question
1. (Table: Demand for Solar Water Heaters) Examine the table Demand for Solar Water
Heaters. The marginal cost of producing solar water heaters is zero, and only two firms,
Rheem and Calefi, produce them. If they agree to produce only 50 water heaters, with
each firm producing only 25, by how much does Rheem's profit rise if it cheats on the
agreement and produces 30 water heaters?
A) $2,700
B) $2,000
C) $5,000
D) $3,000
Heaters. The marginal cost of producing solar water heaters is zero, and only two firms,
Rheem and Calefi, produce them. If they agree to produce only 50 water heaters, with
each firm producing only 25, by how much does Rheem's profit rise if it cheats on the
agreement and produces 30 water heaters?
A) $2,700
B) $2,000
C) $5,000
D) $3,000
answer
B
question
2. Clark owns a lemonade stand in a competitive lemonade market, and as such, he is a
price-taking firm. Which event would most likely increase his market power?
A) Clark owns exclusive rights to harvest lemons from all domestic citrus orchards.
B) The average total cost curve for firms in the industry is horizontal.
C) The government abolishes the system of patents and copyrights.
D) A booming economy increases the demand for lemonade and attracts entry into the
market
price-taking firm. Which event would most likely increase his market power?
A) Clark owns exclusive rights to harvest lemons from all domestic citrus orchards.
B) The average total cost curve for firms in the industry is horizontal.
C) The government abolishes the system of patents and copyrights.
D) A booming economy increases the demand for lemonade and attracts entry into the
market
answer
A
question
3. Market structures are categorized by which two criteria?
A) the size of the firms and the extent of advertising
B) the number of firms and the size of the firms
C) whether or not products are differentiated and the extent of advertising
D) the number of firms and whether or not products are differentiated
A) the size of the firms and the extent of advertising
B) the number of firms and the size of the firms
C) whether or not products are differentiated and the extent of advertising
D) the number of firms and whether or not products are differentiated
answer
D
question
4. (Figure: Prices, Cost Curves, and Profits) Examine the figure Prices, Cost Curves, and
Profits. If the price is P1 and the firm decides to produce at output Q1, then the firm
earns:
A) a loss equal to (ca) × Q1.
B) a loss equal to (bc) × Q1.
C) zero.
D) a loss equal to (ba) × Q1
Profits. If the price is P1 and the firm decides to produce at output Q1, then the firm
earns:
A) a loss equal to (ca) × Q1.
B) a loss equal to (bc) × Q1.
C) zero.
D) a loss equal to (ba) × Q1
answer
A
question
5. (Figure: Payoff Matrix for the United States and the European Union) Examine the
figure Payoff Matrix for the United States and the European Union. Suppose that the
United States and the European Union both produce corn, and each region can make
more profit if output is limited and the price of corn is high. If either region increases
their output of corn, the profits of both are affected as shown in the payoff matrix. The
Nash equilibrium combination is for:
A) the European Union to produce a high output and the United States to produce a
low output.
B) both the United States and the European Union to produce a low output.
C) both the United States and the European Union to produce a high output.
D) the United States to produce a high output and the European Union to produce a
low output.
figure Payoff Matrix for the United States and the European Union. Suppose that the
United States and the European Union both produce corn, and each region can make
more profit if output is limited and the price of corn is high. If either region increases
their output of corn, the profits of both are affected as shown in the payoff matrix. The
Nash equilibrium combination is for:
A) the European Union to produce a high output and the United States to produce a
low output.
B) both the United States and the European Union to produce a low output.
C) both the United States and the European Union to produce a high output.
D) the United States to produce a high output and the European Union to produce a
low output.
answer
C
question
6. (Figure: Marginal Product of Labor) Examine the figure Marginal Product of Labor.
The total product of labor for eight workers is:
A) 96 bushels.
B) 75 bushels.
C) 35 bushels.
D) 40 bushels.
The total product of labor for eight workers is:
A) 96 bushels.
B) 75 bushels.
C) 35 bushels.
D) 40 bushels.
answer
A
question
7. (Figure: Long-Run Average Cost) Examine the figure Long-Run Average Cost. This
firm has _____ in the output region from B to C.
A) falling marginal cost
B) constant returns to scale
C) diseconomies of scale
D) economies of scale
firm has _____ in the output region from B to C.
A) falling marginal cost
B) constant returns to scale
C) diseconomies of scale
D) economies of scale
answer
C
question
8. (Figure: The Market for Lattes) Examine the figure The Market for Lattes. If the
government assesses a tax of $0.75 on sellers of lattes, the price producers will receive
for a latte after the tax will:
A) decrease from $2 to $1.25.
