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Reference: Ref 7-1 (Table: The Market for Fried Twinkies) Look at the table The Market for Fried Twinkies. As a result of the $0.30 tax per fried Twinkie, the government will receive total tax revenue of:

$1,500.

If the marginal tax rate equals the average tax rate, the tax system is:

proportional.

Reference: Ref 7-16 (Table: Three Tax Structure Proposals) Look at the table Three Tax Structure Proposals. Policy makers interested in implementing a progressive tax structure would suggest using:

proposal 2.

Reference: Ref 7-1 (Table: The Market for Fried Twinkies) Look at the table The Market for Fried Twinkies. The government decides to tax fried Twinkies at a rate of $0.30 per Twinkie and collect that tax from the producers. According to the table, consumers will pay _____ per Twinkie and buy _____ Twinkies after the tax.

$1.50; 5,000

(Figure: The Shrimp Market) Look at the figure The Shrimp Market. If the government wants to limit shrimp sales to 250 pounds, it can impose a _____ excise tax on sellers, and the total tax revenue generated will be _____.

$10; $2,500

Reference: Ref 7-5 (Figure: The Shrimp Market) Look at the figure The Shrimp Market. If the government wants to limit shrimp sales to 250 pounds, it can impose a _____ excise tax on sellers, and the total tax revenue generated will be _____.

$10; $2,500

Reference: Ref 7-7 (Figure: The Market for Hamburgers) Look at the figure The Market for Hamburgers. If the market is originally in equilibrium and the government imposes an excise tax of $0.80 per unit of the good sold, consumer surplus will be reduced by:

$175.

$240.

Reference: Ref 7-16 (Table: Three Tax Structure Proposals) Look at the table Three Tax Structure Proposals. If one wished to use a proportional or flat tax structure, one should use proposal _____, in which the percentage of income taxed is _____.

1; 20%

Reference: Ref 7-11 (Table: Taxes, Spending, and Income) Look at the table Taxes, Spending, and Income. Suppose Governor Meridias decides to initiate a state tax of 5% on all sales. A poor household will spend _____ of its annual income on the sales tax, while a wealthy household will spend _____ of its annual income.

4.5%; 4%

If the government imposes a $500 excise tax on SUVs and the demand curve for SUVs is downward-sloping, suppliers of SUVs will simply raise the price by $500 and consumers will bear the entire burden of the tax.

True

If the government wants to limit sales of a particular good, it may do so by imposing a quota. However, the same reduction in sales may be achieved by an appropriately chosen excise tax.

True

In general, the incidence of an excise tax is shared between buyers and sellers.

True

The FICA tax falls most heavily on workers because the price elasticity of demand for labor is greater than the price elasticity of supply of labor.

True

The price that buyers pay and the price that sellers receive in the presence of an excise tax are unaffected by which of these groups officially pays the tax.

True

Suppose price elasticity of demand is relatively inelastic for good X. If the price elasticity of supply for good X is elastic and an excise tax is imposed on good X, who will bear the greater burden of the tax?

consumers

If the government levies an excise tax in a market whose demand curve is perfectly inelastic, the burden of the tax will fall completely on the _____, and the deadweight loss will equal _____.

consumers; zero

Reference: Ref 7-9 (Figure: The Market for Blue Jeans) Look at the figure The Market for Blue Jeans. The government recently levied a $10 tax on the producers of blue jeans. What area or areas in the graph identify the loss of producer surplus due to the tax?

d + e

When the imposition of an excise tax causes the quantity demanded and quantity supplied to decrease relative to the no-tax equilibrium, this will result in:

deadweight loss.

Reference: Ref 7-14 (Figure: The Market for Lattes) Look at the figure The Market for Lattes. If the government assesses a tax of $0.75 on sellers of lattes, the price producers will receive for a latte after the tax will:

decrease from $2 to $1.50.

If demand and supply are both very inelastic, a decrease in the rate of an excise tax will likely:

decrease government revenue.

Suppose the government levies a $4 per month excise tax on cable TV. If the demand for cable TV is relatively (but not perfectly) inelastic and the supply curve is relatively (but not perfectly) elastic, then the price of cable TV will:

increase by less than $4.

Assuming a normal upward-sloping supply curve and downward-sloping demand curve, if the government imposes a $5 excise tax on leather shoes and collects the tax from the suppliers, the price of leather shoes will:

increase by less than $5.

Given any downward-sloping demand curve for a good, the more inelastic the supply curve, the _____ equilibrium output will fall and the _____ will be the deadweight loss when the government imposes an excise tax.

less; smaller

Given any upward-sloping supply curve for a good, the more inelastic the demand curve, the _____ equilibrium output will fall and the _____ will be the deadweight loss when the government imposes an excise tax.

less; smaller

Suppose the government decides to fight obesity in America by imposing an excise tax based on the saturated fat content of food. The most likely effect of this tax would be to:

lower the profits of ice cream suppliers.

Given any downward-sloping demand curve for a good, the more price-elastic the supply curve, the _____ equilibrium output will fall and the _____ will be the deadweight loss when the government imposes an excise tax.

more; larger

A _____ tax takes a larger share of the income of high-income taxpayers than of low-income taxpayers.

progressive

If the marginal tax rate is higher than the average rate, the tax system is:

progressive

If the marginal tax rate is higher than the average rate, the tax system is:

progressive.

Reference: Ref 7-16 (Table: Three Tax Structure Proposals) Look at the table Three Tax Structure Proposals. A regressive tax structure can be found in:

proposal 3.

If the marginal tax rate is less than the average tax rate, the tax system is:

regressive.

Reference: Ref 7-11 (Table: Taxes, Spending, and Income) Look at the table Taxes, Spending, and Income. Suppose Governor Meridias decides to initiate a state tax of 5% on all sales. This tax will be:

regressive.

A progressive tax:

takes a larger share of the income of high-income taxpayers than of low-income taxpayers.

Reference: Ref 5-27 (Figure: The Shrimp Market) Look at the figure The Shrimp Market. If the government imposes a quota limiting sales of shrimp to 1,000 pounds, the quota rent per pound is:

$0.

Reference: Ref 7-1 (Table: The Market for Fried Twinkies) Look at the table The Market for Fried Twinkies. Of the $0.30 tax per fried Twinkie, consumers actually pay _____, while producers actually pay _____.

$0.20; $0.10

Reference: Ref 5-2 (Table: The Market for Soda) Look at the table The Market for Soda. If the government does not impose a price control, the price of a can of soda will equal:

$0.75.

Reference: Ref 7-9 (Figure: The Market for Blue Jeans) Look at the figure The Market for Blue Jeans. The government recently levied a $10 tax on the producers of blue jeans. What is the tax revenue?

$1,000

Reference: Ref 11-11 (Figure: The Average Total Cost Curve) Look at the figure The Average Total Cost Curve. The total cost of producing 10 pairs of boots is approximately:

$1,308.

Reference: Ref 7-1 (Table: The Market for Fried Twinkies) Look at the table The Market for Fried Twinkies. The government decides to tax fried Twinkies at a rate of $0.30 per Twinkie and collect that tax from the producers. After paying the tax, producers will receive _____ per Twinkie, and they will sell _____ Twinkies after the tax.

$1.20; 5,000

Bessie wants to calculate the accounting and economic profits of her cattle farm in Nebraska. She pays $30,000 per year in overhead, $80,000 in wages, and $20,000 in insurance. She forgoes $30,000 per year that she could make as a teacher. If her total revenue equals $140,000, that means her accounting profit is _____ and her economic profit is _____.

$10,000; -$20,000

Reference: Ref 11-22 (Table: Workers and Output) Look at the table Workers and Output. After graduation you achieve your dream of opening an art shop that specializes in selling mud statues. You pay $10 per day on a loan from your uncle, and regardless of how much you produce, you pay $10 per day to each of the workers who make the mud statues. The fixed cost of producing 25 statues is:

$10.

Suppose the government imposes a $10 per month tax on cell phone service. If the demand curve for cell phone service is perfectly inelastic and the supply curve is upward-sloping, the monthly price for cell phone service will increase by:

$10.

Reference: Ref 11-19 (Table: Cakes) Look at the table Cakes. Pat is opening a bakery to make and sell special birthday cakes. She is trying to decide how many mixers to purchase. Her estimated fixed and average variable costs if she purchases one, two, or three mixers are shown in the table. Assume that average variable costs do not vary with the quantity of output. If Pat purchases three mixers and bakes 400 cakes per day, what is her average total cost?

$10.25

Suppose a local floral shop has explicit costs of $200,000 per year and implicit costs of $50,000 per year. If the store earned an economic profit of $50,000 last year, the store's accounting profit equaled:

$100,000.

Reference: Ref 11-10 (Table: Production Function for Soybeans) Look at the table Production Function for Soybeans. Assume that the fixed input, capital, is 10 acres of land and a tractor, which have a combined cost of $150 per day. The cost of labor is $100 per worker per day. The variable cost of producing 25 bushels of soybeans is:

$100.

Reference: Ref 9-3 (Table: Marginal Cost of Sweatshirts) Look at the table Marginal Cost of Sweatshirts. The marginal cost of the second sweatshirt is:

$11.

Reference: Ref 9-5 (Table: Marginal Benefit of Sweatshirts) Look at the table Marginal Benefit of Sweatshirts. The marginal benefit of producing the fifth sweatshirt is:

$12.

Reference: Ref 11-16 (Table: Cost Data) Look at the table Cost Data. The average fixed cost of producing 4 purses is:

$12.50.

Reference: Ref 8-21 (Figure: The Market for Calculators) Look at the figure The Market for Calculators. Assume that S and D represent the domestic demand and supply of calculators. The world price, PW, equals $100. The government imposes a quota restricting imports to 25 calculators. The domestic price rises to _____ and the quota rent is equal to area _____.

$120; H + I

Reference: Ref 9-3 (Table: Marginal Cost of Sweatshirts) Look at the table Marginal Cost of Sweatshirts. The marginal cost of the third sweatshirt is:

$13.

Reference: Ref 9-5 (Table: Marginal Benefit of Sweatshirts) Look at the table Marginal Benefit of Sweatshirts. The marginal benefit of producing the third sweatshirt is:

$14.

Reference: Ref 5-33 (Figure: Market I) Look at the figure Market I. A surplus of the good will result if the price is:

$15.

Reference: Ref 9-3 (Table: Marginal Cost of Sweatshirts) Look at the table Marginal Cost of Sweatshirts. The marginal cost of the fourth sweatshirt is:

$15.

