Micro final

Filler

Filler

On a graph we draw a consumer's budget constraint, measuring the number of apples on the horizontal axis and the number of light bulbs on the vertical axis. If the slope of the budget constraint is -2, then Selected Answer:d. All of the above are correct. Correct Answer:a. an apple costs twice as much as a light bulb.

a. an apple costs twice as much as a light bulb.

Refer to Figure 7-25. At the equilibrium price, total surplus is a.$1,152. b.$576. c.$2,304. d.$288.

a.$1,152.

Refer to Table 11-2. Suppose the cost to install each streetlight is $360 and the families have agreed to split the cost of installing the streetlights equally. To maximize their own surplus, how many streetlights would the Greene's like the town to install? a.3 streetlights b.0 streetlights c.2 streetlights d.1 streetlight

a.3 streetlights

Refer to Table 11-2. Suppose the cost to install each streetlight is $360 and the families have agreed to split the cost of the streetlights equally. If the families vote to determine the number of streetlights to install, basing their decision solely on their own willingness to pay (and trying to maximize their own surplus), what is the greatest number of streetlights for which the majority of families would vote "yes?" a.4 streetlights b.2 streetlights c.3 streetlights d.1 streetlight

a.4 streetlights

Refer to Table 11-2. Suppose the cost to install each streetlight is $360. How many streetlights should the town install to maximize total surplus from the streetlights? a.4 streetlights b.1 streetlight c.3 streetlights d.2 streetlights

a.4 streetlights

Irene is a vegetarian, so she does not eat pork. That is, pork provides no additional utility to Irene. She loves broccoli, however. If we illustrate Irene's indifference curves by drawing broccoli on the horizontal axis and pork on the vertical axis, her indifference curves will a.be vertical straight lines. b.slope upward. c.slope downward. d.be horizontal straight lines.

a.be vertical straight lines.

Suppose a consumer spends her income on two goods: music CDs and DVDs. The price of a CD is $8, and the price of a DVD is $20. If we graph the budget constraint by measuring the quantity of CDs purchased on the vertical axis and the quantity of DVDs on the horizontal axis, what is the slope of the budget constraint? Selected Answer:c. -0.4 Correct Answer:b. -2.5

b. -2.5

Which of the following is an example of the free-rider problem? Selected Answer:b. Bruce owns Buster, a large dog who barks whenever anyone walks near his house. Betty lives next to Bruce, and Buster's barking can be heard whenever anyone walks near her house, too. Thus, Betty receives free protection from burglars because of Buster's barking. Correct Answer:b. Bruce owns Buster, a large dog who barks whenever anyone walks near his house. Betty lives next to Bruce, and Buster's barking can be heard whenever anyone walks near her house, too. Thus, Betty receives free protection from burglars because of Buster's barking.

b. Bruce owns Buster, a large dog who barks whenever anyone walks near his house. Betty lives next to Bruce, and Buster's barking can be heard whenever anyone walks near her house, too. Thus, Betty receives free protection from burglars because of Buster's barking.

When two goods are perfect substitutes, the Selected Answer:b. marginal rate of substitution is constant. Correct Answer:b. marginal rate of substitution is constant.

b. marginal rate of substitution is constant.

Kelly is willing to pay $5.20 for a gallon of gasoline. The price of gasoline at her local gas station is $3.80. If she purchases ten gallons of gasoline, then Kelly's consumer surplus is a.$52. b.$14. c.$1.40. d.$3.80.

b.$14.

Refer to Figure 6-25. The amount of the tax per unit is a.$1. b.$3. c.$2. d.$1.50.

b.$3.

Refer to Figure 21-20. Assume that the consumer has an income of $40. If the price of chocolate chips is $4 and the price of marshmallows is $4, the optimizing consumer would choose to purchase a.9 marshmallows and 6 chocolate chips. b.5 marshmallows and 5 chocolate chips. c.10 marshmallows and 10 chocolate chips. d.3 marshmallows and 9 chocolate chips.

b.5 marshmallows and 5 chocolate chips.

Suppose that a firm has only one variable input, labor, and firm output is zero when labor is zero. When the firm hires 6 workers the firm produces 90 units of output. Fixed costs of production are $6 and the variable cost per unit of labor is $10. The marginal product of the seventh unit of labor is 4. Given this information, what is the average total cost of production when the firm hires 7 workers? a.70 cents b.81 cents c.$9.64 d.$10.06

b.81 cents

Suppose that Amanda receives a pay increase. We would expect a.Amanda's demand for normal goods to decrease. b.Amanda's demand for inferior goods to decrease. c.Amanda's demand for each of two goods that are complements to increase. d.to observe Amanda moving down and to the right along her given demand curve.

b.Amanda's demand for inferior goods to decrease.

