microeconomics

For the Fall semester, you had to pay a nonrefundable fee of $600 for your meal plan, which gives you up to 150 meals. If you eat 100 meals, your marginal cost of the 100th meal is: $6. $4. $0.25. $0.

$0

In many cities in the United States, a single firm provides electricity. Those firms are: monopolists. oligopolists. monopolistic competitors. perfect competitors.

monopolists

If a firm's production process exhibits increasing returns to scale, then doubling all the firm's inputs will lead output to _____. double. more than double. less than double. fall by one-half.

more than double.

Relative to a single price monopolist, a price discriminating monopolist generates: less total surplus. more total surplus. the same amount of total surplus, but lower profits. the same amount of total surplus, but higher profits.

more total surplus

If the demand for a good decreases as income decreases, then the good is a(n): complementary good. normal good. inferior good. substitute good.

normal good

For perfectly competitive firms, marginal revenue ______ price; for monopolists marginal revenue ______ price. equals; equals equals; is greater than is less than; equals equals; is less than

equals; is less than

If the local slaughterhouse gives off an unpleasant stench, then the equilibrium quantity of meat will be _____ the quantity that maximizes total economic surplus. more equitable equal to lower than higher than

higher than

Pat earns $25,000 per year (after taxes), and Pat's spouse, Chris, earns $35,000 (after taxes). They have two pre-school-aged children. Childcare for their children costs $12,000 per year. Given that Chris doesn't want to stay home with the kids, regardless of what Pat does, Pat should stay home with the kids if, and only if, the value of Pat spending more time with the kids is greater than: $37,000 per year. $25,000 per year. $13,000 per year. $12,000 per year.

13,000

Fran runs a doughnut shop in a tiny 3-person town. The table below shows the quantity demand by the three townspeople at various prices. $/Donut QDAl QDBetty QDCarol 10 cents 10 4 6 25 cents 9 2 5 35 cents 7 1 5 50 cents 5 0 4 When the price of a doughnut is 25 cents, what is the market demand for doughnuts? 9 doughnuts 13 doughnuts 16 doughnuts 20 doughnuts

16

Suppose a firm uses workers and office space to produce output. The firm is locked into a year-long lease on its office space, but it can easily vary the number of employee-hours it uses each day. The table below describes the relationship between the number of employee-hours the firm uses each day and the firm's daily output. Each unit of output sells for $2, the hourly wage rate is $14, and the rent on the office space is $50 per day. Employee-Hours/Day Output/Day 0 0 1 40 4 80 9 120 15 160 23 200 When the firm uses 9 employee-hours, its total cost each day is: $126 $64 $56 $176

176

Suppose a monopolist faces the demand curve shown below. If the monopolist's marginal cost is constant and equal to $30, its profit-maximizing level of output is: 50 units. 40 units. 20 units. 30 units.

20

John is trying to decide how to divide his time between his job as a stocker in the local grocery store, which pays $7 per hour for as many hours as he chooses to work, and cleaning windows for the businesses downtown. He makes $2 for every window he cleans. John is indifferent between the two tasks, and the number of windows he can clean depends on how many hours he spends cleaning in a day, as shown in the table below: What is John's opportunity cost of cleaning windows for an hour? $14 $8 $7 $2

7

The reason economists consider monopoly to be socially undesirable is that monopolists: earn too much economic profit. can charge any price they want. exploit the inelastic nature of demand. produce less than the socially optimal level of output.

produce less than the socially optimal level of output.

Total revenue minus both explicit and implicit costs defines a firm's: gross earnings. profit. marginal earnings. net worth.

profit

When calculating price elasticity of demand, if the percentage change in price is negative, then the percentage change in quantity demanded is typically: greater than one. positive. less than one. negative.

positive

Refer to the table below. The marginal cost of the 3rd unit of this activity is: Units of Activity Total Cost Total Benefit 0 $0 $0 1 $30 $100 2 $40 $160 3 $60 $190 4 $100 $210 5 $150 $220 6 $210 $225

$20

Refer to the table below. The average cost of 4 units of this activity is: Units of Activity Total Cost Total Benefit 0 $0 $0 1 $30 $100 2 $40 $160 3 $60 $190 4 $100 $210 5 $150 $220 6 $210 $225 $20 $25 $30 $40

$25

Suppose that Tom bought a bike from Helen for $195. If Helen's reservation price was $185, and Tom's reservation price was $215, the total economic surplus from this transaction was: $30 $185 $195 $215

$30

Amy is thinking about going to the movies tonight. A movie ticket costs $15, and she'll have to cancel a $20 dog-sitting job that she would have been willing to do for free. The opportunity to Amy cost of going to the movies is: $5. $15. $20. $35

$35

The following graph depicts demand. The slope of the demand curve (ignoring the negative sign) is: 2. 1.5. 1. 0.5.

