Microeconomics
A consumer faces the following situation. Her marginal utility of a luxury good with a price of $100 is 100 utils. An alternative good has a marginal utility of 75 utils and a price of $50. What should she do if she wishes to increase her total utility? A) purchase fewer of the luxury goods and more of the alternative goods B) purchase more of the luxury goods and fewer of the alternative goods C) purchase fewer of the luxury goods and fewer of the alternative goods D purchase more of the luxury goods and more of the alternative goods
A) purchase fewer of the luxury goods and more of the alternative goods
A decrease in the costs of producing a service will do what to the total utility and the consumer surplus generated from consumption of the service? A) total utility will increase and the consumer surplus will decrease B) total utility and consumer surplus will increase C) total utility and consumer surplus will decrease D) total utility will decrease and the consumer surplus will increase E) One cannot tell about what will happen to consumer surplus
B) total utility and consumer surplus will increase
Suppose a person currently enjoys eating fruit three times as much as eating yogurt. The price of a serving of fruit is $2 and the price of a yogurt is $1. Is the person spending her income (for these two goods) in a manner that maximizes her satisfaction? A) Yes, she is. B) No, she should increase the consumption of fruit and yogurt. C) No, she should increase the consumption of fruit and decrease the consumption of yogurt D) No, she should decrease the consumption of fruit and increase the consumption of yogurt.
C) No, she should increase the consumption of fruit and decrease the consumption of yogurt
Which of the following statements about utility is most accurate? As one consumes more of a good: A) marginal and total utility are likely to increase. B) marginal and total utility are likely to decrease. C) marginal utility is likely to increase; total utility is likely to decrease. D) marginal utility is likely to decrease; total utility is likely to increase. E) None of the above is true.
D) marginal utility is likely to decrease; total utility is likely to increase.
A monopolist can sell 300 units of output for $45 per unit. Alternatively, it can sell 301 units of output for $44.60 per unit. The marginal revenue of the 301st unit of output is a) -$120.00. b) -$75.40. c) -$0.40. d) $75.40.
b) -$75.40.
Refer to Table 10-6. If the government charged a fee of $85 per unit of pollution, how many units of pollution would the firms eliminate altogether? a) 10 b) 12 c) 14 d) 16
b) 12
Refer to Table 7-7. You have two essentially identical extra tickets to the Midwest Regional Sweet 16 game in the men's NCAA basketball tournament. The table shows the willingness to pay of the four potential buyers in the market for a ticket to the game. You hold an auction to sell the two tickets. Who makes the winning bids, and what do they offer to pay for the tickets? a) Michael and Earvin; more than $350 but less than or equal to $400 b) Michael and Earvin; more than $400 but less than or equal to $500 c) Earvin and Larry; more than $300 but less than or equal to $350 d) Larry and Charles; less than $300
a) Michael and Earvin; more than $350 but less than or equal to $400
Refer to Figure 8-11. Suppose Q1 = 4; Q2 = 7; P1 = $6; P2 = $8; and P3 = $10. Then the deadweight loss of the tax is a) $6. b) $8. c) $9. d) $12.
a) $6.
Suppose that a firm operating in perfectly competitive market sells 300 units of output at a price of $3 each. Which of the following statements is correct? Marginal revenue equals $3. (i) Average revenue equals $100. (ii) Total revenue equals $300. (iii) a) (i) only b) (iii) only c) (i) and (ii) only d) (i), (ii), and (iii)
a) (i) only
Refer to Table 3-34. Indonesia's opportunity cost of producing bananas is a) 2.5 units of rice. This is higher than India's opportunity cost of producing bananas. b) 2.5 units of rice. This is lower than India's opportunity cost of producing bananas. c) 2/5 units of rice. This is higher than India's opportunity cost of producing bananas. d) 2/5 units of rice. This is lower than India's opportunity cost of producing bananas.
a) 2.5 units of rice. This is higher than India's opportunity cost of producing bananas.
