MICRO SECOND EXAM

Refer to the table above. What is the average total cost of producing 140 units of output? a. $1.79 b. $4.23 c. $10.00 d. $7.33

a. $1.79

Linda spends $5 a week on apples and oranges. If the price of both goods is $1 per unit, how many apples and oranges, respectively, does she purchase per week if she wants to maximize her utility? a. 1 and 4 b. 2 and 3 c. 3 and 2 d. 0 and 5

a. 1 and 4

Refer to the table above. Suppose that the government imposes a price ceiling at a price of $15. The number of units that would be exchanged in this market would be a. 150, since that is the equilibrium quantity and the price ceiling is above the equilibrium price. b. 170, since that is the average of the quantity demanded and the quantity supplied at the price ceiling. c. 260, since that is the number of units supplied at the price ceiling. d. 80, since that is the number of units demanded at the price ceiling.

a. 150, since that is the equilibrium quantity and the price ceiling is above the equilibrium price.

Suppose you are eating buffalo wings at a local happy hour. The total utility from doing so after the fourth, fifth, sixth, and seventh wings are 80, 116, 136, 150, respectively. The marginal utility of the sixth wing is __________ . a. 20 b. 14 c. 22.7 d. 136

a. 20

Total utility for the first four oranges is a. 60 b. 40 c. 11 d. 52

a. 60

Michael can produce the following combinations of X and Y: 10X and 10Y, 5X and 15Y, and 0X and 20Y. Vernon can produce the following combinations of X and Y: 100X and 20Y, 50X and 30Y, or 0X and 40Y. It follows that a. Michael has the comparative advantage in producing Y and Vernon has the comparative advantage in producing X. b. Neither Michael nor Vernon has a comparative advantage in producing Y. c. Neither Michael nor Vernon has a comparative advantage in producing X. d. Michael has the comparative advantage in producing X and Vernon has the comparative advantage in producing Y.

a. Michael has the comparative advantage in producing Y and Vernon has the comparative advantage in producing X.

The profit-maximizing monopolist charges price a. P5 b. P4 c. P3 d. P2

a. P5

Refer to the graph above. Suppose that wheat producers lobby the government for a price floor and receive one. This price floor is set at PF. What has happened to the producers' surplus as a result of the imposition of the price floor? a. Producers' surplus has changed by (area 2 - area 5) b. Producers' surplus has changed by (area 3 - area 5) c. Producers' surplus has fallen by (area 4 + 5) d. Producers' surplus has risen by (area 2 + 3)

a. Producers' surplus has changed by (area 2 - area 5)

Which of the following is an implicit cost? a. Smith, who could work for someone else, works for himself. b. Jones buys $100 worth of supplies from Smith. c. Williamson pays his income taxes on April 15. d. Brown pays the bill he received in the mail.

a. Smith, who could work for someone else, works for himself.

Five months ago Wilson opened up a health club. Which of the following is an implicit cost related to the health club? a. Wilson previously worked as an accountant, earning $3,000 a month. b. Wilson usually eats four hamburgers a day, priced at $3 each. c. Wilson paid $120 for an outside laundry service to clean the towels used at the club. d. Wilson paid $100 for the pest control exterminator to spray the health club.

a. Wilson previously worked as an accountant, earning $3,000 a month.

An inferior good is a. a good for which the demand rises as income falls. b. any good that consumers think is of low quality. c. a good for which the demand rises as income rises. d. a good for which the quantity demanded increases as its price decreases.

a. a good for which the demand rises as income falls.

Points that lie inside (or below) the PPF are a. attainable but productive inefficient. b. unattainable. c. attainable and neither productive efficient nor productive inefficient. d. attainable and productive efficient.

a. attainable but productive inefficient.

As the price of good X rises, the demand for good Y falls. Therefore, goods X and Y are a. complements. b. inferior goods. c. normal goods. d. substitutes.

a. complements.

If the marginal utility of a good is negative, then a. consumers should buy less of it. b. consumers will consume it only if it is free. c. consumers should buy more of it to make its marginal utility positive. d. the law of diminishing marginal utility is being violated.

a. consumers should buy less of it.

Refer to the graph above. Suppose that wheat producers lobby the government for a price floor and receive one. This price floor is set at PF. What has happened to the consumers' surplus as a result of the imposition of the price floor? a. consumers' surplus has gone down by (area 2 + 4) b. consumers' surplus has risen by (area 2 + 3) c. consumers' surplus has risen by (area 2 + 4) d. consumers' surplus has gone down by (area 3 - area 5)

a. consumers' surplus has gone down by (area 2 + 4)

Good Y is an inferior good. If the average income of those who buy good Y rises, the _____________ curve for good Y will shift ____________ resulting in a(n) _____________ in the equilibrium price of Y and a(n) ____________ in the equilibrium quantity of Y. a. demand; leftward; decrease; decrease b. supply; leftward; increase; decrease c. supply; rightward; decrease; increase. d. demand; rightward; increase; increase

a. demand; leftward; decrease; decrease

For a price taker, market equilibrium price is $50. At 1,000 units, MR = MC, ATC = $45, and AVC = $30. This price taker will a. earn $5,000 profits if it produces 1,000 units. b. maximize its profits if it produces fewer than 1,000 units. c. shut down its operation, and by doing this minimize its losses. d. earn $50,000 profits if it produces 1,000 units of the good.

a. earn $5,000 profits if it produces 1,000 units.