Reference: Ref 9-5 (Table: Marginal Benefit of Sweatshirts) Look at the table Marginal Benefit of Sweatshirts. The marginal benefit of producing the second sweatshirt is:

$15.

Reference: Ref 6-13 (Figure: The Demand Curve) Look at the figure The Demand Curve. If the price is $8, total revenue is _____. If the price is $7, total revenue is _____.

$16; $21

Reference: Ref 10-24 (Table: Denise's Consumption of Coffee and Gasoline) Look at the table Denise's Consumption of Coffee and Gasoline. Given the information provided, the price of each cup of coffee is _____ and the price of each gallon of gasoline is _____.

$1; $2

Suppose an income tax is levied on none of the first $1,000, 10% of the next $9,000, and 20% of the remainder of earnings. How much tax would Miranda have to pay if she earned $20,000?

$2,900

Reference: Ref 9-19 (Table: TC's Pizza Parlor) Look at the table TC's Pizza Parlor and assume that marginal cost is constant in the intervals of production. If 10 slices are being produced, the marginal cost of producing one more slice of pizza is:

$2.

Reference: Ref 5-32 (Table: Quantity Supplied and Quantity Demanded) Look at the table Quantity Supplied and Quantity Demanded. A price floor equal to _____ would produce excess supply in this market.

$20

$20.

Reference: Ref 5-33 (Figure: Market I) Look at the figure Market I. A price floor at $15 would result in deadweight loss of:

$20.

$200.

Reference: Ref 11-31 (Table: Lindsay's Farm) Look at the table Lindsay's Farm. Lindsay's fixed cost of production is:

$200.

Reference: Ref 9-18 (Scenario: Betty's Cookie Shop) Betty's implicit and explicit costs are equal to:

$204,500.

When the price of chocolate-covered peanuts decreases from $1.10 to $0.95, the quantity demanded increases from 190 bags to 215 bags. If the price is $1.10, total revenue is _____, and if the price is $0.95, total revenue is _____.

$209; $204.25

Reference: Ref 11-11 (Figure: The Average Total Cost Curve) Look at the figure The Average Total Cost Curve. The total cost of producing three pairs of boots is approximately:

$216.

$250.

Reference: Ref 11-31 (Table: Lindsay's Farm) Look at the table Lindsay's Farm. When Lindsay produces 50 units of produce, her total cost is:

$250.

$29

Reference: Ref 9-19 (Table: TC's Pizza Parlor) Look at the table TC's Pizza Parlor. Assume that the marginal benefit is constant in intervals of production. Suppose five slices of pizza are being produced. What is the marginal benefit of producing one more slice of pizza?

A business produces 10 pairs of eyeglasses. It incurs $35 in average total cost and $5 in average fixed cost. The average variable cost of producing 10 pairs of eyeglasses is:

$30.

$300.

When the price of chocolate-covered peanuts increases from $1.55 to $2.00, the quantity demanded decreases from 220 to 180. If the price is $1.55, total revenue is _____, and if the price is $2.00, total revenue is _____.

$341; $360

A business produces 10 pairs of eyeglasses. It incurs $30 in average variable cost and $5 in average fixed cost. The average total cost of producing 10 pairs of eyeglasses is:

$35.

Reference: Ref 11-16 (Table: Cost Data) Look at the table Cost Data. The average variable cost of producing 4 purses is:

$35.00.

A business produces 10 pairs of eyeglasses. It incurs $30 in average variable cost and $5 in average fixed cost. The total cost of producing 10 pairs of eyeglasses is:

$350.

Reference: Ref 11-31 (Table: Lindsay's Farm) Look at the table Lindsay's Farm. When Lindsay produces 140 units of produce, her total cost is:

$350.

$40.

Reference: Ref 9-12 (Table: Tutoring) Look at the table Tutoring. If the college requires all tutors to register with the dean and charges each tutor $10 to register and if Sigmund can charge all students their willingness to pay, his total profit from tutoring will be:

$40.

Reference: Ref 11-11 (Figure: The Average Total Cost Curve) Look at the figure The Average Total Cost Curve. The total cost of producing five pairs of boots is approximately:

$408.

Reference: Ref 11-14 (Figure: Short-Run Costs) Look at the figure Short-Run Costs. At 7 units of output, average fixed cost is approximately _____, and average variable cost is approximately _____.

$40; $100

Reference: Ref 8-15 (Figure: The Domestic Supply and Demand for SUVs in the United States) Look at the figure The Domestic Supply and Demand for SUVs in the United States. Suppose the world price equals $50,000 and there is free trade. Calculate the loss of consumer surplus.

$41,250 million

$450.

Reference: Ref 7-14 (Figure: The Market for Lattes) If an excise tax of $2.25 is assessed on each latte, government revenue will be:

$450.

Reference: Ref 11-16 (Table: Cost Data) Look at the table Cost Data. The average total cost of producing 4 purses is:

$47.50.

Reference: Ref 9-1 (Scenario: Accounting and Economic Profit) Look at the scenario Accounting and Economic Profit. What is the opportunity cost of Wang's $100,000 inheritance being used to start his business?

$5,000

Reference: Ref 9-1 (Scenario: Accounting and Economic Profit) Look at the scenario Accounting and Economic Profit. The implicit cost of capital for Wang's Wicker Furniture Store is:

$5,000.

Reference: Ref 5-27 (Figure: The Shrimp Market) Look at the figure The Shrimp Market. If the government imposes a quota limiting sales of shrimp to 500 pounds, the quota rent per pound is:

$5.

A business produces 10 pairs of eyeglasses. It incurs $30 in average variable cost and $35 in average total cost. The total fixed cost of producing 10 pairs of eyeglasses is:

$50.

Reference: Ref 9-12 (Table: Tutoring) Look at the table Tutoring. If he can charge all students their willingness to pay, at the optimal hours of tutoring, Sigmund's total profit is:

$50.

Reference: Ref 7-5 (Figure: The Shrimp Market) Look at the figure The Shrimp Market. If the government wants to limit shrimp sales to 500 pounds, it can impose a _____ excise tax on sellers, and the total tax revenue generated will be _____.

$5; $2,500

Tonya's budget constraint for gasoline (G) and clothes (C) each month can be expressed by the equation G = 100 - 2C. If the price of clothing is $10, the price of gasoline is _____ and the total amount of income spent on both clothing and gasoline each month is _____.

$5; $500

Reference: Ref 11-16 (Table: Cost Data) Look at the table Cost Data. The average total cost of producing 2 purses is:

$60

Reference: Ref 9-1 (Scenario: Accounting and Economic Profit) Look at the scenario Accounting and Economic Profit. What is the implicit cost of Wang's Wicker Furniture Store?

$65,000

The Atlanta Symphony wants to make sure that its concerts are affordable for all residents of Atlanta and therefore prices all of its tickets at $25. However, outside Symphony Hall, people can sell the same tickets for $75 or more. The true cost to the concertgoer of a ticket to the symphony is at least:

$75.

Sarah's accountant tells her that she made a profit of $43,002 running a pottery studio in Orlando. Sarah's husband, an economist, claims Sarah lost $43,002 running her pottery studio. This means her husband is claiming that she incurred _____ in _____ costs.

$86,004; implicit

Suppose a local hardware store has explicit costs of $2 million per year and implicit costs of $44,000 per year. If the store earned an economic profit of $50,000 last year, this means that the store's accounting profit equaled:

$94,000.

Until recently Rosemarie worked as an accountant, earning $30,000 annually. Then she inherited a piece of commercial real estate that had been renting for $12,000 annually. Rosemarie decided to leave her job and operate a Peruvian restaurant in the space she inherited. At the end of the first year, her books showed total revenues of $260,000 and total costs of $230,000 for food, utilities, cooks, and other supplies. Her economic profit at the end of one year is:

-$12,000.

Reference: Ref 9-1 (Scenario: Accounting and Economic Profit) Look at the scenario Accounting and Economic Profit. The economic profit of Wang's Wicker Furniture Store is:

-$35,000.

You decide to quit your $60,000-per-year job as an information technology specialist and illustrate children's books. At the end of the first year of illustrating, you have earned $20,000. You also spent $5,000 for paint and paper. Your economic profit in the first year as an illustrator is:

-$45,000.

Reference: Ref 10-6 (Scenario: Tom's Budget Constraint) Read the scenario Tom's Budget Constraint. If we measure music downloads on the horizontal axis and movies on the vertical axis, the slope of Tom's budget line is:

-1/5.

Faruq spends all of his income on tacos and milkshakes. His income is $100, the price of tacos is $10, and the price of milkshakes is $2. Put tacos on the horizontal axis and milkshakes on the vertical axis. The slope of Faruq's budget line is equal to:

-5.

Reference: Ref 10-1 (Table: The Utility of Pecan Rolls) Look at the table The Utility of Pecan Rolls. The marginal utility for the fifth roll is:

Reference: Ref 9-8 (Table: Marginal and Total Benefit) Look at the table Marginal and Total Benefit. Rodger is deciding how many football games he wants to attend this year. Suppose football tickets cost $10, but suppose too that the star player just got injured and will be out for the season. As a result of the injury, Rodger's total benefit of attending any game is now only 10% of the value shown in the table. In this case, how many games should he attend?

Reference: Ref 9-8 (Table: Marginal and Total Benefit) Look at the table Marginal and Total Benefit. Sed is deciding how many football games he wants to attend this year. If tickets to each football game cost $75, how many games should he attend?

Reference: Ref 10-1 (Table: The Utility of Pecan Rolls) Look at the table The Utility of Pecan Rolls. The marginal utility for the fifth roll is:

Reference: Ref 10-3 (Table: The Utility of Macaroni and Cheese) Look at the table The Utility of Macaroni and Cheese. Carmen loves macaroni and cheese for Thanksgiving. The marginal utility she derives from the fifth serving she eats is:

If the elasticity of demand is _____ and the elasticity of supply is _____, tax revenue is likely to increase.

0.2; 0.5

The price of gasoline rises 5% and the quantity of gasoline purchased falls 1%. The price elasticity of demand is equal to _____, and demand is described as _____.

0.2; inelastic

Reference: Ref 6-2 (Table: Price Elasticity) Look at the table Price Elasticity. What is the price elasticity of demand between $0.75 and $0.50?

0.33

Reference: Ref 10-10 (Table: Marginal Utility per Dollar of M&Ms) Look at the table Marginal Utility per Dollar of M&Ms. The price of M&Ms is $2 per bag. The marginal utility per dollar of the fifth bag of M&Ms is:

0.5

If the price of chocolate-covered peanuts decreases from $1.10 to $0.90 and the quantity demanded increases from 190 bags to 210 bags, then the price elasticity of demand (by the midpoint method) is:

0.5.