0.5.

If 20% increase in the price of a good leads to a 60% decrease in the quantity demanded, then what is the price elasticity of demand? 30. 3. 1/3. 1/6.

3

Refer to the figure below. The equilibrium price is ______, and the equilibrium quantity is ______. $30; 15 $25; 20 $25; 5 $35; 20

35;20

The following graph depicts demand. The price elasticity of demand at point A is: 5/2. 5/8. 2/5. 8/5.

5/2

Refer to the table below. The law of diminishing marginal returns becomes evident after ______ units of output are produced. Output/Day NumberofEmployeeHours/Day 0 0 33 1 66 2 99 4 132 7 165 11 -- 33 66 99 132

66

Which of the following is a defining characteristic of all perfectly competitive markets? Each firm in the market faces a perfectly inelastic demand curve. The market demand curve is perfectly elastic. All firms sell the same standardized product. Consumers display strong brand loyalty.

All firms sell the same standardized product.

What might cause a demand curve to shift to the right? An increase in the price of a substitute. An increase in the product's own price. An increase in the price of a complement. A decrease in the price of a substitute.

An increase in the price of a substitute.

Which of the following is NOT necessarily true in a market equilibrium? Price represents the value of an extra unit of consumption. Both rich and poor have adequate access to the good. Price represents the cost of an extra unit of production. All mutually beneficial trades have been made.

Both rich and poor have adequate access to the good.

Assume that Joe is willing to produce a hamburger for $1, and Mary is willing to pay $3 for a hamburger. Which of the following is true? Joe and Mary can make a mutually beneficial exchange. Joe and Mary cannot make a mutually beneficial exchange. Joe and Mary will not trade in equilibrium. Joe and Mary will only trade if the equilibrium price is less than $1.

Joe and Mary can make a mutually beneficial exchange.

Curly told Larry about his new business venture: Curly pays Acme International $1,000 per month for supplies, works out of his apartment on his own computer and earns a monthly revenue of $1,500. Should Larry quit his job and do what Curly is doing? Yes, as long as Larry has at least $1,000 in savings to get started. Not if Larry is earning more than $500 per month at his current job. Not unless Larry can borrow the $1,000 monthly payment at no interest. Yes, as long as Larry can work out if his apartment and owns a computer.

Not if Larry is earning more than $500 per month at his current job.

Refer to the figure below. If the government imposed a price ceiling of $40, what would happen in this market? There would be excess supply. There would be excess demand. The price ceiling would have no effect. The equilibrium quantity would fall.

The price ceiling would have no effect.

Suppose you observe a decrease in the equilibrium price and quantity of corn. Of the options listed below, this is best explained by: a decrease in the cost of growing corn. an increase in the cost of growing corn. a rise in consumer income assuming corn is a normal good. a fall in consumer income assuming corn is a normal good.

a fall in consumer income assuming corn is a normal good.

The short run is best defined as: one year or less. a period of time sufficiently short that all factors of production are variable. the period of time between quarterly accounting reports. a period of time sufficiently short that at least one factor of production is fixed.

a period of time sufficiently short that at least one factor of production is fixed.

The role that prices play in directing resources away from overcrowded markets and towards markets that are underserved is known as the ______ function of price. allocative market rationing transitive

allocative

The allocative function of price cannot operate unless there is: a significant barrier to entry. both free entry and free exit. either free entry or free exit. neither free entry no free exit.

both free entry and free exit

It is likely that for most people: coffee and tea are substitutes. coffee and non-dairy creamer are substitutes. coffee and Coke are complements. coffee and coffee mugs are substitutes.

coffee and tea are substitutes.

If two products are substitutes, then the: income elasticity of demand for both will be high. price elasticity of demand for both will be positive. cross-price elasticity of demand between them will be negative. cross-price elasticity of demand between them will be positive.

cross-price elasticity of demand between them will be positive.

