question
Lou consumes a lot of tea, which is a normal good for this consumer. When the price of tea increases, ...
A) the income effect causes her to consume more tea.
B) the substitution effect causes her to consume more tea.
C) her income and substitution effects work in opposite directions.
D) both income and substitution effects cause her to consume less tea.
A) the income effect causes her to consume more tea.
B) the substitution effect causes her to consume more tea.
C) her income and substitution effects work in opposite directions.
D) both income and substitution effects cause her to consume less tea.
answer
D
question
Juan is willing to pay $100 for a new phone and Sarah is willing to pay $85. What is the gain in total consumer
surplus if the price of the phone falls from $90 to $70?
A) $15
B) $35
C) $160
D) $185
surplus if the price of the phone falls from $90 to $70?
A) $15
B) $35
C) $160
D) $185
answer
B
question
Robin spends their entire weekly budget on burritos, which cost $7 each, and bubble tea, which costs $3 per
order. At their current weekly consumption levels of these goods, the marginal utility of their last burrito was
1,200, and the marginal utility of their last bubble tea was 800. What can we conclude from this information?
A) Robin's utility would increase if they consumed more burritos and less bubble tea.
B) Robin's utility would increase if they consumed fewer burritos and more bubble tea.
C) Robin's utility would be maximized if they consumed only bubble tea.
D) Robin's utility would be maximized if they consumed only burritos.
order. At their current weekly consumption levels of these goods, the marginal utility of their last burrito was
1,200, and the marginal utility of their last bubble tea was 800. What can we conclude from this information?
A) Robin's utility would increase if they consumed more burritos and less bubble tea.
B) Robin's utility would increase if they consumed fewer burritos and more bubble tea.
C) Robin's utility would be maximized if they consumed only bubble tea.
D) Robin's utility would be maximized if they consumed only burritos.
answer
B
question
Suppose the Marginal Product of Labor is below (less than) its Average Product. Then using more labor will ...
A) reduce its Total Product.
B) raise its Average Product.
C) raise its Marginal Product.
D) reduce its Average Product.
A) reduce its Total Product.
B) raise its Average Product.
C) raise its Marginal Product.
D) reduce its Average Product.
answer
D
question
The firm "Finest Cabinetry" produces 100 tables per week, at a total cost of $10,000 and total fixed cost of
$6,000. We can conclude that average variable cost is ...
A) $4,000.
B) $100.
C) $60.
D) $40.
$6,000. We can conclude that average variable cost is ...
A) $4,000.
B) $100.
C) $60.
D) $40.
answer
D
question
What is meant by a firm's capacity?
A) The output level where revenue is maximized.
B) The output level where profits are maximized.
C) The output level where ATC are minimized.
D) The highest output level it can produce.
A) The output level where revenue is maximized.
B) The output level where profits are maximized.
C) The output level where ATC are minimized.
D) The highest output level it can produce.
answer
C
question
A firm's production costs are minimized when ...
A) the ratio of marginal products is 1.
B) the marginal product of each input is 0.
C) the total product received from each input is equal.
D) the ratio of marginal products equals the input price ratio.
A) the ratio of marginal products is 1.
B) the marginal product of each input is 0.
C) the total product received from each input is equal.
D) the ratio of marginal products equals the input price ratio.
answer
D
question
For most consumers, rice and soy sauce are complements. When the price of soy sauce increases, this leads to...
A) an increase in demand for rice
B) a decrease in demand for rice
C) an increase in the supply of rice
D) a decrease in the supply of rice
A) an increase in demand for rice
B) a decrease in demand for rice
C) an increase in the supply of rice
D) a decrease in the supply of rice
answer
B
question
In the market for a normal good, a fall in average household income leads to a new equilibrium with...
A) a lower price and a larger quantity
B) a lower price and a smaller quantity
C) a higher price and a larger quantity
D) a higher price and a smaller quantity
A) a lower price and a larger quantity
B) a lower price and a smaller quantity
C) a higher price and a larger quantity
D) a higher price and a smaller quantity
answer
B
question
Consider a regular supply and demand diagram for refrigerators. If the price of compressors (which are needed in the production of refrigerators) rises, then the new equilibrium will have...
A) a lower price and a larger quantity
B) a lower price and smaller quantity
C) a higher price and a larger quantity
D) a higher price and a smaller quantity
A) a lower price and a larger quantity
B) a lower price and smaller quantity
C) a higher price and a larger quantity
D) a higher price and a smaller quantity
answer
D
question
In a market without price controls, excess demand (or a shortage) is eliminated by...
A) a price increase
B) a price decrease
C) standing in line
D) the underground economy
A) a price increase
B) a price decrease
C) standing in line
D) the underground economy
answer
A
question
A maximum permissible price, set by law, is called a ....
A) price floor
B) price ceiling
C) price equilibrium
D) bargain basement price
A) price floor
B) price ceiling
C) price equilibrium
D) bargain basement price
answer
B
question
In a market where the price is stuck above the equilibrium price,...
