Economics questions

1) Suppose that you purchased a ticket to the symphony for $40 from an online ticket broker. Once you arrived at the symphony, you discovered that parking costs you an additional $10. In this situation, the additional $10 you pay for parking is an example of

 

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A) an inefficient cost.

B) marginal cost.

C) opportunity cost.

D) an economic loss.

 

2) Opportunity cost is

 

A) the additional cost incurred from the consumption of one more unit of output.

B) the cost involved when choosing between alternatives.

C) the cost of production which cannot be recaptured.

D) the total cost incurred from the consumption of additional output.

 

3) As an individual consumes ________ of a product within a given period of time, it is likely that each additional unit consumed will yield ________ satisfaction.

 

A) more; successively more

B) more; successively less

C) more; no additional

D) less; negative

 

Refer to the information provided in Figure 3.1 below to answer the questions that follow.

 

 

Figure 3.1

 

4) Refer to Figure 3.1. Which of the following would be most likely to cause the demand for Dr. Pepper to shift from D0 to D1?

 

A) an increase in income, assuming that Dr. Pepper is a normal good

B) a decrease in the price of 7-UP, assuming 7-UP is a substitute for Dr. Pepper

C) an increase in the price of Dr. Pepper

D) an increase in the price of sugar used to make Dr. Pepper

5) If the price of spinach decreases, there will be ________ of spinach enchiladas.

 

A) an increase in the supply

B) a decrease in the supply

C) an increase in the quantity supplied

D) a decrease in the quantity supplied

 

Refer to the information provided in Figure 3.15 below to answer the questions that follow.

 

 

Figure 3.15

 

6) Refer to Figure 3.15. A decrease in the wage rate of gardenburger makers will cause a movement from Point B on supply curve S2 to

 

A) Point A on supply curve S2.

B) Point C on supply curve S2.

C) supply curve S3.

D) supply curve S1.

 

Refer to the information provided in Table 3.2 below to answer the questions that follow.

 

Table 3.2

Price per Cheeseburger Quantity Demanded (Cheeseburgers per Month) Quantity Supplied (Cheeseburgers per Month)
$5 1,500 500
6 1,200 700
7 900 900
8 600 1,100
9 300 1,300

 

 

 

 

 

 

 

7) Refer to Table 3.2. This market will be in equilibrium if the quantity of cheeseburgers demanded is

 

A) 300.

B) 600.

C) 900.

D) 1,200.

 

8) Refer to Table 3.2. If the price per cheeseburger is $5, the price will

 

A) remain constant because the market is in equilibrium.

B) decrease because there is an excess demand in the market.

C) increase because there is an excess demand in the market.

D) decrease because there is an excess supply in the market.

 

Refer to the information provided in Figure 3.13 below to answer the questions that follow.

 

Figure 3.13

 

9) Refer to Figure 3.13. The market is initially in equilibrium at Point A. If supply shifts from S1 to S2 and there is an excess demand of 6 cheeseburgers, the price of cheeseburgers will have

 

A) moved from $5.00 to $7.00.

B) moved from $7.00 to $5.00.

C) remained constant at $5.00.

D) remained constant at $7.00.

 

10) Refer to Figure 3.13. The market is initially in equilibrium at Point A. If supply shifts from S1 to S2, the equilibrium price will change from ________ and the equilibrium quantity will change from ________.

 

A) $5.00 to $7.00; 10 to 7

B) $5.00 to $7.00; 4 to 7

C) $7.00 to $5.00; 7 to 4

D) $7.00 to $5.00; 7 to 10

 

 

Refer to the information provided in Figure 4.2 below to answer the questions that follow.

 

Figure 4.2

 

11) Refer to Figure 4.2. The market is initially in equilibrium at the intersection of S2 and D, and supply shifts from S2 to S1. Which of the following statements is true?

 

A) Price will still serve as a rationing device causing quantity demanded to rise from 8 to 11 soft pretzels.

B) There is no need for price to serve as a rationing device in this case because the new equilibrium quantity is lower than the original equilibrium quantity.

C) Price will still serve as a rationing device causing quantity supplied to fall from 8 to 4 soft pretzels.

D) The market cannot move to a new equilibrium until there is also a change in supply.

 

12) An example of an effective price ceiling would be the government setting the price of wheat at ________ per bushel when the market price is at $4.25 per bushel.