When negative externalities are involved, the market is said to a. fail, because it overproduces the good connected with the negative externality. b. fail, because it underproduces the good connected with the negative externality. c. succeed, because it produces the socially optimal quantity of the good connected with the negative externality. d. be "in optimum," because the equilibrium fully adjusts for the negative externality.

a. fail, because it overproduces the good connected with the negative externality.

Suppose that for a given good demand decreases and supply increases at the same time. If demand decreases by a greater amount than supply increases, then equilibrium price __________ and equilibrium quantity __________ for that good. a. falls; falls b. rises; rises c. falls; rises d. rises; falls

a. falls; falls

Don receives 100 utils from consuming two oranges. The utility he derives from consuming the second orange equals 30 utils. The information provided a. is consistent with the law of diminishing marginal utility. b. lends support to the inferiority of oranges as consumer goods. c. is inconsistent with the law of diminishing marginal utility. d. is sufficient to determine the quantity of oranges Don will consume.

a. is consistent with the law of diminishing marginal utility.

The demand curve facing a perfectly competitive firm a. is horizontal. b. is downward sloping c. is vertical d. is upward sloping

a. is horizontal

The demand curve facing a perfectly competitive firm a. is horizontal. b. is downward sloping c. is vertical d. is upward sloping

a. is horizontal.

"As additional units of a variable input are added to a fixed input, eventually the marginal physical product of the variable input will decline." This is a statement of the a. law of diminishing marginal returns. b. law of supply. c. average-marginal rule. d. law of diminishing marginal utility.

a. law of diminishing marginal returns.

There are 30 students in a class. The average grade for the first 29 students is 87. The grade of the remaining student is 84. Given this student's grade, the average grade of the 30-student class will be a. lower than 87. b. 87 c. 84 d. higher than 87.

a. lower than 87.

When negative externalities are connected with the production of a good, a. market output will be greater than the socially optimal output. b. there will be a shortage of the good. c. the government should subsidize the production of the good. d. private costs and social costs are equal.

a. market output will be greater than the socially optimal output.

A price ceiling is a government-mandated a. maximum price above which legal trades cannot be made. b. minimum price above which legal trades cannot be made. c. maximum price below which legal trades cannot be made. d. minimum price below which legal trades cannot be made.

a. maximum price above which legal trades cannot be made.

If the minimum wage law sets a price floor above the equilibrium wage in the market for unskilled labor, then the a. minimum wage will create a surplus of unskilled labor. b. unskilled labor market will change, but we cannot be certain how. c. minimum wage will not impact the unskilled labor market. d. minimum wage will create a shortage of unskilled labor.

a. minimum wage will create a surplus of unskilled labor.

Suppose that a consumer purchases a combination of X and Y such that MUX/PX = 15 utils per dollar and MUY /PY = 10 utils per dollar. To maximize utility, the consumer should buy a. more of X and less of Y. b. less of both X and Y. c. more of both X and Y. d. less of X and more of Y.

a. more of X and less of Y.

Which of the following situations is clearly and unambiguously descriptive of a positive externality? a. none of these situations b. Jack feels better after his daily walk. c. The President of the United States yesterday signed a legislative act that is very popular in the country. d. Joriel studies harder than anyone in his class.

a. none of these situations

If, for a perfectly competitive firm, marginal cost is greater than marginal revenue for the 100th unit, then it follows that a. producing the 100th unit adds more to total cost than it does to total revenue. b. the firm is maximizing profit, if it produces the 100th unit. c. producing the 100th unit adds more to total revenue than it does to total cost. d. marginal cost equals marginal revenue for the 99th unit.

a. producing the 100th unit adds more to total cost than it does to total revenue.

The market for good X is initially in equilibrium at $5. The government then places a per-unit tax on good X, as shown by the shift of S1 to S2. As a result, the equilibrium price a. rises from $5.00 to $6.25 b. remains constant at $5.00 c. falls from $5.00 to $4.00 d. none of the above

a. rises from $5.00 to $6.25

The market for good X is initially in equilibrium at $5. The government then places a tax on the producers of good X, taxing them on each unit of good X they sell. As a result, the supply curve a. shifts (up and) leftward from S1 to S2. b. shifts (down and) rightward from S2 to S1. c. does not shift from S1. d. There is not enough information to answer the question.

a. shifts (up and) leftward from S1 to S2.

At a price for which quantity demanded exceeds quantity supplied, a __________ is experienced, which pushes the price __________ toward its equilibrium value. a. shortage; upward b. surplus; upward c. shortage; downward d. surplus; downward

a. shortage; upward

One reads the following in a newspaper: "Today the president and Congress agreed to impose new restrictive quotas on Japanese cars coming into the country." As a result, an economist would predict that the a. supply of cars in the country will fall and the (average) price of cars will rise. b. demand for cars in the country will fall and the (average) price of cars will rise. c. supply of cars in the country will remain the same and the (average) price of cars will fall. d. supply of cars in the country will rise and the (average) price of cars will fall.

a. supply of cars in the country will fall and the (average) price of cars will rise.

If the cross elasticity of demand for two goods is negative, a. the goods are complements. b.both goods are normal goods. c. one of the goods is necessarily a normal good, and the other good is necessarily an inferior good. d. the goods are substitutes.

a. the goods are complements.

The opportunity cost of attending college is a. the highest valued alternative one forfeits to attend college. b. the least valued alternative one forfeits to attend college. c. equal to the salary one will earn when one graduates from college. d. the money one spends on college tuition, books, and so forth.

a. the highest valued alternative one forfeits to attend college.