If the price of a good increases by 20% and the quantity demanded changes by 15%, then the price elasticity of demand is equal to:

0.75.

Reference: Ref 6-2 (Table: Price Elasticity) Look at the table Price Elasticity. What is the price elasticity of demand between $1.25 and $1.00?

0.82

Japan must give up the production of 75 computers to produce 25 additional cellular telephones. The opportunity cost of producing 3 computers is _____ cell phone(s).

Tomas produces 100 cartons of free range eggs when the price is $5 and 150 cartons of free range eggs when the price is $7. What is the value of Tomas's price elasticity of supply?

1.2

Reference: Ref 6-2 (Table: Price Elasticity) Look at the table Price Elasticity. What is the price elasticity of demand between $1.50 and $1.25?

1.22

Reference: Ref 6-13 (Figure: The Demand Curve) Look at the figure The Demand Curve. By the midpoint method, the price elasticity of demand between $6 and $7 is approximately:

1.86

Reference: Ref 6-13 (Figure: The Demand Curve) Look at the figure The Demand Curve. By the midpoint method, the price elasticity of demand between $6 and $7 is approximately:

1.86.

Faruq spends all of his income on tacos and milkshakes. His income is $100, the price of tacos is $10, and the price of milkshakes is $2. If Faruq spends all of his income, the opportunity cost of one milkshake is equal to _____ tacos.

1/5

A restaurant manager has estimated that the price elasticity of demand for meals is 2. If the restaurant increases menu prices by 5%, she can expect the number of meals sold to decrease by _____ and total revenue to _____.

10%; fall

If Japan must give up the production of 75 computers to produce 25 additional cellular telephones, the opportunity cost of producing 4 cellular telephones is _____ computers.

In a single year, the Netherlands can raise 100 tons of beef or produce 1,000 boxes of tulips. In the same growing season, Belgium can raise 50 tons of beef or produce 750 boxes of tulips. Trade will take place between these two countries if 1 ton of beef costs _____ boxes of tulips.

Reference: Ref 10-8 (Table: Utility from Oranges and Star Fruit) Look at the table Utility from Oranges and Star Fruit. Oranges cost $2 per pound and star fruit costs $5 per pound. Calvin has $26 to spend. If Calvin spends all of his money on oranges, how many pounds of oranges can he buy?

Reference: Ref 9-11 (Table: Expected Exam Scores from Studying Economics and Accounting) Look at the table Expected Exam Scores from Studying Economics and Accounting. The marginal benefit in terms of your economics score of spending the first hour studying economics is _____ points.

France and England both produce wine and cloth with constant opportunity costs. France can produce 150 barrels of wine if it produces no cloth or 100 bolts of cloth if it produces no wine. England can produce 50 barrels of wine if it produces no cloth or 150 bolts of cloth if it produces no wine. When international trade takes place, each country specializes completely in the production of the good in which it has a comparative advantage—1 barrel of wine exchanges for 1 bolt of cloth—and France exports 50 units of wine. We can conclude that France produces _____ units of wine and _____ units of cloth and that France consumes _____ units of wine and _____ units of cloth.

150; 0; 100; 50

Reference: Ref 9-11 (Table: Expected Exam Scores from Studying Economics and Accounting) Look at the table Expected Exam Scores from Studying Economics and Accounting. If you studied for a total of three hours and divided your time to maximize your combined scores, you would expect your combined scores to be _____ points.

155

Reference: Ref 10-9 (Table: Optimal Choice of Milk and Honey) Look at the table Optimal Choice of Milk and Honey. The price of milk is $2 per gallon, and the price of honey is $4 per jar. Hal's income is $16. If he buys 2 jars of honey and 4 gallons of milk, his total utility will be:

188

Reference: Ref 10-9 (Table: Optimal Choice of Milk and Honey) Look at the table Optimal Choice of Milk and Honey. The price of milk is $2 per gallon, and the price of honey is $4 per jar. Hal's income is $16. Assuming that Hal spends all of his income on honey and milk, if he buys 3 jars of honey, he can buy _____ gallons of milk.

Reference: Ref 7-16 (Table: Three Tax Structure Proposals) Look at the table Three Tax Structure Proposals. What percentage of income does an individual pay in taxes under proposal 3 if that individual's pretax income is $100,000?

Reference: Ref 9-10 (Figure: Marginal Benefits and Marginal Costs) Look at the figure Marginal Benefits and Marginal Costs. More time spent studying economics adds points to economics scores but (MB) subtracts points from accounting scores (MC). When Claudia studies economics for four hours, the marginal benefit is _____ points; when she studies for six hours, the marginal benefit is _____ points.

20; 10

Reference: Ref 10-8 (Table: Utility from Oranges and Star Fruit) Look at the table Utility from Oranges and Star Fruit. Oranges cost $2 per pound and star fruit costs $5 per pound. Calvin has $26 to spend. If Calvin buys 4 pounds of star fruit and 3 pounds of oranges, how much is his total utility?

280

Reference: Ref 10-8 (Table: Utility from Oranges and Star Fruit) Look at the table Utility from Oranges and Star Fruit. Oranges cost $2 per pound and star fruit costs $5 per pound. Calvin has $26 to spend. If Calvin buys 4 pounds of star fruit, how many pounds of oranges can he buy?

Reference: Ref 8-24 (Scenario: The Production of Wheat and Toys) Look at the scenario Production of Wheat and Toys. The opportunity cost of producing a unit of wheat in country B is:

3 toys.

Reference: Ref 6-2 (Table: Price Elasticity) Look at the table Price Elasticity. What is the price elasticity of demand between $2.00 and $1.75?

3.00

If the elasticity of demand is _____ and the elasticity of supply is _____, tax revenue is likely to decrease.

3.3; 2.1

Reference: Ref 8-2 (Table: Production Possibilities for Machinery and Petroleum) Look at the table Production Possibilities for Machinery and Petroleum. The opportunity cost in Mexico of producing 10 units of machinery is _____ units of petroleum.

Reference: Ref 9-8 (Table: Marginal and Total Benefit) Look at the table Marginal and Total Benefit. Sed is deciding how many football games he wants to attend this year. His marginal benefit from increasing the number of games that he attends from two to three is:

30.

Reference: Ref 10-18 (Table: Consumer Equilibrium) Look at the table Consumer Equilibrium. Assume that goods X and Y both cost $1 per unit and you have $4 to spend on both goods. To maximize utility, you would consume _____ unit(s) of X and _____ unit(s) of Y.

3; 1

Reference: Ref 10-18 (Table: Consumer Equilibrium) Look at the table Consumer Equilibrium. Assume that the price of good X is $2 per unit, the price of good Y is $1 per unit, and you have $10 to spend on both goods. To maximize utility, you would consume _____ units of X and _____ units of Y.

3; 4

Reference: Ref 10-8 (Table: Utility from Oranges and Star Fruit) Look at the table Utility from Oranges and Star Fruit. Oranges cost $2 per pound and star fruit costs $5 per pound. The table shows Calvin's total utility from eating various amounts of oranges and star fruits. If Calvin has $26, he should eat _____ oranges and _____ pounds of star fruit, and he will have _____ left over.

3; 4; no money

Reference: Ref 10-9 (Table: Optimal Choice of Milk and Honey) Look at the table Optimal Choice of Milk and Honey. The price of milk is $2 per gallon, and the price of honey is $4 per jar. Hal's income is $16. Assuming that Hal spends all of his income on honey and milk, if he buys 2 jars of honey, he can buy _____ gallons of milk.

Reference: Ref 10-9 (Table: Optimal Choice of Milk and Honey) Look at the table Optimal Choice of Milk and Honey. The price of milk is $2 per gallon, and the price of honey is $4 per jar. Hal's income is $16. If he spends all of his income on honey, the most he can buy is _____ jars, and his total utility will be _____.

4; 152

Reference: Ref 10-18 (Table: Consumer Equilibrium) Look at the table Consumer Equilibrium. Assume that goods X and Y both cost $1 per unit and you have $7 to spend on both goods. To maximize utility, you would consume _____ units of X and _____ units of Y.

4; 3

Tonya's budget constraint for gasoline (G) and clothes (C) each month can be expressed with the equation G = 100 - 2C. If the price of clothing is $10, which of the following consumption bundles is NOT feasible for Tonya?

50 units of clothing and 100 units of gasoline

Reference: Ref 8-24 (Scenario: The Production of Wheat and Toys) Look at the scenario Production of Wheat and Toys. If each country specializes completely in the good for which it has the comparative advantage, which combination represents a maximum possible amount of total production of the two goods, given the specialization?

50 wheat and 75 toys

50.

Reference: Ref 8-1 (Table: The Production Possibilities for Cars and Leather Boots) Look at the table The Production Possibilities for Cars and Leather Boots. The opportunity cost of producing one car in Mexico is:

500 pairs of leather boots.

Reference: Ref 10-6 (Scenario: Tom's Budget Constraint) Read the scenario Tom's Budget Constraint. The combination _____ music downloads and _____ movies lies ON Tom's budget line.

50; no

Reference: Ref 8-4 (Figure: The Production Possibility Frontiers for Jackson and Tahoe) Look at the figure The Production Possibility Frontiers for Jackson and Tahoe. In autarky, Jackson produces and consumes 30 head of cattle and 80 bushels of wheat, while Tahoe produces and consumes 80 head of cattle and 60 bushels of wheat. Assume each nation specializes completely, based on comparative advantage, and the price of 1 head of cattle equals the price of 2 bushels of wheat. If Jackson exports 120 bushels of wheat to Tahoe, Tahoe will export _____ head of cattle to Jackson.

Faruq spends all of his income on tacos and milkshakes. His income is $100, the price of tacos is $10, and the price of milkshakes is $2. If Faruq purchases 10 milkshakes, he can purchase _____ tacos.

Reference: Ref 10-8 (Table: Utility from Oranges and Star Fruit) Look at the table Utility from Oranges and Star Fruit. Oranges cost $2 per pound and star fruit costs $5 per pound. Calvin has $26 to spend. If Calvin buys 2 pounds of star fruit, how many pounds of oranges can he buy?

Reference: Ref 5-2 (Table: The Market for Soda) Look at the table The Market for Soda. If the government imposes a price ceiling of $1 per can of soda, the quantity of soda demanded will be:

8 cans.

Reference: Ref 10-4 (Figure: Budget Lines for Tea and Scones) Look at the figure Budget Lines for Tea and Scones. For months now, Agnes has had $20 per month to spend on tea and scones. The price of each cup of tea and each scone is $1. Which of the charts shows what will happen to her budget line if her income increases to $25?