 

A) $3.75

B) $5.00

C) $7.75

D) $12.00

 

Refer to the information provided in Figure 4.6 below to answer the questions that follow.

Equilibrium in this market occurs at the intersection of curves S and D.

 

 

Figure 4.6

 

13) In figure 4.6, the area of [A + B + C] represents

 

A) producer surplus.

B) consumer surplus.

C) consumer surplus plus producer surplus.

D) consumer surplus minus producer surplus.

 

14) The total of consumer plus producer surplus is ________ at the market equilibrium.

A) greatest

B) smallest

C) zero

D) negative

 

Refer to the information provided in Figure 4.5 below to answer the questions that follow.

 

Figure 4.5

 

15) Refer to Figure 4.5. The United States imports 9 million CD-Rom drives at a world price of ________ per CD-Rom drive.

 

A) $15

B) $25

C) between $15 and $25

D) >$25

16) Refer to Figure 4.5. The United States will import 3 million CD-Rom drives if ________ tax per CD-Rom drive is levied on imported CD-Rom drives.

 

A) no

B) a $10

C) a $15

D) a $25

 

17) A government wants to reduce electricity consumption by 20%. The price elasticity of demand for electricity is -5. The government must ________ the price of electricity by ________.

 

A) raise; 4.0%

B) raise; 0.25%

C) raise; 1.25%

D) lower; 0.25%

 

18) The price elasticity of demand for bottled water in New York is -3, and the price elasticity of demand for bottled water in Florida is -0.6. In other words, demand in New York is ________, and demand in Florida is ________.

 

A) elastic; inelastic

B) inelastic; elastic

C) elastic; unit elastic

D) inelastic; unit inelastic

 

Refer to the information provided in Figure 5.3 below to answer the questions that follow.

 

 

Figure 5.3

 

 

 

 

 

 

 

19) Refer to Figure 5.3. Use the midpoint formula. If the price of a gardenburger decreases from $10 to $8, the price elasticity of demand equals ________ and demand is ________.

 

A) 4.5; elastic

B) -0.5; inelastic

C) -4.5; elastic

D) -9.0; inelastic

 

20) Refer to Figure 5.3. Use the midpoint formula. If the price of a gardenburger decreases from $8 to $6, the price elasticity of demand equals ________, and demand is ________.

 

A) -0.57; inelastic

B) -1.75; elastic

C) -1.9; inelastic

D) -2.0; elastic

 

21) Assume you earn $75,000 a year and your favorite entertainment magazine costs you $25 a year. Your demand for the entertainment magazine is likely to be

 

A) elastic.

B) inelastic.

C) perfectly elastic.

D) perfectly inelastic.

 

22) Darius has $1,200 a month to spend on clothing (c) and food (f). The price of clothing is $60 and the price of food is $10. What is the equation for Darius’s budget constraint?

 

A) c + f < $1,200

B) $60 × c + $10 × f ≤ $1,200

C) $60 × c + $10 × f > $1,200

D) $60 × + $10 × f = $1,200

 

Refer to the information provided in Table 6.1 below to answer the questions that follow.

 

Table 6.1

Dozens of Oysters per Day Total Utility Marginal Utility
1 60  
2 104  
3 134  
4 152  
5   8
Number of

Beers per Day

Total Utility Marginal Utility
1 40  
2 70  
3 94  
4 114  
5   14

 

 

23) Refer to Table 6.1. The marginal utility of the second dozen oysters per day is

 

A) 20.

B) 30.

C) 44.

D) 104.

 

24) Refer to Table 6.1. The marginal utility of the third dozen oysters per day is

 

A) 10.

B) 30.

C) 44.

D) 134.

 

25) A fall in the price of 7-UP that causes a household to shift its purchasing pattern away from Sprite and toward 7-UP is the ________ effect of a price change.

 

A) income

B) substitution

C) complementary

D) diminishing marginal utility

 

26) For normal goods, the substitution and income effects of a price increase will do which of the following?

 

A) Both will decrease the quantity of the good demanded.

B) Both will increase the quantity of the good demanded.

C) The substitution effect will increase the quantity of the good demanded while the income effect will decrease the quantity of the good demanded.

D) The substitution effect will decrease the quantity of the good demanded while the income effect will increase the quantity of the good demanded.

 

27) Which of the following in NOT a decision that must be made by perfectly competitive firms?

