Micro Economics Unit 2

**Is it possible for accounting profit to be positive and economic profit to be negative? A. Yes, this could occur if explicit costs were modest and implicit costs were high. B. Yes, this could occur if implicit costs were modest and explicit costs were high. C. No, economic profit must always be larger than accounting profit. D. No, economic profit and accounting profit will always end up being the same.

(A)

**Months ago you spent​ $30 on a ticket to see your favorite musician.​ However, you start having doubts the day of the show because you do not feel prepared for an exam the following day. Which of the following bits of information should​ (according to the ideas about sunk costs discussed in the​ chapter) influence your final​ decision? Earlier in the day you found a​ $10 bill on the​ ground, which makes you feel less guilty about wasting​ $30. A. This extra money decreases the opportunity cost of studying making you more likely to skip the show. B. This does not impact your decision since it is still a sunk cost that will not impact your decision. C. None of the above D. This extra money will make you more likely to attend the show

(B)

**Months ago you spent​ $30 on a ticket to see your favorite musician.​ However, you start having doubts the day of the show because you do not feel prepared for an exam the following day. Which of the following bits of information should​ (according to the ideas about sunk costs discussed in the​ chapter) influence your final​ decision? You notice a mistake on your credit card​ statement! You paid​ $20 for the​ ticket, not​ $30. A. none of the above B. This does not impact your decision since it is still a sunk cost that will not impact your decision. C. This lower cost decreases the opportunity cost of studying making you more likely to skip the show. D. This lower cost will make you more likely to attend the show

(B)

Refer to the table above. What is the marginal product of the sixth worker?

20 pairs of shoes

**Q13. If the price of a good increases, ___. A. the budget constraint shifts to the right B. The budget constraint shifts to the left C. the consumer surplus increases D. the consumer surplus decreases

D

**Q15. The quantity supplied of a good is ____ A. inversely related to the price of the good B. determined irrespective of the market price C. always equal to the quantity demanded of the good D. the amount of the good that sellers are ready to supply at a given price

D

**Q17. Elasticity is: A. the sum of the percentage change in two variables B. the difference of the percentage in two variables C. the product of the percentage change in two variables D. the ratio of the percentage change in two variables

D

**Q20. Assume that a seller in a perfectly competitive market charges more than the equilibrium price. It is likely that this seller will _____. A. Increase his profit B. Increase his sales C. Lose only a few buyers D. Lose almost all of his buyers

D

**Q24. If the demand and supply curves for a commodity shift to the right by the same amount, then in comparison the initial equilibrium, the new equilibrium will be characterized by: A. A higher quantity and price B. A lower quantity and a higher price C. The same quantity and a lower price D. A higher quantity and the same price

D

**Q4. Which of the following is NOT an element of a seller's decision-making process in a perfectly competitive market? A. Relationship between inputs and outputs B. The cost of the inputs C. The price of the output D. The number of buyers

D

*When the price of milk is $3 per bottle, Steve purchases 20 bottles of milk. When the price increases to $6, Steve's consumption falls to 15 bottles. Steve's elasticity of demand for milk is: A. -0.43 B. -0.75 C. -0.50 D. -0.25

D

**The graph below shows the short-run cost curves and three possible marginal revenue curves for a perfectly competitive firm. If the firm were facing MR1, then we know that this firm should ______. A. keep producing, even though it's incurring a loss it's less than the fixed cost that must be paid if it shuts down. B. Shut down, since it's incurring a loss that is greater than the fixed costs that must be paid if shut down C. keep producing, since it is making a profit at the profit-maximizing output D. shut down, since it is incurring a loss and when a firm earns less than zero profit, it should shut down.

(C)

**A firm is experiencing economies of scale when its average total cost declines as more output is produced. The table below shows the​ long-run total costs of three different firms. Do firms 1 and 2 experience economies of​ scale? Or do they experience diseconomies of​ scale? A. Firm 1 is experiencing diseconomies of​ scale, while firm 2 is experiencing economies of scale. B. Both firms are experiencing economies of scale. C. Both firms are experiencing diseconomies of scale D. Firm 1 is experiencing economies of​ scale, while firm 2 is experiencing diseconomies of scale.

(D)

**Consider a market where there are many firms with different cost structures. When determining which firms enter the market​ first, we look at​ ____________. A. marginal cost B. average variable cost C. fixed costs D. average total costs

(D)

**The graph below shows the short-run cost curves and three possible marginal revenue curves for a perfectly competitive firm. If the firm were facing MR2, then we know that this firm should ____ A. Shut down since it's incurring a loss that is greater than the fixed cost that must be paid if it shuts down B. shut down since it is incurring a loss and when a firm earns less than zero profit, it should shut down C. keep producing, since it is making a profit at the profit-maximizing D. keep producing, even though it is incurring a loss it is less than the fixed costs that must be paid if it shuts down

(D)

**Which of the following situations depicts diseconomies of scale? A. The average total cost of a firm increases from $50 to $55 when it increases its production from 10 units to 20 units. B. The average total cost of a firm increases from $50 to $55 when it increases its production from 10 units to 20 units. C. The average total cost of a firm remains at $50 when it decreases its production from 20 units to 10 units. D. The average total cost of a firm decreases from $50 to $40 when it increases its production from 10 units to 20 units.

(NOT C)

The following table shows the total output produced by different numbers of workers in a shoe factory. Refer to the table above. What is the marginal product of the third worker?

68 pairs of shoes

Refer to the table above. The marginal product of workers falls below zero when the ________ worker is hired.