The fewer substitutes for a good, a. the lower its price elasticity of demand. b. the higher its price elasticity of demand. c. the lower its income elasticity of demand. d. the higher its income elasticity of demand.

a. the lower its price elasticity of demand.

Economic profit is the difference between total revenue and a. the sum of explicit and implicit costs. b. sunk costs. c. implicit costs. d. explicit costs.

a. the sum of explicit and implicit costs.

Suppose a producer decides that if the price of his or her product is $10, the quantity supplied will be 1,000 units, and if the price is $11, the quantity supplied will be 1,100. The supply of the good is a. unit elastic. b. elastic c. perfectly elastic d. inelastic

a. unit elastic.

The economy is currently operating at point F. The opportunity cost of moving to point E is approximately a. zero televisions. b. 55 televisions. c. 35 televisions. d. 40 televisions.

a. zero televisions.

Refer to the table above. The dollar amounts that go in blanks (A) and (B), respectively, are a. $3.33 and $2.50. b. $1.00 and $0.75. c. $10.00 and $10.00. d. $30.00 and $40.00.

b. $1.00 and $0.75.

The market for good X is initially in equilibrium at $5. The government then places a per-unit tax on good X, as shown by the shift of S1 to S2. What is the per-unit tax equal to? a. $1.00 b. $2.25 c. 4.00 d. $0.25

b. $2.25

A monopolist can sell 26,000 units at a price of $30 per unit. Lowering price by $2 raises the quantity demanded by 3,000 units. What is the change in total revenue resulting from this price change? a. $3,000 b. $32,000 c. $24,000 d. $6,000

b. $32,000

Refer to the graph above. Suppose the good shown is being sold at the $6 price ceiling. At a quantity of 75 units, what is the maximum per-unit price buyers would be willing to pay for a good "tied" to the good shown in the graph? a. $8 b. $4 c. $10 d. $6

b. $4

The opportunity cost of moving from point D to point C is a. 5,000 televisions. b. 10,000 fax machines c. 5,000 fax machines. d. 10,000 televisions.

b. 10,000 fax machines

In an eight-hour day, Andy can produce either 24 loaves of bread or 8 pounds of butter. In an eight-hour day, John can produce either 8 loaves of bread or 8 pounds of butter. The opportunity cost of producing 1 pound of butter is a. 1 hour for Andy and 1 hour for John. b. 3 loaves of bread for Andy and 1 loaf of bread for John. c. 1/3 loaves of bread for Andy and 1 loaf of bread for John. d. 1/3 hour for Andy and 1 hour for John.

b. 3 loaves of bread for Andy and 1 loaf of bread for John.

Refer to the table above. Suppose that the government imposes a price ceiling at a price of $10. The number of units that would be exchanged in this market would be a. 150, since that is the equilibrium quantity and the price ceiling is below the equilibrium price. b. 90, since that is the number of units supplied at the price ceiling (and the quantity supplied is less than the quantity demanded). c. 155, since that is the average of the quantity demanded and the quantity supplied at the price ceiling. d. 220, since that is the number of units demanded at the price ceiling (and the quantity demanded is greater than the quantity supplied).

b. 90, since that is the number of units supplied at the price ceiling (and the quantity supplied is less than the quantity demanded).

Which of the following statement is false based on information presented in the textbook (and the video lecture)? a. There is a price ceiling in the market for transplanted kidneys at a price of $0. b. In the market for transplanted kidneys the legal price is the same as the equilibrium price. c. There is evidence of a shortage in the market for kidneys (for transplants). d. The waiting list for transplanted kidneys is used as a non-price rationing device.

b. In the market for transplanted kidneys the legal price is the same as the equilibrium price.

Suppose the government imposes a price ceiling above the equilibrium price of a given good. Which of the following is the most likely result? a. Some buyers and sellers will be willing to risk breaking the law in order to exchange the good at a price above the equilibrium price since there would be a shortage of the good at the price ceiling. b. No change will occur in the market. c. Some other rationing device will emerge to allocate the good among buyers. d. Brute force will be used to allocate the good among buyers.

b. No change will occur in the market.

Suppose the demand for a particular good is perfectly inelastic and the government decides to impose a tax on the production of this good. Who will pay the greater share of such a tax? a. The buyers and the sellers will pay equal shares. b. The buyers will pay the entire share. c. The sellers will pay the entire share. d. The sellers will bear the greater share of the tax.

b. The buyers will pay the entire share.

Suppose equilibrium is at point A. Something then changes and equilibrium becomes point C. Which of the following is consistent with the change in equilibrium from point A to C (assuming that good X is a normal good)? a. There was an increase in the price of a substitute and an increase in wages. b. There was an increase in income and production technology advanced. c. There was a decrease in the price of a complement and an increase in wages. d. There was a decrease in income and production technology advanced.

b. There was an increase in income and production technology advanced.

If the cross elasticity of demand for good A with respect to good B is 2.7, then good A is a. a normal good. b. a substitute for good B. c. an inferior good. d. a complement to good B.

b. a substitute for good B.

Suppose you live in New York City and the government has imposed price ceilings on apartment rental rates. You want to rent an apartment from Smith, who says that unless you buy the furniture in the apartment for $4,000, he cannot rent the apartment to you. The condition of buying the furniture could be considered a. a price ceiling. b. a tie-in sale. c. a price floor. d. to be something no renter would agree to.

b. a tie-in sale.