 

A) how much output to supply

B) which production technology to use

C) how much of each input to demand

D) what price to charge for its output

 

28) Economic costs include

 

A) both a normal rate of return on investment and the opportunity cost of each factor of production.

B) the direct costs of hiring all factors of production.

C) the opportunity cost of each factor of production minus any interest charges paid on borrowed funds.

D) total revenue minus accounting profit.

 

SCENARIO 7.1: You own and are the only employee of a company that writes computer software that gamblers use to collect sports data. Last year your total revenue was $90,000. Your costs for equipment, rent, and supplies were $50,000. To start this business you invested an amount of your own capital that could pay you a $40,000 a year return.

 

29) Refer to Scenario 7.1. During the year your economic costs were

 

A) $40,000.

B) $60,000.

C) $90,000.

D) $100,000.

 

30) To determine the optimal method of production for a good or service, a firm needs to know

 

A) the market price of output.

B) the technologies of production that are available to the firm.

C) the prices of inputs.

D) All of the above are correct.

 

Use the information provided in Table 7.1 below to answer the questions that follow.

 

Table 7.1

Inputs Required to Produce a Product Using Alternative Technologies

Technology Units of Capital Number of Employees
A 8 36
B 12 24
C 16 16
D 24 12

 

31) Refer to Table 7.1 above. Which technology is the most labor intensive?

 

A) A

B) B

C) C

D) D

 

32) Refer to Table 7.1 above. Which technology is the most capital intensive?

 

A) A

B) B

C) C

D) D

 

 

 

 

 

Refer to the information provided in Figure 7.2 below to answer the questions that follow.

 

 

Figure 7.2

 

33) Refer to Figure 7.2. The marginal product of the first worker is ________ lawns mowed.

 

A) 3

B) 4

C) 5

D) 11

 

34) Refer to Figure 7.2. The average product of the first worker is ________ lawns mowed.

 

A) 3

B) 4

C) 5

D) 11

 

35) Costs of production are determined

 

A) only by the technologies that are available.

B) only by the input prices that are available.

C) by the technologies that are available and by input prices.

D) by the technologies that are available and by the demand for the output.

 

 

 

 

 

 

 

 

 

 

 

 

 

Refer to the information provided in Figure 7.8 below to answer the question that follows.

 

Figure 7.8

 

36) Refer to Figure 7.8 above. If Roller Skates Unlimited moves from isoquant A to isoquant B, the number of roller skates produced

 

A) decreases.

B) increases.

C) remains constant, but Roller Skates Unlimited uses more capital and more labor.

D) remains constant, but input prices have risen.

 

37) Isoquants slope downward because as a firm uses more

 

A) units of an input to produce a product, total cost increases.

B) units of an input to produce a product, the input’s marginal productivity increases.

C) of one input, then to keep output constant it needs less of the other input.

D) both B and C

 

38) A dairy company, Farley Farm, has total costs of $10,000 and total variable costs of $3,000. Farley Farm’s total fixed costs are

 

A) $0.

B) $7,000.

C) $13,000.

D) indeterminate because the firm’s output level is not known.

 

39) Wilbur’s Widgets, a widget company, produces 100 widgets. Its average fixed cost is $6 and its total variable cost is $400. The total cost of producing 100 widgets is

 

A) $306.

B) $400.

C) $600.

D) $1,000.

 

 

Refer to the information provided in Figure 8.1 below to answer the question that follows.

 

 

Figure 8.1

 

40) Refer to Figure 8.1 above. If Cyndy’s Floral Arrangements produces 200 silk flower arrangements, the average fixed costs are

 

A) $0.20.

B) $5.

C) $20.

D) $50.

 

41) All of the following statements are true EXCEPT:

 

A) The total variable cost curve increases as output increases.

B) The total variable cost curve shows the variable costs of production given current factor prices.

C) The total variable cost curve starts at the origin.

D) The total variable cost curve is a horizontal line.

 

 

42) If scarcity were eliminated,

 

A) trade would become unnecessary.

B) opportunity costs would increase.

C) all nations would have an absolute advantage in producing all products.

D) the concept of trade-offs would become irrelevant.

 

43) A point on a total variable cost curve shows the ________ variable cost a firm will bear to produce a certain output.

 

A) highest

B) lowest

C) change in

D) average

 

 

Refer to the information provided in Table 8.2 below to answer the questions that follow.