B) decrease from $2 to $1.
C) decrease from $2 to $1.50.
D) decrease from $2 to $1.75.
government assesses a tax of $0.75 on sellers of lattes, the price producers will receive
for a latte after the tax will:
A) decrease from $2 to $1.25.
B) decrease from $2 to $1.
C) decrease from $2 to $1.50.
D) decrease from $2 to $1.75.
answer
C
question
9. (Scenario: A Small-Town Monopolist) Use the information from the scenario A SmallTown
Monopolist. If the company is allowed to offer different prices for its good, what
is the maximum amount of profit this company can earn?
A) $750
B) $1,375
C) $1,520
D) $1,000
Monopolist. If the company is allowed to offer different prices for its good, what
is the maximum amount of profit this company can earn?
A) $750
B) $1,375
C) $1,520
D) $1,000
answer
B
question
10. A higher tax rate is more likely to increase tax revenue collected if the price elasticity
of:
A) demand and supply are both low.
B) demand is low, but the price elasticity of supply is high.
C) demand is high, but the price elasticity of supply is low.
D) demand and supply are both high.
of:
A) demand and supply are both low.
B) demand is low, but the price elasticity of supply is high.
C) demand is high, but the price elasticity of supply is low.
D) demand and supply are both high.
answer
A
question
11. A firm's shut-down point is the minimum value of:
A) average variable cost.
B) average total cost.
C) marginal cost.
D) total cost.
A) average variable cost.
B) average total cost.
C) marginal cost.
D) total cost.
answer
A
question
12. The short run is the period of time in which:
A) the firm will not be able to make a profit.
B) at least one input is fixed.
C) the firm is guaranteed to make a profit.
D) a firm can adjust the quantity of any input.
A) the firm will not be able to make a profit.
B) at least one input is fixed.
C) the firm is guaranteed to make a profit.
D) a firm can adjust the quantity of any input.
answer
B
question
13. The ability of a monopolist to raise the price of a product above the competitive level by
reducing the output is known as:
A) barrier to entry.
B) market power.
C) patents and copyrights.
D) product differentiation.
reducing the output is known as:
A) barrier to entry.
B) market power.
C) patents and copyrights.
D) product differentiation.
answer
B
question
14. (Figure: Change in the Total Product) Examine the figure Change in the Total Product.
The figure shows a production function that moves from TP1 to TP2. Which statement is
a likely cause of this shift?
A) The firm employed more of a variable input in the short run.
B) The firm employed more of a fixed input in the long run.
C) Workers in the firm are less productive on average.
D) The firm has suffered a decrease in available technology.
The figure shows a production function that moves from TP1 to TP2. Which statement is
a likely cause of this shift?
A) The firm employed more of a variable input in the short run.
B) The firm employed more of a fixed input in the long run.
C) Workers in the firm are less productive on average.
D) The firm has suffered a decrease in available technology.
answer
B
question
15. In the short run, if AVC < P < ATC, a perfectly competitive firm:
A) does not produce output and earns zero economic profit.
B) does not produce output and earns an economic profit.
C) produces output and earns an economic profit.
D) produces output and incurs an economic loss.
A) does not produce output and earns zero economic profit.
B) does not produce output and earns an economic profit.
C) produces output and earns an economic profit.
D) produces output and incurs an economic loss.
answer
D
question
16. (Figure: A Firm's Cost Curves) Examine the figure A Firm's Cost Curves. The curve
labeled V represents the firm's _____ curve.
A) marginal cost
B) average variable cost
C) average total cost
D) total cost
labeled V represents the firm's _____ curve.
A) marginal cost
B) average variable cost
C) average total cost
D) total cost
answer
A
question
17. (Figure: Short-Run Monopoly) Examine the figure Short-Run Monopoly. The profitmaximizing
rule is satisfied by the intersection at point:
A) L.
B) G.
C) H.
D) J.
rule is satisfied by the intersection at point:
A) L.
B) G.
C) H.
D) J.
answer
A
question
18. (Figure: Short-Run Monopoly) Examine the figure Short-Run Monopoly. The profitmaximizing
price is price:
A) Q.
B) N.
C) O.
D) P.
price is price:
A) Q.
B) N.
C) O.
D) P.
answer
B
question
19. (Figure: Payoff Matrix I for Blue Spring and Purple Rain) Examine the figure Payoff
Matrix I for Blue Spring and Purple Rain. The figure refers to two producers of bottled
water. Each has two strategies available to it: a high price and a low price. The
dominant strategy for Purple Rain is to:
A) always adopt the same strategy as Blue Spring.