The most important challenge facing a firm in a perfectly competitive market is deciding: whether to maximize its profits. how much to produce. what price to charge. whether to advertise.

how much to produce.

Economics is best defined as the study of: inflation, interest rates and the stock market. supply and demand. how people make choices in the face of scarcity and the implications of those choices for society as a whole. the financial concerns of businesses and individuals.

how people make choices in the face of scarcity and the implications of those choices for society as a whole.

If a monopolist's marginal revenue exceeds its marginal cost at its current level of output, then to maximize its profit the monopolist should: do nothing. decrease output in order to increase the gap between marginal revenue and marginal cost. increase output until marginal revenue equals marginal cost. increase output until price equals marginal cost.

increase output until marginal revenue equals marginal cost.

If it is possible to make a change that will help some people without harming others, then the situation is: efficient. inefficient. fair. unfair.

inefficient

If demand is ______ with respect to price, a price increase will ______ total revenue. elastic; increase inelastic; increase unit elastic; decrease inelastic; decrease

inelastic; increase

The Cost-Benefit Principle indicates that an action should be taken if, and only if: its benefits are positive. its costs are small. its benefits are a result of its costs. its benefits exceed its costs.

its benefits exceed its costs.

According to the law of diminishing returns, when some factors of production are fixed, in order to increase production by a given amount, a firm will eventually need to add successively: smaller and smaller quantities of the variable factors of production. constant quantities of the variable factors of production. larger and larger quantities of the variable factors of production. larger and larger quantities of the fixed factor of production.

larger and larger quantities of the variable factors of production.

If the demand curve facing a monopolist shifts, then the monopolist's: marginal revenue curve and profit-maximizing level of output will change. marginal revenue curve will not change, but its profit-maximizing level of output will. total cost curve will change, but its variable cost curve will not. marginal revenue curve will change, but its profit-maximizing level of output will not.

marginal revenue curve and profit-maximizing level of output will change.

The primary objective of most private firms is to: maximize revenue. maximize profit. minimize cost. maximize output.

maximize profit.

Unlike economic profit, economic rent: can be less than zero. may not be driven to zero by competition. doesn't involve opportunity costs. only applies to land.

may not be driven to zero by competition.

A monopolistically competitive firm is one: that behaves like a monopolist. of many firms that sell products that are close but not perfect substitutes. of many firms that all sell the exact same product. of a small number of firms that sell products that are close but not perfect substitutes.

of many firms that sell products that are close but not perfect substitutes.

Jody has purchased a non-refundable $75 ticket to attend a Miley Cyrus concert on Friday night. Subsequently, she is asked to go to out dinner at no expense to her. If she uses cost-benefit analysis to choose between going to the concert and going out to dinner, the opportunity cost of going out to dinner should include: only the entertainment value of the concert. the cost of the ticket plus the entertainment value of the concert. only the cost of concert ticket. neither the cost of the ticket nor the entertainment value of the concert.

only the entertainment value of the concert.

The percentage change in quantity supplied that results from a 1 percent change in price is known as the: cross-price elasticity of supply. slope of the supply curve. price elasticity of supply cross-price elasticity of demand

price elasticity of supply

The Cost-Benefit Principle tells us that a firm should continue to expand production as long as: the firm's profit is positive. price of the good is greater than its marginal cost. it can sell another unit of the good. the supply curve is upward sloping.

price of the good is greater than its marginal cost.

The price elasticity of demand for a good measures the responsiveness of: demand to a one percent change in price of that good. price to a one percent change in the demand for that good. quantity demanded to a one percent change in price of that good. price to a one percent change in the quantity demanded of that good.

quantity demanded to a one percent change in price of that good.

Adam Smith's theory of the invisible hand posits that the most efficient allocation of resources is often achieved by: reducing economic inequality. government intervention in the market. collective action. the actions of independent, self-interested buyers and sellers.

the actions of independent, self-interested buyers and sellers.

Economies of scale exist when: firms become larger. input prices are falling. the average cost of production falls as output rises. doubling all the inputs leads to less than double the output.

the average cost of production falls as output rises.

The tendency for consumers to purchase more of a good or service as its price falls is captured by: the law of supply. the law of increasing cost. cross-price elasticity of demand. the law of demand.

the law of demand.

The entire group of buyers and sellers of a particular good or service makes up: the demand curve. the supply curve. the market. the equilibrium price and quantity.

the market

In general, when the price of a variable factor of production increases: total cost falls. the profit maximizing level of output rises. the profit-maximizing price falls. the profit-maximizing level of output falls.

the profit-maximizing level of output falls.