 

Table 8.2

Number of Earnings TVC MC AVC TFC TC AFC ATC
0         50    
1   25          
2             47.50
3     23.33        
4         150    
5 135            

 

44) Refer to Table 8.2. If Danica produces zero earrings, her total fixed costs are

 

A) $0.

B) $25.

C) $50.

D) indeterminate from this information.

 

45) Refer to Table 8.2. If Danica produces one pair of earrings, her total variable costs are

 

A) $25.

B) $50.

C) $75.

D) indeterminate from this information.

 

46) If an individual perfectly competitive firm charges a price ________ the industry equilibrium price while competitors charge the equilibrium price, the firm will not sell any of what it produces.

 

A) above

B) below

C) equal to

D) More information is needed to answer the question.

 

47) Any firm’s ________ equals P × q.

 

A) total cost

B) total revenue

C) marginal revenue

D) marginal cost

 

48) The ________ that a firm takes in when it increases output by one additional unit is marginal revenue.

 

A) total revenue

B) added revenue

C) extra resources

D) additional labor

 

Refer to the information provided in Table 8.5 below to answer the following questions.

 

Table 8.5

Number of Fruit Baskets TFC TVC TC MC
0 $100 $0 $100
1 100 20 120 20
2 100 30 130 10
3 100 42 142 12
4 100 62 162 20
5 100 92 192 30
6 100 136 236 44

 

 

49) Refer to Table 8.5. Assume that Polynesian Fruit sells fruit baskets in a perfectly competitive market. The market price of a fruit basket is $44. To maximize profits, Polynesian Fruit should sell ________ fruit baskets and their profit is ________.

 

A) three; $10

B) four; $14

C) five; $28

D) six; $28

 

50) Refer to Table 8.5. Assume that Polynesian Fruit sells fruit baskets in a perfectly competitive market. The market price of a fruit basket is $30. To maximize profits, Polynesian Fruit should sell ________ fruit baskets and their profit it ________.

 

A) zero; $0

B) two; -$70

C) three; -$52

D) five; -$42

 

Refer to Scenario 9.1 below to answer the questions that follow.

 

SCENARIO 9.1: Amy borrowed $40,000 from her parents to open a bagel shop. She pays her parents a 5% yearly return on the money they lent her. Her other yearly fixed costs equal $18,000. Her variable costs equal $40,000. In her first year, Amy sold 40,000 dozen at a price of $2.50 per dozen.

 

51) Refer to Scenario 9.1. Amy’s total fixed costs equal

 

A) $2,000.

B) $18,000.

C) $20,000.

D) $22,000.

 

 

 

 

52) Refer to Scenario 9.1. Amy’s total costs equal

 

A) $20,000.

B) $40,000.

C) $60,000.

D) $100,000.

 

Refer to the information provided in Figure 9.1 below to answer the questions that follow.

 

 

Figure 9.1

 

 

53) Refer to Figure 9.1. The profit maximizing quantity of wheat is ________ bushels.

 

A) 6

B) 9

C) 12

D) 16

 

54) Refer to Figure 9.1. If this farmer maximizes profits, his average total cost will be

 

A) $7.

B) $9.

C) $11.

D) $15.

 

55) In the long run, firms will ________ as long as there are more economies of scale, and new firms will enter the industry as long as they earn ________.

 

A) expand; zero profits

B) contract; positive economic profits

C) contract; zero profits

D) expand; positive economic profits

 

56) In long-run equilibrium for a perfectly competitive industry, firms earn ________ economic profits and produce efficiently.

 

A) zero

B) negative

C) positive

D) All of the above are possible.

 

57) Assume the market for orange juice is perfectly competitive. Orange juice producers currently earn a zero economic profit. If consumers switch from orange juice to grape juice, which of the following is most likely to occur?

 

A) Orange juice producers will now incur economic losses in both the short run and the long run.

B) Orange juice producers will incur economic losses in the short run. Some producers will exit the industry until those remaining earn a zero economic profit.

C) Orange juice producers will incur economic losses in the short run. Some producers will exit the industry until those remaining earn an economic profit.

D) Orange juice producers will now earn economic profits in the short run, and there will be no additional adjustments in the long run.

 

58) An industry with a ________ long-run supply curve is called a constant-cost industry.

 

A) horizontal

B) positive sloping

C) negative sloping

D) vertical

 

59) When a small amount of output is produced per unit of the input, the input is said to exhibit

 

A) high productivity.

B) low productivity.

C) marginal productivity.

D) derived productivity.