7th

(figure #10 ch. 5) The following figure displays John's budget constraint when he spends his income on tables and chairs. Refer to the figure above. Which of the following statements is true? A. the opportunity cot of buying one chair is 5 tables B. the opportunity cost of buying one table is 7 chairs C. the opportunity cost of tables increases as more tables are bought D. the price of tables is more than the price of chairs

A

(using graph from 5 hw) The following figure illustrates the budget constraint of a consumer of jeans and sweaters. Refer to the figure above. A change in the budget constraint from B1 to B2 indicates: A. decrease price of sweaters B. increase consumer's income C. increase in the price of sweaters D. a decrease in the consumer's income

A

**Q16. The Law of Supply states that _____ A. supply creates its own demand B. the quantity supplied of a good rises when the price rises, all other things C. at the equilibrium price, there is always some excess supply in the market D. the quantity supplied of a good will always equal the quantity of the good demanded

A

**Q18. Negative values of the price elasticity of demand of a good can be attributed to: A. the Law of Demand B. the Law of Supply C. the Law of Increasing Marginal Utility D. the Law of Diminishing Marginal Rate of Substitution

A

**Q9. If quantity of tea is measured on the horizontal axis and quantity of coffee is measured on the vertical axis, an increase in the price of coffee will cause the budget constraint to: A. Pivot leftward along the vertical axis B. Pivot rightward along the vertical axis C. Pivot leftward along the horizontal axis D. pivot rightward along the horizontal axis

A

**The graph below shows the short-run cost curves and three possible marginal revenue curves for a perfectly competitive firm. If the firm were facing MR3, then we know that this firm should ______. A. shut down since it is incurring a loss that is greater than the fixed costs that must be paid if it shuts down B. keep producing, even though it is incurring a loss it is less than the fixed costs that must be paid if it shuts down. C. Shut down, since it is incurring a loss and when a firm earns less than zero profit, it should be shut down. D. keep producing, since it is making a profit at the profit-maximizing output

A

*Q11. The market demand is the ____ of the individual demand of all the potential buyers. A. Sum B. Product C. Square of the sum D. Square root of the sum

A

*Q22. If the percentage change in the quantity supplied of a good is less than the percentage change in price of the good, the good is said to have a(n): A. Inelastic supply B. Unit elastic supply C. Elastic supply D. Perfectly elastic supply

A

*Q6. While making a purchase decision using marginal thinking, a buyer should buy the good that yields the: A. highest marginal benefit per dollar spent B. lowest marginal benefit per dollar spent C. highest average benefit plus marginal benefit per dollar spent D. lowest average benefit plus marginal benefit per dollar spent

A

A firm is experiencing economies of scale when its average total cost declines as more output is produced. The table below shows the​ long-run total costs of three different firms. Minimum efficient scale is the lowest level of output where​ long-run average total cost is minimized. Firm​ 3's minimum efficient scale occurs when the output is​ ______ unit(s). A. 3 B. 2 C. 4 D. 1

A

A firm sells 30 units of its product at a price of $5 per unit. It incurs a fixed cost of $100 and a variable cost of $20. The firm's profit is: A. $30 B. $50 C. $100 D. $150

A

An optimizing consumer has to choose between two goods-Good A priced at P_{A} and Good B priced at P_{B}. Given that MB_{A} is the marginal benefit from consuming Good A and MB_{B} is the marginal benefit from consuming Good B, the consumer's well-being will be maximized at the point where: A. MBA/PA = MBB/PB B. MBA= MBB C. MBA/PB = MBB/PA

A

Assume that a consumer can spend $20 on two goods: pens and pencils. If the price of one pen is $5 and the price of one pencil is $2, which of the following combinations of the two goods represents a point on the consumers budget constraint? A. 2 pens and 5 pencil B. 1 pens and 10 pencils C. 2 pens and 3 pencils D. 3 pens and 2 pencils

A

Assume that the supply curve for a commodity shifts to the left and the demand curve shifts to the right, and the shift in demand is greater than the shift in supply. Then, in comparison to the initial equilibrium, the new equilibrium will be characterized by: A. a higher price and quantity B. a higher price and a lower quantity C. a lower price and a higher quantity D. a lower price and quantity

A

At a price of $1/table, the quantity supplied of tables is 100 units, whereas the quantity demanded is 70 units. Given this information, which of the following statements is true? A. at a price of $1/table, there is a surplus in the market B. The market clearing price is $1/table C. at a price of $1/table there is a shortage in the market D. the equilibrium price is $1/table

A

Sharon consumes 10 chocolates when the price of one chocolate is $2. If her elasticity of demand for chocolates is -1, she consumes ________ chocolates when the price increases to $4. A. 5 B. 6 C. 8 D. 9

A

Helium is lighter than air and thus can be used to make party balloons float. Helium is also an inert gas that is vital for many industrial applications that require achieving super low temperatures. This relatively new industrial application for helium has caused the demand for helium to ___. This has resulted in a ___ in the price of party balloons since helium is a ____ for these balloons. A. increase, increase, input B. decrease, decrease, substitute C. decrease, increase, substitutue D, increase, decrease, input

A

If quantity of tea is measured on the horizontal axis and quantity of coffee is measured on the vertical axis, an increase in the price of coffee will cause the budget constraint to: A. pivot leftward along the vertical axis. B. pivot leftward along the horizontal axis. C. pivot rightward along the vertical axis. D. pivot rightward along the horizontal axis.

A

If the demand and supply curves for a commodity shift to the right by the same amount, then in comparison to the initial equilibrium, the new equilibrium will be characterized by: A. a higher quantity and the same price B. the same quantity and a lower price C. a higher quantity and price D. a lower quantity and a higher price

A

In a perfectly competitive market, situations of surplus or shortage of a good: A. are self-corrected due to the competitive nature of the market B. are permanent phenomena C. can exist simultaneously D. exist till the government or any ruling authority intervenes

A

Q1. The automobile market in the US is often said to be highly competitive. But it is not perfectly competitive. What makes this market not perfectly competitive? A. Different car companies make different vehicles with different features. B. An individual car buyer can dictate what price he or she pays for a vehicle. C. More than three major car companies exist in this market. D. an individual seller can dictate what price a consumer pays for a vehicle.