Under which of the following scenarios would a park be considered a club good? a.Visitors can enter the park free of charge, but frequently all of the picnic tables are in use. b.Visitors to the park must pay an admittance fee, but there are always plenty of empty picnic tables. c.Visitors to the park must pay an admittance fee and frequently all of the picnic tables are in use. d.Visitors can enter the park free of charge and there are always plenty of empty picnic tables.

b.Visitors to the park must pay an admittance fee, but there are always plenty of empty picnic tables.

A $5 tax levied on the buyers of pants will cause the a.demand curve for pants to shift up by $5. b.demand curve for pants to shift down by $5. c.supply curve for pants to shift up by $5. d.supply curve for pants to shift down by $5.

b.demand curve for pants to shift down by $5.

Refer to Scenario 5-4. The change in equilibrium quantity will be a.greater in the milk market than in the beef market. b.greater in the beef market than in the milk market. c.the same in the milk and beef markets. d.Any of the above could be correct.

b.greater in the beef market than in the milk market.

A family on a trip budgets $1,000 for meals and gasoline. If the price of a meal for the family is $50 and if gasoline costs $3.50 per gallon, then how many meals can the family buy if they buy 100 gallons of gasoline? Selected Answer:c. 13 Correct Answer:c. 13

c. 13

Refer to Figure 7-25. Suppose the government imposes a price ceiling of $16 in this market. If the buyers with the highest willingness to pay purchase the good, then total surplus will be a.$256. b.$1,280. c.$1,024. d.$768.

c.$1,024.

Refer to Figure 10-10. Taking into account private and external costs, the maximum total surplus that can be achieved in this market is a.$1,440. b.$760. c.$1,080. d.$1,920.

c.$1,080.

Refer to Table 13-15. What is average variable cost when output is 50 units? a.$4.40 b.$4.80 c.$4.00 d.$3.60

c.$4.00

Refer to Scenario 13-9. Ellie's annual accounting costs will equal a.$165,700. b.$75,200. c.$55,200. d.$80,500.

c.$55,200.

Refer to Figure 21-17. When the price of X is $6, the price of Y is $24, and income is $48, Paul's optimal choice is point C. Then the price of Y decreases to $8. Paul's new optimal choice is point a.A. b.B. c.D. d.E.

c.D.

Refer to Figure 4-26. Which of the following movements would illustrate the effect in the market for paper napkins as a result of a "Go Green" advertising campaign encouraging people to use cloth napkins? a.Point A to Point D b.Point C to Point D c.Point C to Point B d.Point A to Point B

c.Point C to Point B

The Mansfield Public Library has a large number of books that anyone with a library card may borrow. Anyone can obtain a card for free. Because the number of copies of each book is limited, not everyone can have the same book at the same time. What type of good would the library books be classified as in this case? a.private goods b.club goods c.common resources d.public goods

c.common resources

A decrease in input costs to firms in a market will result in a(n) a.increase in equilibrium price and a decrease in equilibrium quantity. b.increase in equilibrium price and an increase in equilibrium quantity. c.decrease in equilibrium price and an increase in equilibrium quantity. d.decrease in equilibrium price and a decrease in equilibrium quantity.

c.decrease in equilibrium price and an increase in equilibrium quantity.

Two firms, A and B, each currently dump 50 tons of chemicals into the local river. The government has decided to reduce the pollution and from now on will require a pollution permit for each ton of pollution dumped into the river. It costs Firm A $100 for each ton of pollution that it eliminates before it reaches the river, and it costs Firm B $50 for each ton of pollution that it eliminates before it reaches the river. The government gives each firm 20 pollution permits. Government officials are not sure whether to allow the firms to buy or sell the pollution permits to each other. What is the total cost of reducing pollution if firms are not allowed to buy and sell pollution permits from each other? What is the total cost of reducing pollution if the firms are allowed to buy and sell permits from each other? Selected Answer:d. $4,500; $3,500 Correct Answer:d. $4,500; $3,500

d. $4,500; $3,500

Consider the town of Springfield with only three residents, Sophia, Amber, and Cedric. The three residents are trying to determine how large, in acres, they should build the public park. The table below shows each resident's willingness to pay for each acre of the park. Acres Sophia Amber Cedric Refer to Table 11-1. Suppose the cost to build the park is $9 per acre and that the residents have agreed to split the cost of building the park equally. If the residents vote to determine the size of park to build, basing their decision solely on their own willingness to pay (and trying to maximize their own surplus), what is the largest park size for which the majority of residents would vote "yes?" Selected Answer:d. 4 acres Correct Answer:d. 4 acres