 

60) The demand for ________ is a “derived demand.”

 

A) hot chocolate on a cold day

B) U.S. Treasury bonds

C) a dog groomer by a grooming shop

D) hot dogs on the 4th of July

 

 

 

 

 

 

 

 

Refer to the data provided in Table 10.1 below to answer the following questions.

 

Table 10.1

 

61) Refer to Table 10.1. The marginal revenue product of the third worker is

 

A) $5.

B) $25.

C) $125.

D) $375.

 

62) Refer to Table 10.1. The marginal revenue product of the ________ worker is $100.

 

A) second

B) third

C) fourth

D) fifth

 

63) The formula (MPL)(MRX), where L is for labor and X is the output, is for

 

A) the marginal product of labor.

B) the marginal revenue from labor.

C) the marginal revenue product of labor.

D) total revenue of labor.

 

Refer to the information provided in Figure 10.1 below to answer the questions that follow.

 

 

Figure 10.1

 

 

 

64) Refer to Figure 10.1. This firm is currently hiring 15 workers and paying a wage of $10. This firm should

 

A) do nothing because it is maximizing profits.

B) increase employment to 16 workers to increase profits.

C) reduce employment to 14 workers to increase profits.

D) increase employment to 17 workers to increase profits.

 

65) A firm will reduce its quantity of labor as long as the MRP of labor ________ the market wage rate.

 

A) is greater than or equal to

B) is less than

C) is equal to

D) determines

 

66) According to the output effect of a factor price decrease, the demand for

 

A) the factor whose price has decreased will increase, but the demand for the other factors will decrease.

B) all factors decreases.

C) all factors increases.

D) the factor whose price has decreased will decrease, but the demand for the other factors will increase.

 

67) The owner of Instant Printing, a firm that prints business cards, tells you that as a result of a decrease in the wage rate of printer operators he has increased the amount of output he produces and the amount of capital he uses. How would you respond to this?

 

A) You should tell him that this doesn’t make any economic sense because according to the factor substitution effect he should have substituted away from capital and toward labor.

B) This seems logical, because the output effect of a factor price decrease would cause a firm to demand more of all inputs, not just the input whose price decreased.

C) You should tell him that instead of increasing output and the demand for all factors of production, he should decrease output and the demand for all factors of production so that he can cover the lower labor costs by generating more revenue.

D) You tell him that capital must be an superior input, because he increased his use of capital when the price of labor decreased.

 

68) The number of seats available in an arena is fixed at 20,000. The equilibrium price for a ticket to a basketball game at the arena is $75. The equilibrium price for a ticket to a hockey game at the arena is $60. Which of the following is true?

 

A) Basketball games must be more expensive to produce than hockey games.

B) The demand for hockey games must be more elastic than the demand for basketball games.

C) The supply of hockey games must be less elastic than the supply of basketball games.

D) The demand for each hockey game must be lower than the demand for each basketball game.

 

 

69) A firm hires labor, capital, and land to produce grapefruits. Currently the marginal product of the last unit of labor input is 40, the marginal product of the last unit of capital input is 60, and the marginal product of the last unit of land input is 200. The market wage is $20 and the market price for capital is $30. If the firm is using the optimal combination of inputs, then the price of land is

 

A) $4.

B) $40.

C) $100.

D) indeterminate from the given information.

 

70) As economists use the term, building a new construction vacation home is an example of

 

A) household investment.

B) business depreciation.

C) infrastructure investment.

D) social capital investment.

 

71) We would NOT consider ________ an act of capital investment.

 

A) a son paying for his mother to go back to college

B) a company purchasing solar panels for its headquarters

C) a city government building a new fire station

D) FedEx delivering a package

 

72) Which of the following are examples of institutions that economists would classify as belonging to the financial capital market?

 

A) the stock market

B) banks

C) savings and loans

D) all of the above

 

73) The two most important forms of ________ income are interest and profits.

 

A) rental

B) tax-free

C) intangible

D) capital

 

74) You paid $140 for a biology textbook at the beginning of the semester. At the end of the semester you sell the textbook for $85. The textbook has depreciated

 

A) $140.00.

B) $85.00.

C) $55.00.

D) an indeterminate amount based on this information.

 

 

 

75) You borrow $75,000 at an interest rate of 3% to open Spinners, a bicycle shop. You will earn an economic profit if the return on your investment is

 

A) greater than 3%.

B) 3%.

