in the market for chicken sandwiches? a) Supply will shift to the right, and price will fall. b) Supply will shift to the left, and price will rise. c) Demand will shift to the right, and price will rise. d) Demand will shift to the left, and price will fall.

b) Supply will shift to the left, and price will rise.

Which of the following companies is not likely to be able to benefit from significant economies of scale? a) Tesla, a car company that plans to sell electric cars to the masses. b) Taylor's Tailors, a company that makes unique bespoke (i.e., custom) suits for men. c) HTC, a company that used to make phones but now plans to be the number one producer of Virtual Reality headsets. d) HT Apparel, a company that plans to use robotic sewing machines to produce standardized textiles at a lower cost than everbefore.

b) Taylor's Tailors, a company that makes unique bespoke (i.e., custom) suits for men.

Suppose it is 2,500 B.C.E. and the market for wheat in Egypt is in equilibrium. Two things then happen at the same time. First, the Nile fails to flood that year, so it does not deliver vital nutrients to the land around the river. Second, the Pharaoh imposes a tax of one senyu per bushel on wheat, to be paid by consumers. Which of the following is correct? a) The price rises and quantity is indeterminate. b) The price is indeterminate and quantity falls. c) The price is indeterminate and quantity rises. d) Price rises and quantity falls.

b) The price is indeterminate and quantity falls.

A new program to teach computer science more effectively graduates its first class of computer scientists, resulting in a significant increase in the number of programmers and software engineers available. Which of the following will occur? a) The wages of programmers will rise. b) The supply of software will shift to the right. c) The supply of software will shift to the left. d) The demand for software will shift to the left.

b) The supply of software will shift to the right.

Economic analysis suggests that bureaucrats and public-sector managers have a strong incentive to a) make sure that their budgets are as small as possible so more funds will be available for other government programs. b) expand their budgets to sizes beyond what would be considered economically efficient, to increase their power and prestige. c) ensure that their budgets are exactly the size that would be considered economically efficient, so that resources are not wasted and no important tasks are left undone. d) economize on their spending and return unspent funds to the general treasury.

b) expand their budgets to sizes beyond what would be considered economically efficient, to increase their power and prestige.

In the long run in a perfectly competitive market, economic profit will tend to converge toward, and stay around, a) positive economic profit. b) zero economic profit. c) negative economic profit. d) This is a trick question; profit does not tend to move toward any particular level.

b) zero economic profit.

You are repainting your house, and currently can paint one room each day. You call a friend in, and now you can paint 1.5 rooms per day. The marginal product of your friend is... a) 1.5 rooms per day. b) 1 room per day. c) 0.5 rooms per day. d) 0 rooms per day.

c) 0.5 rooms per day.

Which of the following is correct? a) A monopoly's profit-maximizing output is efficient. b) Average Total Cost pricing regulation results in the efficient amount of output. c) A monopoly that does not have enough revenue to pay its variable costs will shut down immediately. d) Imposing marginal cost pricing on a monopoly will increase its profits.

c) A monopoly that does not have enough revenue to pay its variable costs will shut down immediately.

Consider broadcast radio and television (broadcast radio and television are transmitted over radio waves through the air, like to your car radio, or to a television with an antenna, which I'm sure none of you use). What kind of good are these? a) A private good, because they are privately produced. b) A public good, because they are publicly produced. c) A public good, because they are nonrivalrous and nonexcludeable. d) A private good, because they are rivalrous and excludeable.

c) A public good, because they are nonrivalrous and nonexcludeable.

You are operating a house painting business (because you got so good at it from painting your own house). You currently have yourself and two other employees, and you can paint a total of 2 rooms per day. Adding a fourth worker will allow you to paint an additional 0.5 rooms per day. What does adding the fourth worker do to your average product? a) Average product rises. b) Average product stays the same. c) Average product falls. d) Average product falls, then rises.

c) Average product falls.

Suppose the market for coffee is in equilibrium. An FDA report is released documenting a variety of significant health benefits of drinking coffee every day. What happens in the market for coffee (the drink—not the bean)? a) Supply shifts to the right, price falls, quantity rises. b) Supply shifts to the left, price rises, quantity falls. c) Demand shifts to the right, price rises, quantity rises. d) Demand shifts to the left, price falls, quantity falls.

c) Demand shifts to the right, price rises, quantity rises.