A

Q10. Increases in the marginal product of labor can be attributed to: A. Specialization of workers B. Depreciation of capital C. Diminishing returns to workers D. Congestion and thus better use of work space

A

Q18. A firm sells 30 units of its product at a price of $5/unit. It incurs a fixed cost of $100 and a variable cost of $20. The firm's profit is: A. $30 B. $50 C. $100 D. $150

A

Q18. Which of the following is likely to lead to a rightward shift in the supply curve of cotton? A. An increase in labor productivity due to training programs B. A rise in labor costs due to wage demands by labor unions C. An increase in the price of cotton D. A decrease in the price of cotton

A

Q21. When the price of a good increases by 300%, the quantity supplied of the good increases from 200 units to 900 units. The price elasticity of supply of the good is: A. 1.17 B. 1.5 C. 3 D. 4.5

A

Q24. Which of the following situations depicts diseconomies of scale? A. The average total cost of a firm increases from $50 to $55 when it increases its production from 10 units to 20 units B. The average total cost of a firm decrease from $50 to $40 when it increases its production from 10 units to 20 units C. The average total cost of a firm remains at $50 when it increases its production from 10 units to 20 units D. The average total cost of a firm remains at $50 when it decreases its production from 20 units to 10 units

A

Q26. Z is a normal good. The equilibrium price and equilibrium quantity of Z in the year 2011 was $25 and 60 units, respectively. It was seen that, in 2014, the equilibrium price of Z had decreased to $15, but the equilibrium quantity had increased to 70 units. Other things remaining the same, which of the following could explain this change? A. Shift of the supply curve of Z to the right B. Shift of the supply curve of Z to the left C. Shift of the demand curve for Z to the left D. Shift of the demand curve for Z to the right

A

Q3. Which of the following examples best describes the concept of free entry? A. Jack has an old cell phone that he wants to sell. He opens an account on eBay and auctions it off B. Pure-circuit Corporation wants to expand its production, so it doubles its annual recruitment C. To increase its market share, System Corporation decides to charge a price lower than the market price D. The government enters the market to correct any shortage or surplus in the market for gasoline

A

Q6. Suppose the market for cement is such that the output of all sellers is identical in composition and quality. While there are a large number of buyers and sellers, everyone conducts transactions at a common market price. Which of the following statements is true about the structure of the cement market? A. The cement market is perfectly competitive. B. The cement market is government regulated. C. All participants in the cement market are price-makers. D. All transactions in the cement market are likely to be involuntary

A

Q7. A seller who is a price-taker charges____ A. the market price B. a price above the market price C. a price below the market price D. different prices to different buyers

A

Q7. Which of the following statements is true of the long run? A. There are no fixed inputs in the long run. B. Capital can't be changed in the long run C. Labor can't be changed in the long run D. A firm can't alter its level of output in the long run

A

Q8. A firm produced 376 units with 10 workers. When the 11th worker was hired, the output increased to 398 units. The marginal product of the 11th worker is: A. 22 units B. 37.6 units C. 36.18 units D. 398 units

A

Suppose the university is trying to determine the most efficient way to allocate the rooms such that those who value the rooms the most get them. What would be the most efficient> A. auctioning them to the highest bidder B. allocating based on grades C. allocating on seniority D. using random lottery

A

Suppose ventilator manufacturers are profit-maximizing firms with costs outlined in this chapter​ (large fixed cost and increasing marginal​ costs). These firms typically operate in a competitive​ market, though the government is considering the following policies to boost production. For each​ policy, explain whether production will in fact increase.i If the government gives each firm a large sum of money with no strings​ attached, will ventilator production​ increase? A. No, a no strings attached payment does not impact marginal revenue or marginal cost so production will remain unchanged. B. No, the large sum will increase marginal revenue making it profitable for firms to decrease production. C. Yes, the large sum will induce all firms to increase production. D. None of the ABove

A

The following table shows the total output of bread produced by different numbers of workers in a bakery. Refer to the table above. Diminishing marginal returns sets in when: A. the fourth worker is hired B. the fifth worker is hired C. the second worker is hired D. the seventh worker is hired

A

The general rule for benefit maximization suggests that in personal equilibrium: A. the ratio of marginal benefits to price should be identical across all goods. B. the ratio of total benefits to price should be identical across all goods C. the ratio of marginal benefits to income should be identical across all goods D. the ratio of total benefits to income should be identical across all goods

A

The supply curve represents___ A. the minimum price sellers are willing to accept to sell an extra unit of a good. B. The max price buyers are willing to pay to buy an extra unit of a good C. the minimum price buyers are willing to pay to buy an extra unit of a good D. the max price sellers are willing to accept to sell an extra unit of a good

A

When the price of a good increases by 300%, the quantity supplied of the good increases from 200 units to 900 units. The price elasticity of supply of the good is: A. 1.17 B. 4.5 C. 3 D. 1.5

A

Which of the following statements correctly describes a perfectly competitive market? A. All participants in a perfectly competitive market are price-takers B. In a perfectly competitive market, individual sellers and buyers can influence the market price C. Haggling and bargaining is commonly observed in a perfectly competitive market D. Buyers in a perfectly competitive market pay different prices according to their individual demand

A

Z is a normal good. The equilibrium price and equilibrium quantity of Z in the year 2019 was $25 and 60 units. In 2020, the equilibrium price of Z had decreased to $15 and the equilibrium quantity decreased to 50 units. Other things remaining the same, which of the following could explain this change? A. shift of the demand curve for Z to the left B. shift of the demand curve for Z to the right C. shift of the supply curve of Z to the right D. shift of the supply curve of Z to the left

A

Q14. Which of the following factors is likely to lead to an increase in the quantity demanded of pens? A. Pens and writing pads B. Laptops and electric heaters C. Motorcycles and typewriters D. Nokia and Samsung cell phones

A.

(budget constraint from 5 hw) Refer to the figure above. If the price of a sweater is $3 and the budget constraint of the consumer is B3, his income is: A. $45 B. $135 C. $270 D. $90

B

**Q12. Which of the following refers to diminishing marginal returns? A. The revenue of a cell phone manufacturer decreased when it increased its product price B. The additional output produced in a firm decreased as more workers were hired C. The profits of an entrepreneur increased substantially after he hired a few of his employees D. The total output of a firm decreased as more workers were hired

B

**Q19. When the price of milk is $3/bottle, Steve purchases 20 bottles of milk. When the price increases to $6, Steve's consumption falls to 15 bottles. Steve's elasticity of demand for milk is: A. -0.25 B. -0.43 C. -0.50 D. -0.75

B

**Q23. The long-run average cost curve connects the lower part of the short-run cost curves because: A. Prices of inputs are less when acquired for a longer time period B. In the long run, firms have more flexibility to change input combinations C. Specialization of inputs increases productively only in the long run D. The firm earn positive profits in the long run