d. 4 acres

Consider the town of Springfield with only three residents, Sophia, Amber, and Cedric. The three residents are trying to determine how large, in acres, they should build the public park. The table below shows each resident's willingness to pay for each acre of the park. Acres Sophia Amber Cedric Refer to Table 11-1. Suppose the cost to build the park is $9 per acre. How large should the park be to maximize total surplus from the park in Springfield? Selected Answer:d. 5 acres Correct Answer:d. 5 acres

d. 5 acres

Alicia is a vegetarian, so she does not eat beef. That is, beef provides no additional utility to Alicia. She loves potatoes, however. If we illustrate Alicia's indifference curves by drawing beef on the horizontal axis and potatoes on the vertical axis, her indifference curves will Selected Answer:d. be horizontal straight lines. Correct Answer:d. be horizontal straight lines.

d. be horizontal straight lines.

The Pennsylvania Turnpike is a tolled freeway running through the state of Pennsylvania. Motorists must pay tolls at various points along the Turnpike based on the distance they traveled on the freeway. Suppose that despite the tolls, many motorists in the urban areas use the Turnpike causing traffic to slow during peak times. What type of good would the Turnpike be classified as in this case? Selected Answer:d. private good Correct Answer:d. private good

d. private good

Refer to Table 11-2. Suppose the cost to install each streetlight is $360 and the families have agreed to split the cost of installing the streetlights equally. If the residents choose to install the number of streetlights that will maximize total surplus from the streetlights, how much total surplus will the Greene family receive? a.$360 b.$480 c.-$80 d.$320

d.$320

Refer to Figure 7-6. If the government imposes a price floor of $110 in this market, then consumer surplus will decrease by a.$800. b.$400. c.$200. d.$600.

d.$600.

Two firms, A and B, each currently dump 20 tons of chemicals into the local river. The government has decided to reduce the pollution and from now on will require a pollution permit for each ton of pollution dumped into the river. The government gives each firm 10 pollution permits, which it can either use or sell to the other firm. It costs Firm A $100 for each ton of pollution that it eliminates before it reaches the river, and it costs Firm B $50 for each ton of pollution that it eliminates before it reaches the river. After the two firms buy or sell pollution permits from each other, we would expect that a.Firm A will increase its pollution and Firm B will reduce its pollution. b.Firm A will no longer pollute, and Firm B will not reduce its pollution at all. c.Firm A will dump 10 tons of pollution into the river, and Firm B will dump 10 tons of pollution into the river. d.Firm B will no longer pollute, and Firm A will not reduce its pollution at all.

d.Firm B will no longer pollute, and Firm A will not reduce its pollution at all.

If sellers do not adjust their quantities supplied at all in response to a change in price, a.advances in technology must be prevalent. b.the time period under consideration must be very long. c.supply is perfectly elastic. d.supply is perfectly inelastic.

d.supply is perfectly inelastic.

Suppose that a decrease in the price of good X results in fewer units of good Y being demanded. This implies that X and Y are a. substitute goods. b. normal goods. c. inferior goods. d. complementary goods.

a. substitute goods.

Refer to Figure 8-2. The loss of producer surplus associated with some sellers dropping out of the market as a result of the tax is a.$1. b.$3. c.$2. d.$0.

a.$1.

Refer to Table 10-3. The market equilibrium quantity of output is a.3 units. b.6 units. c.4 units. d.5 units.

a.3 units.

Refer to Figure 4-18. At a price of $35, there would be a a.surplus of 400 units. b.surplus of 200 units. c.surplus of 600 units. d.shortage of 400 units.

a.surplus of 400 units.

Refer to Table 7-6. If the market price of an apple is $1.40, then consumer surplus amounts to a. $3.40 b. $0.60. c. $1.40. d. $1.20.

b. $0.60.

Refer to Scenario 13-9. Ellie's annual economic costs will equal a.$55,200. b.$135,700. c.$75,200. d.$80,500.

b.$135,700.

The marginal product of an input in the production process is the increase in a.profit obtained from an additional unit of that input. b.quantity of output obtained from an additional unit of that input. c.total revenue obtained from an additional unit of that input. d.total revenue obtained from an additional unit of that input.

b.quantity of output obtained from an additional unit of that input.

Refer to Table 13-15. What is average fixed cost when output is 40 units? a.$8.00 b.$5.00 c.$1.00 d.$3.32

c.$1.00

Refer to Figure 4-18. Equilibrium price and quantity are, respectively, a.$25 and 600 units. b.$35 and 200 units. c.$25 and 400 units. d.$15 and 200 units.

c.$25 and 400 units.