If there is excess demand in a market, then this suggests that: there is no way to help some people without harming others. there is an opportunity for mutually beneficial trades. the market price is above the equilibrium price. the market is in equilibrium.

there is an opportunity for mutually beneficial trades.

When a market is in equilibrium: there is either excess demand or excess supply. both excess demand and excess supply are positive. both excess demand and excess supply are positive and equal to each other. there is neither excess demand nor excess supply.

there is neither excess demand nor excess supply.

Suppose the table below describes the demand for a good produced by monopolist. PriceQuantity $10 1 $9 2 $8 3 $7 4 $6 5 $5 6 $4 7 The total revenue from selling 6 units is ______, and the marginal revenue of selling the 6th unit is ______. $5; 5 $30; 0 $24; $5 $30; $1

$30; 0

Frank owns an apple farm and plans to spend 4 hours today picking apples. The number of apples he can pick per hour depends on the total number of hours he spends working in either the east orchard or the west orchard in the manner shown in the table below. East Orchard #Apples/Hour WestOrchard #Apples/Hour 1 40 1 10 2 32 2 10 3 25 3 10 4 20 4 10 How should Frank divide his time between the east and the west orchard? He should spend all 4 hours in the east orchard. He should spend 3 hours in the east orchard and 1 hour in the west orchard. He should spend 2 hours in east orchard and 2 hours in the west orchard. He should spend 1 hour in the east orchard and 3 hours in the west orchard.

He should spend 3 hours in the east orchard and 1 hour in the west orchard.

Refer to the figure below. Suppose all the sellers in this market started out charging a price of $45 per unit. What is the most likely result? They would all make a large profit because $45 is more than the equilibrium price. They would all just break even because $45 is their reservation price. They would lower their prices because at $45 there would be excess supply. They would lower their prices because at $45 there would be excess demand.

They would lower their prices because at $45 there would be excess supply.

The price of bananas will increase in response to: an excess supply of bananas. an excess demand for bananas. an increase quantity of bananas supplied. an increase in the supply of bananas.

an excess demand for bananas.

The responsiveness of the quantity demanded of one good to a change in the price of a different good is measured by the: price elasticity of demand. income elasticity of demand. price elasticity of supply. cross-price elasticity of demand.

cross-price elasticity of demand.

Price discrimination means charging: higher prices to women and minorities. different prices for different products because production costs are different. the same price to all buyers even if production costs are different. different prices to different buyers for essentially the same good or service.

different prices to different buyers for essentially the same good or service.

Suppose Mary is willing to pay up to $15,000 for a used Ford pick-up truck. If she buys one for $12,000, her ______ would be ______. benefit; $12,000 cost; $15,000 economic surplus; $3,000 economic surplus; $12,000

economic surplus; $3,000

The marginal benefit of an activity is the: same as the total benefit of an activity. total benefit of an activity divided by the level of the activity. extra benefit associated with an extra unit of the activity. total benefit associated with an extra unit of the activity.

extra benefit associated with an extra unit of the activity.

In perfectly competitive markets, an implication of entry and exit in response to economic profit and loss is that: firms must earn positive economic profit in the long run. all firms will exit the market in the long run. firms will earn zero economic profit in the long run. market demand is completely elastic.

firms will earn zero economic profit in the long run.

Suppose that the market price for hot dogs sold by street vendors has just risen from $4.50 to $5.00, and that in response Curly has now begun operating a hot dog cart. We can assume that Curly's reservation price for hot dogs is: at least $5.00. $4.50. greater than $4.50 but no more than $5.00. $5.00.

greater than $4.50 but no more than $5.00.

Shelly purchases a leather purse for $400. One can infer that: she paid too much. her reservation price was at least $400. her reservation price was exactly $400. her reservation price was less than $400.

her reservation price was at least $400.

The figure below shows the demand curve, marginal revenue curve, marginal cost curve and average total cost curve for a monopolist. At this monopolist's profit-maximizing level of output, it: earns an economic profit of $16 per day. incurs an economic loss of $16 per day. earns an economic profit of $64 per day. incurs an economic loss of $64 per day.

incurs an economic loss of $16 per day.