If Casey bought 16 cotton t-shirts last year when her income was $40,000 and she buys 14 cotton t-shirts this year when her income is $45,000, then for Casey cotton t-shirts are a. a complementary good. b. an inferior good. c. a substitute good. d. a normal good.

b. an inferior good.

Marginal utility is defined as the a. change in marginal utility a person derives from the consumption of a good. b. change in total utility a person derives from the consumption of a good divided by the change in the quantity of the good consumed. c. change in total utility a person derives from the consumption of a good divided by the price of that good. d. change in total utility a person derives from the consumption of a good divided by the value in use of that good.

b. change in total utility a person derives from the consumption of a good divided by the change in the quantity of the good consumed.

In this example, marginal utility a. constantly increases. b. constantly diminishes. c. increases then diminishes. d. diminishes then increases.

b. constantly diminishes.

The market for good X is initially in equilibrium at $5. The government then places a per-unit tax on good X, as shown by the shift of S1 to S2. As a result, a. consumers end up paying $5.00 per unit, and producers end up receiving and keeping $5.00 per unit. b. consumers end up paying $6.25 per unit, and producers end up receiving $6.25 per unit, but keeping only $4.00 per unit. c. consumers end up paying $6.25 per unit, and producers end up receiving $5.00 per unit, but keeping only $4.00 per unit. d. consumers end up paying $6.25 per unit, and producers end up receiving and keeping $4.00 per unit.

b. consumers end up paying $6.25 per unit, and producers end up receiving $6.25 per unit, but keeping only $4.00 per unit.

The market demand curve in a perfectly competitive market is a. vertcial b. downward sloping c. horizontal d. upward sloping

b. downward sloping

The market demand curve in a perfectly competitive market is a. vertical b. downward sloping c. horizontal d. upward sloping

b. downward sloping

When positive externalities are involved, the market is said to a. be "in optimum," because the equilibrium fully adjusts for the positive externality. b. fail, because it underproduces the good connected with the positive externality. c. fail, because it overproduces the good connected with the positive externality. d. succeed, because it produces the socially optimal quantity of the good connected with the positive externality.

b. fail, because it underproduces the good connected with the positive externality.

If an industry is in long-run competitive equilibrium and experiences a decrease in demand, then as a result the equilibrium price will __________, which will cause the representative firm's __________ curve to shift downward and some firms will __________ the industry. a. rise; marginal revenue; enter b. fall; demand; exit c. rise; marginal cost; enter d. fall; marginal cost; enter

b. fall; demand; exit

If the price of good X rises and the demand for good X is elastic, then the percentage __________ in quantity demanded is __________ the percentage rise in price, and total revenue __________. a. rise; greater than; falls b. fall; greater than; falls c. fall; greater than; rises d. fall; less than; falls

b. fall; greater than; falls

Economies of scale are said to exist when inputs are increased by some percentage and output increases by a(n) __________ percentage, causing unit costs to __________. a. smaller; rise b. greater; fall c. greater; rise d. smaller; fall

b. greater; fall

Suppose a consumer is purchasing Coke and pretzels in quantities such that she is achieving consumer equilibrium. Then the price of Coke decreases. The consumer will likely __________ her consumption of Coke and the marginal utility of Coke will __________ while the total utility from Coke will __________. a. increase; increase; increase b. increase; decrease; increase c. increase; decrease; decrease d. decrease; increase; increase

b. increase; decrease; increase

If the percentage change in quantity demanded is less than the percentage change in price for good Y, then the demand for good Y is a. unit elastic b. inelastic c. elastic d. perfectly elastic

b. inelastic

Consider two straight-line PPFs. They have the same vertical intercept, but curve I is flatter than curve II. The opportunity cost of producing the good on the horizontal axis a. cannot be compared for the two curves without more information. b. is greater along curve II. c. is the same along both curves. d. is greater along curve I.

b. is greater along curve II.

The perfectly competitive firm will seek to produce the level of output for which a. average total cost is at a minimum. b. marginal cost equals marginal revenue. c. average fixed cost is at a minimum. d. average variable cost is at a minimum.

b. marginal cost equals marginal revenue.

A perfectly competitive firm should increase its level of production as long as a. the total revenue curve is rising. b. marginal revenue is greater than marginal cost. c. the marginal revenue curve is rising. d. total revenue is less than total cost.

b. marginal revenue is greater than marginal cost.

Oil producers expect that oil prices next year will be lower than oil prices this year. As a result, oil producers are most likely to a. place more oil on the market this year, thus increasing the quantity supplied of oil at lower but not higher prices. b. place more oil on the market this year, thus shifting the present supply curve of oil rightward. c. hold some oil off the market this year, thus shifting the present supply curve of oil leftward. d. hold some oil off the market this year, thus decreasing the quantity supplied of oil at lower but not higher prices.

b. place more oil on the market this year, thus shifting the present supply curve of oil rightward.

The profit of the monopolist is a. uncertain b. positive c. negative d. zero

b. positive

When a monopolist increases output above the profit-maximizing output level, a. producer surplus falls and consumer surplus falls. b. producer surplus falls but consumer surplus rises. c. producer surplus rises but consumer surplus falls. d. producer surplus rises and consumer surplus rises

b. producer surplus falls but consumer surplus rises.