A) the quantity supplied determines the amount exchanged
B) there must be a price ceiling set by the government
C) some buyers will be unable to find sellers
D) some sellers will be unable to find buyers
A) the quantity supplied determines the amount exchanged
B) there must be a price ceiling set by the government
C) some buyers will be unable to find sellers
D) some sellers will be unable to find buyers
answer
D
question
A price floor is only binding if it is set...
A) below the equilibrium price
B) above the equilibrium price
C) low enough to create excess demand
D) at the equilibrium price
A) below the equilibrium price
B) above the equilibrium price
C) low enough to create excess demand
D) at the equilibrium price
answer
B
question
Which of the following will have the least elastic demand?
A) carbonated drinks
B) soda with sugar
C) Sierra Mist
D) drinks
A) carbonated drinks
B) soda with sugar
C) Sierra Mist
D) drinks
answer
D
question
If total expenditure on Ibuprofen rose after its price fell, then we know the demand for Ibuprofen was...
A) perfectly inelastic
B) inelastic
C) unit-elastic
D) elastic
A) perfectly inelastic
B) inelastic
C) unit-elastic
D) elastic
answer
D
question
At its current price, the elasticity of demand for bowls of pho at a local restaurant is 0.8. If the restaurant wants to increase its revenue, it should...
A) keep the price as it is.
B) reduce the price
C) raise the price
D) hire more cooks
A) keep the price as it is.
B) reduce the price
C) raise the price
D) hire more cooks
answer
C
question
If a demand curve is a horizontal straight line, then the [absolute value of the] price elasticity of demand is...
A) 0
B) between 0 and 1
C) 1
D) infinity
A) 0
B) between 0 and 1
C) 1
D) infinity
answer
D
question
With 10 units of capital and 10 units of labor, Stitches' Fabrics produced 300 yards of fabric per day. After both
inputs were raised to 15 units of each, the firm produced 500 yards per day. This factory experienced ...
A) constant returns to scale.
B) diseconomies of scale.
C) economies of scale.
inputs were raised to 15 units of each, the firm produced 500 yards per day. This factory experienced ...
A) constant returns to scale.
B) diseconomies of scale.
C) economies of scale.
answer
C
question
If total revenue increases as more units are sold, then marginal revenue must be ...
A) increasing.
B) constant.
C) positive.
D) negative.
A) increasing.
B) constant.
C) positive.
D) negative.
answer
C
question
In the short run, how would higher fixed costs affect a firm's output level?
A) It would lead to an increase in output.
B) It would lead to no change in output.
C) It would lead to a decrease in output.
D) It would lead to a shutdown.
A) It would lead to an increase in output.
B) It would lead to no change in output.
C) It would lead to a decrease in output.
D) It would lead to a shutdown.
answer
B
question
One reason why many movie theaters charge lower admission for senior citizens is that ...
A) senior citizens have a more elastic demand than other movie-goers.
B) senior citizens have a less elastic demand than other movie-goers.
C) movie-theater owners don't maximize their profits.
D) the government makes them do it.
A) senior citizens have a more elastic demand than other movie-goers.
B) senior citizens have a less elastic demand than other movie-goers.
C) movie-theater owners don't maximize their profits.
D) the government makes them do it.
answer
A
question
Compared with a perfectly competitive industry, a monopoly will generate ...
A) greater output, a higher price, and a gain in economic surplus.
B) greater output, a lower price, and a gain in economic surplus.
C) lower output, a higher price, and a loss in economic surplus.
D) lower output, a lower price, and a loss economic surplus.
A) greater output, a higher price, and a gain in economic surplus.
B) greater output, a lower price, and a gain in economic surplus.
C) lower output, a higher price, and a loss in economic surplus.
D) lower output, a lower price, and a loss economic surplus.
answer
C
question
This table summarizes the demand faced by a single-price monopolist:
Price- $8 $7 $6 $5 $4
Quantity 5 6 7 8 9
Suppose a monopolist's marginal revenue is MR = 30 - 2Q and its marginal cost is MC = 6 +2Q. The profit-maximizing
quantity is ...
A) 2.
B) 4.
C) 6.
D) 24.
Price- $8 $7 $6 $5 $4
Quantity 5 6 7 8 9
Suppose a monopolist's marginal revenue is MR = 30 - 2Q and its marginal cost is MC = 6 +2Q. The profit-maximizing
quantity is ...
A) 2.
B) 4.
C) 6.
D) 24.
answer
C
question
Because there are no entry barriers in Perfect Competition, in the long run ...
A) a firm's accounting profits will turn negative.
B) a firm's economic profits will tend toward zero.
C) a firm's accounting profits will tend toward zero.
D) a firm's economic profits will tend to equal its accounting profits.
A) a firm's accounting profits will turn negative.