Reference: Ref 10-7 (Figure: Budget Lines for Oranges and Apples) Look at the figure Budget Lines for Oranges and Apples. For some time, Antonio has had $5 per month to spend on oranges and apples. The price of an orange is $0.50 and the price of an apple is $0.25. Which of the charts shows what will happen to his budget line if his income increases to $6?

Reference: Ref 7-10 (Figure: Income Tax Payments) Look at the figure Income Tax Payments. Which panel or panels best represent the effects of a proportional income tax?

Reference: Ref 8-19 (Figure: The Market for Laptop Sleeves) Look at the figure The Market for Laptop Sleeves. Assume that S and D are the domestic supply and demand curves and the world price is PW. Identify the area of consumer surplus when a tariff raises the domestic price from the world price to PT.

A + B

Which of the following taxes best illustrates the ability-to-pay principle of tax fairness?

A property tax that is proportional to the value of the home is charged to homeowners to fund primary and secondary education.

Which of the following is an example of a tariff?

A tax of 5% of the value of each Yamaha motorcycle imported from Japan.

Reference: Ref 11-18 (Figure: Long-Run and Short-Run Average Cost Curves) Look at the figure Long-Run and Short-Run Average Cost Curves. If a firm faced the long-run average total cost curve shown in the figure and it expected to produce 100,000 units of the good in the long run, the firm should build the plant associated with:

ATC2

ATC2.

Reference: Ref 10-5 (Figure and Table: The Budget Line) Look at the figure and table The Budget Line. _____ in the price of potatoes would rotate the budget line along the _____ axis _____ the origin.

An increase; vertical; toward

Reference: Ref 10-4 (Figure: Budget Lines for Tea and Scones) Look at the figure Budget Lines for Tea and Scones. For months now, Agnes has had $20 per month to spend on tea and scones. The price of each cup of tea and each scone has been $1. Which of the charts shows what will happen to her budget line if the price of a scone rises to $2?

Reference: Ref 7-10 (Figure: Income Tax Payments) Look at the figure Income Tax Payments. Which panel or panels best represent the effects of a progressive income tax?

Reference: Ref 8-21 (Figure: The Market for Calculators) Look at the figure The Market for Calculators. Assume that S and D represent the domestic demand and supply of calculators. The world price, PW, equals $100. When the economy moves from autarky, under which the price is $150, to free trade, consumer surplus rises by area _____ and producer surplus falls by _____.

B + C + G + H + I + J + K + L; B + C

Other things being equal, the price elasticity of demand for a product will be lower:

Bayer aspirin to be more price-elastic.

Reference: Ref 10-4 (Figure: Budget Lines for Tea and Scones) Look at the figure Budget Lines for Tea and Scones. For months now, Agnes has had $20 per month to spend on tea and scones. The price of each cup of tea and each scone has been $1. Which of the charts shows what will happen to her budget line if her income decreases to $10?

Reference: Ref 10-4 (Figure: Budget Lines for Tea and Scones) Look at the figure Budget Lines for Tea and Scones. For months now, Agnes has had $20 per month to spend on tea and scones. The price of each cup of tea and each scone has been $1. Which of the charts shows what will happen to her budget line if the price of both a cup of tea and a scone increase to $2?

Reference: Ref 10-7 (Figure: Budget Lines for Oranges and Apples) Look at the figures Budget Lines for Oranges and Apples. For some time, Antonio has had $5 per month to spend on oranges and apples. The price of an orange is $0.50 and the price of an apple is $0.25. Which of the charts shows what will happen to his budget line if the price of an orange rises to $1.00 and the price of an apple rises to $0.50?

Reference: Ref 6-4 (Figure: Demand Curves) Look at the figure Demand Curves. Which graph shows a perfectly inelastic demand curve?

(Figure: Comparative Advantage and the Production Possibility Frontier) Look at the figure Comparative Advantage and the Production Possibility Frontier. _____ has an absolute advantage in the production of _____ and a comparative advantage in the production of _____.

Colombia; roses; roses

Reference: Ref 8-7 (Figure: Comparative Advantage and the Production Possibility Frontier) Look at the figure Comparative Advantage and the Production Possibility Frontier. _____ has an absolute advantage in the production of _____ and a comparative advantage in the production of _____.

Colombia; roses; roses

(Figure: Demand Curves) Look at the figure Demand Curves. Which graph shows a perfectly elastic demand curve?

Reference: Ref 6-4 (Figure: Demand Curves) Look at the figure Demand Curves. Which graph shows a perfectly elastic demand curve?

Reference: Ref 8-19 (Figure: The Market for Laptop Sleeves) Look at the figure The Market for Laptop Sleeves. Assume that S and D are the domestic supply and demand curves and the world price is PW. Identify the area of deadweight loss when a tariff raises the domestic price from the world price to PT.

D + F

Which of the following is an "either-or" decision?

Dylan must decide whether to major in economics or finance.

Reference: Ref 8-19 (Figure: The Market for Laptop Sleeves) Look at the figure The Market for Laptop Sleeves. Assume that S and D are the domestic supply and demand curves and the world price is PW. Identify the area of government tax revenue when a tariff raises the domestic price from the world price to PT.

If the demand curve for clams is downward-sloping, a quota that is set below the equilibrium quantity will result in a demand price that is lower than the equilibrium price.

False

Marginal analysis should be used in "either-or" decisions.

False

Mary, an avid gardener, plans to spend 8 hours working in her garden. It takes her 45 minutes to prune a bush and 30 minutes to fertilize a tree. If she prunes eight bushes, she will still have enough time to fertilize six trees.

False

Reference: Ref 8-21 (Figure: The Market for Calculators) Look at the figure The Market for Calculators. Assume that S and D represent the domestic demand and supply of calculators. The world price, PW, equals $100. The government imposes a quota restricting imports to 25 calculators. If import licenses are granted to foreigners, the net loss due to the import quota is equal to area:

G + H + I + J.

Reference: Ref 8-21 (Figure: The Market for Calculators) Look at the figure The Market for Calculators. Assume that S and D represent the domestic demand and supply of calculators. The world price, PW, equals $100. The government imposes an import tariff of $20 per calculator. Compared with the free trade situation, the tariff leads to a deadweight loss equal to area:

G + J.

The model suggesting that countries will specialize in producing the good that uses its relatively abundant factor of production most intensively is referred to as the _____ model.

Heckscher-Ohlin

Honduras exports clothing to the United States, and the United States exports bulldozers to Honduras. Proponents of the Heckscher-Ohlin model would explain this pattern of trade by stating that:

Honduras has a relatively large endowment of factors of production for making clothing, while the United States has a relatively large endowment of factors of production for making bulldozers.

If a good has a price-inelastic demand, then which of the following is NOT likely to be characteristic of this good?

It has many substitutes.

If the United States can produce 30 computers for every car it produces and Japan can produce 15 computers for every car it produces, _____ has the _____ advantage in car production.

Japan; comparative

If at a given quantity _____, the decision maker should do _____ of the activity.

MB > MC; more

Rapidly increasing health costs have been a major political concern since at least 1992. Suppose the government sets the maximum price for a normal doctor visit at $20 to control rising health costs but the current market price is $40. What will happen?

More people will try to visit the doctor, but there will be fewer doctors willing to see patients at that price.

Which of the following statements about opportunity cost is FALSE?

Opportunity cost is synonymous with explicit cost.

Reference: Ref 5-16 (Figure: The Market for Milk) Look at the figure The Market for Milk. With a binding price floor, the price could be equal to _____, consumers would demand _____, and producers would supply _____.

P1; Q1; Q3

Reference: Ref 5-17 (Figure: The Market for Tortillas) Look at the figure The Market for Tortillas. With a nonbinding price floor, the price could be equal to _____, consumers would demand _____, and producers would supply _____.

P2; Q2; Q2

There are several close substitutes for Quaker State oil but fewer substitutes for a complete checkup of your car's engine. We can expect the demand for:

Quaker State oil to be more price-elastic.

The price elasticity of demand for gasoline in the short run has been estimated to be 0.1. If a war in the Middle East causes the price of oil (from which gasoline is made) to increase, how will that affect total expenditures on gasoline in the short run, all other things equal?

Quantity demanded will not change much, but total expenditures will rise.

Reference: Ref 5-1 (Figure: Rent Controls) Look at the figure Rent Controls. If rent controls are imposed and the government wants them to be immediately effective, they will most likely be set at either _____ or _____.

Rent0; Rent1

Reference: Ref 5-1 (Figure: Rent Controls) Look at the figure Rent Controls. Suppose that rent controls are imposed. If the government wanted a rent control ceiling to be effective immediately, what is one possible price to set?

Rent1

Reference: Ref 5-1 (Figure: Rent Controls) Look at the figure Rent Controls. Without rent controls, the equilibrium rent is:

Rent2.

Reference: Ref 5-1 (Figure: Rent Controls) Look at the figure Rent Controls. If rent controls are set at Rent0, renters would be willing to pay a price at least as high as:

Rent4 for Q0 units.

Which of the following best describes a "how much" decision?

Should I buy a third hot dog?

The United States; computers; computers

If the marginal cost of producing the seventh sports jersey is $21, then the total cost of seven sports jerseys is:

The answer cannot be determined from the information provided.

Lauren has 11 people working in her tangerine grove. The marginal product of the eleventh worker is 13 bushels of tangerines. If she hires a twelfth worker, the marginal product of that worker will be:

The answer cannot be determined with the information available.

Which of the following is a "how much" decision?

Tim is trying to decide the amount of money to save each month to buy a new car next year.

The price elasticity of demand for ground beef has been estimated to be 1.0. If mad cow disease strikes the United States and a large percentage of the cattle are removed from the market, how will that affect total expenditures on ground beef, all other things equal?

Total expenditures will remain unchanged.

The price elasticity of demand for fresh zucchini has been estimated to be 2.25. A new irrigation system yields a 25% increase in the nation's crop of fresh zucchini. Which of the following best describes how this will affect total expenditures on zucchini, all other things equal?

Total expenditures will rise.

The price elasticity of demand for gasoline in the long run has been estimated to be 1.5. If an extended war in the Middle East caused the price of oil (from which gasoline is made) to increase and remain high for a decade, how would that affect total expenditures on gasoline in the long run, all other things equal?

Total expenditures would fall.

A binding minimum wage will generally cause increased unemployment for low-skilled workers.

True

A perfectly inelastic demand curve for insulin would mean that the quantity demanded does NOT respond at all to changes in the price of insulin.