The income tax requires that taxpayers pay 10percent on the first $40,000 of income and 20 percent on all income over $40,000. Emily paid $9,000 in taxes. What were her marginal and average tax rates? a) 20 percent and 13.8 percent, respectively b) 20 percent and 15 percent, respectively c) 10 percent and 13.8 percent respectively d) 10 percent and 15 percent respectively
a) 20 percent and 13.8 percent, respectively
Refer to Table 17-4. Suppose there are exactly two sellers of gasoline in Mauston: Shellon and Standstop. If Shellon sells 150 gallons and Standstop sells 200 gallons, then a) Shellon's profit is $450 and Standstop's profit is $600. b) Shellon's profit is $1,050 and Standstop's profit is $1,200. c) the two firms are colluding and earn monopoly profits. d) consumers in Mauston are worse off than they would be if the two firms colluded.
a) Shellon's profit is $450 and Standstop's profit is $600.
The most popular movie stars have high incomes for a number of reasons. One such reason is a) an ability for almost everyone to enjoy movies at a relatively low cost. b) the above-average intellect of the average movie star. c) a compensating differential. d) a lack of technological advances in the movie industry.
a) an ability for almost everyone to enjoy movies at a relatively low cost.
If demand is price inelastic, then a) buyers do not respond much to a change in price. b) buyers respond substantially to a change in price, but the response is very slow. c) buyers do not alter their quantities demanded much in response to advertising, fads, or general changes in tastes. d) the demand curve is very flat.
a) buyers do not respond much to a change in price.
Other things equal, a particular job will likely pay a higher wage if it involves a) danger to the worker. b) personal enjoyment for the worker. c) intellectual stimulation for the worker. d) All of the above are correct.
a) danger to the worker.
When small changes in price lead to infinite changes in quantity demanded, demand is perfectly a) elastic, and the demand curve will be horizontal. b) inelastic, and the demand curve will be horizontal. c) elastic, and the demand curve will be vertical. d) inelastic, and the demand curve will be vertical.
a) elastic, and the demand curve will be horizontal.
Refer to Table 17-25. The dominant strategy a) for both firms is to offer the discount. b) for both firms is to not offer the discount. c) for firm A is to offer the discount. The dominant strategy for firm B is to not offer the discount. d) for firm A is to not offer the discount. The dominant strategy for firm B is to offer the discount.
a) for both firms is to offer the discount.
Which of the following is likely to have the most price elastic demand? a) fountain ink pens b) milk c) disposable diapers d) shampoo
a) fountain ink pens
Refer to Table 12-13. In this economy Tax B exhibits a) horizontal and vertical equity. b) horizontal equity but not vertical equity. c) vertical equity but not horizontal equity. d) neither horizontal nor vertical equity.
a) horizontal and vertical equity.
If the government levies a $5 tax per ticket on buyers of NFL game tickets, then the price paid by buyers of NFL game tickets would a) increase by less than $5. b) increase by exactly $5. c) increase by more than $5. d) decrease by an indeterminate amount.
a) increase by less than $5
If the demand for light bulbs increases, producer surplus in the market for light bulbs a) increases. b) decreases. c) remains the same. d) may increase, decrease, or remain the same.
a) increases.
As the number of firms in an oligopoly increases, the a) price approaches marginal cost, and the quantity approaches the socially efficient level. b) price and quantity approach the monopoly levels. c) price effect exceeds the output effect. d) individual firms' profits increase.
a) price approaches marginal cost, and the quantity approaches the socially efficient level.
When a binding price ceiling is imposed on a market, a) price no longer serves as a rationing device. b) the quantity supplied at the price ceiling exceeds the quantity that would have been supplied without the price ceiling. c) all buyers benefit. d) All of the above are correct.
a) price no longer serves as a rationing device.
According to the Coase theorem, in the presence of externalities.. a) private parties can bargain to reach an efficient outcome. b) government assistance is necessary to reach an efficient outcome. c) the assignment of legal rights can prevent externalities. d) the initial distribution of property rights will determine the efficient outcome
a) private parties can bargain to reach an efficient outcome.
