ECN 2210-08

If a college town were to impose rent controls on rental housing, which of the following would be likely to occur? a. The supply of rental housing would increase. b. The quality of rental housing units would improve. c. Black markets would develop in which side payments and illegal subleasing were commonplace. d. An investment boom would lead to a surplus of rental housing units. e. Both a and d are correct.

38

The owners of a business a. have little incentive to monitor shirking on the part of employees. b. are residual income claimants. c. have little incentive to provide their employees with an incentive system that encourages operational efficiency. d. are paid the market rate of return for resources they supply to the firm.

Not C

Which of the following is true? a. About one-third of millionaires have college degrees. b. More than 75 percent of American millionaires have college degrees. c. The majority of millionaires received most of their wealth through an inheritance. d. The percentage of the population that are millionaires in inflation-adjusted dollars has been stable since the 1970s.

Not C 40

A competitive price-searcher firm is currently producing 10 units of output. At this level of output the firm is charging a price equal to $10, has marginal revenue equal to $6, has marginal cost equal to $6, and has average total cost equal to $12. From this information we can conclude that a. the profits of the firm are negative. b. the firm is currently earning zero profit. c. firms are likely to enter this market in the long run. d. the firm would earn more profit by reducing output.

Not D

If price rises, what happens to the demand for a product? a. It does not change. b. Uncertain--economic theory has no answer to this question. c. It increases. d. It decreases

Not D 36

John takes 10 minutes to iron a shirt and 20 minutes to type a paper. Harry takes 10 minutes to iron a shirt and 30 minutes to type a paper. Which of the following statements is correct? a. Harry has a comparative advantage in ironing. b. John has a comparative advantage in ironing. c. Neither can gain from specialization and exchange. d. Harry has a comparative advantage in typing.

a. Harry has a comparative advantage in ironing.

How long does it take a firm to go from the short run to the long run? a. It depends on the nature of the firm. b. one year c. two years d. six months

a. It depends on the nature of the firm.

Which of the following is the best example of a firm operating in a competitive price-searcher market? a. TGI Fridays, a family restaurant b. a Kansas wheat farmer c. Boeing, an aircraft manufacturer d. U.S. Postal Service

a. TGI Fridays, a family restaurant

Which of the following is most likely to reduce the nominal market wage in a job category? a. The job is prestigious, and the work is quite interesting. b. The job requires employees to work the night shift from 11 p.m. to 7 a.m. c. The job requires employees to move from city to city quite often. d. The job is widely viewed as dangerous.

a. The job is prestigious, and the work is quite interesting.

A cold spell in Florida extensively reduced the orange crop, and as a result, California oranges commanded a higher price. Which of the following statements best explains the situation? a. The supply of Florida oranges fell, causing their price to increase and the demand for California oranges to increase. b. The supply of Florida oranges fell, causing the supply of California oranges to increase as well as their price. c. The demand for Florida oranges was reduced by the freeze, causing an increase in the price of California oranges and a greater demand for them. d. The supply of Florida oranges fell, causing the supply of California oranges to decrease and their price to increase.

a. The supply of Florida oranges fell, causing their price to increase and the demand for California oranges to increase.

Which of the following describes a situation in which demand must be elastic? a. Total revenue does not change when the price of pens rises. b. A 20 percent increase in the price of pens leads to a 20 percent decrease in the quantity of pens demanded. c. The price of pens rises by 10 cents, and total revenue rises. d. Total revenue decreases when the price of pens rises. e. The price of pens rises by 10 cents, and quantity of pens demanded falls by 50.

a. Total revenue does not change when the price of pens rises.

Which one of the following industries most closely resembles the competitive price-taker model? a. vegetable farming b. retail clothing c. telecommunications d. computer manufacturing

a. Vegetable Farming

The difference between the earnings of construction workers who work on bridges and skyscrapers and those who work on highways is most likely due to a. a compensating differential. b. differences in unionization rates. c. differences in education requirements. d. apprenticeship requirements.

a. a compensating differential.

Which of the following is a price taker? a. a potato grower in Idaho b. a star baseball player c. an ice cream store at Disney World d. a respected lawyer

a. a potato grower in Idaho

Which one of the following is a price taker? a. an Indiana cattle farmer (beef producer) b. a North Carolina furniture manufacturer c. a star baseball player d. a local retail clothing shop

a. an Indiana cattle farmer (beef producer)

In price-taker markets, individual firms have no control over price. Therefore, the firm's marginal revenue curve is a. constant at the market price of the product. b. precisely the same as the firm's total revenue curve. c. a downward-sloping curve. d. indeterminate.

a. constant at the market price of the product.