Suppose the production of cotton causes substantial environmental damage because the pesticides used by cotton farmers often make their way into nearby rivers and streams, and are very harmful to fish and other wildlife. If cotton farmers do not have to pay for the environmental damage caused by the pesticides used to grow cotton, then the market equilibrium price will be ______ and the market equilibrium quantity will be ______. inefficiently high; inefficiently low inefficiently high; inefficiently high inefficiently low; inefficiently high inefficiently low; inefficiently low

inefficiently low; inefficiently high

A situation is efficient if it is: possible to find a transaction that will make at least one person better off, even if others are made worse off. possible to find a transaction that will make everyone better off. possible to find a transaction that will make at least one person better off without harming others. not possible to find a transaction that will make at least one person better off without harming others.

not possible to find a transaction that will make at least one person better off without harming others.

If consumers completely cease purchasing a product when its price increases by any amount, then demand is: inelastic. perfectly inelastic. unit elastic. perfectly elastic.

perfectly elastic.

Refer to the figure below. Suppose the solid line represents the current supply of Star Wars action figures. If the price of the plastic used to make action figures rises, current supply will: shift to S(B). not change because a change in the price of plastic will not affect the demand for action figures. shift to S(A). not change; only the quantity supplied will change.

shift to S(A).

Larry was accepted at three different graduate schools, and must choose one. Elite U costs $50,000 per year and did not offer Larry any financial aid. Larry values attending Elite U at $60,000 per year. State College costs $30,000 per year, and offered Larry an annual $10,000 scholarship. Larry values attending State College at $40,000 per year. NoName U costs $20,000 per year, and offered Larry a full $20,000 annual scholarship. Larry values attending NoName at $15,000 per year. Larry maximizes his economic surplus by attending: Elite U. State College. NoName U because he has a full scholarship there. NoName U because the annual cost is only $20,000.

state college

If pencils and paper are complements for most consumers, then if the price of paper increases, you would expect: the equilibrium price and quantity of pencils to fall the equilibrium price and quantity of pencils to rise the equilibrium price of pencils to fall and the equilibrium quantity of pencils to rise the equilibrium price of pencils to rise and the equilibrium quantity of pencils to fall

the equilibrium price and quantity of pencils to fall

If the market supply curve does not capture all of the costs to society of producing an additional unit of good, then: the market equilibrium will be socially optimal. the market equilibrium will not be efficient. the allocation of resources will be efficient. the market will not be in equilibrium.

the market equilibrium will not be efficient.

The opportunity cost of an activity includes the value of: all of the alternatives that must be forgone. the next-best alternative that must be foregone. the least-best alternative that must be foregone. the chosen activity minus the value of the next-best alternative.

the next-best alternative that must be foregone.

Which of the following statements about implicit costs is true? They are always fixed. They measure the forgone opportunities of the firm's owners. They exceed explicit costs. They do not enter into the calculation of economic profit.

they measure the forgone opportunities of the firm's owners

Janie must choose to either mow the lawn or wash clothes. If she mows the lawn, she will earn $30, and if she washes clothes, she will earn $45. She dislikes both tasks equally and they both take the same amount of time. Janie will therefore choose to ______ because it generates a ______ economic surplus. mow the lawn; bigger wash clothes; bigger mow the law; smaller wash clothes; smaller

wash clothes; bigger

Frank owns an apple farm and plans to spend 4 hours today picking apples. The number of apples he can pick per hour depends on the total number of hours he spends working in either the east orchard or the west orchard in the manner shown in the table below. East Orchard #Apples/Hour WestOrchard #Apples/Hour 1 40 1 10 2 32 2 10 3 25 3 10 4 20 4 10 What is the marginal benefit to Frank of the 2nd hour he spends picking in the east orchard? 8 apples 24 apples 32 apples 64 apples

24 apples

Suppose Island Bikes, a profit-maximizing firm, is the only bike rental company in a small resort town. The marginal cost to Island Bikes of renting out a bike is $3, and Island Bikes has no fixed costs. Each day Island Bikes has six potential customers, whose reservations prices are listed below. Customer Reservation Price ($/Rental) A 22 B 16 C 12 D 8 E 6 F 4 Suppose Island Bikes knows that customers whose reservation prices are at least $10 always rent bikes before noon, while those whose reservation prices are below $10 never do so. If Island bikes can charge a different price in the morning and in the afternoon, then in the morning, it will rent out ______ bike(s) and charge ______ per bike. 1; $22 2; $16 3; $12 4; $8

3; $12

Suppose a firm uses workers and office space to produce output. The firm is locked into a year-long lease on its office space, but it can easily vary the number of employee-hours it uses each day. The table below describes the relationship between the number of employee-hours the firm uses each day and the firm's daily output. Each unit of output sells for $2, the hourly wage rate is $14, and the rent on the office space is $50 per day. Employee-Hours/Day Output/Day 0 0 1 40 4 80 9 120 15 160 23 200 This firm's fixed cost each day is: $66 $64 $50 $14

50

A price-taker faces a demand curve that is: vertical at the market price. upward sloping. downward sloping. horizontal at the market price.

horizontal at the market price.