Refer to Table 10-19. The social optimum can be reached if a) subsidy of $36 is applied to each unit of the good b) subsidy of $23 is applied to each unit of the good c) a tax of $23 is applied to each unit of the good d) a tax of $15 is applied to each unit of the good
a) subsidy of $36 is applied to each unit of the good
Suppose the United States has a comparative advantage over Mexico in producing pork. The principle of comparative advantage asserts that a) the United States should produce more pork than what it requires and export some of it to Mexico. b) the United States should produce a moderate quantity of pork and import the remainder of what it requires from Mexico. c) the United States should refrain altogether from producing pork and import all of what it requires from Mexico. d) Mexico has nothing to gain from importing United States pork.
a) the United States should produce more pork than what it requires and export some of it to Mexico.
Suppose that a firm produces electricity by burning coal. The production process creates a negative externality of air pollution. If the firm does not internalize the cost of the externality, it will produce where a) the value of electricity to consumers equals the private cost of producing electricity. b) the value of electricity to consumers equals the social cost of producing electricity. c) the cost of the externality is maximized. d) the transaction costs of private bargaining are minimized.
a) the value of electricity to consumers equals the private cost of producing electricity.
The demand for a good or service is determined by a) those who buy the good or service. b) the government. c) those who sell the good or service. d) both those who buy and those who sell the good or service.
a) those who buy the good or service.
Refer to Figure 15-9. The deadweight loss caused by a profit-maximizing monopoly amounts to a) $250. b) $500. c) $750. d) $1,000.
b) $500.
Refer to Table 15-7. What are Sally's fixed costs? a) $0 b) $100 c) $600 d) $745
b) $100
Refer to Scenario 17-4. The likely outcome of this game is that PM Inc. earns a) $30 million and Brown Inc. earns $60 million. b) $40 million and Brown Inc. earns $40 million. c) $50 million and Brown Inc. earns $50 million. d) $60 million and Brown Inc. earns $30 million.
b) $40 million and Brown Inc. earns $40 million.
A 10 percent increase in gasoline prices reduces gasoline consumption by about a) 6 percent after one year and 2.5 percent after five years. b) 2.5 percent after one year and 6 percent after five years. c) 10 percent after one year and 20 percent after five years. d) 0 percent after one year and 1 percent after five years.
b) 2.5 percent after one year and 6 percent after five years.
Refer to Table 15-19. If a monopolist faces a constant marginal cost of $9, how much output should the firm produce? a) 2 units b) 3 units c) 4 units d) 5 units
b) 3 units
Refer to Figure 10-2. A benevolent social planner would like to see a) 200 units of plastic produced. b) 500 units of plastic produced. c) 650 units of plastic produced. d) more than 650 units of plastic produced.
b) 500 units of plastic produced.
Refer to Table 7-5. If the market price of an orange is $0.70, then the market quantity of oranges demanded per day is a) 5. b) 6. c) 4. d) 7.
b) 6.
Refer to Figure 5-10. Total revenue when the price is P2 is represented by the area(s) a) B + D. b) A + B. c) C + D. d) D.
b) A + B.
Which of the following is not a characteristic of a perfectly competitive market? a) Firms are price takers. b) Firms have difficulty entering the market. c) There are many sellers in the market. d) Goods offered for sale are largely the same.
b) Firms have difficulty entering the market.
You and your college roommate eat three packages of Ramen noodles each week. After graduation last month, both of you were hired at several times your college income. You still enjoy Ramen noodles very much and buy even more, but your roommate plans to buy fewer Ramen noodles in favor of foods she prefers more. When looking at income elasticity of demand for Ramen noodles, yours would a) be negative, and your roommate's would be positive. b) be positive, and your roommate's would be negative. c) be zero, and your roommate's would approach infinity. d) approach infinity, and your roommate's would be zero.
b) be positive, and your roommate's would be negative.
Since people get sick at all hours of the day, some nurses who work in hospitals are required to work the night shift. In most cases, the nurses who work the night shift earn a higher hourly wage for the same work as the nurses who work the day shift. This difference in pay is referred to as a a) discriminatory wage practice. b) compensating differential. c) wage inequity. d) a market inefficiency.
b) compensating differential.