Cecilia's Café is in a competitive price-searcher market. Cecilia's is currently producing where average total cost is at its minimum, and Cecilia's is earning a positive economic profit. In the long run we would expect Cecilia's output to a. decrease and average total cost to be higher. b. increase and average total costs to be lower. c. remain unchanged as Cecilia's is doing the best it can. d. decrease and average total cost to be lower.

a. decrease and average total cost to be higher.

Some economists argue that competitive price-searcher markets are inefficient because a. firms do not produce the output rate that would minimize their average total costs. b. barriers to entry are high. c. the firms' marginal costs and marginal revenues are not always equal. d. the firms earn economic profits in the long run.

a. firms do not produce the output rate that would minimize their average total costs.

In which statement(s) is "demand" used correctly? (I) "An increase in the price of hot dogs will reduce the demand for hot dogs." (II) "An increase in the price of hot dogs will reduce the demand for hot dog buns." a. in both statements I and II b. in neither statements I nor II c. in statement II only d. in statement I only

a. in both statements I and II

The statement, "Violent crime has decreased in the last five years," a. is positive because it is testable. b. is normative since it can be answered by simply looking at the facts. c. is not very interesting because all normative issues are of little importance. d. is obviously wrong and, therefore, cannot be a positive statement.

a. is positive because it is testable.

A completely vertical demand curve implies a price elasticity of demand that is a. perfectly inelastic. b. perfectly elastic. c. equal to infinity. d. of unitary elasticity.

a. perfectly inelastic.

The dynamic process of competition a. puts the profit motive of sellers to work for buyers. b. is hindered by the self-interest of business decision makers. c. will permit business decision makers to earn long-run economic profit unless they are regulated by government. d. conflicts with the interest of consumers when businesses pursue profit rather than the public interest.

a. puts the profit motive of sellers to work for buyers.

When profits exist in a competitive price-searcher market, a. rival firms will be attracted into the market. b. product differentiation will prevent new firms from making a profit. c. high barriers to entry will prevent rival firms from entering the market. d. the profits will persist because the firms face a downward-sloping demand curve.

a. rival firms will be attracted into the market.

If high-level executives of a company award themselves sizable bonuses even though the firm they manage is making losses and performing poorly, this event is most likely to arise because of a. the principal-agent problem. b. competition among business firms for high-level executives. c. the law of diminishing marginal returns. d. economies of scale.

a. the principal-agent problem.

If the CEO of a large corporation uses the corporate jet to fly friends to the Super Bowl at company expense, this is most clearly an example of a. the principal-agent problem. b. a negative externality. c. the duality problem. d. the violation of ceteris paribus conditions.

a. the principal-agent problem.

If you paid $100 for a truckload of cabbage on Monday, how much should you be willing to sell it for on Friday, the day before it spoils? a. whatever you can get for it b. $100 plus normal accounting profit c. $100 d. $50 because it has lost value since Monday

a. whatever you can get for it

A production possibilities curve indicates that when resources are being used efficiently, a. you can only produce more of one good only if you produce less of another good. b. it is impossible to expand the total output of goods over time. c. you can only produce more of one good only if you produce more of another good. d. you can only produce more of one good only if you lower its price.

a. you can only produce more of one good only if you produce less of another good.

In the short run, if average variable cost equals $50, average total cost equals $75, and output equals 100, the total fixed cost must be a. $7,500. b. $2,500. c. $25. d. $5,000

b. $2,500.