The profit-maximizing monopolist produces output a. q4 b. q1 c. q2 d. q3

b. q1

Refer to the graph above. At a wage of $7, there will be a __________ of unskilled workers equal to ___________ thousand workers. a. shortage; 10 b. surplus; 20 c. shortage; 20 d. surplus; 10

b. surplus; 20

Refer to the table above. Diminishing marginal returns set in with the addition of which unit of the variable input? a. the third b. the fourth c. the second d. the first

b. the fourth

Entrepreneurship is a. knowledge of the particular natural resources to be found in a given area. b. the talent for organizing the use of land, labor and capital, among other things. c. accumulated technical knowledge in using labor and capital. d. skill in influencing government regulators and legislators.

b. the talent for organizing the use of land, labor and capital, among other things.

Consider the following information about a business Diane opened last year: price = $20, quantity sold = 25,000; implicit cost = $255,000; explicit cost = $360,000. Assuming that all relevant costs and revenue are noted, what was Diane's economic profit? a. $220,000 b. -$140,000 c. -$115,000 d. $140,000

c. -$115,000

Assume that the price of oranges increases to $2, while the price of apples remains at $1, and Linda allocates $5 of the weekly food budget to purchasing apples and oranges. If Linda wants to maximize her utility, her new consumption bundle will consist of a. none of the above b. 1 apple and 2 oranges. c. 3 apples and 1 orange. d. 5 apples and no oranges.

c. 3 apples and 1 orange.

Total utility for the first two oranges is a. 20 b. cannot be determined c. 36 d. 40

c. 36

Refer to the Table above. What quantity of output should the profit-maximizing firm produce? a. 41 units b. 42 units c. 44 units d. 45 units

c. 44 units

The market for good X is initially in equilibrium at $5. The government then places a per-unit tax on good X, as shown by the shift of S1 to S2. Approximately what percentage of the tax do producers end up paying? a. 55 percent b. 70 percent c. 45 percent d. 63 percent

c. 45 percent

The market for good X is initially in equilibrium at $5. The government then places a per-unit tax on good X, as shown by the shift of S1 to S2. Approximately what percentage of the tax do consumers end up paying? a. 63 percent b. 70 percent c. 55 percent d. 45 percent

c. 55 percent

Refer to the graph above. The number of units exchanged at the price ceiling is a. 100 b. 125 c. 75 d. 175

c. 75

Who has the comparative advantage in the production of good A? a. Neither Alex nor Adam b. Both Alex and Adam c. Adam d. Alex

c. Adam

In which of the following situations would a negative externality most likely be involved? a. Lucy went to a fancy restaurant last night and ordered the most expensive meal on the menu. She hated it. b. Richard is taking an economics class from Professor Franklin. Professor Franklin often says things that confuse Richard. c. Alyson lives near an airport. At five o'clock in the morning every day she can hear the airplanes taking off and it awakens her. d. It is night and Kenneth is sitting in his easy chair reading a novel by John Grisham. The lamp he is reading by has only a 40-watt light bulb. He is having a hard time reading.

c. Alyson lives near an airport. At five o'clock in the morning every day she can hear the airplanes taking off and it awakens her.

Suppose Valerie is consuming lipstick (L) and eye shadow (E) and nothing else. MUL = 40 and MUE = 36. The price of eye shadow is $9, and the price of lipstick is $15. What should Valerie do? a. Consume more lipstick and less eye shadow. b. Consume more of both. c. Consume more eye shadow and less lipstick. d. Consume less of both.

c. Consume more eye shadow and less lipstick.

Suppose the marginal utility (MU) of a paperback books is 60 and each book costs $10, while the MU of a hamburger is 50 and each costs $7.50. If you consume one book and buy one hamburger per week, are you attaining consumer equilibrium? a. There is not enough information to answer the question. b. No. You need to buy more books and fewer hamburgers to move toward consumer equilibrium. c. No. You need to buy more hamburgers and fewer books to move toward consumer equilibrium. d. Yes, so there is no need to change.

c. No. You need to buy more hamburgers and fewer books to move toward consumer equilibrium.

Which of the following would result in a movement from point A on D1 to point B on D2? a. There was an increase in the price of a complement to good X. b. There was a decrease in the price of a substitute for good X. c. There was an increase in the price of a substitute for good X. d. There was a decline in technology in the production of good X.

c. There was an increase in the price of a substitute for good X.

Ari is currently consuming 10 hot dogs and 8 hamburgers per week. The last hot dog she consumed yielded 20 utils while the last hamburger she ate gave her 25 utils. If hot dogs cost $2 and hamburgers cost $2.50, is Ari consuming the correct quantities of these two goods to be in consumer equilibrium? a. No, she should consume more hot dogs and fewer hamburgers. b. There is not enough information to answer the question. c. Yes, so there is no need to change her consumption. d. No, she should consume more hamburgers and fewer hot dogs.

c. Yes, so there is no need to change her consumption.

An advance in technology in the production of good X causes a. the supply curve for good X to change from vertical to upward sloping. b. a leftward shift in the supply curve for good X. c. a rightward shift in the supply curve for good X. d. the supply curve for good X to change from upward sloping to vertical.

c. a rightward shift in the supply curve for good X.

The price at which a perfectly competitive firm sells its product is determined by a. the government, because there are so many buyers and sellers of the product that together they cannot agree on the price. b. the buyers of the product, because there are so many sellers that they cannot agree on a price. c. all sellers and buyers of the product. d. the individual seller based on his costs of production and his profit margin.

c. all sellers and buyers of the product.