Mrs. Smith operates a business in a competitive market. The current market price is $8.10. At her profit- maximizing level of production, the average variable cost is $8.00, and the average total cost is $8.25. Mrs. Smith should a) shut down her business in the short run but continue to operate in the long run. b) continue to operate in the short run but shut down in the long run. c) continue to operate in both the short run and long run. d) shut down in both the short run and long run.
b) continue to operate in the short run but shut down in the long run.
If a firm in a competitive market doubles its number of units sold, total revenue for the firm will a) more than double. b) double. c) increase but by less than double. d) may increase or decrease depending on the price elasticity of demand.
b) double.
If an aluminum manufacturer does not bear the entire cost of the smoke it emits, it will a) emit a lower level of smoke than is socially efficient. b) emit a higher level of smoke than is socially efficient. c) emit an acceptable level of smoke. d) not emit any smoke in an attempt to avoid paying the entire cost.
b) emit a higher level of smoke than is socially efficient.
In the short run, a firm operating in a competitive industry will shut down if price is a) less than average total cost. b) less than average variable cost. c) greater than average variable cost but less than average total cost. d) greater than marginal cost.
b) less than average variable cost.
Refer to Figure 14-1. If the market price is $5.00, the firm will earn a) positive economic profits in the short run. b) negative economic profits in the short run but remain in business. c) negative economic profits and shut down. d) zero economic profits in the short run.
b) negative economic profits in the short run but remain in business.
Corrective taxes are typically advocated to correct for the effects of a) positive externalities. b) negative externalities. c) patents. d) All of the above are correct.
b) negative externalities.
A rain barrel is a container that captures and stores rainwater for landscape and garden use during dry periods. Rain barrels provide an external benefit to the community through water conservation. What can the government do to equate the equilibrium quantity of rain barrels and the socially optimal quantity of rain barrels? a) impose a tax on rain barrels that is equal to the per-unit externality. b) offer a subsidy on rain barrels that is equal to the per-unit externality c) encourage homeowners to bargain with rain barrel producers d) nothing.
b) offer a subsidy on rain barrels that is equal to the per-unit externality
A firm cannot price discriminate if it a) has perfect information about consumer demand. b) operates in a competitive market. c) faces a downward-sloping demand curve. d) is regulated by the government.
b) operates in a competitive market.
Technology spillover is one type of a) negative externality. b) positive externality. c) subsidy. d) producer surplus.
b) positive externality.
If a nonbinding price ceiling is imposed on a market, then the a) quantity sold in the market will decrease. b) quantity sold in the market will stay the same. c) price in the market will increase. d) price in the market will decrease.
b) quantity sold in the market will stay the same.
When negative externalities are present in a market a) private costs will be greater than social costs. b) social costs will be greater than private costs. c) only government regulation will solve the problem. d) the market will not be able to reach any equilibrium.
b) social costs will be greater than private costs.
One of the least regulated common resources today is a) state parks. b) the ocean. c) forest preserves. d) the Great Lakes.
b) the ocean.
Refer to Figure 10-4. The socially optimal quantity would be a) Q1 b)Q2 c)Q3 d)Q4
b)Q2
Refer to Table 15-1. If the monopolist sells 8 units of its product, how much total revenue will it receive from the sale? a) $14 b) $40 c) $112 d) $164
c) $112
Suppose a firm in a competitive market produces and sells 150 units of output and earns $1,800 in total revenue from the sales. If the firm increases its output to 200 units, the average revenue of the 200th unit will be a) less than $12. b) more than $12. c) $12. d) Any of the above may be correct depending on the price elasticity of demand for the product.
c) $12.
In a competitive market the price is $8. A typical firm in the market has ATC = $6, AVC = $5, and MC = $8. How much economic profit is the firm earning in the short run? a) $0 per unit b) $1 per unit c) $2 per unit d) $3 per unit
c) $2 per unit
Refer to Table 10-4. The social cost of the 2nd unit of output that is produced is a) $7. b) $23. c) $30. d)$38.
c) $30.