The efficient amount of output is where the marginal cost to society is equal to the marginal benefit to society. Is this where the monopolist produces? a) Yes, because the monopolist produces at MC = MR. b) Yes, because the monopolist maximizes profit, and is therefore efficient by definition. c) No, the efficient output is where MC = D, because Demand represents the marginal benefits to society. d) No, because firms earning a profit must be inefficient.

c) No, the efficient output is where MC = D, because Demand represents the marginal benefits to society.

Suppose the market for potato chips is in equilibrium, and then two things happen at the same time: The price of potatoes (which are used to make potato chips ) goes up, and a big sporting and social event occurs. Eating lots of potato chips is traditional at this big sporting event. Which of the following is correct? a) Price rises, quantity falls. b) Price falls, quantity is indeterminate. c) Price rises, quantity is indeterminate. d) Price is indeterminate, quantity rises.

c) Price rises, quantity is indeterminate.

The shutdown rule implies that only the Marginal Cost Curve above Average Variable Costs is relevant. This section of the Marginal Cost Curve is upward sloping, and the Equimarginal Principle means that as price rises, the quantity of output a firm produces will rise. This relationship between price and quantity produced is known as... a) The Law of Diminishing Returns b) The First Law of Demand c) The Law of Supply d) The Law of Unintended Consequencese) The Second Law of Demand

c) The Law of Supply

A tornado destroys several carpet factories in North Georgia. Which of the following occurs? a) The quantity of carpet supplied rises. b) The price of carpet falls. c) The carpet supply curve shifts to the left. d) The carpet supply curve shifts to the right.

c) The carpet supply curve shifts to the left.

You go to the bookstore, or go to an online vendor, and find that they will offer you an academic discount for software. You have to present a faculty or student ID. What kind of price discrimination is this? a) First Degree b) Second Degree c) Third Degree

c) Third Degree

34) Suppose the equilibrium price of toilets is $250. The government imposes a $600 minimum price for each toilet. Which of the following is not likely to occur? a) Toilet manufacturers produce more toilets than consumers are willing to buy. b) Consumers prefer to keep old, inefficient, unreliable toilets rather than replacing them with new ones. c) Toilet manufacturers produce the lowest-quality toilets possible, while also complying with regulations. d) The market in used toilets (removed from renovation projects or demolition sites) grows larger (meaning more buyers and sellers).

c) Toilet manufacturers produce the lowest-quality toilets possible, while also complying with regulations.

Suppose your company has $1 million in explicit costs, and could rent out its buildings to earn a revenue of $0.5 million. Its equipment could be rented out for another $0.25 million. What is your economic cost? a) $1 million b) $1.25 million c) $1.5 million d) $1.75 million

d) $1.75 million

Equilibrium is efficient because... a) Total surplus is maximized. b) Marginal benefit equals marginal cost. c) Every unit that is produced has a benefit to consumers greater than (or equal to) the cost of its production. d) All of the above.

d) All of the above.

Suppose you are able to signal to a potential employer that you are very productive. Which of the following is correct? a) You are more likely to be hired. b) You are likely to be paid more. c) You are likely to be able to negotiate other employment terms to your benefit. d) All of the above.

d) All of the above.

The U.S. government provides targeted assistance to particular industries through programs like the Export-Import Bank (which gives low-interest loans to U.S. business to encourage exports). Suppose a politician proposes expanding the program to domestic production as well, with the federal government backing crowdfunded projects and making loans to businesses. Which of the following objections might an economist make? a) Consumers and private investors are better judges of which businesses worth investing in. b) Businesses are likely to use lobbying and political contributions to obtain loans, resulting in wasted resources due to rent seeking. c) If these investments turn out to be unprofitable, taxpayers will have to pay for the loss, rather than the officials that made the investment. This does not encourage wise investing. d) All of the above. e) None of the above.

d) All of the above.