Refer to Table 10-3. Taking into account private and external costs/benefits, the maximum total surplus that can be achieved in this market is a.$18. b.$46. c.$55. d.$38.

c.$55.

Suppose a country imposes a lump-sum income tax of $5,000 on each individual in the country. What is the marginal income tax rate for an individual who earns $40,000 during the year? a.10% b.The marginal tax rate cannot be determined without knowing the entire tax schedule. c.0% d.More than 10%

c.0%

The amount by which total cost rises when the firm produces one additional unit of output is called a.fixed cost. b.variable cost. c.marginal cost. d.average cost.

c.marginal cost.

Refer to Figure 7-16. If the price of the good is $500, then producer surplus amounts to a. $700. b. $800. c. $575. d. $450.

a. $700.

Kristi and Rebecca sell lemonade on the corner for $0.50 per cup. It costs them $0.10 to make each cup. On a certain day, their producer surplus is $20. How many cups did Kristi and Rebecca sell? a. 50. b. 200. c. 40. d. 8.

a. 50.

Which of the following events would unambiguously cause an increase in the equilibrium price of cotton shirts? a. an increase in the price of wool shirts and an increase in the price of raw cotton b. an increase in the price of wool shirts and a decrease in the price of raw cotton c. a decrease in the price of wool shirts and an increase in the price of raw cotton d. a decrease in the price of wool shirts and a decrease in the price of raw cotton

a. an increase in the price of wool shirts and an increase in the price of raw cotton

A market demand curve shows a. how much of a good all buyers are willing and able to buy at each possible price. b. the sum of all prices that individual buyers are willing and able to pay for each possible quantity of the good. c. how quantity demanded changes when the number of sellers changes. d. the relationship between price and the number of buyers in a market.

a. how much of a good all buyers are willing and able to buy at each possible price.

If a market is allowed to adjust freely to its equilibrium price and quantity, then an increase in demand will a. increase producer surplus. b. reduce producer surplus. c. not affect producer surplus. d. Any of the above are possible.

a. increase producer surplus.

Consumer surplus a. is the amount a consumer is willing to pay minus the amount the consumer actually pays. b. is the amount of a good that a consumer can buy at a price below equilibrium price. c. measures how much a seller values a good. d. is the number of consumers who are excluded from a market because of scarcity.

a. is the amount a consumer is willing to pay minus the amount the consumer actually pays.

Other things equal, when the price of a good falls, the a. quantity supplied of the good decreases. b. quantity supplied of the good increases. c. supply decreases. d. demand increases.

a. quantity supplied of the good decreases.

Tom quit his $65,000 a year corporate lawyer job to open up his own law practice. In Tom's first year in business his total revenue equaled $150,000. Tom's explicit cost during the year totaled $85,000. What is Tom's economic profit for his first year in business? a.$0 b.$85,000 c.$20,000 d.$65,000

a.$0

Refer to Figure 8-2. Total surplus without the tax is a.$10, and total surplus with the tax is $7.50. b.$20, and total surplus with the tax is $2.50. c.$20, and total surplus with the tax is $7.50. d.$10, and total surplus with the tax is $2.50.

a.$10, and total surplus with the tax is $7.50.

Refer to Table 4-12. If only members are allowed to purchase tickets to this year's celebrity golf tournament, then what will be the equilibrium price? a.$20 b.$10 c.$15 d.$25

a.$20

Refer to Figure 8-2. The loss of consumer surplus for those buyers of the good who continue to buy it after the tax is imposed is a.$3. b.$1.50. c.$4.50. d.$0.

a.$3.

A binding price ceiling (i) causes a surplus. (ii) causes a shortage. (iii) is set at a price above the equilibrium price. (iv) is set at a price below the equilibrium price. a.(ii) and (iv) only b.(ii) only c.(iv) only d.(i) and (iii) only

a.(ii) and (iv) only

Suppose that when the price of good X increases from $800 to $850, the quantity demanded of good Y increases from 65 to 70. Using the midpoint method, the cross price elasticity of demand is about a.1.2, and X and Y are substitutes. b.-0.1, and X and Y are complements. c.0.1, and X and Y are substitutes. d.-1.2, and X and Y are complements.

a.1.2, and X and Y are substitutes.

Refer to Figure 10-10. The socially optimal quantity of output is a.120 units, since the value to the buyer of the 120th unit is equal to the cost incurred by society of the 120th unit. b.120 units, since the value to the buyer of the 120th unit is equal to the cost incurred by the seller of the 120th unit. c.160 units, since the value to the buyer of the 160th unit is equal to the cost incurred by the seller of the 160th unit. d.160 units, since the value to the buyer of the 160th unit is equal to the cost incurred by society of the 160th unit.

a.120 units, since the value to the buyer of the 120th unit is equal to the cost incurred by society of the 120th unit.