Refer to Scenario 17-2. If BQ were to drill a second well, what would its profit be if Exxoff did not drill a second well? a) $43 million b) $67 million c) $86 million d) $129 million
c) $86 million
Refer to Figure 2-16. Inefficient production is represented by which point(s)? Practice a) A, C b) B, C c) B, E d) D
c) B, E
Which of the following statements is correct concerning the burden of a tax imposed on take-out food? a) Buyers bear the entire burden of the tax. b) Sellers bear the entire burden of the tax. c) Buyers and sellers share the burden of the tax. d)We have to know whether it is the buyers or the sellers that are required to pay the tax to the government in order to make this determination.
c) Buyers and sellers share the burden of the tax.
To maximize total surplus with a monopoly firm, a benevolent social planner would choose the level of output where a) MR = MC. b) MR intersects the demand curve. c) MC intersects the demand curve. d) MR exceeds MC by the greatest amount.
c) MC intersects the demand curve.
Of the following countries, which country's government collects the least amount of tax revenue as a percentage of that country's total income? a) Japan b) United States c) Mexico d) Denmark
c) Mexico
In a certain economy, jam and bread are produced, and the economy currently operates on its production possibilities frontier. Which of the following events would allow the economy to produce more jam and more bread, relative to the quantities of those goods that are being produced now? a) Unemployed labor is put to work producing jam and bread. b) The economy puts its idle capital to work producing jam and bread. c) The economy experiences economic growth. d) All of the above are correct.
c) The economy experiences economic growth.
Suppose that flower gardens create a positive externality equal to $1 per plant. What is the relationship between the equilibrium quantity and the socially optimal quantity of plants grown? a) They are equal. b) The equilibrium quantity is greater than the socially optimal quantity. c) The equilibrium quantity is less than the socially optimal quantity. d) There is not enough information to answer the question.
c) The equilibrium quantity is less than the socially optimal quantity.
Which of the following statements is correct? a) Compensating wage differentials reflect different skills of workers. b) Discrimination by employers affects the marginal productivity of workers. c) The signaling theory of education suggests that schooling does not affect worker productivity. d) The superstar phenomenon explains why more talented entertainers earn more than less talented entertainers.
c) The signaling theory of education suggests that schooling does not affect worker productivity.
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
For a firm, marginal revenue minus marginal cost is equal to a) profit. b) average total cost. c) change in profit. d) change in average revenue.
c) change in profit.
Which of the following events must cause equilibrium price to fall? a) demand increases and supply decreases b) demand and supply both decrease c) demand decreases and supply increases d) demand and supply both increase
c) demand decreases and supply increases
Corrective taxes differ from most taxes in that corrective taxes a) reduce economic efficiency. b) do not raise revenue for the government. c) do not cause deadweight losses. d) always result in a high burden on sellers of goods to which the corrective tax applies.
c) do not cause deadweight losses.
An agreement between two duopolists to function as a monopolist usually breaks down because a) they cannot agree on the price that a monopolist would charge. b) they cannot agree on the output that a monopolist would produce. c) each duopolist wants a larger share of the market to capture more profit. d) each duopolist wants to charge a higher price than the monopoly price.
c) each duopolist wants a larger share of the market to capture more profit.
Pete is a non-union employee at The Electric Co. The majority of the employees at The Electric Co. are unionized. The union at The Electric Co. has negotiated very good benefits. Even though he is not a union member and he does not have to pay union dues, Pete receives all the benefits that the union has negotiated. Pete's behavior is an example of a) rivalry. b) a barrier to entry. c) free riding. d) Taft-Hartley opposition.
c) free riding.
The price elasticity of demand for bread is a) computed as the change in the price of bread divided by the change in the quantity demanded of bread. b) independent of the availability of close substitutes. c) influenced by whether consumers view bread as a necessity or luxury. d) All of the above are correct.
c) influenced by whether consumers view bread as a necessity or luxury.
The competitive firm's short-run supply curve is that portion of the a) average variable cost curve that lies above marginal cost. b) average total cost curve that lies above marginal cost. c) marginal cost curve that lies above average variable cost. d) marginal cost curve that lies above average total cost.
c) marginal cost curve that lies above average variable cost.