Use the table below to answer the following question. Units Total Fixed Cost Total Variable of Output (dollars) Cost (dollars) 1 150 25 2 150 48 3 150 70 4 150 100 -------------------------------------------- What is the marginal cost of producing the third unit of output? a. $23.33 b. $22 c. This cannot be determined from the data. d. $73.33

b. $22

Mr. Hudson notes that if he produces 10 pairs of shoes per day, his average fixed cost (AFC) is $14 and his marginal cost $8; if he produces 20 pairs of shoes per day, his MC is $15. What is his AFC when output is 20 pairs of shoes per day? a. $15 b. $7 c. $8 d. $5

b. $7

There are 1,000 identical firms in a price-taker industry. In the short run, the total revenues of each firm are less than total costs. What will happen in the long run? a. Firms will exit the market, and the product price will rise. b. Additional firms will enter the market, but the price will remain the same because the existing firms will not allow it to decrease. c. Nothing, because each firm is already maximizing its profits. d. Additional firms will enter the market, and price will be driven down to where each firm will be making just enough to stay in business (cover its variable costs).

b. Additional firms will enter the market, but the price will remain the same because the existing firms will not allow it to decrease.

Rebecca decides to buy a dress that Hillary has for sale; they agree on a price of $20. Which of the following best describes who gains and who loses from the transaction? a. If Hillary gains from the transaction, Rebecca must lose an equal amount. b. Both parties expect to gain from this transaction. c. If the dress originally costs more than $20, Rebecca gains and Hillary loses. d. If the dress originally costs less than $20, Hillary gains and Rebecca loses.

b. Both parties expect to gain from this transaction.

Claude's Copper Clappers sells clappers for $40 each in a competitive price-taker market. At its present rate of output, Claude's marginal cost is $40, average variable cost is $45, and average total cost is $60. Claude should a. raise the price b. shut down c. maintain the present rate of output d. increase output e. reduce output but not to zero

b. Shut Down

Should a profit-seeking grocer who purchased apples last Saturday at $.30 each be willing to sell them for $.20 each on Thursday rather than allow the apples to spoil by Friday? a. Yes, if the apple buyers promise to purchase apples next week at $.40 each. b. Yes; the sunk costs incurred when the apples were originally purchased should not affect the current decision of whether to sell. c. No; it makes no sense to sell the apples below cost. d. No; if consumers are unwilling to pay the cost of production, the apples should not be provided.

b. Yes; the sunk costs incurred when the apples were originally purchased should not affect the current decision of whether to sell.

Assume the demand curve for cookies is downward sloping. If the price of cookies falls from $1.50 to $1.25 per dozen, a. the demand for cookies will rise. b. a larger quantity of cookies will be demanded. c. a smaller quantity of cookies will be demanded. d. the demand for cookies will fall.

b. a larger quantity of cookies will be demanded.

Which of the following is the best example of a firm operating in a competitive price-searcher market? a. a Texas rancher that raises beef cattle b. a pizza parlor operating near a college campus c. Boeing, the aircraft manufacturer d. Shell Oil Company, a major refiner of gasoline

b. a pizza parlor operating near a college campus

When several hurricanes hit Florida in 2004, a number of local governments imposed price controls that prevented sellers from raising their prices for badly needed products like plywood and generators. In the areas where the controls were imposed, they resulted in a. an expanded availability of these badly needed products. b. a reduced availability of these badly needed products. c. an increase in the speed with which people recovered from the hurricanes. d. a more efficient allocation of these goods for which price controls were in effect.

b. a reduced availability of these badly needed products.

The term ceteris paribus means that a. no one knows which variables will change and which will remain constant. b. all variables except those specified are constant. c. the basic postulate of economics does not apply for the case being considered. d. everything is changing.

b. all variables except those specified are constant.

The term ceteris paribus means that _____ a. no one knows which variables will change and which will remain constant. b. all variables except those specified are constant. c. everything is changing. d. the basic postulate of economics does not apply for the case being considered.

b. all variables except those specified are constant.

Which one of the following is a price taker? a. a North Carolina furniture manufacturer b. an Indiana cattle farmer (beef producer) c. a local retail clothing shop d. a star baseball player

b. an Indiana cattle farmer (beef producer) {or Potato grower in Idaho}

Business owners who care only about maximizing profits are a. likely to be replaced by discriminating businesses. b. at an advantage when competing against those who practice employment discrimination. c. more concerned about racial discrimination than gender discrimination. d. likely to discriminate against certain groups of workers.

b. at an advantage when competing against those who practice employment discrimination.