B

*Q13. The total cost of a firm is $50, the average variable cost is $2, and the average fixed cost is $3. How many units of the output does the firm produce? A. 5 units B. 10 units C. 15 units D. 18 units

B

A consumer's budget constraint refers to the collection of all possible bundles that ____/ A. give the consumer the same degree of satisfaction B. exactly exhausted a consumer's entire budget C. a consumer finds suitable for possible purchase D. a consumer can purchase with her income

B

A firm sells 20 units of a good at a price of $5 per unit. If the average cost of production of the good equals $3 per unit, the firm's revenue is: A. $40 B. $100 C. $60 D. $120

B

A surplus occurs in a market when A. the marginal cost of production is negligible B. the price is higher than the equilibrium price C. supply exceeds demand D. demand exceeds supply

B

Assume that an individual spends his income on sweaters and shirts. If the price of a sweater increases: A. the opportunity cost of buying sweaters decreases. B. the opportunity cost of buying sweaters increases. C. the opportunity cost of buying shirts increases. D. There is no change in the opportunity cost of consuming either good.

B

At a price of $5/table, the quantity supplied of tables is 500 units whereas the quantity demanded is 660 units. Given this information, which of the following statements is true? A. at $5/table, there is a surplus in the market B. At $5/table, there is a shortage in the market C. $5/table is the equilibrium price D. $5/table is the market clearing price

B

At all the points above the midpoint on a linear demand curve, the value of price elasticity of demand is: A. less than one B. greater than one C. zero D. equal to one

B

Charley Spends all of his income on soft drinks and pizza. Suppose he is currently buying these products in amounts such that his marginal benefit from an additional soft drink is $70 and his marginal benefit from an additional slice of pizza is $130. If the price of a soft drink is $3 and the price of pizza is $5, is Charley maximizing his total benefits? A. yes, there is no other consumption choice that will make his total benefits greater B. No, he should shift consumption toward pizza and away from soft drinks to maximize total benefits C. no, he should increase his consumption of both goods D. no, he should shift consumption toward soft drinks and away from pizza to maximize total benefits

B

Charley spends all of his income on soft drinks and pizza. Suppose he is currently buying these products in amounts such that his marginal benefit from an additional soft drink is $170 and his marginal benefit from an additional slice of pizza is $30. If the price of a soft drink is $4 and the price of pizza is $4, is he maximizing his total benefits? A. no, he should increase his consumption of both goods B. no, he should shift consumption toward soft drinks and away from pizza to maximize total benefits C. no, he should shift consumption toward pizza and away from soft drinks to maximize total benefits D. yes, there is no other consumption choice that will make his total benefits greater

B

In a marketplace, prices A. are a before and after comparison B. are a trade-off C. optimize using total value D. are marginal optimization

B

In a perfectly competitive​ market, a seller cannot choose to raise the price of its good since all sellers in the market produce identical goods, so raising the price would result in losing all its customers. All firms in a perfectly competitive market are said to be​ __________ A. price neutral B. price takers C. price leaders D. profitable in the long run

B

Market demand is derived by ____ A. fixing the quantity and adding up their prices that each buyer pays. B. fixing the price and adding up the quantities that each buyer demands. C. dividing each buyer's demand by the total number of customers in the market, fixing the price and adding up the quantities that each buyer demands D. Adding up both the prices each buyer pays and the quantities that each buyer demands

B

Months ago you spent​ $30 on a ticket to see your favorite musician.​ However, you start having doubts the day of the show because you do not feel prepared for an exam the following day. Which of the following bits of information should​ (according to the ideas about sunk costs discussed in the​ chapter) influence your final​ decision? You thought there was no hope of reselling the​ ticket, though your roommate just offered to buy it for​ $10. A. This does not impact your decision since it is still a sunk cost that will not impact your decision. B. The ability to resell the ticket means it is no longer a sunk cost and skipping the show brings you an additional​ $10 in​ benefit, making you more likely to skip the show. C. None of the above D. The ability to resell the ticket means it is no longer a sunk cost and skipping the show only brings you an additional​ $10 so you are more likely to attend the show.

B

Negative values of the price elasticity of demand of a good can be attributed to: A. the Law of Diminishing Marginal Rate of Substitution. B. the Law of Demand C. the Law of Increasing Marginal Utility. D. the Law of Supply

B

Other things remaining same, a right shift in the demand curve will lead to: A. an increase in the equilibrium price and a decrease in the equilibrium quantity B. an increase in the equilibrium price and the equilibrium quantity C. a decrease in the equilibrium price and the equilibrium quantity D. a decrease in the equilibrium price and an increase in the equilibrium quantity

B

Q11. Willingness to pay: A. is the lowest price that a buyer is willing and able to pay for a unit of good. B. the highest price that a buyer is willing and able to pay for a unit of good C. is equal to the price of the lowest-priced goods in a consumption bundle D. is equal to the price of the highest-priced goods in a consumption bundle

B

Q19. If the marginal cost of a perfectly competitive firm producing a good is $50 and the market price of the good is $100, the firm should: A. Decrease its output B. Increase its output C. Try to increase the market price D. Try to decrease the market price

B

Q2. A firm is said to be a price taker if it: A. Can affect the market price of goods by changing its supply B. Sells as much of any good as it wants at the prevailing market price C. Consults the government before fixing the price of its goods and services D. Is not free to enter a new market or exit from an existing market

B

Q20. A firm has an average total cost of $50. If it sells 20 units of its product at $80 each, what is its profit? A. $30 B. $600 C. $1000 D. $1600

B

Q8. The demand curve for most goods is normally___ A. upward sloping B. downward sloping C. parallel to the y-axis D. parallel to the x-axis

B

Utility measures ____. A. a consumer's preference for good A compared to good B B. the happiness of satisfaction that comes from consuming a good. C. how responsive a consumer is to changes in prices of income D. the number of goods or services that consumers can buy with a given level of income

B

Which is NOT an example of a market? A. medical residents express preferences for residencies and hospitals express their preferences for medical residents, and these preferences are used to match residents to residencies B. city requires homeowners to pay $5000 for putting in a sidewalk on their street C. a cattle auction, where farmers and ranchers bring cattle to be purchased by packing plants D. Etsy.com is a website where artists, designers, and crafts persons offer items they have made to interested buyers

B

Which of the following examples best approximates a competitive market? A. the market for Jackson Pollock paintings B. the market for soybeans in the US C. the market for Tesla electric cars D. the market for F-35 fighter planes

B

Which of the following examples best describes the concept of free entry> A. Purecircuit Corp. wants to expand its production, so it doubles its annual recruitement B. Jack has an old cell phone that he wants to sell. He opens an account on eBay and auctions it off. C. To increase its market share, System Corp. decides to charge a price lower than the market price. D. The government enters the market to correct any shortage or surplus in the market for gasoline.