Suppose the table below describes the demand for a good produced by monopolist. PriceQuantity $10 1 $9 2 $8 3 $7 4 $6 5 $5 6 $4 7 The monopolist's marginal revenue from selling the 4th unit of output is less than $7 because: marginal cost is greater than $3. the consumer only pays $4 for the 4th unit. it has to charge $1 less for each of the first 3 units of output. demand is perfectly elastic.

it has to charge $1 less for each of the first 3 units of output.

John is trying to decide how to divide his time between his job as a stocker in the local grocery store, which pays $7 per hour for as many hours as he chooses to work, and cleaning windows for the businesses downtown. He makes $2 for every window he cleans. John is indifferent between the two tasks, and the number of windows he can clean depends on how many hours he spends cleaning in a day, as shown in the table below: Hours/dayCleaningWindows #WindowsCleaned 0 0 1 7 2 11 3 14 4 16 5 17 John's benefit from his first hour cleaning windows is: $14 $18 $7 $2.

$14

Pat used to work as an aerobics instructor at the local gym earning $35,000 a year. Pat quit that job and started working as a personal trainer. Pat makes $50,000 in total annual revenue. Pat's only out-of-pocket costs are $12,000 per year for rent and utilities, $1,000 per year for advertising and $3,000 per year for equipment. Pat's accounting profit is _______, and Pat's economic profit is _______. $50,000; $15,000 $34,000; -$1,000 $34,000; $15,000 $15,000; -$1,000

$34,000; -$1,000

You won a free ticket to see the latest Star Trek movie this Friday night (which you can costlessly resell for its face value of $15). Your favorite band is also performing on Friday and is your only alternative activity. Friday is your last chance to see either the movie or the band. Tickets to see your favorite band cost $30, and on any given day, you would be willing to pay as much as $50 for a ticket. Based on this information, what is your opportunity cost of going to see the Star Trek movie on Friday? $0 $30 $35 $50

$35

Larry was accepted at three different graduate schools, and must choose one. Elite U costs $50,000 per year and did not offer Larry any financial aid. Larry values attending Elite U at $60,000 per year. State College costs $30,000 per year, and offered Larry an annual $10,000 scholarship. Larry values attending State College at $40,000 per year. NoName U costs $20,000 per year, and offered Larry a full $20,000 annual scholarship. Larry values attending NoName at $15,000 per year. Larry's opportunity cost of attending Elite U is: $70,000 $50,000 $20,000 $15,000

$70000

John is trying to decide how to divide his time between his job as a stocker in the local grocery store, which pays $7 per hour for as many hours as he chooses to work, and cleaning windows for the businesses downtown. He makes $2 for every window he cleans. John is indifferent between the two tasks, and the number of windows he can clean depends on how many hours he spends cleaning in a day, as shown in the table below: Hours/dayCleaningWindows #WindowsCleaned 0 0 1 7 2 11 3 14 4 16 5 17 A second hour cleaning windows will yield additional earnings of ______. $2 $14 $8 $7

$8

Suppose Island Bikes, a profit-maximizing firm, is the only bike rental company in a small resort town. The marginal cost to Island Bikes of renting out a bike is $3, and Island Bikes has no fixed costs. Each day Island Bikes has six potential customers, whose reservations prices are listed below. Customer Reservation Price ($/Rental) A 22 B 16 C 12 D 8 E 6 F 4 Suppose Island Bikes knows that customers whose reservation prices are at least $10 always rent bikes before noon, while those whose reservation prices are below $10 never do so. If Island bikes can charge a different price in the morning and in the afternoon, then in the afternoon, it will rent out ______ bike(s) and charge ______ per bike. 1; $8 2; $6 3; $4 5; $10