C) between 0 and 3%.

D) 6% or less.

 

76) If business leaders expect the new Congress to lower the corporate profits tax, most likely this will cause business firms, ceteris paribus, to

 

A) plan to decrease investment in the future to compensate for the lower tax rate.

B) decrease investment because they would expect lower benefits from investment.

C) not change their investment plans because lower corporate profit taxes will not change the demand for their product.

D) increase investment because the lower corporate profits tax will increase the return on any investment.

 

77) The expected cost of an investment

 

A) is zero if a firm uses its own funds.

B) equals the market rate of interest plus the normal rate of return on an investment.

C) depends on the market interest rate.

D) equals the market rate of interest plus the inflation rate.

 

78) You work as a forecaster for a luxury automobile manufacturer. You know that there is a strong positive relationship between the demand for luxury automobiles and income levels. The government issues a report predicting that it expects income levels to increase steadily over the next 5 years. All else equal, which of the following courses of action would you recommend to the firm?

 

A) Don’t change the amount of investment made, but raise the price of luxury automobiles in response to the expected increase in the demand.

B) Suggest that the firm make an investment in new capital to produce luxury automobiles only after it can verify an increase in income levels.

C) Start to increase investment now so that when income levels increases and the demand for luxury automobiles increases, the firm will be able to meet the new demand.

D) Suggest that the firm curtail its advertising to avert a substantial increase in demand for luxury automobiles.

 

79) The number of seats available in an arena is fixed at 20,000. The equilibrium price for a ticket to a basketball game at the arena is $75. The equilibrium price for a ticket to the circus at the arena is $25. Which of the following is true?

 

A) Basketball games must be more expensive to produce than a circus performance.

B) The demand for each basketball game must be more than the demand for each circus performance.

C) The supply of circus performances must be less elastic than the supply of basketball games.

D) The demand for each circus performance must be greater than the demand for each basketball game.

 

 

Refer to the information provided in Figure 12.1 below to answer the question that follows.

 

 

Figure 12.1

 

80) Refer to Figure 12.1. This competitive firm is currently producing an output where ATC is at point B. The firm’s move toward an output where ATC will be at point A will make the economy

 

A) more fair and the distribution of outcome more equitable.

B) more stable.

C) less efficient.

D) less stable.

 

81) Refer to Figure 12.1. The firm is

 

A) equally efficient when it produces at points A and B.

B) less efficient when it produces at point A than at point B.

C) less efficient when it produces at point B than at point A.

D) producing at least possible cost anywhere along the given ATC curve.

 

82) Initially the wheat and corn markets are in equilibrium, then preferences shift away from wheat and into corn. If you are a wheat farmer, the best profit-maximizing strategy is to

 

A) shut down.

B) increase output so as to increase your market share.

C) shift more of your farming capacity wheat production.

D) decrease output so as to minimize short run losses.

 

 

 

 

 

 

 

Refer to the information provided in Figure 12.3 below to answer the question that follows.

 

 

Figure 12.3

 

83) Refer to Figure 12.3. The DVD industry is a constant-cost industry. As the demand for DVD players shifts from D’ to D, which of the following will NOT occur?

 

A) Fewer resources will be allocated to produce DVD players.

B) The demand for DVDs will decrease.

C) If the market for DVD players is competitive, the price will decrease to $4.00 in the short and long run.

D) If the market for DVD players is perfectly competitive, economic profits in this industry will decrease in the short run, but will fall back to zero in the long run.

 

84) An economist estimates that the maintenance of a public park costs $20,000 a year and that the park generates $35,000 a year in revenue for merchants near it. From society’s point of view, the maintenance of this park is

 

A) inefficient because everyone in the community pays taxes to support the park, but only the merchants near the park benefit.

B) inefficient because the additional revenues generated by the park are so low.

C) potentially efficient because the value of the gains exceed the value of the losses.

D) potentially efficient because no one would be made worse off as a result of maintaining the park.

 

85) A person who chooses ________ the labor force reveals that either leisure or the value of nonpaid labor is worth ________ to him or her than the value that society places on his or her potential product in the market.

 

A) to stay in; more

B) not to be in; more

C) to exit; less

D) to enter; more

 

 

 

 

 

 

86) Which of the following is an example of an external benefit?

 

A) More people start to install solar panels on their roofs, and as a result, electricity use goes down, as does the pollution created by the generation of electricity.