True

A production function that is characterized by economies of scale will not be subject to the operation of diminishing returns.

True

At the optimal consumption bundle, the marginal utility of each good purchased is always the same.

True

Diminishing returns are one explanation for diseconomies of scale.

True

Economic profits can be negative even if accounting profits are positive.

True

Economies of scale most often occur in industries whose initial fixed cost of plant and equipment is low.

True

Evidence shows that increased international trade has increased the wages of unskilled workers in the United States.

True

For a Giffen good, the income effect works in the opposite direction from the substitution effect, and the income effect is larger than the substitution effect.

True

France and the United Kingdom both produce wine and cloth with constant opportunity costs. If opportunity costs in the two countries are different and France has a comparative advantage in wine production, then England MUST have a comparative advantage in cloth production.

True

If Joe drinks iced tea while he is mowing his yard, he will probably derive a lower marginal utility from the sixth glass of tea than from the first glass.

True

If a firm builds a larger plant and increases output and if its long-run average total cost does not change, the firm has constant returns to scale.

True

If demand for a good is perfectly inelastic, then consumers will bear the entire burden of an excise tax imposed on that good.

True

If demand is perfectly inelastic, changes in price leave total revenue unchanged.

True

If funeral homes discover that the price elasticity of demand for caskets equals 0.55 at the current price, funeral homes should increase prices to increase revenue.

True

If the demand curve for clams is downward-sloping and the supply curve is upward-sloping, a quota that is set below the equilibrium quantity will result in a supply price higher than the demand price.

True

If the demand curve for clams is downward-sloping, a quota that is set below the equilibrium quantity will decrease the price that consumers pay for clams.

True

If the marginal utility of hot dogs exceeds the marginal utility of french fries, then the consumer should always increase the consumption of hot dogs and decrease the consumption of french fries.

True

If the price of laundry detergent equals the price of dishwashing powder, then a utility-maximizing consumer will always buy equal amounts of laundry detergent and dishwashing powder.

True

If the state of Minnesota established a price floor in the market for pumpkins that was double the current market-clearing price, this would lead to an inefficient number of pumpkins sold in Minnesota.

True

If the substitution effect and the income effect of a price change move in opposite directions for a particular good, then the good must be an inferior good.

True

If the supply curve for clams is upward-sloping, a quota that is set below the equilibrium quantity will result in a supply price that is lower than the equilibrium price.

True

In the long run, when a firm adds physical capital, workers become more productive, so variable costs increase.

True

It is not possible to earn an economic profit without also earning an accounting profit.

True

Relative to the size of their economy, many other countries engage in more foreign trade than the United States.

True

Sarah has been told she has only one week to finish some pottery for a show. Sarah has exhausted her supply of clay, and new clay is absolutely necessary for finishing her products. For Sarah, the price elasticity of demand for new clay is elastic.

True

Since labor is relatively scarce in Canada, free trade should cause the wages paid to Canadian labor to rise.

True

Star athletes, singers, and actors often start their career very young, forgoing a college education. This is an example of poor decision making, since a college education provides benefits that will be invaluable later in their lives.

True

The Ricardian model of international trade assumes that countries have the usual bowed-out (concave to the origin) production possibility frontiers.

True

The United States and the European Union levy heavy import tariffs on agricultural products, which hurt many poor farmers from the very poorest countries in the world.

True

The assumption that a rational consumer seeks to maximize his or her utility implies that utility is measurable according to some objective scale.

True

The director of River City Public Transport recently stated, "The last seven times we increased bus fares, revenues dropped." This remark suggests the demand for bus service is elastic.

True

The long-run average total cost curve shows the relationship between output and the average total cost when fixed cost has been chosen to minimize average total cost for each level of output.

True

The long-run average total cost curve shows the relationship between output and the average total cost when variable cost has been chosen to minimize average total cost for each level of output.

True

The optimal consumption bundle is the combination of goods that lies above the budget constraint.

True

The optimal consumption rule implies that if Pascal is maximizing his utility by spending all of his income on concert tickets and cab rides, with prices equal to PTickets and PRides, respectively, then it must be the case that MUTickets / MURides = PTickets / PRides.

True

When a country moves from autarky to free international trade, consumers and producers in the import and export sectors all gain (i.e., both consumer surplus and producer surplus increase in both sectors).

True

(Figure: The Market for Roses) Look at the figure The Market for Roses. Assume that PA is the autarky price and PW is the world price. Consumer surplus with international trade would be area:

W + X + Z.

Reference: Ref 8-10 (Figure: The Market for Roses) Look at the figure The Market for Roses. Assume that PA is the autarky price and PW is the world price. Consumer surplus with international trade would be area:

W + X + Z.

Reference: Ref 8-10 (Figure: The Market for Roses) Look at the figure The Market for Roses. Assume that PA is the autarky price and PW is the world price. Consumer surplus without international trade would be area:

Reference: Ref 8-10 (Figure: The Market for Roses) Look at the figure The Market for Roses. Assume that PA is the autarky price and PW is the world price. Producer surplus without international trade would be area:

X + Y.

a + f

The term diminishing returns refers to:

a decrease in the extra output due to the use of an additional unit of a variable input when all other inputs are held constant.

A price ceiling is:

a maximum price sellers are allowed to charge for a good or service

A price ceiling is:

a maximum price sellers are allowed to charge for a good or service.

A student organization is formed on your college campus to protest against the high rent for apartments near campus. This organization is planning a meeting with the dean and president of the college. Which of the following best describes the policy the student organization will fight for?

a price ceiling

A quota is:

a quantity restriction.

Reference: Ref 5-9 (Figure: Supply and Demand) Look at the figure Supply and Demand. A price ceiling of P3 causes:

a shortage equal to the distance DE.

Reference: Ref 5-2 (Table: The Market for Soda) Look at the table The Market for Soda. If the government imposes a price ceiling of $0.50 per can of soda, there will be:

a shortage of three cans.

If the opportunity costs of production are constant, then the production possibility frontier is:

a straight line.

An effective price floor would result in:

a surplus of the good.

An effective price floor would result in:v

a surplus of the good.

If a 20% price increase generates a 20% decrease in quantity demanded, then this is _____ response.

a unit-elastic

The income effect will play a greater role in a consumer's spending if the good:

accounts for a substantial share of the consumer's spending.

In the long run:

all inputs are variable.

An effective price floor will lead to:

an excess supply or a surplus.

Suppose Eastland College does not have a summer program and could rent out the campus to various summer sports camps for $100,000. The potential revenue of the summer camps represents:

an implicit cost of capital.

Rent controls in New York City cause all of the following EXCEPT:

an increase in the quantity supplied of rent-controlled apartments.

Reference: Ref 11-31 (Table: Lindsay's Farm) Look at the table Lindsay's Farm. Lindsay's variable costs of production:

are zero when she produces no crops.

Reference: Ref 6-3 (Figure: Demand for Notebook Computers) Look at the figure The Demand for Notebook Computers. Total revenue at point S equals the:

area 0PSM.

Reference: Ref 6-3 (Figure: Demand for Notebook Computers) Look at the figure The Demand for Notebook Computers. Total revenue at point V equals the:

area 0TVN.

An important determinant of the price elasticity of demand is the:

availability of substitutes.

Reference: Ref 11-14 (Figure: Short-Run Costs) Look at the figure Short-Run Costs. B is the _____ cost curve.

average total

Reference: Ref 11-17 (Figure: A Firm's Cost Curves) Look at the figure A Firm's Cost Curves. The curve labeled W represents the firm's _____ cost curve.

average total

Reference: Ref 11-14 (Figure: Short-Run Costs) Look at the figure Short-Run Costs. C is the _____ cost curve.

average variable

Reference: Ref 11-17 (Figure: A Firm's Cost Curves) Look at the figure A Firm's Cost Curves. The curve X represents the firm's _____ cost curve.

average variable

Reference: Ref 5-20 (Figure: Price Controls) Look at the graph Price Controls. An effective price floor would be at price _____ and a _____ would result from the difference between points _____.

b; surplus; f and e

Reference: Ref 5-20 (Figure: Price Controls) Look at the graph Price Controls. The consumer surplus lost to a price floor at point b is equal to the area:

bcge.

If a good is a necessity with few substitutes, all others things equal, then demand will tend to:

be less price-elastic.

According to the _____ principle, those who use public services should bear the burden of the tax that pays for them.

benefits

Reference: Ref 8-24 (Scenario: The Production of Wheat and Toys) Look at the scenario Production of Wheat and Toys. If each country specializes in the good for which it has the comparative advantage, then the price of wheat in terms of toys will be:

between two units of toys and three units of toys.

Reference: Ref 11-18 (Figure: Long-Run and Short-Run Average Cost Curves) Look at the figure Long-Run and Short-Run Average Cost Curves. If a firm is producing at point C on the ATC2 but anticipates increasing output to 225,000 units in the long run, the firm will build a _____ plant and have _____ of scale.

bigger; diseconomies

If demand is perfectly inelastic and the supply curve is upward-sloping, then the burden of an excise tax is:

borne entirely by consumers.

Housing tends to take up a substantial share of a consumer's spending. An increase in the price of housing will result in:

both an income and substitution effect to decrease the quantity demanded of housing.

Reference: Ref 6-4 (Figure: Demand Curves) Look at the figure Demand Curves. Which graph shows a perfectly inelastic demand curve?

Part of the _____ associated with the Chicago Cubs baseball team is their batting cages used in practice.

capital

Reference: Ref 8-4 (Figure: The Production Possibility Frontiers for Jackson and Tahoe) Look at the figure The Production Possibility Frontiers for Jackson and Tahoe. Tahoe has an absolute advantage in producing:

cattle only.

Suppose the Jamaican government sets coffee prices at $1 per pound, when the market price is $10. The government's actions will:

cause coffee shortages even in a coffee-rich country.

In making an "either-or" decision:

choose the activity that results in the greater economic profit.

The pair of items that is likely to have the highest cross-price elasticity of demand is:

coffee and tea.

The price of pretzels increases and the demand for tortilla chips decreases, so we can assume that these two goods are:

complementary.

The price of coffee increases by 10%, and as a result, Alex purchases fewer doughnuts. For Alex, coffee and doughnuts are:

complements

Reference: Ref 9-12 (Table: Tutoring) Look at the table Tutoring. Sigmund faces:

constant marginal cost.

Reference: Ref 11-21 (Figure: Long-Run Average Cost) Look at the figure Long-Run Average Cost. This firm has _____ in the output region from A to B.

constant returns to scale

The government decides to impose a price ceiling on a good because it thinks the market-determined price is too high. If the government imposes the price ceiling below the equilibrium price:

consumers will respond to the lower price and wish to purchase more of the good than at the equilibrium price.