If the demand for a consumer good decreases, the demand for resources required to produce the good will a. decrease. b. decrease if the demand for the consumer good is relatively inelastic; otherwise, the demand will increase. c. increase. d. increase if the demand for the consumer good is relatively inelastic; otherwise, the demand will decrease.

b. decrease if the demand for the consumer good is relatively inelastic; otherwise, the demand will increase

When the price of designer jeans goes from $85 to $60, the quantity demanded increases from 100,000 to 120,000. Over this price range, the a. arc elasticity of demand for the jeans is -4. b. demand for the jeans is inelastic. c. demand for the jeans is elastic. d. demand for the jeans is of unitary elasticity.

b. demand for the jeans is inelastic.

Claude's Copper Clappers sells clappers for $40 each in a competitive price-taker market. At its present rate of output, Claude's marginal cost is $39, average variable cost is $25, and average total cost is $45. To improve his profit/loss situation, Claude should a. raise the price b. increase output c. reduce output but not to zero d. maintain the present rate of output e. shut down

b. increase output

The height of the supply curve at a quantity of 100 represents the a. total value of all 100 units to consumers. b. minimum price required to induce a producer to supply the hundredth unit. c. profit derived by producers from the sale of the hundredth unit. d. equilibrium price of the good regardless of the position of the demand curve.

b. minimum price required to induce a producer to supply the hundredth unit.

If the demand and marginal revenue curves confronting firm A are identical, it may be concluded that firm A is a a. monopolist. b. price taker. c. monopolistic competitor. d. price searcher.

b. price taker.

Automated production methods are only attractive when they a. are undertaken in heavily unionized sectors of the economy. b. reduce per-unit costs c crease labor productivity. d.replace workers.

b. reduce per-unit costs

If the government provides free schooling for all students, an economist would say education is a. a free good, having no cost. b. scarce even though its cost is paid by taxpayers rather than by students. c. an example of a good that is no longer scarce. d. all of the above.

b. scarce even though its cost is paid by taxpayers rather than by students.

Economic theory suggests that the standard of living of American workers would rise if a. the minimum wage were doubled. b. technological improvements increased output per worker-hour. c. workers were forced to retire earlier. d. automation were outlawed.

b. technological improvements increased output per worker-hour.

"Now that Blake paints the broad surfaces and I do the trim work, we can paint a house in three-fourths the time that it took for each of us to do both." This statement most clearly reflects a. the importance of secondary effects. b. the law of comparative advantage. c. behavior inconsistent with economizing. d. the fallacy of composition.

b. the law of comparative advantage.

Your professor loves her work, teaching economics. She has been offered other positions in the corporate world that would increase her income by 25 percent, but she has decided to continue working as a professor. Her decision would not change unless a. the marginal benefit of a corporate job decreased. b. the marginal cost of teaching increased. c. the marginal benefit of teaching increased. d. the marginal cost of teaching decreased.

b. the marginal cost of teaching increased.

Profits and losses play an important role in helping a. to signal to government which businesses are suffering losses so that they can be subsidized. b. to allocate scarce resources in a manner that maximizes the value created to society. c. consumers decide which products they value the most by looking at each firm's profit. d. ensure that the total profits in the economy exactly equal the total losses.

b. to allocate scarce resources in a manner that maximizes the value created to society.

The price of an airline ticket from Denver to Washington, D.C. costs $600. A bus ticket costs $150. Traveling by plane takes 6 hours compared with 51 hours by bus. Other things constant, an individual would gain by choosing air travel if, and only if, his time were valued at more than a. $15 per hour. b. $6 per hour. c. $10 per hour. d. $8 per hour.

c. $10 per hour.

Suppose the state of New York imposes a one dollar per pack tax on cigarettes, which increases their price by 30 percent, and as a result, the quantity sold declines by 20 percent. The price elasticity of demand for cigarettes is equal to a. -0.20. b. -3.00. c. -0.67. d. -1.50.

c. -0.67.

If the elasticity of demand for cigarettes is 0.4, then an increase in the price of a pack of cigarettes from $1.00 to $1.30 would reduce quantities demanded by about a. 95 percent. b. 40 percent. c. 12 percent. d. 27 percent.

c. 12 percent.

If two workers can produce 22 units of output, and the addition of a third worker increases output to 30 units, the marginal product of the third worker is a. 10 units. b. 30 units. c. 8 units. d. 22 units.

c. 8 units.