Which of the following can eliminate the inefficiency inherent in monopoly pricing? a) arbitrage b) cost-plus pricing c) price discrimination d) regulations that force monopolies to reduce their levels of output
c) price discrimination
Total surplus in a market will increase when the government a) imposes a tax on that market. b) imposes a binding price floor on that market. c) removes a binding price ceiling from that market. d) None of the above is correct.
c) removes a binding price ceiling from that market.
Hunter is an ambitious, competitive person who has always tried to be the best at everything he does. Consider the following job options facing Hunter and choose the option that will likely afford him the highest wage. a) elementary school teacher who works 9 months of the year b) manager in a large firm who earns an annual salary with no potential for bonuses or commissions c) salesperson who earns a small base salary plus a percentage of the sales he makes d) local television news anchor who works during the day
c) salesperson who earns a small base salary plus a percentage of the sales he makes
Which of the following professionals is most likely to generate the income of a superstar? a) the best teacher b) the best dentist c) the best guitar player d) the best airplane pilot
c) the best guitar player
If something happens to alter the quantity demanded at any given price, then a) the demand curve becomes steeper. b) the demand curve becomes flatter. c) the demand curve shifts. d) we move along the demand curve.
c) the demand curve shifts.
Refer to Figure 6-7. Suppose a price floor of $8 is imposed on this market. As a result, a) buyers' total expenditure on the good decreases by $20. b) the supply curve shifts to the left; quantity sold is now 30 units and the price is $8. c) the quantity of the good demanded decreases by 10 units. d) the price of the good continues to serve as the rationing mechanism.
c) the quantity of the good demanded decreases by 10 units.
Which of the following would both make a worker's wage higher than otherwise? a) the work is safe, the employer pays an efficiency wage b) the work is safe, the employer does not pay an efficiency wage c) the work is dangerous, the employer pays an efficiency wage d) the work is dangerous, the employer does not pay and efficiency wage
c) the work is dangerous, the employer pays an efficiency wage
A free rider problem arises when a) there are very few beneficiaries and exclusion of any one of them is possible. b) there are many beneficiaries and exclusion of any one of them is possible. c) there are many beneficiaries and exclusion of any one of them is impossible. d) there are very few beneficiaries and they all try to use the good simultaneously.
c) there are many beneficiaries and exclusion of any one of them is impossible.
Refer to Figure 19-5. Given demand for labor, D1, and supply of labor, S2, which of the following could be considered an efficiency wage? a) $4 b) $5 c) $6 d) $7
d) $7
Refer to Table 4-6. If these are the only four sellers in the market, then the market quantity supplied at a price of $10 is a) 3 units. b) 11 units. c) 25 units. d) 44 units.
d) 44 units.
Refer to Table 15-21. If the monopolist can engage in perfect price discrimination, what is the quantity that maximizes economic profit? a) 5 ties b) 6 ties c) 7 ties d) 8 ties
d) 8 ties
Refer to Figure 2-16. It is possible for this economy to produce a) 30 gadgets and 90 b) 50 gadgets and 80 widgets. c) 80 gadgets and 50 widgets. d) 90 gadgets and 30 widgets.
d) 90 gadgets and 30 widgets.
Altering incentives so that people take account of the external effects of their actions a) is called internalizing the externality. b) can be done by imposing a corrective tax. c) is the role of government in markets with externalities. d) All of the above are correct.
d) All of the above are correct.
Before the flu season begins, Jeremy gets a flu shot. As a result, Jeremy and several of his friends and relatives avoid the flu for the entire flu season. It would make sense to argue that a) flu shots provide a positive externality, and that flu shots should be subsidized. b) if flu shots are not subsidized, then the number of people getting flu shots will be smaller than the socially optimal number. c) the externality generated by flu shots is more like the externality generated by education than the externality generated by pollution. d) All of the above are correct.
d) All of the above are correct.
Refer to Figure 2-5. The opportunity cost of obtaining 40 additional dryers by moving from point D to point C is a) 0 washers. b) 20 washers. c) 40 washers. d) None of the above; the economy cannot move from point D to point C.
d) None of the above; the economy cannot move from point D to point C.