Refer to Figure 4-26. Which of the following movements would illustrate the effect in the market for doctor's visits of an increase in the number of medical students graduating from medical school and successfully completing their residency programs? a.Point A to Point B b.Point C to Point D c.Point A to Point D d.Point C to Point B

a.Point A to Point B

Refer to Figure 10-10. Which of the following statements is correct? a.The private cost of producing the 120th unit of output is $12. b.The social cost of producing the 120th unit of output is $22. c.The external cost of producing the 120th unit of output is $2. d.All of the above are correct.

a.The private cost of producing the 120th unit of output is $12.

Refer to Table 6-2. A price ceiling set at $5 will a.be binding and will result in a shortage of 250 units. b.not be binding. c.be binding and will result in a shortage of 300 units. d.be binding and will result in a shortage of 50 units.

a.be binding and will result in a shortage of 250 units.

Cashews and asparagus are normal goods. When the price of asparagus falls, the substitution effect by itself causes a.cashews to be relatively more expensive, so the consumer buys less cashews. b.the consumer to feel richer, so the consumer buys less cashews. c.the consumer to feel richer, so the consumer buys more cashews. d.cashews to be relatively less expensive, so the consumer buys more cashews.

a.cashews to be relatively more expensive, so the consumer buys less cashews.

Refer to Figure 8-2. The imposition of the tax causes the price received by sellers to a.decrease by $2. b.decrease by $4. c.increase by $5. d.increase by $3.

a.decrease by $2.

Consider a good to which a per-unit tax applies. The greater the price elasticities of demand and supply for the good, the a.greater the deadweight loss from the tax. b.smaller the deadweight loss from the tax. c.more efficient is the tax. d.more equitable is the distribution of the tax burden between buyers and sellers.

a.greater the deadweight loss from the tax.

If a market is allowed to move freely to its equilibrium price and quantity, then an increase in supply will a.increase consumer surplus. b.reduce consumer surplus. c.not affect consumer surplus. d.Any of the above are possible.

a.increase consumer surplus.

For a firm, the production function represents the relationship between a.quantity of inputs and quantity of output. b.quantity of inputs and total cost. c.implicit costs and explicit costs. d.quantity of output and total cost.

a.quantity of inputs and quantity of output.

Refer to Figure 7-4. When the price falls from P1 to P2, which area represents the increase in consumer surplus to existing buyers? a. AFG b. BCGD c. BDF d. ABC

b. BCGD

Suppose that demand for a good decreases and, at the same time, supply of the good decreases. What would happen in the market for the good? a. Equilibrium quantity would increase, but the impact on equilibrium price would be ambiguous. b. Equilibrium quantity would decrease, but the impact on equilibrium price would be ambiguous. c. Equilibrium price would decrease, but the impact on equilibrium quantity would be ambiguous. d. Equilibrium price would increase, but the impact on equilibrium quantity would be ambiguous.

b. Equilibrium quantity would decrease, but the impact on equilibrium price would be ambiguous.

Refer to Figure 21-8. If the price of good X is $5, and your budget constraint is DE, what is the price of good Y? a.$5 b.$10 c.$1.67 d.$2.50

b.$10

Suppose a consumer is currently spending all of her available income on two goods: music CDs and DVDs. If the price of a CD is $9, the price of a DVD is $18, and she is currently consuming 10 CDs and 5 DVDs, what is the consumer's income? a.$270 b.$180 c.$360 d.$90

b.$180

Refer to Figure 21-20. Assume that the consumer has an income of $100 and currently optimizes at bundle A. When the price of marshmallows decreases to $5, which bundle will the optimizing consumer choose? a.A b.B c.C d.D

b.B

Suppose the demand for macaroni is inelastic, the supply of macaroni is elastic, the demand for cigarettes is inelastic, and the supply of cigarettes is elastic. If a tax were levied on the sellers of both of these commodities, we would expect that the burden of a.the macaroni tax would fall more heavily on the sellers than on the buyers, and the burden of the cigarette tax would fall more heavily on the buyers than on the sellers. b.both taxes would fall more heavily on the buyers than on the sellers. c.both taxes would fall more heavily on the sellers than on the buyers. d.the macaroni tax would fall more heavily on the buyers than on the sellers, and the burden of the cigarette tax would fall more heavily on the sellers than on the buyers.

b.both taxes would fall more heavily on the buyers than on the sellers.