Which of these answers correctly ranks the markets from most competitive to least competitive? a) Potatoes, onions, cavendish bananas b) Diamonds, 24K gold, sapphires c) Smartphones, organic chicken, organic beef d) Common wheat, fast food, cable internet service

d) Common wheat, fast food, cable internet service

Which of the following correctly summarizes positive and negative externalities? a) If there is a negative externality, people do too little of a bad thing. If there is a positive externality, people do too much of a bad thing. b) If there is a negative externality, government policy will fix the market failure. If there is a positive externality, government policy will not fix the market failure. c) If there are negative or positive externalities, government policy cannot improve on the market equilibrium. d) If there is a negative externality, people do too much of a bad thing. If there is a positive externality, people do too little of a good thing.

d) If there is a negative externality, people do too much of a bad thing. If there is a positive externality, people do too little of a good thing.

Which of the following best summarizes chapters 5 and 6, on market failure and public choice economics? a) Markets are always inefficient, so government intervention is necessary to make sure most parts of the economy can function. b) Government intervention is always inefficient, and markets are always efficient, so it is best to leave markets alone and unregulated. c) Markets and government usually work very well, so it doesn't really matter if we use one system or the other. d) Markets often work well, but fail in predictable ways. Government intervention might fix these problems, but government is itself prone to failure. As a result, efficiency may not be attainable.

d) Markets often work well, but fail in predictable ways. Government intervention might fix these problems, but government is itself prone to failure. As a result, efficiency may not be attainable.

Which market structure is most likely to result in positive economic profits that cannot be competed away? a) Perfect Competition b) Monopolistic Competition c) Oligopoly d) Monopoly

d) Monopoly

What is the title of the official in charge of making sure markets reach equilibrium? a) Secretary of the Treasury b) Chairman of the Federal Reserve c) President of the Chamber of Commerce d) None of the above

d) None of the above

Consumer Surplus is... a) The area above the supply curve and below the price. b) The area above the demand curve and below the price. c) The difference between the price and the cost of production. d) The difference between what consumers are willing to pay and what they actually pay.

d) The difference between what consumers are willing to pay and what they actually pay.

Suppose the government imposes a maximum annual tuition on bachelor's degree-granting institutions of $2,000 per year. Which of the following is not likely to occur? a) Universities will cut costs, resulting in a lower-quality educational experience. b) There will be more people trying to get into colleges and universities than these schools can handle, resulting in long wait-lists for admissions. c) Some people will set up fake or fraudulent bachelor's degree programs to attempt to make money off of the increased number of would-be students. d) Universities will compete for students more intensely, resulting in more and larger scholarships.

d) Universities will compete for students more intensely, resulting in more and larger scholarships.

What is the pattern in voting outcomes for the tables we just saw?a) Voting always results in funding being approved. b) Voting never results in funding being approved. c) Voting always results in an efficient outcome if the benefits of the program are greater than the costs of the program. d) When voters pay in proportion to benefits received, efficient policy is likely to pass, and inefficient policy is unlikely to pass.

d) When voters pay in proportion to benefits received, efficient policy is likely to pass, and inefficient policy is unlikely to pass.

In equilibrium... a) total surplus is maximized. b) quantity supplied equals quantity demanded. c) supply intersects demand. d) all of the above

d) all of the above

Which of the following statements is correct? a) In an increasing cost industry, the long run supply curve slopes upward. b) In a constant cost industry, the long run supply curve is horizontal. c) In a decreasing cost industry, the long run supply curve slopes downward. d) all of the above

d) all of the above

Suppose the price of tomato sauce is $4 per jar, but then rises to $7 per jar. The Law of Demand states that... a) demand will rise. b) demand will fall. c) quantity demanded will rise. d) quantity demanded will fall.

d) quantity demanded will fall.

Which of the following is correct? a) Average Fixed Cost declines as output rises. b) Marginal Cost falls as Marginal Product initially rises, but when diminishing returns set in, Marginal Cost rises as Marginal Product falls. c) Marginal Cost passes through the minimum of AVC and ATC. d) Average Total Cost is the sum of Average Variable Cost and Average Fixed Cost. e) All of the above. f) None of the above.

e) All of the above.