Don can produce 10 pens or 20 pencils in one hour while Bob can produce 15 pens or 5 pencils in one hour. Which of the following statements is correct? a. Don has a comparative advantage over Bob in the production of pens b. Bob has a comparative advantage over Don in the production of pencils c. Bob has a comparative advantage over Don in the production of pens d. Bob and Don cannot gain from specialization and exchange.

c. Bob has a comparative advantage over Don in the production of pens

If price falls, what happens to the demand for a product? a. It does not change. b. Uncertain--economic theory has no answer to this question. c. It decreases. d. It increases.

c. It decreases.

Which of the following is true of a competitive price-searcher firm when the market is in a long-run equilibrium? a. MR < MC < price b. MR < MC = price c. MR = MC < price d. MR = MC = price

c. MR = MC < price

An example of a non-pecuniary job characteristic is a. over-time pay. b. an end-of-the-year bonus. c. a comfortable work environment. d. salary.

c. a comfortable work environment.

The fact that wage differentials continue to exist across different groups of workers leads economists to believe that a. the market has failed to properly allocate wages to different workers. b. discrimination by customers is the most common type of economic discrimination. c. differences in human capital and job characteristics must be important in explaining the differences in wages. d. firms apparently are not profit maximizers.

c. differences in human capital and job characteristics must be important in explaining the differences in wages.

Test pilots are paid high wages by airplane makers primarily because a. the demand for labor in this area is very high relative to the demand for labor in other areas of employment. b. the demand for labor in this area is very low relative to the demand for labor in other areas of employment. c. few people possess the required skills and the occupation is very risky. d. the demand for labor in this category is highly elastic.

c. few people possess the required skills and the occupation is very risky.

"Bill Gates has made billions of dollars producing and marketing computer software. Many workers and consumers must have suffered in order for Gates to amass such enormous wealth." The person who made this observation a. has failed to comprehend the fallacy of composition. b. has failed to understand the principle of opportunity cost. c. has failed to understand that specialization and exchange generally result in mutual economic gain. d. has utilized the economic way of thinking by thinking the gains of producers are made primarily at the expense of consumers and workers.

c. has failed to understand that specialization and exchange generally result in mutual economic gain.

The production possibilities curve illustrates the basic principle that a. an economy's capacity to produce is unrelated to its population. b. an economy will automatically move toward a point at which all of its resources are being used inefficiently. c. if all the resources of an economy are being used efficiently, more of one good can be produced only if more of another good is produced.

c. if all the resources of an economy are being used efficiently, more of one good can be produced only if more of another good is produced.

The entry of new firms into a competitive market will a. increase market supply and increase market prices. b. decrease market supply and decrease market prices. c. increase market supply and decrease market prices. d. decrease market supply and increase market prices.

c. increase market supply and decrease market prices.

"The standard of living is too low for many individuals in the United States. The government should implement policies designed to achieve a more equal distribution of income." The preceding statements are a. an empirically validated economic principle. b. positive economic statements based on cause and effect. c. normative economic statements based on value judgments. d. based on the fallacy of composition argument.

c. normative economic statements based on value judgments.

Low-skill workers earn a lower wage than more experienced, higher skilled workers because the a. low-skill workers were never given the opportunity to invest in human capital. b. low-skill workers lack the intelligence necessary to do any other form of work. c. supply of low-skill workers is large relative to the demand for workers in this skill category. d. low-skill workers are too lazy to search for other employment opportunities.

c. supply of low-skill workers is large relative to the demand for workers in this skill category.

Bill lives in Montana and likes to grow zucchini. He applies fertilizer to his crop twice during the growing season and notices that the second layer of fertilizer increases his crop but not as much as the first layer. What economic concept best explains this observation? a. the principal-agent problem b. the law of diminishing marginal utility c. the law of diminishing returns d. return equalization principle

c. the law of diminishing returns

"If I didn't have a date tonight, I would save $10 and spend the evening playing tennis." The opportunity cost of the date is a. the other things that could be purchased with the $10. b. the forgone value of a night of tennis. c. the other things that could be purchased with the $10 plus the forgone value of a night of tennis. d. dependent upon how pleasant a time one has on the date.

c. the other things that could be purchased with the $10 plus the forgone value of a night of tennis.

Since it is costly for stockholders to monitor corporate managers, managers may be able to achieve personal perks and pursue other policies that conflict with profit maximization. This is an example of a. an external benefit. b. sunk costs. c. the principal-agent problem. d. economies of scale.

c. the principal-agent problem.