Refer to Figure 10-9, Panel (b). The market equilibrium quantity is a) Q2, which is the socially optimal quantity. b) Q3, which is the socially optimal quantity. c) Q2, and the socially optimal quantity is Q3. d) Q3, and the socially optimal quantity is Q2.
d) Q3, and the socially optimal quantity is Q2.
Refer to Figure 2-4. Unemployment could cause this economy to produce at which point(s)? a) Q, S b) Q, S, T c) R, U d) T
d) T
On average, electricians who work on dangerous high-voltage power lines earn more per hour than similarly skilled electricians who don't work on dangerous high-voltage power lines. The difference in pay is attributed to a) the marginal product of labor. b) the marginal product of capital. c) diminishing marginal returns. d) a compensating differential.
d) a compensating differential.
If all firms have the same costs of production, then in long-run equilibrium, a) price exceeds average total cost for all firms. b) price exceeds marginal cost for all firms. c) some firms may earn positive economic profits. d) all firms have zero economic profits and just cover their opportunity costs.
d) all firms have zero economic profits and just cover their opportunity costs.
Refer to Figure 8-11. The deadweight loss of the tax is represented by the a) length of the line segment connecting points A and B. b) length of the line segment connecting points A and C. c) length of the line segment connecting points B and C. d) area of the triangle bounded by the points A, B, and C.
d) area of the triangle bounded by the points A, B, and C.
Cartels are difficult to maintain because a) the monopoly output is very difficult to determine. b) the number of firms is always large. c) costs to the firms in a cartel are continually rising. d) each firm has an incentive to deviate from its agreed output level.
d) each firm has an incentive to deviate from its agreed output level.
Refer to Figure 4-18. At a price of $35, there would be a) a shortage, and the price would tend to rise from $35 to a higher price. b) a surplus, and the price would tend to rise from $35 to a higher price. c) excess demand, and the price would tend to fall from $35 to a lower price. d) excess supply, and the price would tend to fall from $35 to a lower price.
d) excess supply, and the price would tend to fall from $35 to a lower price.
Refer to Figure 4-7. The movement from Da to Db in the market for potato chips could be caused by a(n) a) decrease in the price of potato chips. b) decrease in income, assuming that potato chips are a normal good. c) announcement by the FDA that potato chips cause cancer. d) increase in the price of a pretzels
d) increase in the price of a pretzels
A certain competitive firm sells its output for $20 per unit. The 50th unit of output that the firm produces has a marginal cost of $22. Production of the 50th unit of output does not necessarily a) increase the firm's total revenue by $20. b) increase the firm's total cost by $22. c) decrease the firm's profit by $2. d) increase the firm's average variable cost by $0.44.
d) increase the firm's average variable cost by $0.44.
Danita rescues dogs from her local animal shelter. When Danita's income rises by 7 percent, her quantity demanded of dog biscuits increases by 12 percent. For Danita, the income elasticity of demand for dog biscuits is a) negative, and dog biscuits are a normal good. b) negative, and dog biscuits are an inferior good. c) positive, and dog biscuits are an inferior good. d) positive, and dog biscuits are a normal good.
d) positive, and dog biscuits are a normal good.
An income tax in which the average tax rate is the same for all taxpayers would be considered a a) progressive tax. b) regressive tax. c) distortion-free tax. d) proportional tax.
d) proportional tax.
Rent control policies tend to cause a) relatively smaller shortages in the short run than in the long run because supply and demand tends to be more elastic in the short run than in the long run. b) relatively larger shortages in the short run than in the long run because supply and demand tends to be more elastic in the short run than in the long run. c) relatively larger shortages in the short run than in the long run because supply and demand tends to be more inelastic in the short run than in the long run. d) relatively smaller shortages in the short run than in the long run because supply and demand tends to be more inelastic in the short run than in the long run.
d) relatively smaller shortages in the short run than in the long run because supply and demand tends to be more inelastic in the short run than in the long run.
In order to explain the changing gap in earnings between skilled and unskilled workers in recent years, economists have proposed two hypotheses. One hypothesis emphasizes a) compensating differentials. b) the increased recognition that a larger stock of human capital usually leads to higher earnings. c) the decreasing importance of labor unions. d) the increasing importance of international trade.
d) the increasing importance of international trade.