If marijuana were legalized, it is likely that there would be an increase in the supply of marijuana. Advocates of marijuana legalization argue that this would significantly reduce the amount of revenue going to the criminal organizations that currently supply marijuana. These advocates believe that the a.supply for marijuana is elastic. b.demand for marijuana is inelastic. c.supply for marijuana is inelastic. d.demand for marijuana is elastic.

b.demand for marijuana is inelastic.

Refer to Scenario 5-4. Total consumer spending on milk will a.decrease, and total consumer spending on beef will decrease. b.increase, and total consumer spending on beef will decrease. c.decrease, and total consumer spending on beef will increase. d.increase, and total consumer spending on beef will increase.

b.increase, and total consumer spending on beef will decrease.

Mark spends his weekly income on gin and cocktail olives. The price of gin has risen from $7 to $9 per bottle, the price of cocktail olives has fallen from $6 to $5 per jar, and Mark's income has stayed fixed at $46 per week. If you measure gin on the vertical axis and cocktail olives on the horizontal axis, then the budget constraint a.shifts in a parallel fashion to the old budget constraint after the price changes. b.is flatter after the price changes. c.is the same after the price changes. d.is steeper after the price changes.

b.is flatter after the price changes.

An optimizing consumer will select the consumption bundle in which the a.marginal rate of substitution is equal to marginal utility. b.marginal rate of substitution is equal to the relative price ratio of the goods. c.ratio of total utilities is equal to the relative price ratio. d.ratio of income to price equals the marginal rate of substitution.

b.marginal rate of substitution is equal to the relative price ratio of the goods.

If income increases and prices are unchanged, the consumer's budget constraint a.rotates outward along the horizontal axis. b.shifts outward. c.shifts inward. d.remains the same.

b.shifts outward.

Suppose demand is perfectly elastic, and the supply of the good in question decreases. As a result, a.the equilibrium quantity and the equilibrium price both are unchanged. b.the equilibrium quantity decreases, and the equilibrium price is unchanged. c.buyers' total expenditure on the good is unchanged. d.the equilibrium price increases, and the equilibrium quantity is unchanged.

b.the equilibrium quantity decreases, and the equilibrium price is unchanged.

Which of the following demonstrates the law of demand? a. Melissa buys fewer muffins at $0.75 per muffin than at $1 per muffin, other things equal. b. Kendra buys fewer Snickers at $0.60 per Snickers after the price of Milky Ways falls to $0.50 per Milky Way. c. Dave buys more donuts at $0.25 per donut than at $0.50 per donut, other things equal. d. After Jon got a raise at work, he bought more pretzels at $1.50 per pretzel than he did before his raise.

c. Dave buys more donuts at $0.25 per donut than at $0.50 per donut, other things equal.

Assume Leo buys coffee beans in a competitive market. It follows that a. Leo has a limited number of sellers from which to buy coffee beans. b. Leo will negotiate with sellers whenever he buys coffee beans. c. Leo cannot influence the price of coffee beans even if he buys a large quantity of them. d. None of the above is correct.

c. Leo cannot influence the price of coffee beans even if he buys a large quantity of them.

Suppose roses are currently selling for $40 per dozen, but the equilibrium price of roses is $30 per dozen. We would expect a a. shortage to exist and the market price of roses to increase. b. shortage to exist and the market price of roses to decrease. c. surplus to exist and the market price of roses to decrease. d. surplus to exist and the market price of roses to increase.

c. surplus to exist and the market price of roses to decrease.

Refer to Figure 6-25. The burden of the tax on buyers is a.$3 per unit. b.$1 per unit. c.$2 per unit. d.$1.50 per unit.

c.$2 per unit.

Refer to Figure 4-18. At what price would there be an excess demand of 200 units of the good? a.$35 b.$30 c.$20 d.$15

c.$20

Refer to Table 4-12. If both members and non-members are allowed to purchase tickets to this year's celebrity golf tournament, then what will be the equilibrium price? a.$20 b.$15 c.$25 d.$10

c.$25

Refer to Figure 5-12. Using the midpoint method, the price elasticity of demand between point X and point Y is a.1. b.0.4. c.2.5. d.2.

c.2.5.

Refer to Table 10-3. The socially optimal quantity of output is a.6 units. b.4 units. c.5 units. d.3 units.

c.5 units.

Refer to Table 4-9. Which combination would produce a decrease in equilibrium price and an indeterminate change in equilibrium quantity? a.A b.B c.C d.D

c.C

Refer to Figure 21-8. You have $600 to spend on good X and good Y. If good X costs $100 and good Y costs $100, your budget constraint is a.DE. b.BC. c.CD. d.AB.

c.CD.