B

Which of the following inputs can be changed in the short run? A. office space B. labor employed C. land owned D. machinery

B

Which of the following statements is true of the concept of willingness to pay? A. he willingness to pay is the lowest price that a buyer is willing to pay for an extra unit of a commodity B. If a consumer is consuming 10 units of a commodity and she is ready to pay $2 for the eleventh unit, her willingness to pay for the eleventh unit is $2 C. the willingness to pay for a commodity increases exponentially as the consumption of the commodity increases D. The willingness to pay for a commodity inceases linearly as the consumption of the commodity increases

B

Which of the following statements is true of the short run? A. all firms earn zero economic profits in the short run B. Only some of a firm's input can be varied in the short run. C. All factors of production can be changed in the short run. D. All the factors of production are fixed in the short run.

B

Willingness to pay: A. is equal to the price of the highest-priced goods in a consumption bundle. B. is the highest price that a buyer is willing and able to pay for a unit of good. C. is equal to the price of the lowest-priced goods in a consumption bundle. D. is the lowest price that a buyer is willing and able to pay for a unit of good.

B

*Q15. (referring to figure) What is the market-wide consumer surplus when the market price of wine is $18? A. $36,000 B. $3,000 C. $45,000 D. $210,000

B (calculate area of the triangle made by highest price, price, and Dmarket)

Q21. (referring to the scenario). Thomas's elasticity of demand for wine is: A. -0.33 B. -0.67 C. -0.25 D. -1

B =(30-20)/30 / (10-15)/10 1/3 / -1/2 1/3 x -2 -2/3

A price ceiling imposed by the government: A. is a tax that increases the market price of a good B. can create situations of excess demand C. involves pricing a commodity above the market price D. helps in establishing equilibrium in case of shortage or surplus

B?

(figure from 5 hw) Refer to the figure above. A change in the budget constraint from B2 to B3 indicates A. a decrease in the price of sweaters. B. a decrease in the price of jeans. C. an increase in the consumer's income. D. a decrease in the consumer's income.

C

***Q12. Which of the following pairs of goods is likely to be considered substitutes? A. Coffee and Sugar B. Printers and printing ink C. A ford car and public transportation D. A Nokia cell phone and a Nokia cell phone charger

C

**Q14. (Referring to figure) What is the market-wide consumer surplus when the market price of wine is $9? A. $180,000 B. $90,000 C. $60,000 D. $210,000

C

**Q15. When the marginal cost curve lies below the average cost curve, _____. A. The marginal cost curve is vertical B. The marginal cost curve is horizontal C. The average cost curve slopes downward D. The average cost curve slopes upward

C

**Q16. (referring to the figure) What is the loss in the market-wide consumer surplus when the price of wine changes from $9 to $18? A. $144,000 B. $30,000 C. $57,000 D. $0

C

**Q5. The slope of a budget constraint represents: A. the price of the good measured along the horizontal axis B. the price of the good measured along the vertical axis C. The opportunity cost of one good in terms of another D> the money income of the consumer

C

**The graph on the bottom shows the​ long-run average cost curve and marginal cost curve for a firm in a perfectly competitive market. Based on the graph to the​ bottom, the​ long-run supply curve is​ __________. A. segment AC B. same as ATC C. segment BC D. segment AB

C

*Q11. Which of the following is an example of specialization? A. The output of workers in a chocolate factory doubled when a new manager was appointed B. The cost of production of a light bulb making factory decrease as its capacity increased C. Instead of a worker making an entire shoe, the total productivity increased when different workers were allotted different jobs in the production process D. Import of better technology and machinery from developed countries greatly increased when the number of laser printers that a company was manufacturing

C

*Q8. The general rule for benefit maximization suggests that in personal equilibrium: A. the ratio of total benefits to price should be identical across all goods B. the ratio of total benefits to income should be identical across all goods C. the ratio of marginal benefits to price should be identical across all goods D. the ratio of marginal benefits to income should be identical across all goods

C

A buyer is a price taker if she: A. can purchase some amount of a good at a fixed price provided she has the money to pay for it. B. can bargain over the prices of the goods she consumes. C. can purchase any amount of a good at a fixed price provided she has the money to pay for it. D. always pays less than the market-determined price for the goods she is consuming. E. ignores the prices of related goods and considers only the price of the goods she is purchasing.

C

A firm produced 376 units with 10 workers. When the eleventh worker was hired, the output increased to 398 units. The marginal product of the eleventh worker is: A. 37.6 units B. 398 units C. 22 units D. 36.18 units

C

A firm with a fixed cost of $300 every month and variable cost of $200 every month decides to shut down. In such a situation it would lose: A. $200/month B. $0 C. $300/month D. $500/month

C

A good is said to have a relatively elastic demand if the value of price elasticity is: A. between 0.5 and 1 B. equal to 0 C. greater than 1 D. between 0 and 0.5

C

A production function establishes the relationship between: A. the quantity of output produced and the firm's profit. B. the market price of a good and the quantity of output supplied. C. the quantity of inputs used and the quantity of output produced. D. the market price of a good and the sales revenue generated.