Decision making "at the margin" means making a choice based on __________ of a decision. a. the total benefits b. the total costs c. comparing the additional benefits and costs d. comparing the total benefits and costs

c. comparing the additional benefits and costs

If a firm earns normal profit, then it has generated revenues a. sufficient to cover explicit costs, but not implicit costs. b. greater than total opportunity costs. c. equal to the sum of implicit and explicit costs. d. sufficient to cover implicit costs, but not explicit costs.

c. equal to the sum of implicit and explicit costs.

A rising marginal cost curve is a reflection of a a. falling average fixed cost curve. b. rising marginal physical product curve. c. falling marginal physical product curve. d. rising average variable cost curve.

c. falling marginal physical product curve.

Cy recently went into the business of producing and selling cardboard boxes. For this business, which of the following is most likely to be a fixed cost? a. labor costs b. adhesive costs c. fire insurance d. paper costs

c. fire insurance

Microeconomics is the branch of economics that deals with a. the production side of the economy, exclusively. b. the buying side of the economy, exclusively. c. human behavior and choices as they relate to relatively small units --- an individual, a firm, an industry. d. highly aggregated markets or the entire economy.

c. human behavior and choices as they relate to relatively small units --- an individual, a firm, an industry.

The main difference between the short run and the long run is that a. the long run always refers to a time period of one year or longer. b. firms earn losses in the long run, but not in the short run. c. in the short run, one or more inputs are fixed. d. in the long run, only one input can be fixed.

c. in the short run, one or more inputs are fixed.

If a person's income falls, his or her budget constraint moves a. outward away from the origin, and its slope remains the same. b. inward toward the origin, and its slope changes. c. inward toward the origin, and its slope remains the same. d. outward away from the origin, and its slope changes.

c. inward toward the origin, and its slope remains the same.

The shorter the period of time consumers have to adjust to price changes, the __________ the __________ elasticity of demand. a. higher; income b. higher; price c. lower; price d. lower; income

c. lower; price

Refer to the graph above. Suppose the minimum wage is set at $5. The result will be a. a shortage of unskilled labor. b. unemployment. c. no impact on the unskilled labor market. d. a prolonged surplus of unskilled labor.

c. no impact on the unskilled labor market.

The minimum wage is an example of a a. price door b. price ceiling c. price floor. d. price wall

c. price floor.

The condition in an economy that makes a "rationing device" a necessity is: a. the economy is centrally planned by the government. b. the economy is organized around free markets. c. scarcity exists. d. there are fewer types of goods than there are people in the economy.

c. scarcity exists.

Which of the following is not a characteristic of perfect competition? a. there are no barriers to entry or exit b. buyers and sellers have access to all relevant information c. sellers produce and sell a heterogeneous product d. buyers and sellers having no influence on price

c. sellers produce and sell a heterogeneous product

If goods are not rationed according to price, if follows that a. first-come-first-served will necessarily be the rationing device used in the market. b. there will be surpluses in the market. c. some non-price rationing device will be used to ration the goods. d. they won't get rationed at all.

c. some non-price rationing device will be used to ration the goods.

An unrecoverable cost that should be disregarded in any current or future decision is also called a(n) __________ cost. a. explicit b. variable c. sunk d. implicit

c. sunk

Market failure is a situation in which a. there is a question over the quality of a product for sale. b. there are too many buyers but not enough sellers. c. the market does not provide the ideal or optimal amount of a particular good. d. prices are too high for "average" people to buy necessities.

c. the market does not provide the ideal or optimal amount of a particular good.

If the current market price of good Z is below the equilibrium price of good Z a. there is a surplus of good Z. b. demand must necessarily decrease to restore equilibrium. c. there is a shortage of good Z. d. it must be because the government has imposed a price ceiling in the market for good Z.

c. there is a shortage of good Z.

At the minimum wage (set above the equilibrium wage), a. all individuals who end up working are paid less than if they were paid the equilibrium wage. b. none of the individuals who end up working are paid more than if they were paid the equilibrium wage. c. there will be fewer people working (or fewer labor hours demanded) than at the equilibrium wage. d. none of the workers will lose there jobs or find themselves working fewer hours.

c. there will be fewer people working (or fewer labor hours demanded) than at the equilibrium wage.

A profit-maximizing monopolist a. will always set price equal to marginal cost. b. will always set price below marginal revenue c. will always set price above marginal cost. d. will always set price below marginal cost.

c. will always set price above marginal cost.

Refer to the Table above. What is the increase in profit that would result from producing 43 units of the product rather than producing 40 units? a. $48 b. $60 c. $28 d. $10

d. $10

Consider the following data: equilibrium price = $15, quantity of output produced = 10,000 units, average total cost = $12, and average variable cost $7. Given this data, total revenue is __________, total cost is __________, and total fixed cost is __________. a. $15,000; $12,000; $7,000 b. $150,000; $120,000; $70,000 c. $15,000; $12,000; $5,000 d. $150,000; $120,000; $50,000

d. $150,000; $120,000; $50,000

If Jack bought 12 DVDs last year when his income was $40,000 and he buys 14 DVDs this year when his income is $43,000, then his income elasticity of demand is ______________ which means that DVDs are a(n) ______________ good for Jack. a. +0.41; normal b. -2.13; inferior c. -0.47; inferior d. +2.13; normal

d. +2.13; normal

Consider two points on the PPF: point A, at which there are 10 apples and 20 pears, and point B, at which there are 7 apples and 21 pears. If the economy is currently at point A, the opportunity cost of moving to point B is a. 21 pears. b. 7 apples. c. 3 apples. d. 1 pear.

d. 1 pear.