Refer to Table 7-14. You and your best friend want to hire a professional photographer to take pictures of your two families. The table shows the costs of the four potential sellers in the local photography market. You and your friend agree to offer $500 for each session. Who accepts the offer, and what is the total producer surplus in the market? a.Kevin and Steve; $500 b.LeBron and Kobe; $500 c.Kevin and Steve; $150 d.LeBron and Kobe; $300

c.Kevin and Steve; $150

What would happen to the equilibrium price and quantity of coffee if the wages of coffee-bean pickers fell and the price of tea fell? a.Quantity would fall, and the effect on price would be ambiguous. b.Price would rise, and the effect on quantity would be ambiguous. c.Price would fall, and the effect on quantity would be ambiguous. d.Quantity would rise, and the effect on price would be ambiguous.

c.Price would fall, and the effect on quantity would be ambiguous.

Which of the following might cause the demand curve for an inferior good to shift to the left? a.a decrease in income b.an increase in the price of a substitute c.an increase in the price of a complement d.None of the above is correct.

c.an increase in the price of a complement

A competitive market is one in which there a.are many sellers, and they compete with one another in such a way that some sellers are always being forced out of the market. b.are many sellers, and each seller has the ability to set the price of his product. c.are so many buyers and so many sellers that each has a negligible impact on the price of the product. d.is only one seller, but there are many buyers.

c.are so many buyers and so many sellers that each has a negligible impact on the price of the product.

Suppose that 50 ice cream cones are demanded at a particular price. If the price of ice cream cones rises from that price by 4 percent, the number of ice cream cones demanded falls to 46. Using the midpoint approach to calculate the price elasticity of demand, it follows that the a.price elasticity of demand for ice cream cones in this price range is 0. b.demand for ice cream cones in this price range is inelastic. c.demand for ice cream cones in this price range is elastic. d.demand for ice cream cones in this price range is unit elastic.

c.demand for ice cream cones in this price range is elastic.

A good will have a more elastic demand, the a.more it is regarded as a necessity. b.shorter the period of time. c.greater the availability of close substitutes. d.more broad the definition of the market.

c.greater the availability of close substitutes.

Refer to Scenario 5-4. The equilibrium price will a.increase in the milk market and decrease in the beef market. b.decrease in both the milk and beef markets. c.increase in both the milk and beef markets. d.decrease in the milk market and increase in the beef market.

c.increase in both the milk and beef markets.

Giffen goods have positively-sloped demand curves because they are a.inferior goods with no substitution effect. b.inferior goods for which the substitution effect outweighs the income effect. c.inferior goods for which the income effect outweighs the substitution effect. d.normal goods with no substitution effect.

c.inferior goods for which the income effect outweighs the substitution effect.

Assume that a 4 percent decrease in income results in a 6 percent increase in the quantity demanded of a good. The income elasticity of demand for the good is a.positive, and the good is an inferior good. b.negative, and the good is a normal good. c.negative, and the good is an inferior good. d.positive, and the good is a normal good.

c.negative, and the good is an inferior good.

Holding the nonprice determinants of demand constant, a change in price would a.result in either a decrease in demand or an increase in demand. b.have no effect on the quantity demanded. c.result in a movement along a stationary demand curve. d.result in a shift of supply.

c.result in a movement along a stationary demand curve.

When the price of an inferior good increases, a.both the income and substitution effects encourage the consumer to purchase more of the good. b.both the income and substitution effects encourage the consumer to purchase less of the good. c.the income effect encourages the consumer to purchase more of the good, and the substitution effect encourages the consumer to purchase less of the good. d.the income effect encourages the consumer to purchase less of the good, and the substitution effect encourages the consumer to purchase more of the good.

c.the income effect encourages the consumer to purchase more of the good, and the substitution effect encourages the consumer to purchase less of the good.

Refer to Figure 10-10. The graph represents a market in which a.there is no externality. b.there is a positive externality. c.there is a negative externality. d.The answer cannot be determined from inspection of the graph.

c.there is a negative externality.

In the work-leisure model, suppose consumption and leisure are both normal goods. The income effect of a wage increase results in the worker choosing to a.work more than before. b.work more with a higher level of consumption. c.work less than before. d.possibly work more or less than before.

c.work less than before.

Caroline sharpens knives in her spare time for extra income. Buyers of her service are willing to pay $2.95 per knife for as many knives as Caroline is willing to sharpen. On a particular day, she is willing to sharpen the first knife for $2.00, the second knife for $2.25, the third knife for $2.75, and the fourth knife for $3.50. Assume Caroline is rational in deciding how many knives to sharpen. Her producer surplus is a. $1.30. b. $1.15. c. $0.95. d. $1.85.

d. $1.85.