C

Consider a market where there are many firms with different cost structures. The last firm to enter earns ____. A. the greatest economic profits B. average economic profits C. zero economic profits D. positive economic profits

C

Consider the following statement: Given that burgers and fries are complementary goods, if the price of fries decreases, the demand for both goods rise. A. it is somewhat inaccurate. The decrease in the price of fries will increase the quantity demanded (not the demand) for burgers. It will, however, as the statement claims, increase the demand for fries B. no, the quantity demanded (not the demand) for both goods are increased as a result of the decrease in the price of fries C. It is somewhat inaccurate. The decrease in the price of fries will increase the quantity demanded (not the demand) for fries. It will, however, as the statement claims, increase the demand for burgers D. Yes, the decrease in the price of fries will increase both the demand for fries and the demand for burgers

C

If a consumer purchases any combination of goods and services on his ____, he will exhaust his income completely. A. indifference curve B. demand function C. budget constraint D. demand schedule

C

If individual only consumes goods X and Y and is currently maximizing her total benefits, which of the following must be true? A. the marginal benefits/dollar spent are the same for both goods B. the equal bang for the buck rule is adhered to C. all the given choices D. MBx/Px =MBy/Py

C

If the demand and supply curves for a commodity both shift to the left and the shift in demand is less than the shift in supply, then in comparison to the initial equilibrium, the new equilibrium will be characterized by: A. a lower price and a higher quantity B. a higher price and quantity C. a higher price and a lower quantity D. the same price and quantity

C

In a perfectly competitive market, sellers ____ and buyers ______ A. cannot charge more than the market price; are able to pay less than the market price B. Are able to charge more than the market price; are able to pay less than the market price C. cannot charge more than the market price; cannot pay less than the market price. D. are able to charge more than the market price; cannot pay less than the market price

C

In the long run: A. all factors of production are fixed B. only some inputs of a firm can be changed C. all factors of production can be changed D. all firms earn positive economic profits

C

Q1. In a perfectly competitive market, because an individual seller tends to sell only a fraction of the total amount of the good produced: A. He can independently determine the market price B. He can charge prices above the equilibrium price C. Has individual choices do not affect market outcomes D. he always earns a positive profit

C

Q1. Which of the following is NOT a direct determining factor of consumer's purchase decisions? A. Consumer's tastes and preferences B. Market price of the finished goods C. Cost of factor inputs D. Consumers' income

C

Q12. John is ready to pay $5 for an extra loaf of bread. Due to an ongoing discount in the store, he gets a loaf for $2. John's consumer surplus from the purchase is ____. A. $2 B. $2.50 C. $3 D. $10

C

Q14. A firm producing 10 units of output incurs a total cost of $800. When it produces 11 units, the total cost increases to $890. What is the marginal cost of producing the 11th unit? A. $10 B. $80 C. $90 D. $100

C

Q16. A firm sells 20 units of a good at a price of $5/unit. If the average cost of production of the good equals $3/unit, the firm's revenue is: A. $40 B. $60 C. $100 D. $120

C

Q17. A firm earns $600 of total revenue from selling its product at $200/unit. If the per-unit cost of producing the good is $150, the firm sells ____ units of the good. A. 1 B. 2 C. 3 D. 4

C

Q21. At a price of $1/table, the quantity supplied of tables is 100 units, whereas the quantity demanded is 70 units. Given this information, which of the following statements is true? A. The equilibrium price is $1/table B. The market clearing price is $1/table C. At a price of $1/table, there is a surplus in the market D. At a price of $1/table, there is a shortage in the market

C

Q22. A surplus occurs in a market when: A. demand exceeds supply B. Price is lower than the equilibrium price C. Price is higher than the equilibrium price D. the marginal cost of production is negligble

C

Q25. If the demand and supply curves for a commodity shift to the right and the shift in demand is greater than the shift in supply, then in comparison to the initial equilibrium, the new equilibrium will be characterized by: A. a lower price and quantity B. a lower quantity and a higher price C. a higher price and quantity D. a higher quantity and a lower price

C

Q3. Assume that a consumer can spend $20 on two goods, pens and pencils. If the price of one pen is $5 and the price of one pencil is $2, which of the following combinations of the two goods represents a point on the consumers budget constraint? A. 3 pens and 2 pencils B. 1 pen and 10 pencils C. 2 pens and 5 pencils D. 2 pens and 3 pencils

C

Q5. A production function establishes the relationship between: A. The market price of a good and the sales revenue generated B. The quantity of output produced and the firm's profit C. The quantity of inputs used and the quantity of output produced D. The market price of a good and the quantity of output supplied

C

Q7. An optimizing consumer has to choose between two goods Good A priced PA and Good B priced at PB. Given that MBA is the marginal benefit from consuming Good A and MBB is the marginal benefit from consuming Good B, the consumer's well-being will be maximized at the point where A. MBA =MBB B. MBA/PB=MBB/PA C. MBA/PA=MBB/PB D. MBA/MBB = PB/PA

C

Q9. A firm produces 200 units of a good when it employs 7 workers. The marginal product of the eighth worker is 46 units. If the 8th worker is hired, the firm's total products will increase to: A. 208 B. 228 C. 246 D. 332

C

Q9. the Law of Demand states that ____ A. The demand for a commodity is directly related to consumers' income, all other things remaining constant. B. the demand for a commodity always equals the supply of the commodity C. the quantity demanded of a commodity varies inversely with the price of the commodity,all other things remaining constant D. the quantity demanded of a commodity is the same for all consumers in a perfectly com-petitive market

C

Suppose the prices of a pair of jeans, a shirt, and a tie are $30, $20, and $10 respectively. Which of the following statements is true in this context? A. The opportunity cost of buying a tie is 3 pairs of jeans. B. The opportunity cost of buying a tie is 2 shirts. C. The opportunity cost of buying a pair of jeans is 2 ties. D. The opportunity cost of buying a pair of jeans is 2 ties.