Suppose that when the price of a good rises from $12 to $14, the quantity demanded of that good falls from 220 units to 180 units. What is the approximate price elasticity of demand between these two prices? 1.73 0.77 0.27 d. 1.3

d. 1.3

The marginal utility of the third plum is a. 3 b. 17 c. 8 d. 10

d. 10

Refer to the graph above. How many fewer units are exchanged because of the price ceiling than would have been exchanged at the equilibrium price? a. 100 b. 60 c. 65 d. 50

d. 50

If an economy can produce a maximum of 100 units of good X and the opportunity cost of 1X is always 5Y, then what is the maximum number of units of good Y the economy can produce? a. 20 b. 250 c. 100 d. 500

d. 500

Linda spends $5 a week on apples and oranges. If the price of both goods is $1 per unit, what is Linda's total utility from consuming the optimal bundle of goods? a. 85 b. 86 c. 209 d. 88

d. 88

If AFC is $8 at a quantity of output of 1,000 units, and TC is $12,000 at the same level of output, it follows that a. total cost is $4,000. b. marginal cost is $10. c. marginal cost is $1,000. d. AVC is $4.

d. AVC is $4.

Why must profits be zero in long-run competitive equilibrium? a. If profits are not zero, firms will produce higher-quality goods. b. If profits are not zero, marginal cost will rise. c. If profits are not zero, marginal revenue will rise. d. If profits are not zero, firms will enter or exit the industry.

d. If profits are not zero, firms will enter or exit the industry.

Which of the following statements is false? a. If there are only two goods, guns and butter, producing more of one means producing less of the other if the economy is currently operating at a productive efficient point. b. If there are only two goods, guns and butter, it is possible to produce more of both goods if the economy is currently operating at a productive inefficient point. c. If there are only two goods, guns and butter, it is possible to produce more of both goods through economic growth. d. If there are only two goods, guns and butter, it is possible to produce more of both goods if the economy is currently operating at a productive efficient point.

d. If there are only two goods, guns and butter, it is possible to produce more of both goods if the economy is currently operating at a productive efficient point.

Which of the following is true? a. As marginal utility falls, total utility always falls. b. As marginal utility rises, total utility may fall. c. Marginal utility is the same as total utility. d. It is possible for total utility to rise as marginal utility falls.

d. It is possible for total utility to rise as marginal utility falls.

Which of the following is true in a monopoly, at the profit maximizing output level? a. P = MR b. P = ATC c. P = MC d. MR = MC

d. MR = MC

Suppose you just finished your third plateful of Thanksgiving dinner and it yielded zero units of additional satisfaction. Should you go back for more? a. Yes or no. It won't make any difference because your total utility is at its peak. b. Yes. If you received zero units of satisfaction from the third, then obviously the law of diminishing marginal utility is not working in this case. c. Why not? Since the third plateful gave you zero units, the fourth can't give you any less than zero. d. No way. You could get negative utility from the fourth plateful.

d. No way. You could get negative utility from the fourth plateful.

At a price of $15 each, Marta buys 4 books per month. When the price increases to $20, Marta buys 3 books per month. Luz says that Marta's demand for books has decreased. Is Luz correct? a. Yes, Luz is correct. b. No, Luz is incorrect. Marta's quantity demanded has increased, but her demand has stayed the same. c. No, Luz is incorrect. Marta's demand has increased. d. No, Luz is incorrect. Marta's quantity demanded has decreased, but her demand has stayed the same.

d. No, Luz is incorrect. Marta's quantity demanded has decreased, but her demand has stayed the same.

Which of the following statements is false? a. Peaches have a higher price elasticity of demand than fruit. b. Carrots have a higher price elasticity of demand than vegetables. c. Ham has a higher price elasticity of demand than meat. d. Soap has a higher price elasticity of demand than Ivory brand soap.

d. Soap has a higher price elasticity of demand than Ivory brand soap.

Which of the following statements uses the term ceteris paribus correctly? a. New York City is a major American city, ceteris paribus. b. In economics, there are numerous theories, ceteris paribus. c. The price of pineapples is low in Hawaii, ceteris paribus. d. The more ice cream you eat, the more weight you will gain, ceteris paribus.

d. The more ice cream you eat, the more weight you will gain, ceteris paribus.

Consider the following combinations of guns and butter that can be produced: 0 guns, 20,000 units of butter; 5,000 guns, 15,000 units of butter; 10,000 guns, 10,000 units of butter; 15,000 guns, 5,000 units of butter; 20,000 guns, 0 units of butter. The PPF between guns and butter is a. an upward-sloping straight line. b. a downward-sloping bowed-out curve. c. It is impossible to answer this question without knowing which good would be plotted on the vertical axis. d. a downward-sloping straight line.

d. a downward-sloping straight line.

All of the following are true about monopoly except a. there must be a barrier to entry if a monopoly is to continue to earn profits in the long run b. a monopoly will adjust output until marginal revenue equals marginal cost c. the demand curve for a monopolist's product is downward sloping d. a monopoly will set price equal to minimum possible average cost in the long run

d. a monopoly will set price equal to minimum possible average cost in the long run

If Max's demand for hot dogs falls as his income rises, then for Max hot dogs are a. a preferential good. b. a neutral good. c. a normal good. d. an inferior good.

d. an inferior good.