Reference: Ref 10-24 (Table: Denise's Consumption of Coffee and Gasoline) Look at the table Denise's Consumption of Coffee and Gasoline. Suppose Denise initially chooses consumption bundle A. She can increase her total utility by:

consuming more gasoline and less coffee.

Think about running a restaurant. Probably:

cooks and hosts are variable resources.

For which of the following decisions would marginal analysis be relevant?

deciding how much to spend on a summer vacation

Reference: Ref 10-10 (Table: Marginal Utility per Dollar of M&Ms) Look at the table Marginal Utility per Dollar of M&Ms. The price of M&Ms is $2 per bag. If the price of M&Ms increases to $3 per bag, the marginal utility per dollar for each bag of M&Ms will:

decrease

Reference: Ref 6-16 (Figure: The Linear Demand Curve II) Look at the figure Linear Demand Curve II. If price was initially set at $8 and then increased to $10, total revenue would:

decrease, as the price effect is dominated by the quantity effect.

The idea of diminishing returns to an input in production suggests that if a local college adds more custodians, the marginal product of labor for the custodial staff will:

decrease.

Reference: Ref 7-14 (Figure: The Market for Lattes) If the excise tax increases from $1.50 to $2.25 per latte, government revenue will _____ by _____.

decrease; $150

decrease; increase

Reference: Ref 11-19 (Table: Cakes) Look at the table Cakes. Pat is opening a bakery to make and sell special birthday cakes. She is trying to decide how many mixers to purchase. Her estimated fixed and average variable costs if she purchases one, two, or three mixers are shown in the table. Assume that average variable costs do not vary with the quantity of output. If Pat purchases three mixers, her average fixed cost _____ in the range of output between 100 and 400 cakes.

decreases

Reference: Ref 11-19 (Table: Cakes) Look at the table Cakes. Pat is opening a bakery to make and sell special birthday cakes. She is trying to decide how many mixers to purchase. Her estimated fixed and average variable costs if she purchases one, two, or three mixers are shown in the table. Assume that average variable costs do not vary with the quantity of output. If Pat purchases three mixers, her average total cost _____ in the range of output between 100 and 400 cakes.

decreases

Reference: Ref 11-21 (Figure: Long-Run Average Cost) Look at the figure Long-Run Average Cost. This firm has _____ in the output region from B to C.

decreasing returns to scale

As George ate pizza during one recent outing, he found that he enjoyed each additional slice less and less. This implies that his marginal benefit was:

decreasing.

Comparative advantage arises from:

differences in climate, factor endowments, and technology.

Reference: Ref 11-29 (Table: Tonya's Production Function for Apples) Look at the table Tonya's Production Function for Apples. As she hires more labor, Tonya's production function shows that the number of apples picked increases at a decreasing rate because of:

diminishing returns

diminishing returns.

Reference: Ref 11-21 (Figure: Long-Run Average Cost) Look at the figure Long-Run Average Cost. This firm has _____ in the output region from B to C.

diseconomies of scale

The term autarky refers to a country that:

does not trade with other countries.

Reference: Ref 5-20 (Figure: Price Controls) Look at the graph Price Controls. A price floor has been set at point b. The area of deadweight loss that results from this price floor is:

egh.

One would expect to see the supply become more price _____ as harvest season approaches and crops are being brought in from the fields.

elastic

Reference: Ref 5-32 (Table: Quantity Supplied and Quantity Demanded) Look at the table Quantity Supplied and Quantity Demanded. A government-imposed price ceiling equal to $5 would result in:

excess demand.

Accountants use only _____ costs in their computations.

explicit

A rancher in Oklahoma decides to raise the price of her beef by 19% over the prevailing market price. If the demand for beef is perfectly elastic, this rancher's quantity demanded will:

fall to 0.

If labor is scarce in Sri Lanka but capital is abundant, when Sri Lanka opens to trade, the price of labor will _____ and the price of capital will _____.

fall; rise

Steven consumes staples and paper clips. He is maximizing his utility in consumption of both goods. The price of paper clips rises. Assuming that diminishing marginal utility applies to both goods, as he adjusts to this event, the marginal utility of staples will _____, and the marginal utility of paper clips will _____.

fall; rise

Steven consumes staples and paper clips. He is maximizing his utility in consumption of both goods. The price of staples falls. Assuming that diminishing marginal utility applies to both goods, as he adjusts to this event, the marginal utility of staples will _____, and the marginal utility of paper clips will _____.

fall; rise

Reference: Ref 11-4 (Figure: The Total Product) Look at the figure The Total Product. Between points A and B the marginal product of labor is:

falling

Reference: Ref 11-4 (Figure: The Total Product) Look at the figure The Total Product. Between points A and B the marginal product of labor is:

falling.

Steven consumes staples and paper clips. He is maximizing his utility in consumption of both goods. The price of staples rises. After the change in price Steven should consume _____ staples and _____ paper clips.

fewer; more

Reference: Ref 10-1 (Table: The Utility of Pecan Rolls) Look at the table The Utility of Pecan Rolls. Marginal utility is zero for the _____ roll.

fifth

Reference: Ref 10-3 (Table: The Utility of Macaroni and Cheese) Look at the table The Utility of Macaroni and Cheese. Carmen loves macaroni and cheese for Thanksgiving. Carmen's marginal utility from eating macaroni and cheese is zero for the _____ serving.

fifth

Reference: Ref 10-3 (Table: The Utility of Macaroni and Cheese) Look at the table The Utility of Macaroni and Cheese. Carmen loves macaroni and cheese for Thanksgiving. Carmen's total utility is maximized when she eats the _____ serving.

fifth

A _____ is an organization that produces goods or services for sale.

firm

Reference: Ref 9-12 (Table: Tutoring) Look at the table Tutoring. If he can charge all students their willingness to pay, Sigmund's optimal number of tutoring hours is:

five.

An input whose quantity CANNOT be changed in the short run is:

fixed.

Once diminishing returns have set in, as output increases, the total cost curve:

gets steeper.

Mexico is relatively labor-abundant when compared with the United States. Therefore, Mexico has a comparative advantage in _____ compared with the United States.

goods that are labor-intensive in production

Hugo Chávez was the president of Venezuela. Venezuela is a major producer of oil products, which remain the keystone of Venezuela's economy. Suppose President Chávez wanted to increase his popularity with the citizens of Venezuela and enacted a government policy to reduce the price of gasoline sold at state-owned gas stations to 50% of the previous price. Assuming a downward-sloping demand curve for gasoline, in theory, this policy would result in the quantity of gasoline demanded to be _____ the quantity of gasoline supplied.

greater than

The cross-price elasticity of demand of substitute goods is:

greater than 0.

A men's tie store sold an average of 30 ties per day at $5 per tie. The same store sold 60 of the same ties per day at $3 per tie. In this case, the price elasticity of demand (by the midpoint method) is:

greater than 1 but less than 3.

A shirt manufacturer sold 10 dozen shirts per day at $4 per shirt but sold 15 dozen shirts per day at $3 per shirt. The price elasticity of demand (by the midpoint method) is:

greater than 1 but less than 3.

The pair of items that is most likely to have a negative cross-price elasticity of demand is:

hamburgers and ketchup.

Reference: Ref 5-33 (Figure: Market I) Look at the figure Market I. A price floor of $5 imposed on this market would:

have no effect.

Reference: Ref 9-18 (Scenario: Betty's Cookie Shop) Betty is trying to decide at what point she should stop selling cookies, and she knows she cannot change the price of a cookie. She should stop selling cookies if:

her implicit costs are greater than her accounting profits.

Reference: Ref 9-18 (Scenario: Betty's Cookie Shop) Given the information provided, Betty's implicit costs are:

her salary if she worked elsewhere and interest she forgoes by not selling her shop and putting the money in the bank.

To say that you can't have too much of a good thing means that for any good that you enjoy (for example, pizza):

higher consumption will always lead to higher utility.

Compared with autarky, international trade leads to _____ domestic production in exporting industries and _____ domestic production in import-competing industries.

higher; lower

If marginal costs remain constant, the marginal cost curve is:

horizontal.

The fixed cost curve is:

horizontal.

Other things being equal, the price elasticity of demand for a product will be lower:

if there are few or no substitutes available.

By definition, in a black market, goods or services are bought and sold:

illegally.

Expenses associated with factors of production may be _____ costs.

implicit, opportunity, or explicit

In central Florida, the demand for real estate has been increasing rapidly for years. Therefore, the _____ cost of capital is _____ in central Florida's orange groves.

implicit; increasing

Goods and services purchased from abroad are _____, while goods and services sold abroad are _____.

imports; exports

In the short run, the price elasticity of supply for foods low in carbohydrates is lower than it will be in the long run because:

in the short run, food producers do not have much time to respond to changes in demand.

Reference: Ref 11-29 (Table: Tonya's Production Function for Apples) Look at the table Tonya's Production Function for Apples. Tonya is operating:

in the short run.

As defined in the text, the long run is a planning period:

in which a firm can adjust all resources.

If the marginal cost curve is upward-sloping, as output increases, marginal costs will:

increase

Reference: Ref 8-4 (Figure: The Production Possibility Frontiers for Jackson and Tahoe) Look at the figure The Production Possibility Frontiers for Jackson and Tahoe. In autarky, Jackson produces and consumes 30 head of cattle and 80 bushels of wheat, while Tahoe produces and consumes 80 head of cattle and 60 bushels of wheat. With complete specialization according to comparative advantage, the two nations' combined production of wheat will:

increase by 60 bushels.

Reference: Ref 8-4 (Figure: The Production Possibility Frontiers for Jackson and Tahoe) Look at the figure The Production Possibility Frontiers for Jackson and Tahoe. In autarky, Jackson produces and consumes 30 head of cattle and 80 bushels of wheat, while Tahoe produces and consumes 80 head of cattle and 60 bushels of wheat. If the two countries engage in international trade and specialize completely and if the price of 1 head of cattle equals the price of 2 bushels of wheat, world production of cattle will:

increase by 90 head.

Suppose the government imposes a $4 per month excise tax on cable TV. If the demand for cable TV is perfectly inelastic and the supply curve is elastic (but not perfectly elastic), then the price of cable TV will:

increase by exactly $4.

Decreases in input costs and a longer time since a price change will tend to:

increase the price elasticity of supply.

The effect of international trade on U.S. factor markets is to:

increase the wage of highly educated workers.