B) Purple Rain does not have a dominant strategy.
C) always charge a high price.
D) always charge a low price
Matrix I for Blue Spring and Purple Rain. The figure refers to two producers of bottled
water. Each has two strategies available to it: a high price and a low price. The
dominant strategy for Purple Rain is to:
A) always adopt the same strategy as Blue Spring.
B) Purple Rain does not have a dominant strategy.
C) always charge a high price.
D) always charge a low price
answer
B
question
20. In the classic prisoners' dilemma with two accomplices in crime, the dominant strategy
for each individual is to:
A) lie.
B) confess only if the other confesses.
C) not confess.
D) confess.
for each individual is to:
A) lie.
B) confess only if the other confesses.
C) not confess.
D) confess.
answer
D
question
21. De Beers became a monopoly by:
A) technological superiority.
B) ownership of a patent.
C) economies of scale.
D) establishing control over diamond mines
A) technological superiority.
B) ownership of a patent.
C) economies of scale.
D) establishing control over diamond mines
answer
D
question
22. (Figure: The Market for Hotel Rooms) Examine the figure The Market for Hotel
Rooms. Suppose with no tax, the equilibrium price is $110 and the equilibrium quantity
is 250. If the local government levies a tax of $30 per night on each hotel room rented,
the new equilibrium price will equal _____ and the new equilibrium quantity will equal
_____.
A) $110; 250
B) $140; 100
C) $130; 150
D) $120; 200
Rooms. Suppose with no tax, the equilibrium price is $110 and the equilibrium quantity
is 250. If the local government levies a tax of $30 per night on each hotel room rented,
the new equilibrium price will equal _____ and the new equilibrium quantity will equal
_____.
A) $110; 250
B) $140; 100
C) $130; 150
D) $120; 200
answer
C
question
23. (Figure and Table: Variable, Fixed, and Total Costs) Examine the figure and table
Variable, Fixed, and Total Costs. In the figure, the marginal cost when increasing
production from 19 to 36 bushels of wheat is:
A) $22.22.
B) $23.53.
C) $11.11.
D) $11.76
Variable, Fixed, and Total Costs. In the figure, the marginal cost when increasing
production from 19 to 36 bushels of wheat is:
A) $22.22.
B) $23.53.
C) $11.11.
D) $11.76
answer
D
question
24. (Table: Production Function for Soybeans) Examine the table Production Function for
Soybeans. The table shows a production function for soybeans, showing daily
production. Assume that the fixed input, capital, is 10 acres of land and a tractor, which
have a combined cost of $150 per day. The cost of labor is $100 per worker per day.
The total cost of producing 25 bushels of soybeans is:
A) $250.
B) $150.
C) $50.
D) $100.
Soybeans. The table shows a production function for soybeans, showing daily
production. Assume that the fixed input, capital, is 10 acres of land and a tractor, which
have a combined cost of $150 per day. The cost of labor is $100 per worker per day.
The total cost of producing 25 bushels of soybeans is:
A) $250.
B) $150.
C) $50.
D) $100.
answer
A
question
25. (Figure: A Profit-Maximizing Monopoly Firm) Examine the figure A ProfitMaximizing
Monopoly Firm. The firm in this figure will produce _____ units of output
per week.
A) 250
B) 300
C) 200
D) 150
Monopoly Firm. The firm in this figure will produce _____ units of output
per week.
A) 250
B) 300
C) 200
D) 150
answer
C
question
26. (Figure: A Profit-Maximizing Monopoly Firm) Examine the figure A ProfitMaximizing
Monopoly Firm. This firm's price per unit is:
A) $25.
B) $30.
C) $35.
D) $20.
Monopoly Firm. This firm's price per unit is:
A) $25.
B) $30.
C) $35.
D) $20.
answer
B
question
27. (Figure: A Monopolist) Examine the figure A Monopolist. If this monopolist perfectly
price-discriminates, then it will produce _____ units. This will lead to producer surplus
equal to _____, consumer surplus equal to _____, and a deadweight loss equal to _____.
A) 50; $1,225; $0; $0
B) 100; $1,500; $612.50; $612.50
C) 70; $2,450; $0; $0
D) 35; $1,225; $612.50; $612.50
price-discriminates, then it will produce _____ units. This will lead to producer surplus
equal to _____, consumer surplus equal to _____, and a deadweight loss equal to _____.