The expression "There's no such thing as a free lunch" means a. you cannot have a free lunch at the expense of someone else. b. each person must pay for exactly what he or she receives. c. the use of resources to produce a good has an opportunity cost because of scarcity. d. if one person gains, someone else must lose.

c. the use of resources to produce a good has an opportunity cost because of scarcity.

Compensation where the top performer receives much higher rewards than other competitors, even if the others perform at only slightly lower levels, is called a. base pay. b. round-robin pay. c. a compensating differential. d. tournament pay.

d. tournament pay.

Shannon buys a new CD player for her car for $135. She receives consumer surplus of $25 on her purchase if her willingness to pay is a. $25. b. $135. c. $110. d. $160.

d. $160.

Kelly is an attorney and also an excellent typist. She can type 120 words per minute, but she charges attorney fees at $100 per hour. Todd would like some typing work but can only type 60 words per minute. According to the law of comparative advantage, Kelly should hire Todd to do her typing if and only if his wage rate is less than... a. $100 per hour. b. $60 per hour. c. $10 per hour. d. $50 per hour.

d. $50 per hour

Sally recently got a 15 percent raise. She now purchases 7.5 percent more steak dinners. Sally's income elasticity for steak dinners is a. 0.75. b. 2. c. 1.5 d. 0.5.

d. 0.5.

If Harry only pays $25,000 to purchase a new car even though he would have been willing to pay as much as $35,000 for the car, this indicates that a. The seller received $10,000 worth of producer surplus on the transaction. b. The seller earned a $10,000 profit on the sale of the car. c. Harry is an irrational consumer. d. Harry reaped $10,000 of consumer surplus from the transaction.

d. Harry reaped $10,000 of consumer surplus from the transaction.

Which of the following is true for a price-searcher firm? a. Its marginal revenue curve will lie above its demand curve. b. Its marginal revenue curve is horizontal at the market equilibrium price. c. Its marginal revenue curve is equal to its demand curve. d. Its marginal revenue curve will lie below its demand curve.

d. Its marginal revenue curve will lie below its demand curve.

Other things constant, which of the following job characteristics would be most likely to result in a higher pay rate for the job? a. The employer provides low cost child-care services on the premises. b. The job is widely viewed as prestigious. c. The job involves working in pleasant surroundings. d. The job requires substantial amounts of stressful out-of-town travel.

d. The job requires substantial amounts of stressful out-of-town travel.

"The resources now going into the War on Terrorism and into improved airport security would save more lives if they were invested in medical research." This statement most clearly reflects which of the following? a. The best test of an economic theory is its ability to predict. b. The value of goods can be determined objectively. c. selfishness; if people were not selfish, we could have more of everything. d. There is no such thing as a free lunch--the use of scarce resources always has an opportunity cost.

d. There is no such thing as a free lunch--the use of scarce resources always has an opportunity cost.

When calculating the cost of owning and operating a used car for one year, a political science major included the items listed in the table below. Purchase price $5,000 Gas and oil ($.20 per mile, 5,000 miles) $1,000 Depreciation (estimated decline in the value of the car) $1,800 Insurance $200 Maintenance $150 Interest income foregone on $5,000 $500 License plate $80 Total $8,730 -------------------------------------------- Which of the following is the best appraisal of his calculations? a. There is only one error; depreciation should not be included. b. They are correct. c. There are two errors; neither the purchase price nor the interest income foregone should be included. d. There is only one error; the purchase price should not be included.

d. There is only one error; the purchase price should not be included.

Which of the following would cause the demand for plumbers to decrease? a. an increase in the number of plumbers who belong to a union b. an increase in the productivity of plumbers c. a law that mandated higher wages for plumbers d. a decline in the construction of housing

d. a decline in the construction of housing

If the United Auto Workers union can obtain a substantial wage increase for auto workers, there will be a. a decrease in the supply of automobiles, which is a shift to the right of the supply curve. b. an increase in the supply of automobiles, which is a shift to the right of the supply curve. c. an increase in the supply of automobiles, which is a shift to the left of the supply curve. d. a decrease in the supply of automobiles, which is a shift to the left of the supply curve.

d. a decrease in the supply of automobiles, which is a shift to the left of the supply curve.