Refer to Figure 7-22. If the price decreases from $80 to $70 due to a shift in the supply curve, consumer surplus increases by a. $250. b. $500. c. $1000. d. $750.

d. $750.

An example of a perfectly competitive market would be the market for a. electricity. b. coffee shops. c. restaurants. d. soybeans.

d. soybeans.

Matthew bakes apple pies that he sells at the local farmer's market. If the price of apples increases, the a. demand curve for Matthew's pies will increase. b. supply curve for Matthew's pies will increase. c. demand curve for Matthew's pies will decrease. d. supply curve for Matthew's pies will decrease.

d. supply curve for Matthew's pies will decrease.

The marginal seller is the seller a. who supplies the smallest quantity of the good among all sellers, and the marginal buyer is the buyer who demands the smallest quantity of the good among all buyers. b. for whom the marginal cost of producing one more unit of output is the lowest among all sellers, and the marginal buyer is the buyer for whom the marginal benefit of one more unit of the good is the highest among all buyers. c. who has the largest producer surplus, and the marginal buyer is the buyer who has the largest consumer surplus. d. who would leave the market first if the price were any lower, and the marginal buyer is the buyer who would leave the market first if the price were any higher.

d. who would leave the market first if the price were any lower, and the marginal buyer is the buyer who would leave the market first if the price were any higher.

Refer to Figure 6-25. How much tax revenue does this tax generate for the government? a.$300 b.$250 c.$180 d.$150

d.$150

Suppose a tax of $5 per unit is imposed on a good, and the tax causes the equilibrium quantity of the good to decrease from 200 units to 100 units. The tax decreases consumer surplus by $450 and decreases producer surplus by $300. The deadweight loss from the tax is a.$1,000. b.$500. c.$750. d.$250.

d.$250.

Charles purchases 20 basketball tickets per year when his annual income is $50,000 and 25 basketball tickets when his annual income is $60,000. Charles's income elasticity of demand for basketball ticket is a.1.22, and basketball tickets are an inferior good. b.0.82, and basketball tickets are a normal good. c.0.82, and basketball tickets are an inferior good. d.1.22, and basketball tickets are a normal good.

d.1.22, and basketball tickets are a normal good.

Refer to Table 12-10. If Miss Kay has $80,000 in taxable income, her average tax rate is a.18.5%. b.21.8%. c.25.0%. d.20.2%.

d.20.2%.

Refer to Table 6-2. A price ceiling set at $5 results in a.250 units sold. b.350 units sold. c.300 units sold. d.50 units sold.

d.50 units sold.

Five hundred units of good x are currently bought and sold. The marginal buyer is willing to pay $40 for the 500 th unit, and the cost to the marginal seller is $35 for the 500 th unit. We know that a.the equilibrium price of good x is somewhere between $35 and $40. b.the equilibrium quantity of good x exceeds 500 units. c.500 units is not an efficient quantity of good x. d.All of the above are correct.

d.All of the above are correct.

Suppose that demand for a good increases and, at the same time, supply of the good decreases. What would happen in the market for the good? a.Equilibrium quantity would decrease, but the impact on equilibrium price would be ambiguous. b.Equilibrium price would decrease, but the impact on equilibrium quantity would be ambiguous. c.Equilibrium quantity would increase, but the impact on equilibrium price would be ambiguous. d.Equilibrium price would increase, but the impact on equilibrium quantity would be ambiguous.

d.Equilibrium price would increase, but the impact on equilibrium quantity would be ambiguous.

If the cross-price elasticity of two goods is negative, then the two goods are a.inferior goods. b.normal goods. c.necessities. d.complements.

d.complements.

Holding all other factors constant and using the midpoint method, if a candy manufacturer increases production by 20 percent when the market price of candy increases from $0.50 to $0.60, then supply is a.inelastic, since the price elasticity of supply is equal to .91. b.elastic, since the price elasticity of supply is equal to 0.91. c.inelastic, since the price elasticity of supply is equal to 1.1. d.elastic, since the price elasticity of supply is equal to 1.1.

d.elastic, since the price elasticity of supply is equal to 1.1.

Refer to Figure 5-12. If the price decreased from $36 to $12, total revenue would a.decrease by $7,200, and demand is inelastic between points X and Z. b.increase by $7,200, and demand is elastic between points X and Z. c.decrease by $4,800, and demand is inelastic between points X and Z. d.increase by $4,800, and demand is elastic between points X and Z.

d.increase by $4,800, and demand is elastic between points X and Z.