A) 50; $1,225; $0; $0
B) 100; $1,500; $612.50; $612.50
C) 70; $2,450; $0; $0
D) 35; $1,225; $612.50; $612.50
answer
C
question
28. In the short run, if P = ATC, a perfectly competitive firm:
A) does not produce output and incurs an economic loss.
B) produces output and incurs an economic loss.
C) produces output and earns zero economic profit.
D) produces output and earns an economic profit
A) does not produce output and incurs an economic loss.
B) produces output and incurs an economic loss.
C) produces output and earns zero economic profit.
D) produces output and earns an economic profit
answer
C
question
29. (Figure: An Excise Tax) Examine the figure An Excise Tax. If an excise tax equal to
$1.10 is imposed on this good, then the price paid by consumers will:
A) rise by $1.33.
B) rise by $0.50.
C) rise by $1.10.
D) not rise.
$1.10 is imposed on this good, then the price paid by consumers will:
A) rise by $1.33.
B) rise by $0.50.
C) rise by $1.10.
D) not rise.
answer
B
question
30. (Figure: Costs and Profits for Tomato Producers) Examine the figure Costs and Profits
for Tomato Producers. The market for tomatoes is perfectly competitive, and an
individual tomato farmer faces the cost curve shown in the figure. The market price of a
bushel of tomatoes is $18. If the market price falls to $16, the farmer's marginal revenue
_____ and the profit-maximizing output _____.
A) decreases; increases
B) decreases; decreases
C) increases; increases
D) increases; decreases
for Tomato Producers. The market for tomatoes is perfectly competitive, and an
individual tomato farmer faces the cost curve shown in the figure. The market price of a
bushel of tomatoes is $18. If the market price falls to $16, the farmer's marginal revenue
_____ and the profit-maximizing output _____.
A) decreases; increases
B) decreases; decreases
C) increases; increases
D) increases; decreases
answer
B
question
31. (Scenario: Payoff Matrix for Two Firms) Use the information from the scenario Payoff
Matrix for Two Firms. In the scenario, what is the dominant strategy for firm A?
A) Firm A has no dominant strategies.
B) The dominant strategy is to compete.
C) The dominant strategy is to cooperate.
D) Firm A has two dominant strategies.
Matrix for Two Firms. In the scenario, what is the dominant strategy for firm A?
A) Firm A has no dominant strategies.
B) The dominant strategy is to compete.
C) The dominant strategy is to cooperate.
D) Firm A has two dominant strategies.
answer
C
question
32. If a perfectly competitive firm is producing a quantity where MC > MR, then profit:
A) can be increased by decreasing the price.
B) is maximized.
C) can be increased by increasing production.
D) can be increased by decreasing production.
A) can be increased by decreasing the price.
B) is maximized.
C) can be increased by increasing production.
D) can be increased by decreasing production.
answer
D
question
33. What Exam Version is this?
A) Version 1
B) Version 2
A) Version 1
B) Version 2
answer
N/A
question
34. (Figure: The Perfectly Competitive Firm) Examine the figure The Perfectly Competitive
Firm. The figure shows a perfectly competitive firm that faces demand curve d, has the
cost curves shown, and maximizes profit. If the market price is $3, the firm will produce
_____ units of output per day.
A) 400
B) 100
C) 250
D) 300
Firm. The figure shows a perfectly competitive firm that faces demand curve d, has the
cost curves shown, and maximizes profit. If the market price is $3, the firm will produce
_____ units of output per day.
A) 400
B) 100
C) 250
D) 300
answer
D
question
35. (Figure: Water Works) Examine the figure Water Works. The figure shows the demand,
marginal revenue, average cost, and marginal cost for a small town's water works,
which is a natural monopoly. If the water works is unregulated and maximizes profit,
how many customers will it serve?
A) 375
B) 400
C) 300
D) 200
marginal revenue, average cost, and marginal cost for a small town's water works,
which is a natural monopoly. If the water works is unregulated and maximizes profit,
how many customers will it serve?
A) 375
B) 400
C) 300
D) 200
answer
D
question
36. (Figure: Water Works) Examine the figure Water Works. The figure shows the demand,
marginal revenue, average cost, and marginal cost for a small town's water works,
which is a natural monopoly. If the water works is unregulated and maximizes profit,
what price will it charge to each customer?
A) $13
B) $5
C) $21
D) $6
marginal revenue, average cost, and marginal cost for a small town's water works,
which is a natural monopoly. If the water works is unregulated and maximizes profit,
what price will it charge to each customer?
A) $13
B) $5
C) $21
D) $6
answer
A
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