B) Firms are able to reduce their costs of production by using a more efficient technology.

C) The city spends $500,000 to upgrade the local jail.

D) A company opens a slaughterhouse at the end of your street.

 

87) Voss Calculator Company has a monopoly on the sale of graphing calculators. If it sells two of these calculators its total revenue is $500, and if it sells three calculators its total revenue is $800. The marginal revenue of the third calculator sold is

 

A) $100.

B) $150.

C) $300.

D) $800.

 

Refer to the information provided in Figure 13.8 below to answer the question that follows.

 

 

Figure 13.8

 

88) Refer to Figure 13.8. If the government regulates Armstrong Cable so they can earn only a normal return, the price would be set ________ than if the company were not regulated.

 

A) $4 lower

B) $1 higher

C) $3 lower

D) $0.50 lower

 

 

 

 

 

 

 

 

 

Refer to the information provided in Table 13.2 below to answer the questions that follow.

 

Table 13.2

Price ($) Quantity
20.00 1
18.00 2
16.00 3
14.00 4
12.00 5
10.00 6
8.00 7

 

89) Refer to Table 13.2. If a monopoly faces the demand schedule given in the table and has a constant marginal and average cost of $4 per unit of providing the product, then the monopoly maximizes its profits by charging ________ per unit and selling ________ units of output.

 

A) $12; 5

B) $18; 2

C) $10; 6

D) $16; 3

 

90) Government failure

 

A) leads to a more efficient allocation of resources.

B) leads to a less efficient allocation of resources.

C) occurs because households or firms do not act in their own self-interest.

D) occurs because government officials do not act in their own self-interest.

 

91) Which of the following is the best example of an oligopolistic industry?

 

A) convenience stores

B) passenger airline service

C) public utilities

D) clothing manufacturing

 

92) According to the Five Forces Model, the five competitive forces that determine the level of competition and profitability in an industry are

 

A) rivals, buyers, suppliers, substitutes, and potential entrants.

B) rivals, consumers, labor, weather, and government.

C) buyers, suppliers, government, foreign competition, and weather.

D) rivals, government, foreign competition, labor, and weather.

 

93) The demand schedule of a monopolistically competitive firm when compared to the demand schedule of a perfectly competitive firm is

 

A) more price elastic.

B) less price elastic.

C) perfectly price elastic.

D) perfectly price inelastic.

94) Speedy Flowers competes in the monopolistically competitive flower delivery industry in a city. The firm raises its prices by 5% while all other florists keep their prices the same. Which of the following is most likely to occur? Speedy Flowers will

 

A) be unable to sell any flowers because it was the only firm to raise price.

B) lose some of its customers.

C) increase its profits.

D) serve an increased number of customers.

 

95) Assuming no externalities exist, if a good’s price is more than its marginal cost, then the benefits consumers derive are ________ than the cost of resources needed to produce it and ________ should be produced.

 

A) greater; less

B) greater; more

C) less; less

D) less; more

 

96) Traffic congestion is an example of a(n)

 

A) economy of scale.

B) externality.

C) public good.

D) government failure.

 

97) Both Claudia and Javier are certified educators. Claudia makes $55,000 a year working as a teacher in a public high school in Chicago. Javier makes $40,000 working as a grade school teacher in a private school in Chicago. Which of the following is true?

 

A) Javier is clearly worse off than Claudia, because he earns $15,000 a year less.

B) Javier must be better off than Claudia if he is willing to take a job at $15,000 a year less than Claudia.

C) From this information it cannot be determined who is better off because income is an imperfect measure of well-being.

D) Even though income is an imperfect measure of well-being, Claudia and Javier must be equally well off because either is free to switch jobs.

 

98) When measuring ________ for the purpose of classifying people as poor, the measurement used is money income.

 

A) employment

B) wealth

C) income

D) All of the above are correct.

 

 

 

 

 

 

Refer to the information provided in Figure 2.3 below to answer the questions that follow.

 

Figure 2.3

 

99) Refer to Figure 2.3. Assume that this society’s production possibility frontier is represented by Panel C. The marginal rate of transformation of sailboats for surfboards is

 

A) 1/10.

B) -1/10.

C) 10.

D) -10.

 

100) Refer to Figure 2.3. Assume that this society’s production possibility frontier is represented by Panel C. The opportunity cost of sailboats in terms of surfboards is

 

A) constant.

B) increasing.

C) decreasing.

D) infinite.