A country that is relatively labor-abundant and relatively land-scarce opens to international trade. As a result, it finds that wages _____ and rents _____.

increase; decrease

Sam always tries to maximize his utility in his consumption of popcorn and soft drinks. Both of these goods are subject to diminishing marginal utility. Suppose the prices of these goods, along with Sam's income, stay the same, but Sam decides to decrease his consumption of popcorn. Holding everything else constant, this means that Sam must _____ his consumption of soft drinks, and his marginal utility per dollar spent on popcorn will be _____ than it used to be.

increase; greater

Reference: Ref 6-15 (Figure: The Linear Demand Curve) Look at the figure The Linear Demand Curve. If you increase the price of your scarves from $7 to $8, your total revenue will _____, and you notice that your price elasticity of demand is _____.

increase; inelastic

Reference: Ref 11-21 (Figure: Long-Run Average Cost) Look at the figure Long-Run Average Cost. This firm has _____ in the output region from 0 to A.

increasing returns to scale

Which is NOT an inefficiency caused by binding price ceilings?

inefficient allocation of sales among sellers

A binding rent-control price ceiling results in all of the following EXCEPT:

inefficiently high quality of the good being sold.

You manage a nightclub, and lately revenues have been disappointing. Your bouncer suggests that raising drink prices will increase revenues, but your bartender suggests that decreasing drink prices will increase revenues. You aren't sure who is right, but you do know that your bouncer thinks the demand for drinks is _____ and your bartender thinks the demand for drinks is _____.

inelastic; elastic

Reference: Ref 6-13 (Figure: The Demand Curve) Look at the figure The Demand Curve. Between prices $4 and $5, demand is _____, and total revenue will _____ if price increases.

inelastic; increase

If you want to reduce the inefficiency costs of taxation, you should devise taxes to fall on goods for which the supply is _____ and the demand is _____.

inelastic; inelastic

Demand for vegetables at a small farmers' market is steady, but the supply of vegetables has decreased because of a drought. This is good news for farmers if demand is _____ and the _____ effect outweighs the _____ effect.

inelastic; price; quantity

If the executives of the U.S. silicon chip industry lobby Congress for protection from imports on the grounds that theirs is a new industry that needs time to develop technological efficiency, they are using the _____ argument.

infant industry

Reference: Ref 11-29 (Table: Tonya's Production Function for Apples) Look at the table Tonya's Production Function for Apples. Tonya's variable:

input is labor.

Reference: Ref 11-29 (Table: Tonya's Production Function for Apples) Look at the table Tonya's Production Function for Apples. Tonya's fixed:

input is land.

Comparative advantage in international trade:

is used to determine whether trade will be beneficial to both countries involved.

According to the infant industry argument, import protection is needed because:

it enables our protected industries to achieve technological efficiency and thus become competitive with mature foreign industries.

If the government imposes binding rent control:

it may result in some landlords leaving the business because they cannot cover costs.

A binding price ceiling is designed to:

keep prices below the equilibrium level.

Price ceilings will impose costs on society because they:

lead to a smaller quantity offered on the market.

Quotas often:

lead to deadweight losses resulting from a wedge between the price of sellers and that of demanders.

If minimum wages are set above the equilibrium wage in the market, then the number of workers hired will be _____ the number of people who are willing to work.

less than

The principle of diminishing marginal utility means that when Sarah eats pizza, her satisfaction from the second slice of pizza is probably _____ that from the first.

less than

If two goods are complementary, we can assume that the cross-price elasticity of demand for these goods is:

less than 0.

If the price elasticity of supply is:

less than 1, then the supply is price-inelastic.

For most firms, economic profit is:

less than accounting profit.

Reference: Ref 10-18 (Table: Consumer Equilibrium) Look at the table Consumer Equilibrium. Assume that the price of both goods is $1 per unit, that you consume four units of good X and two units of good Y, and that you are spending all of your income. To maximize utility, assuming that the goods are divisible, you would consume _____ of X and _____ of Y.

less; more

A planning period during which all of a firm's resources are variable is the _____ run.

long

To be binding, a price ceiling must be set at a price:

lower than the equilibrium price.

Reference: Ref 8-2 (Table: Production Possibilities for Machinery and Petroleum) Look at the table Production Possibilities for Machinery and Petroleum. The opportunity cost of _____ is _____ in the United States as (than) in Mexico.

machinery; less

Reference: Ref 11-14 (Figure: Short-Run Costs) Look at the figure Short-Run Costs. A is the _____ cost curve.

marginal

Reference: Ref 11-17 (Figure: A Firm's Cost Curves) Look at the figure A Firm's Cost Curves. The curve labeled V represents the firm's _____ cost curve.

marginal

The amount by which total utility changes when an additional unit of a good is consumed is called _____ utility.

marginal

Reference: Ref 9-9 (Figure: The Optimal Quantity) Look at the figure The Optimal Quantity. If the marginal benefit of lawn mowing decreased, the _____ curve in the figure would shift to the _____ and the optimal quantity would be _____ five lawns mowed.

marginal benefit; left; fewer than

Reference: Ref 9-9 (Figure: The Optimal Quantity) Look at the figure The Optimal Quantity. If the marginal benefit of lawn mowing increased, the _____ curve in the figure would shift to the _____ and the optimal quantity would be _____ five lawns mowed.

marginal benefit; right; more than

Reference: Ref 11-16 (Table: Cost Data) Look at the table Cost Data. When the purse factory produces 5 units of output (purses):

marginal cost is above average total cost, and average total cost is rising.

The amount by which an additional unit of an activity increases total cost is:

marginal cost.

Reference: Ref 9-9 (Figure: The Optimal Quantity) Look at the figure The Optimal Quantity. If the cost of lawn mowing increased for all quantities of lawns mowed, the _____ curve in the figure would shift to the _____ and the total profit would _____.

marginal cost; left; decrease

Reference: Ref 9-9 (Figure: The Optimal Quantity) Look at the figure The Optimal Quantity. If the cost of lawn mowing decreased for all quantities of lawns mowed, the _____ curve in the figure would shift to the _____ and the total profit would _____.

marginal cost; right; increase

The _____ is the increase in output that is produced when a firm hires an additional worker.

marginal product

As you consume more turkey relative to mashed potatoes, the _____ of turkey eventually decreases.

marginal utility

The amount by which total utility rises when an additional slice of pie is consumed is called:

marginal utility.

If a star college quarterback turns down a multimillion-dollar offer from the NFL to return for his senior year of college, he may be exhibiting:

misperception of opportunity costs.

According to the profit-maximizing principle of marginal analysis, if the marginal benefit is _____ the marginal cost, _____.

more than; an activity should be reduced

Steven consumes staples and paper clips. He is maximizing his utility in consumption of both goods. The price of staples falls. After the change in price Steven should consume _____ staples and _____ paper clips.

more; fewer

Reference: Ref 10-18 (Table: Consumer Equilibrium) Look again at the table Consumer Equilibrium. Assume that the price of good X is $1 per unit and the price of good Y is $2 per unit and you consume 4 units of good X and 2 units of good Y, and you are spending all of your income. To maximize utility, assuming that the goods are divisible, you would consume _____ of X and _____ of Y.

more; less

Xavier notices that the marginal utility of working with a tutor seems to fall with each hour the tutor helps him study. If Xavier keeps the tutor until his grade actually begins to fall, his marginal utility for the last hour of tutoring will be:

negative

The infant industry argument for trade protection states that:

new industries should be protected from foreign competition until they become established.

Reference: Ref 5-9 (Figure: Supply and Demand) Look at the figure Supply and Demand. A price ceiling of P1 causes:

no change to the market.

Kayla and Jada are roommates in New York City. Both Kayla and Jada recently received raises. Kayla now buys more album downloads than before, but Jada buys fewer. Kayla behaves as if album downloads are _____ goods, and Jada's income elasticity of demand for album downloads is _____.

normal; negative

Jie consumes three heads of broccoli and six bowls of rice each week. The price of a head of broccoli is $2 and the price of rice is $4 per bowl. Jie's marginal utility from the last head of broccoli consumed is 4 utils and her marginal utility from her last bowl of rice is 8 utils. If Jie wants to maximize her utility, she should:

not change her consumption of either broccoli or rice.

Suppose the government imposes a $9 per month tax on cell phone service. If the demand curve for cell phone service is perfectly elastic and the supply curve is upward-sloping, the monthly price for cell phone service will:

not change.

Reference: Ref 11-19 (Table: Cakes) Look at the table Cakes. Pat is opening a bakery to make and sell special birthday cakes. She is trying to decide how many mixers to purchase. Her estimated fixed and average variable costs if she purchases one, two, or three mixers are shown in the table. Assume that average variable costs do not vary with the quantity of output. How many mixers should Pat buy to get the lowest average total cost if she plans to make 100 cakes?

one

Marginal analysis is relevant for:

only "how much" decisions.

The long run is a planning period:

over which a firm can consider all inputs as variable.

Which of the following goods is MOST likely to display increasing marginal utility over some range?

paint, because you need enough to paint at least one entire room

The belief that importing goods from low-wage countries will hurt the standard of living of workers in the importing country is known as the:

pauper labor fallacy.

A tariff imposed on U.S. imports into Japan tends to _____ U.S. producers and _____ Japanese producers.

penalize; benefit

A rent control scheme setting a maximum amount of rent paid below the equilibrium rental price would most likely be supported by:

people who wish to rent such an apartment.

Reference: Ref 8-2 (Table: Production Possibilities for Machinery and Petroleum) Look at the table Production Possibilities for Machinery and Petroleum. The opportunity cost of _____ is _____ in the United States as (than) in Mexico.

petroleum; more

When Joe's income is $100 per week, he spends $20 per week on pizza. When his income rises to $110 per week, he spends $25 per week on pizza. If the price of pizza remains constant, this information implies that for Joe:

pizza is a normal good and a luxury.

The total cost curve is:

positively sloped.

A maximum price set below the equilibrium price is a:

price ceiling.

Hugo Chávez was the president of Venezuela. Venezuela is a major producer of oil products, which remain the keystone of Venezuela's economy. Suppose President Chávez wanted to increase his popularity with the citizens of Venezuela and enacted a government policy to reduce the price of gasoline sold at state-owned gas stations to 50 percent of the previous price. This policy is called a:

price ceiling.

The dictator of a small country restricts the price of cars to an amount less than or equal to $1,200 (a price below the equilibrium price for cars). Such a policy would set a:

price ceiling.

The dictator of a small country restricts the price of cars to an amount less than or equal to $1,200 (a price below the equilibrium price for cars). Such a policy would set a:

price ceilings.