2; $6

Suppose Island Bikes, a profit-maximizing firm, is the only bike rental company in a small resort town. The marginal cost to Island Bikes of renting out a bike is $3, and Island Bikes has no fixed costs. Each day Island Bikes has six potential customers, whose reservations prices are listed below. Customer Res Price($/Rental) A 22 B 16 C 12 D 8 E 6 F 4 If Island Bikes charges a single price to all of its customers, then how many bikes will it rent out each day? 6 5 4 3

3

Suppose Chris is a potter who makes mugs. His total costs depend on the number of mugs he makes each day, as shown in the table below. Number ofMugs Per Day Total CostPer Day 0 $10 1 $14 2 $19 3 $25 4 $32 5 $40 6 $49 If the market for mugs is perfectly competitive, and mugs sell for $7.50 each, then Chris should make ______ mugs per day. 0 4 5 6

4

Refer to the figure below. If Laura and Chris are the only two consumers in this market then at a price of $2.50 per pound, the market demand for hamburger is: 1.5 pounds per week 3 pounds per week 4 pounds per week 4.5 pounds per week

4.5

The figure below shows the demand curve, marginal revenue curve, marginal cost curve and average total cost curve for a monopolist. This monopolist maximizes its profit by producing ______ units per day and charging a price of ______ per unit. 4; $6 8; $6 4; $18 8; $14

4; $18

If a one percent increase in the price of oranges leads to a five percent increase in the quantity supplied, the price elasticity of supply for oranges is ______. 1/5 1/2 5 2

5

John is trying to decide how to divide his time between his job as a stocker in the local grocery store, which pays $7 per hour for as many hours as he chooses to work, and cleaning windows for the businesses downtown. He makes $2 for every window he cleans. John is indifferent between the two tasks, and the number of windows he can clean depends on how many hours he spends cleaning in a day, as shown in the table below: Hours/dayCleaningWindows #WindowsCleaned 0 0 1 7 2 11 3 14 4 16 5 17 Should John spend a third hour cleaning windows? Yes, because he would earn $28. Yes, because the additional amount he would earn is $14, which is greater than his opportunity cost of $7. No, because the additional amount he would earn is $6, which is less than his opportunity cost of $7. Yes, because the additional amount he would earn is $6, which is better than earning nothing.

No, because the additional amount he would earn is $6, which is less than his opportunity cost of $7.

Pat can either drive to work, which takes half an hour and uses $1.50 worth of gas, or take the bus, which takes an hour and costs $1.00. How should Pat get to work? Pat should take the bus because it costs $0.50 less than driving. Pat should drive because it saves half an hour relative to taking the bus. Pat should drive if saving half an hour is worth $0.50 or more. Pat should take the bus if saving half an hour is worth $0.50 or more.

Pat should drive if saving half an hour is worth $0.50 or more.

Duke is a highly skilled negotiator who could work for many law firms. The law firm that hires Duke is able to collect twice as much revenue per hour of Duke's time than it can for any other negotiator in town. The increased revenue will: be evenly split between Duke and the law firm to maximize surplus. all go to the law firm because the firm bears the risk of running the business. all go to Duke because, if it didn't, another firm could hire Duke away. be split between Duke and the law firm, but how it will be split cannot be determined without more information.

all go to Duke because, if it didn't, another firm could hire Duke away.

Refer to the figure below. At a price of $9, there will be: an excess demand of 5 units. an excess supply of 6 units. an excess demand of 1 unit. an excess supply of 5 units.

an excess supply of 5 units.

Matt has decided to purchase his textbooks for the semester. His options are to purchase the books online with next day delivery at a cost of $175, or to drive to campus tomorrow to buy the books at the university bookstore at a cost of $170. Last week he drove to campus to buy a concert ticket because they offered 25 percent off the regular price of $16.Given that driving to campus to buy the concert ticket was rational for Matt, Matt should: not drive to campus to buy the books because the $5 he would save is only two percent of the cost of the books, and that is much less than the 25 percent he saved on the concert ticket. drive to campus to buy the books because the books are cheaper at the bookstore than online. drive to campus to buy the books because the $5 he would save is more than he saved by driving to campus to buy the concert ticket. not drive to campus to buy the books because the cost of gas and his time must certainly be more than the $5 he would save.

drive to campus to buy the books because the $5 he would save is more than he saved by driving to campus to buy the concert ticket.