C

Suppose ventilator manufacturers are​ profit-maximizing firms with costs outlined in this chapter​ (large fixed cost and increasing marginal​ costs). These firms typically operate in a competitive​ market, though the government is considering the following policies to boost production. For each​ policy, explain whether production will in fact increase. Via tax​ subsidies, the government reduces the cost of labor and parts. Does this increase ventilator​ production? A. No, if the government subsidizes production it incentives firms to save money and cut production. B. No, the subsidy will change how many units consumers demand but does not impact production. C. Yes, the subsidy will lower cost and encourage entry into the market causing production to increase. D. None of the Above

C

The automobile market in the US is often said to be highly competitive. What makes this market not perfectly competitive? A. an individual car buyer can dictate what price he or she pays for a vehicle B. More than three major car companies exist in this market C. Different car companies make different vehicles with different features D. an individual seller can dictate what price a consumer pays for a vehicle

C

The buyers of a good will want to purchase it as long as their willingness to pay for the good is___ A. less than the price B. Greater than zero C. Greater than or equal to the price D. Equal to Zero

C

The percentage change in the quantity demanded of a good due to a percentage change in its price is referred to as the: A. price multiplier B. consumer surplus C. price elasticity of demand D. shadow price of the good

C

The price elasticity of demand for a good is likely to be less elastic ____. A. the shorter the available time during which consumers can adjust B. the lower the budget share spent on the good C. all of the above D. the smaller the number of close substitutes for the good

C

The total cost of a firm is $50, the average variable cost is $2, and the average fixed cost is $3. How may units of the output does the firm produce? A. 18 units B. 15 units C. 10 units D. 5 units

C

When the price of a good increases by 300%, the quantity supplied of the good increases from 200 units to 900 units. The price elasticity of supply of the good is: A. 1.5 B. 3 C. 1.17 D. 4.5

C

Which of the following is an example of specialization? A. Which of the following is an example of specialization? B. Import of better technology and machinery from developed countries greatly increased the number of laser printers that a company was manufacturing. C. Instead of a worker making an entire shoe, the total productivity increased when different workers were allotted different jobs in the production process. D. The output of workers in a chocolate factory doubled when a new manager was appointed.

C

Z is a normal good. The equilibrium price and quantity of Z in the year 2019 was $25 and 60 units. In 2020, the equilibrium quantity had decreased to 50 units. Other things remaining the same, which of the following could explain this change? A. shift of the demand curve for Z to the left. B. shift of the demand curve for Z to the right C. Shift of the supply curve of Z to the left D. Shift of the supply curve of Z to the right.

C

which of the following statements is true? A. government price control can be used to bring markets into equilibrium B. Equilibrium is attained when prices are not allowed to respond to market pressure C. binding price ceiling will always cause the quantity demanded to exceed the quantity supplied D. a government price control will always cause the quantity demanded to exceed the quantity supplied

C

Q5. In a perfectly competitive market, ____ A. all exchanges take place involuntarily B. there is only one seller and many buyers C. all sellers sell an identical good or a service D. there is no provision for the protection of property rights

C. All sellers sell an identical good or a service

A firm earns $600 of total revenue from selling its product at $200/unit. If the per-unit cost of producing the good is $150, the firm sells _____ unit(s) of the good. A. 2 B. 4 C. 1 D. 3

D

A firm uses workers, land, and machinery for its production process. Which of the following statements is then true? A. The only way the firm can change its output level in the long run is by changing the amount of land it owns. B. The only way the firm can change its output level in the long run is by changing the number of workers. C. The only way the firm can change its output level in the long run is by changing the amount of machinery. D. The firm can change its output level in the long run by changing any or all of its three inputs.

D

Assume that a combination of 10 bottles of wine and 2 cartons of milk lies on a consumer's budget constraint. If the price of one bottle of wine is $10, and one carton of milk is $1, what is the consumer's income? A. $100 B. $120 C. $20 D. $102

D

Assume that the market for chocolates is perfectly competitive. Which of the following statements would be true in this case? A. Pam wants to produce chocolates, but she is unable to as Roy controls all the cocoa farms in the region B. Terry uses soy milk for producing his chocolates, while Donna uses almond milk for producing hers C. Jessica, a chocolate seller, sometimes sets her price lower or higher than the price at which other sellers sell their chocolates D. Jill starts to produce chocolates today, but the addition of her supply into the market does not decrease the market price

D

Consider a market where there are many firms with different cost structures. If demand shifts to the left​ (decreases), the last firm that entered​ ____________. A. earns negative economic profits and thus undertakes cost-cutting measures to return to profitability B. earns positive economic profits, leading to new forms entering the market C. is indifferent between producing or exciting the market and so the outcome is indeterminate D. earns negative economic profits and so exits the market

D

Does the shape of the market demand curve differ from the shape of an individual demand curve? A. No they both tend to be upward-sloping curves B. Yes, individual demand curves tend to be upward-sloping while market demand curves are horizontal C. Yes, individual demand curves tend to be downward-sloping while market demand curves are upward-sloping D. No, they both tend to be downward-sloping

D

Firm A and Firm B produce the same goods but with different inputs. If the inputs used by firm A are more easily available than the inputs used by firm B, then which of the following statements is true? A. The elasticity of supply of firm A and firm B cannot be compared without information on price change. B. The elasticity of supply of firm A will be lower than the elasticity of supply of firm B C. The elasticity of supply of firm A will be higher than the elasticity of supply of firm B. D. The elasticity of supply of firm A and firm B will be equal.

D

If a good has a price elasticity of demand equal to 0, _____. A. the demand curve of the good is upward sloping B. the percentage change in quantity demanded for the good will be greater than the percentage change in its price C. the smallest increase in its price causes consumers to stop consuming it completely D. the quantity demanded is completely unaffected by a change in its price

D

If the price of the good measured along the vertical axis increases without a change in the price of the good measured along the horizontal axis, the consumer's budget constraint: A. shifts to the left B. pivots rightward without a change in the intercept on the horizontal axis C. shifts to the right D. pivots leftward without a change in the intercept on the horizontal axis

D

John is ready to pay $5 for an extra loaf of bread. Due to an ongoing discount in the store, he gets a loaf for $2. John's consumer surplus from the purchase is ________. A. $2.50 B. $10 C. $2 D. $3

D

Months ago you spent​ $30 on a ticket to see your favorite musician.​ However, you start having doubts the day of the show because you do not feel prepared for an exam the following day. Which of the following bits of information should​ (according to the ideas about sunk costs discussed in the​ chapter) influence your final​ decision? You learn there will be free pizza at the​ concert; thus, you will no longer have to spend​ $10 on dinner. A. This lowers the opportunity cost of studying making you more likely to skip the show. B. None of the Above C. This does not impact your decision since it is still a sunk cost that will not impact your decision. D. This lowers the cost of attending the concert and will make you more likely to attend the show

D

Q10. The buyers of a good will want to purchase it as long as their willingness to pay for the good is _____ A. equal to zero B. greater than zero C. less than the price D. greater than or equal to the price