B) a firm's economic profits will tend toward zero.
C) a firm's accounting profits will tend toward zero.
D) a firm's economic profits will tend to equal its accounting profits.
answer
B
question
This table summarizes the demand faced by a single-price monopolist:
Price- $8 $7 $6 $5 $4
Quantity 5 6 7 8 9
When this monopolist reduces its price from $8 to $7, what is its marginal revenue?
A) -$1
B) $2
C) $7
D) $8
Price- $8 $7 $6 $5 $4
Quantity 5 6 7 8 9
When this monopolist reduces its price from $8 to $7, what is its marginal revenue?
A) -$1
B) $2
C) $7
D) $8
answer
B
question
Suppose a typical perfectly competitive firm is in the following situation in the short run: price = $10; Q = 100
units; ATC = $11; AVC = $9. If this is the best a firm can do, then what will happen in the long run?
A) The industry will shrink because firms are suffering losses.
B) The industry will expand because of economic profits.
C) The size of the industry will remain the same.
D) We can't tell.
units; ATC = $11; AVC = $9. If this is the best a firm can do, then what will happen in the long run?
A) The industry will shrink because firms are suffering losses.
B) The industry will expand because of economic profits.
C) The size of the industry will remain the same.
D) We can't tell.
answer
A
question
From the perspective of a firm in perfect competition, marginal revenue is ...
A) equal to average cost.
B) increasing.
C) decreasing.
D) constant.
A) equal to average cost.
B) increasing.
C) decreasing.
D) constant.
answer
D
question
Considering a firm's decision-making, the long run refers to a period in which ...
A) its taxes are paid.
B) the new fiscal year begins.
C) the amount of labor used is variable.
D) all factors of production are variable.
A) its taxes are paid.
B) the new fiscal year begins.
C) the amount of labor used is variable.
D) all factors of production are variable.
answer
D
question
Maggie's Mushroom Farm produces 1000 pounds of mushrooms per day. At its current use of inputs, the MP
(marginal product) of capital is 10 pounds, and the MP of labor is 20 pounds. An hour of capital costs $15, and an
hour of labor costs $20. We can conclude that ...
A) the firm can produce its current output level more cheaply by using more labor and less capital.
B) the firm can produce its current output level more cheaply by using more capital and less labor.
C) the firm can produce its current output level more cheaply by using less of both inputs.
D) the firm is producing its current output level in the cheapest possible way.
(marginal product) of capital is 10 pounds, and the MP of labor is 20 pounds. An hour of capital costs $15, and an
hour of labor costs $20. We can conclude that ...
A) the firm can produce its current output level more cheaply by using more labor and less capital.
B) the firm can produce its current output level more cheaply by using more capital and less labor.
C) the firm can produce its current output level more cheaply by using less of both inputs.
D) the firm is producing its current output level in the cheapest possible way.
answer
A
question
With their budget, Xiao can afford at most 40 cups of tea. Alternatively, the entire budget could be spent on 20 sandwiches. What is the opportunity cost of one sandwich?
A) $2
B) half a cup of tea
C) 2 cups of tea
D) half a sandwich
A) $2
B) half a cup of tea
C) 2 cups of tea
D) half a sandwich
answer
C
question
An improvement in the technology used to produce a product will...
A) shift the demand curve to the left
B) shift the demand curve to the right
C) shift the supply curve to the left
D) shift the supply curve to the right
A) shift the demand curve to the left
B) shift the demand curve to the right
C) shift the supply curve to the left
D) shift the supply curve to the right
answer
D
question
In a day's work, Felicia could bake 12 loaves of bread or mend 20 socks, while Jae-young could bake 16 loaves of bread or mend 24 socks. Who has the lower opportunity cost per load of bread?
A) Jae-young
B) Neither
C) Felicia
D) Both
A) Jae-young
B) Neither
C) Felicia
D) Both
answer
A
question
Which of the following events would NOT lead to a shift in the supply curve for barley?
A) A less wasteful way of harvesting is invested
B) the price for farming machinery increases
C) the number of barley farmers increases
D) average consumer income increases
A) A less wasteful way of harvesting is invested
B) the price for farming machinery increases
C) the number of barley farmers increases
D) average consumer income increases
answer
D
question
An economy in which most production decisions are taken by a central planning committee is called a....
A) traditional economy
B) command economy
C) market economy
D) class economy
A) traditional economy
B) command economy
C) market economy
D) class economy
answer
B
question
I bought a ticket to a game for $25 dollars and I cannot get a refund. When I arrive at the stadium somebody offers me $40 for the ticket. What is my opportunity cost of attending the game?
A) $15 plus the value of my time
B) $25 plus the value of my time
C) $40 plus the value of my time
D) $65 plus the value of my time
A) $15 plus the value of my time
B) $25 plus the value of my time
C) $40 plus the value of my time
D) $65 plus the value of my time
answer
C
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