Refer to the graph above. If the wheat market is in competitive equilibrium, the consumers' surplus will equal a. area 3 + 5 b. area 1 + 2 + 3 c. area 1 + 2 + 3 + 4 + 5 d. area 1 + 2 + 4

d. area 1 + 2 + 4

Which of the following situations probably would not yield a negative externality? a. a rock concert in the quad next to the library one person who is smoking cigarettes in a closed room where several other people are present b. mowing your lawn early on a Saturday morning when you live in a densely populated neighborhood c. a tutor quietly instructs a student in economics as a d. bystander willingly listens in without the tutor knowing it

d. bystander willingly listens in without the tutor knowing it

Cross elasticity of demand measures the responsiveness of changes in the quantity __________ of one good to changes in __________. a. demanded; income b. supplied; the price of the same good c. demanded; the price of the same good d. demanded; the price of another good

d. demanded; the price of another good

In the long run, if inputs are increased by 10 percent and output increases by 20 percent, then __________ are said to exist. a. diminishing marginal returns b. constant returns to scale c. diseconomies of scale d. economies of scale

d. economies of scale

A cost that is incurred when an actual monetary payment is made is a(n) __________ cost. a. expressed b. implicit c. positive d. explicit

d. explicit

Resource X is necessary to the production of good Y. If the price of resource X falls, the equilibrium price of Y will ______________ and the equilibrium quantity of Y will _______________. a. rise; rise. b. rise; fall. c. fall; fall. d. fall; rise.

d. fall; rise.

Which of the following is not one of the four categories of resources? a. labor b. land c. capital d. government e. entrepreneurship

d. government

As firms exit an industry, the industry supply curve shifts __________ and the equilibrium price __________ until long-run competitive equilibrium is established and the surviving firms are earning __________ economic profits. a. leftward; rises; positive b. rightward; falls; negative c. leftward; falls; zero d. leftward; rises; zero

d. leftward; rises; zero

The change in total cost that results from a change in output is __________ cost. a. average fixed b. average total c. average variable d. marginal

d. marginal

If, as a person consumes additional units of a good, total utility rises by a constant amount, it follows that a. marginal utility is falling. b. marginal utility is rising. c. marginal utility is negative. d. marginal utility is constant.

d. marginal utility is constant.

Samantha is given a flu shot by her doctor. This reduces the probability that she will get the flu and it also reduces the probability that others will get the flu, too. The latter is an example of a a. substitute good. b. negative externality. c. complementary good. d. positive externality.

d. positive externality.

An increase in the number of buyers in a particular market for a good will result in a ___________________ for that good. a. leftward shift in the demand curve b. movement up along the demand curve c. movement down along the demand curve d. rightward shift in the demand curve

d. rightward shift in the demand curve

Suppose that for a given good demand increases and supply decreases at the same time. If demand increases by a lesser amount than supply decreases, then equilibrium price __________ and equilibrium quantity __________ for that good. a. falls; rises b. rises; rises c. falls; falls d. rises; falls

d. rises; falls

A PPF can a. shift outward but not inward. b. shift inward but not outward. c. shift neither inward nor outward. d. shift inward or outward.

d. shift inward or outward.

At a price of $2 there is a a. shortage of 150 units. b. shortage of 100 units. c. surplus of 200 units.. d. shortage of 200 units.

d. shortage of 200 units.

When a positive externality exists, a. social benefits equal private benefits. b. external benefits are necessarily greater than private benefits. c. social benefits are greater than private benefits. d. social benefits are less than private benefits.

d. social benefits are greater than private benefits.

Which of the following cost curves is never U-shaped? a. the average variable cost curve b. the marginal cost curve c. the average total cost curve d. the average fixed cost curve

d. the average fixed cost curve

If MR > MC, then a. profits are being maximized. b. the firm is producing too much of the good to be maximizing profits. c. the firm must be incurring losses. d. the firm can increase its profits (or minimize its losses) by increasing output

d. the firm can increase its profits (or minimize its losses) by increasing output

If MR > MC, then a. profits are being maximized. b. the firm is producing too much of the good to be maximizing profits. c. the firm must be incurring losses. d. the firm can increase its profits (or minimize its losses) by increasing output.

d. the firm can increase its profits (or minimize its losses) by increasing output.

According to information in the textbook, in the early West, many of the open lands were overgrazed. This was largely because a. a government policy in effect at the time subsidized cattle production. b. none of the above c. landowners charged ranchers a fee to graze their cattle. d. the lands were unowned.

d. the lands were unowned.

The higher the opportunity cost of attending college, a. the more likely an individual will go to college. b. the fewer economics classes an individual will take at college. c. the more economics classes an individual will take at college. d. the less likely an individual will go to college.

d. the less likely an individual will go to college.

Resource X is necessary to the production of good Y. If the price of resource X rises, a. there is a movement up the supply curve of Y. b. the supply curve of Y shifts rightward. c. there is a movement down the supply curve of Y. d. the supply curve of Y shifts leftward.

d. the supply curve of Y shifts leftward.

Suppose the government decides that every family should own its own home. To bring this about, the government decides to subsidize the home-construction industry by giving the home-construction companies $10,000 for every house that they build. As a result of this, a. the demand curve for new houses would shift rightward, since now every family would want to buy a house. b. the supply curve of new houses would shift leftward, since it now costs $10,000 more for builders to produce a house. c. the demand curve for new houses would shift leftward. d. the supply curve of new houses would shift rightward, since builders would be willing to produce and sell more houses at each given price.

d. the supply curve of new houses would shift rightward, since builders would be willing to produce and sell more houses at each given price.