D

Q10. Which of the following will lead to a change in the opportunity cost of buying a pen and a pencil? A. an increase in the consumer's income B. a decrease in the consumer's income C. a twofold increase in the prices of pens and pencils D. a twofold increase in the price of pens and a threefold increase in the price of pencils

D

Q13. Two goods are said to be complements when a fall in the price of one good A. leads to a fall in the price of the other good B. does not affect the demand for the other good C. leads to a leftward shift in the demand for the other good D. leads to a rightward shift in the demand for the other good

D

Q17. A seller's willingness to accept is the same as his _____ cost of production A. Total B. fixed C. average D. Marginal

D

Q19. At the competitive equilibrium, the __ A. Demand curve is tangential to the supply curve B. Quantity demanded exceeds the quantity supplied of a good C. Quantity supplied exceeds the quantity demanded of a good D. Quantity demanded is equal to the quantity supplied of a good

D

Q2. Suppose the prices of a pair of jeans, a shirt, and a tie are $30, $20, and $10 respectively. Which of the following is true? A. The opportunity cost of buying a pair of jeans is 2 ties B. The opportunity cost of buying a tie is 3 pairs of jeans C. the opportunity cost of buying a tie is 2 shirts D. the opportunity cost of buying a shirt is 2 ties

D

Q2. The gasoline market in the US is often said to be highly competitive. It is not perfectly competitive, but has features and results that are similar to those of a perfectly competitive market, such as ____ A. an individual buyer cannot influence the market price of gasoline by himself B. gas stations located near each other tend to charge the same or very similar prices C. an individual gas station cannot influence the market price by itself D. all of the above

D

Q23. In a perfectly competitive market, situations or shortages of good: A. Can exist simultaneously B. Are permanent phenomena C. Exist till the government or any ruling authority intervenes D. Are self-corrected due to the competitive nature of the market

D

Q25. In a perfectly competitive market: A. The long-run market price is equal to the average fixed cost of the industry B. The long-run market price is less than the minimum average cost of the industry C. The long-run market price is more than the minimum average cost of the industry because of free entry and exit of firms D. The long-run market price is equal to the minimum average cost of the industry because of free entry and exit of firms

D

Q3. Which of the following is true of a market A. A market must be under continuous surveillance and government control. B. A market always requires a specific physical location. C. Goods and services are exchanged at fixed prices in all markets. D. Price acts as a selection device for buyers and sellers in every market

D

Q4. Assume that a combination of 10 bottles of wine and 2 cartons of milk lies on a consumer's budget constraint. If the price of one bottle of wine is $10, and one carton of milk is $1, what is the consumer's income? A. $100 B. $20 C. $120 D. $102

D

Q4. Which of the following is NOT a required characteristic of a market? A. A collection of economic agents (e.g., buyers and sellers) B. Trade or exchange of a good or service C. Rules and arrangements for trading D. Government setting the price of the good or service

D

Q6. Which of the following inputs can be changed in the short run? A. Machinery B. Land owned C. Office space D. Labor employed

D

Suppose a new off-campus university apartment complex could rent rooms out for $900/month. If instead the university caps prices to $500/month, this would result in A. quantity demanded would exceed quantity supplied, resulting in a surplus B. Quantity supplied would exceed the quantity demanded, resulting in a shortage C. Quantity supplied would exceed the quantity demanded, resulting in a surplus D. Quantity demanded would exceed the quantity supplied, resulting in a shortage

D

The demand curve shows _____. A. the possible bundles of goods that can be purchased with a consumer's B. what goods you like compared to other goods and services C. how the quantity demanded responds to changes in consumer's D. how the quantity demanded responds to changes in the price of the good

D

The long-run average cost curve connects the lower part of the short-run cost curves because: A. The long-run average cost curve connects the lower part of the short-run cost curves because: B. prices of inputs are less when acquired for a longer time period. C. specialization of inputs increases productivity only in the long run. D. in the long run, firms have more flexibility to change input combinations.

D

The quantity demanded of a good is __ A. the amount of the good that sellers are willing to supply at a given market price B. always determined by government intervention C. Determined independently of the market price of the good D. the amount of the good that buyers are willing to purchase at a given market price

D

What is the difference between accounting profit and economic profit? A. Accounting profit only subtracts implicit costs from total​ revenue, while economic profit only subtracts explicit costs. B. Economic profit only subtracts implicit costs from total​ revenue, while accounting profit only subtracts explicit costs. C. Accounting profit subtracts both explicit and implicit costs from total​ revenue, while economic profit only subtracts explicit costs. D. Economic profit subtracts both explicit and implicit costs from total​ revenue, while accounting profit only subtracts explicit costs.

D

Which of the following are necessary ingredients to the buyer's problem? A. consumer's tastes and preferences B. amount of money the consumer has to spend C. prices of goods and services D. all the given choices

D

Which of the following factors is likely to lead an increase in the quantity demanded of pens? A. a fall in the incomes of all consumers B. a fall in the price of paper C. a rise in the incomes of all consumers D. a fall in the price of pens

D

Which of the following statements is true of long run? A. Capital cannot be changed in the long run. B. Labor cannot be changed in the long run. C. A firm cannot alter its level of output in the long run. D. There are no fixed inputs in the long run.

D

While making a purchase decision using marginal thinking, a buyer should buy the good that yields the: A. lowest average benefit plus marginal benefit/dollar spent B. lowest marginal benefit per dollar spent. C. highest average benefit plus marginal benefit/dollar spent D. highest marginal benefit/dollar spent

D

Q20. Sharon consumes 10 chocolates when the price of one chocolate is $2. If her elasticity of demand for chocolates is -1, she consumes ____ chocolates when the price increases to $4. A. 5 B. 6 C. 8 D. 0

D -1 = (10-x)/10 / (2-4)/2 1 = (10-x)/10 10=10-x x=0

In a perfectly competitive market, if one seller chooses to charge a price for its good that is slightly higher than the market price then it will ____ A. all of the above are equally likely B. see no change in number of customers C. See a small decrease in its number of customers D. lose all or almost all of its customers

D.

**The output of workers in a chocolate factory doubled when a new manager was appointed. A. unit elastic B. inelastic C. perfectly elastic D. perfectly inelastic

NOT B