Mary owns her own business and works full time in the store without paying herself a salary. She has $20,000 of her own money invested in the store that she withdrew from her savings account, which earned 10 percent interest. She was offered a job last year making $28,000 per year but turned it down. If Mary's accounting statements show revenues of $100,000 and accounting costs of $60,000, then Mary's a. accounting and economic profit is $40,000. b. accounting profit is $20,000 and her economic profit is zero. c. accounting profit is $40,000 and she is making an economic loss of $8,000. d. accounting profit is $40,000 and her economic profit is $10,000.

d. accounting profit is $40,000 and her economic profit is $10,000.

Compared to the general population, millionaires are more likely to be a. well-educated. b. relatively old. c. self-employed. d. all of the above. e. only b and c above.

d. all of the above.

If Dell Computer finds that its marginal cost exceeds its marginal revenue on a model of laptop, then to maximize profit, it will a. increase output if it is a price taker, but this may not be proper if it is a price searcher. b. increase output if it is a price searcher, but this may not be proper if it is a price taker. c. increase output, regardless of whether it is a price taker or a price searcher. d. decrease output, regardless of whether it is a price taker or a price searcher.

d. decrease output, regardless of whether it is a price taker or a price searcher.

Because of price controls in the former Soviet Union, people often waited in long lines for food and other necessities. Modern economic theory would indicate that, relative to price rationing, waiting in line is a. more efficient since waiting in line reduces the transaction costs of purchasing goods. b. more efficient since waiting in line reduces the cost of the goods to the consumer. c. just as efficient. d. less efficient because the time spent waiting in line imposes an opportunity cost on the buyer that does not generate revenue for the seller.

d. less efficient because the time spent waiting in line imposes an opportunity cost on the buyer that does not generate revenue for the seller.

If the price of Pepsi-Cola increases from 50 cents to 60 cents per can and the quantity demanded decreases from 100 cans to 50 cans, then the Pepsi-Cola Company could increase its total revenue by a. raising price. b. decreasing quantity supplied. c. leaving price the same. d. lowering price. e. decreasing supply.

d. lowering price.

The presence of price controls in a market usually is an indication that a. the usual forces of supply and demand were not able to establish an equilibrium price in that market. b. policymakers correctly believed that, in that market, price controls would generate no inequities of their own. c. an insufficient quantity of a good or service was being produced in that market to meet the public's need. d. policymakers believed that the price that prevailed in that market in the absence of price controls was unfair to buyers or sellers.

d. policymakers believed that the price that prevailed in that market in the absence of price controls was unfair to buyers or sellers.

An individual who possesses a specialized skill that is difficult to execute will a. receive a wage rate that is lower than similarly productive individuals who lack this skill. b. necessarily receive wages considerably higher than those who lack this skill. c. receive a wage determined by the number of other persons possessing this skill. d. receive a high wage only when this skill is in great demand relative to its supply.

d. receive a high wage only when this skill is in great demand relative to its supply.

A technological improvement in producing good A would be graphically illustrated as a shift in the a. demand curve for A to the right. b. supply curve for A to the left. c. demand curve for A to the left. d. supply curve for A to the right.

d. supply curve for A to the right.

Bill lives in Montana and likes to grow zucchini. He applies fertilizer to his crops twice during the growing season and notices that the second layer of fertilizer increases his crop, but not as much as the first layer. What economic concept best explains this observation? a.the law of diminishing marginal utility b. return equalization principle c. the principal-agent problem d. the law of diminishing returns

d. the law of diminishing returns

For most students attending state universities, the largest cost component of going to college is a. tuition. b. the cost of books and supplies. c. the cost of room and board. d. the opportunity cost in terms of forgone current income from the time spent attending college.

d. the opportunity cost in terms of forgone current income from the time spent attending college.

A local restaurant offers an "all you can eat" ribs special. You pay $11.95, and then you can eat as many servings as you desire at no additional cost. It would follow that you will stop eating when a. it is physically impossible for you to eat any more. b. your marginal utility (or value) derived from another serving equals $11.95. c. your total utility (or value) derived from all of the servings consumed just equals $11.95. d. your marginal utility (or value) derived from eating another serving is zero.

d. your marginal utility (or value) derived from eating another serving is zero.

When a firm is a price searcher, its marginal revenue is a. less than price when the firm is maximizing profits. b. equal to price if, and only if, the firm is maximizing profits. c. equal to average total cost at the long-run equilibrium output rate. d. equal to price because the firm's demand curve is perfectly elastic.

not B or C