If the price elasticity of demand for a good is greater than one, then the demand for that good is: elastic. inelastic. unit elastic. perfectly elastic.

elastic

The following graph depicts demand. At point A, demand is: inelastic. elastic. unit elastic. perfectly elastic.

elastic

Suppose that when the price of oranges is $3 per pound, the quantity demanded is 4.7 tons per day and the quantity supplied is 3.9 tons. In this case: excess demand will lead the price of oranges to rise excess supply will lead the price of oranges to fall excess demand will lead the price of oranges to fall excess supply will lead the price of oranges to rise

excess demand will lead the price of oranges to rise

Suppose demand decreases, but there is no change in supply. As the market reaches its new equilibrium: excess demand will lead the price to rise. excess supply will lead the price to rise. excess demand will lead the price to fall. excess supply will lead the price to fall.

excess supply will lead the price to fall.

If the price of textbooks increases by one percent and the quantity demanded falls by one-half percent, then demand for textbooks is: negative. inelastic. elastic. unit elastic.

inelastic.

Suppose two demand curves intersect and so have a point in common. At that point, demand shown by the steeper curve will be _______ the flatter curve. more elastic than less elastic than as elastic as more likely to be unit elastic than

less elastic than

For all firms, the additional revenue collected from the sale of one additional unit of output is termed: price. average revenue. marginal profit. marginal revenue.

marginal revenue

Refer to the table below. Suppose all firms in this industry have identical costs to this firm and are producing 15 units of output. One can predict that Q TotalRev ExplicitCosts ImplicitCosts 10 50 36 5 15 75 63 6 20 100 93 7 25 125 125 8 30 150 161 9 new firms will enter the industry. old firms will exit the industry. firms will attempt to lower their implicit costs. price must rise.

new firms will enter the industry

If most consumer goods and services are ______, then most income elasticities are ______. normal; negative inferior; positive normal; greater than one normal; positive

normal; positive

If a firm functions in an oligopoly, it is: one of a small number of firms that produce goods that are either close or perfect substitutes. the only firm that produces a good with no close substitutes. one of a large number of firms that produce goods that are either close or perfect substitutes. one of a large number of firms that produce a good with no close substitute.

one of a small number of firms that produce goods that are either close or perfect substitutes.

Suppose a firm uses workers and office space to produce output. The firm is locked into a year-long lease on its office space, but it can easily vary the number of employee-hours it uses each day. The table below describes the relationship between the number of employee-hours the firm uses each day and the firm's daily output. Each unit of output sells for $2, the hourly wage rate is $14, and the rent on the office space is $50 per day. Employee-Hours/Day Output/Day 0 0 1 40 4 80 9 120 15 160 23 200 When the firm uses 9 employee-hours, it earns a daily ______ of ______. loss; $64 profit; $64 loss; $114 profit; $114

profit; $64

Suppose that if the price of plane tickets increased, more people would choose to travel by train. If this happened, you would know that: plane tickets are an inferior good. the cross-price elasticity between plane tickets and train tickets is positive. the cross-price elasticity between plane tickets and train tickets is negative. plane tickets and train tickets are complements.

the cross-price elasticity between plane tickets and train tickets is positive.

When Joe's Gas raises its price for regular unleaded gasoline, total revenue from regular unleaded gas falls to zero. It must be the case that the demand for Joe's regular unleaded gasoline is perfectly elastic. the demand for Joe's regular unleaded is inelastic. there are not many good substitutes for Joe's regular unleaded gasoline. consumers are switching to premium grades of gasoline.

the demand for Joe's regular unleaded gasoline is perfectly elastic.

The economic surplus of an action is: the benefit gained by taking an action. the difference the explicit and implicit costs of taking an action. the difference between the benefit and the cost of taking an action. the money a person has left over after taking an action.

the difference between the benefit and the cost of taking an action.

Economic rent is: the amount people pay for an apartment in a perfectly competitive market. the payment made to the owner of a factor of production, which is usually equal to the owner's reservation price. the difference between the payment made to the owner of a factor of production and the owner's reservation price. sometimes higher and sometimes lower than the owner's reservation price.

the difference between the payment made to the owner of a factor of production and the owner's reservation price.

Refer to the figure below. If the price of a latte increases from $2.00 to $2.50: total expenditure would increase. total expenditure would stay the same. total expenditure would decrease. the change in total expenditure, if any, would depend on the supply curve.

total expenditure would decrease