When price controls take the form of maximum prices set below the equilibrium price, they are:

price ceilings.

Reference: Ref 5-18 (Figure: The Market for Spanish Textbooks) Look at the figure The Market for Spanish Textbooks. Suppose the government believes the producers of Spanish textbooks are not profitable and it wants to make sure textbook producers are profitable. It could impose a control called a _____, and for it to be binding, one possible price would be _____.

price floor; $90

If a change in price causes total revenue to change in the same direction, we can conclude that the demand is:

price inelastic.

Reference: Ref 6-3 (Figure: Demand for Notebook Computers) Look at the figure The Demand for Notebook Computers. The change in total revenue resulting from a change in price from P to T suggests that demand is:

price-elastic.

If the government imposes a $5 excise tax on leather shoes and the price of leather shoes increases by $2:

producers are paying more of the tax than are the consumers.

When a market begins to engage in international trade:

producers in the exporting industry may be better off.

If a market begins to engage in international trade, we can assume that:

producers in the importing industry may be worse off.

If the government levies an excise tax in a market whose supply curve is perfectly inelastic, the burden of the tax will fall completely on the _____, and the deadweight loss will equal _____.

producers; zero

The supply curve for a good will be more elastic if:

production inputs are readily available at a relatively low cost.

The university president believes that increasing student tuition by 5% will increase revenues. If the president is correct that revenues will increase, then the tuition increase will _____ the number of students enrolling by _____.

reduce; less than 5%

The incidence of a tax:

refers to how much of the tax is actually paid by consumers and producers.

Reference: Ref 7-11 (Table: Taxes, Spending, and Income) Look at the table Taxes, Spending, and Income. Suppose Governor Meridias decides to initiate a state tax of 5% on all sales. This tax will be:

regressive

A tax that rises less than in proportion to income is described as:

regressive.

Reference: Ref 9-19 (Table: TC's Pizza Parlor) Look at the table TC's Pizza Parlor and assume that marginal cost is constant in the intervals of production. The marginal cost for pizza production:

remains constant.

In a single year, Argentina can raise 100 tons of beef or produce 1,000 boxes of tulips. In the same growing season, Venezuela can raise 50 tons of beef or produce 750 boxes of tulips. When the two countries begin trading beef for tulips, we expect the total surplus from beef consumption and production to:

rise in Argentina.

According to the infant industry argument, import protection is needed because:

rise; fall

If a country imposes a tariff on imported shoes, we expect the domestic price of shoes to _____ and the quantity of shoes consumed in the domestic market to _____.

rise; fall

If a nation exports a good when the economy is opened to trade, relative to the autarky price, the domestic price of the good will _____ and domestic consumption will _____.

rise; fall

If labor is abundant in South Africa but capital is scarce, when South Africa opens to trade, the price of labor will _____ and the price of capital will _____.

rise; fall

Reference: Ref 11-4 (Figure: The Total Product) Look at the figure The Total Product. As labor is hired between L1 and L2, the total product is _____ and the marginal product is _____.

rising; positive

How much _____ Susan obtains from eating green beans is a measure of the utility of green beans for her.

satisfaction

Reference: Ref 10-1 (Table: The Utility of Pecan Rolls) Look at the table The Utility of Pecan Rolls. Marginal utility begins to diminish at the _____ roll.

second

Reference: Ref 10-5 (Figure and Table: The Budget Line) Look at the figure and table The Budget Line. A decrease in income would:

shift the budget line to the left.

Reference: Ref 10-5 (Figure and Table: The Budget Line) Look at the figure and table The Budget Line. An increase in income would:

shift the budget line to the right.

Reference: Ref 11-7 (Figure: Change in the Total Product) Look at the figure Change in the Total Product. As indicated by the change in a production function from TP1 to TP2, the marginal product of labor curve has:

shifted upward.

An excise tax that the government collects from the producers of a good:

shifts the supply curve upward.

A price ceiling is likely to result in a persistent _____, a transfer of surplus from _____, and _____ deadweight loss.

shortage; producers to consumers; some

In the short run:

some inputs are fixed and some inputs are variable.

Reference: Ref 11-4 (Figure: The Total Product) Look at the figure The Total Product. Labor added from L1 and up to L2 is:

subject to diminishing marginal returns.

Since the price of walnuts increases as the demand for cashews increases, we can assume that these two goods are:

substitutes.

Consumption of more of a good that has become cheaper in place of a good that has become relatively more expensive is the:

substitution effect.

The government might impose a price floor if _____ can make a strong moral or political argument for _____ prices.

suppliers; higher

If an excise tax is imposed on beer and collected from the producers, the _____ curve will shift _____ by the amount of the tax.

supply; upward

Reference: Ref 5-15 (Figure: The Market for English Textbooks) Look at the figure The Market for English Textbooks. With a binding price floor at $90, the market outcome would be a _____ of _____ textbooks.

surplus; 45

The belief that trade must be bad for exporting countries because the foreign workers are paid very low wages by our standards is the:

sweatshop labor fallacy.

Workers in China earn low wages relative to world standards. A person who believes trade must be bad for workers in China because of this adheres to the:

sweatshop labor fallacy.

Which model states that nations that are abundant in a factor will have a comparative advantage in a good whose production is intensive in that factor?

the Heckscher-Ohlin model

the Netherlands has a comparative advantage in raising beef.

Reference: Ref 9-10 (Figure: Marginal Benefits and Marginal Costs) Look at the figure Marginal Benefits and Marginal Costs. More time spent studying economics adds points to economics scores (MB) but subtracts points from accounting scores (MC). At four hours of study, Claudia will maximize her benefit from study time because:

the difference between total benefits and total costs is maximized.

In the long run:

the firm has time to change the level of all inputs.

A persistent shortage may occur if:

the government imposes a price ceiling.

You own a small deli that sells sandwiches, salads, and soup. Which of the following is an implicit cost of the business?

the job offer you did not accept at a local catering service

Consumers in a particular market will bear the greater burden of an excise tax:

the more price-elastic supply is relative to demand.

Producers in a particular market will bear the greater burden of an excise tax:

the more price-elastic the demand is relative to supply.

The implicit cost of capital is:

the opportunity cost of capital used by a business.

France and England both produce wine and clothing with constant opportunity costs. France will have a comparative advantage in wine production if:

the opportunity cost of wine production is lower in France than in England.

Reference: Ref 5-9 (Figure: Supply and Demand) Look at the figure Supply and Demand. A binding price ceiling is represented by:

the price P3.

The university hopes to raise more revenue by increasing parking fees. This plan will work only if:

the price effect is larger than the quantity effect.

If the government wants to minimize the deadweight loss from taxes, it should tax goods for which:

the price elasticity of demand is low.

Reference: Ref 5-32 (Table: Quantity Supplied and Quantity Demanded) Look at the table Quantity Supplied and Quantity Demanded. If a price ceiling of $10 is imposed in this market:

the quantity demanded will be greater than the quantity supplied.

When the price goes down, the quantity demanded goes up. The price elasticity of demand measures:

the responsiveness of the quantity change to the price change.

In economic analysis, the principle of marginal analysis refers to:

the result that the optimal quantity of an activity is that at which marginal benefit is equal to marginal cost.

Both the United States and Canada produce automobiles and their components; however, each particular model or component is produced in only one of the two countries. Which of the following explains this pattern of production and trade?

the role of increasing returns

Countries that trade based on the Heckscher-Ohlin model will find that:

their import goods tend to utilize their relatively scarce factors of production most intensively.

Reference: Ref 8-1 (Table: The Production Possibilities for Cars and Leather Boots) Look at the table The Production Possibilities for Cars and Leather Boots. Given the opportunity costs of production:

there is no basis for trade.

Reference: Ref 11-19 (Table: Cakes) Look at the table Cakes. Pat is opening a bakery to make and sell special birthday cakes. She is trying to decide how many mixers to purchase. Her estimated fixed and average variable costs if she purchases one, two, or three mixers are shown in the table. Assume that average variable costs do not vary with the quantity of output. How many mixers should Pat buy to get the lowest average total cost if she plans to make 400 cakes?

three

to fall.

If marginal costs of production are greater than marginal benefits of production:

too much of the good is being produced.

For Heidi, the marginal cost of producing one additional photograph equals the change in _____ divided by the change in the _____ of photographs.

total cost; number

Profit is the difference between _____ and _____.

total revenues; total costs

The marginal utility of coffee consumption for Steve is the change in _____ generated by consuming an additional cup of coffee.

total utility

Policies that limit imports, usually to insulate domestic producers from foreign competition, are known as:

trade protection.

Reference: Ref 9-11 (Table: Expected Exam Scores from Studying Economics and Accounting) Look at the table Expected Exam Scores from Studying Economics and Accounting. If you studied for a total of three hours, your combined scores would be maximized by spending _____ hours studying economics.

two

Cindy just graduated from college and started working at a large accounting firm. Although the firm will match her contributions to a retirement account, Cindy wants to wait several years before participating, since there are so many things she needs to buy right now. What type of behavior does this represent?

unrealistic expectations about the future

Economists describe the satisfaction consumers receive from consuming goods and services as:

utility

For economists, the satisfaction an individual derives from the consumption of goods and services is best described as:

utility

In economics, the ability of pumpkin pie to satisfy a want is referred to as its:

utility

A factor of production whose quantity can be changed during the SHORT run is a(n) _____ factor of production.

variable

An input whose quantity can be changed in the short run is a(n) _____ input.

variable

There is one gas station in a small rural town. The owner of the station claims that he will sell the same quantity of gas no matter how high or low the price. If he is correct in this assertion, the demand curve for gas at his station must be _____, with a price elasticity of _____.

vertical; zero

Suppose Bob has a part-time business washing cars. He has washed nine cars on a given day; the marginal benefit of washing the tenth car is $20 and the marginal cost is $12. Bob should:

wash the tenth car.

Reference: Ref 8-24 (Scenario: The Production of Wheat and Toys) Look at the scenario Production of Wheat and Toys. Country A has an absolute advantage in _____ and a comparative advantage in the production of _____.

wheat and toys; wheat

Diminishing returns to an input occur:

when some inputs are fixed and some are variable.

If two firms are identical in all respects except that one has more of the fixed input capital than another, the marginal product curve for the firm with more capital:

will lie above the marginal product curve for the firm with less capital.

If two firms are identical in all respects except that one has more of the fixed input capital than another, the total product curve for the firm with more capital:

will lie above the total product curve for the firm with less capital.

If total utility is at a maximum, marginal utility is:

zero.

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