question
Refer to Figure 5-16. The price of X is $20, the price of Y is $5, and the consumer's income is $40. Which point represents the consumer's optimal choice?
answer
A (6)
question
The slope of an indifference curve is
answer
C - the marginal rate of substitution.
question
Refer to Figure 5-10. When comparing bundle A to bundle E, the consumer
answer
B - prefers bundle E because it lies on a higher indifference curve.
question
Refer to Figure 5-10. Which of the following statements is correct?
answer
B - Bundle E is preferred to all other points identified in the figure.
question
Refer to Figure 21-16. The price of X is $5, the price of Y is $20, and the consumer's income is $40. Which point represents the consumer's optimal choice?
answer
C
question
Refer to Figure 21-16. The price of X is $25, the price of Y is $25, and the consumer's income is $100. Which point represents the consumer's optimal choice?
answer
B
question
Refer to Figure 5-10. When comparing bundle B to bundle C, the consumer
answer
B - is indifferent between the two bundles.
question
Refer to Figure 5-18. Bundle B represents a point where
answer
D - MRSxy > Px/Py.
question
Refer to Figure 5-3. Which of the graphs in the figure reflects an increase in the price of good X only?
answer
A - graph a
question
Refer to Figure 5-18. Bundle C represents a point where
answer
MRSxy = Px/Py.
question
Refer to Figure 5-3. Which of the graphs in the figure reflects an increase in the price of good Y only?
answer
C - graph c
question
Refer to Figure 5-1. All of the points identified on the figure represent affordable consumption options with the exception of
answer
B - E.
question
Refer to Figure 5-1. A consumer who chooses to spend all of her income could be at which point(s) on the figure?
answer
C - B, C, or D only
question
Refer to Figure 5-18. Bundle D represents a point where
answer
C
MRSxy < Px/Py.
MRSxy < Px/Py.
question
Refer to Figure 5-1. If the price of a CD is $12, then the consumer's income amounts to
answer
D - $240.
question
Refer to Figure 5-1. If the consumer's income is $140, then what is the price of a CD?
answer
C - $7
question
The theory of consumer choice is to demand as the theory of
answer
C - the competitive firm is to supply.
question
.The theory of consumer choice examines
answer
B - the tradeoffs inherent in decisions made by consumers.
question
Just as the theory of the competitive firm provides a more complete understanding of supply, the theory of consumer choice provides a more complete understanding of
answer
A - demand.
question
The price elasticity of demand measures
answer
buyers' responsiveness to a change in the price of a good.
question
Demand is said to be price elastic if
answer
buyers respond substantially to changes in the price of the good.
question
If the quantity demanded of a certain good responds only slightly to a change in the price of the good, then the
answer
demand for the good is said to be inelastic.
question
Demand is elastic if the price elasticity of demand is
answer
D
greater than 1.
greater than 1.
question
Which of the following is not a determinant of the price elasticity of demand for a good?
answer
B
the availability of complements for the good
the availability of complements for the good
question
Goods with many close substitutes tend to have
answer
A
more elastic demands.
more elastic demands.
question
For a good that is a necessity, demand
answer
A
tends to be inelastic.
tends to be inelastic.
question
The value of the price elasticity of demand for a good will be relatively large when
answer
C
the good is a luxury rather than a necessity.
the good is a luxury rather than a necessity.
question
Which of the following is likely to have the most price inelastic demand?
answer
B
prescription medicine
prescription medicine
question
Which field of economics studies how the number of firms affects the prices in a market and the efficiency of market outcomes?
answer
Industrial Organization
question
.Economists normally assume that the goal of a firm is to(i) sell as much of its product as possible.(ii) set the price of the product as high as possible.(iii) maximize profit.
answer
C
(iii) only
(iii) only
question
An entrepreneur's motivation to start a business arises from
answer
All of the above could be correct.
question
The amount of money that a firm receives from the sale of its output is called
answer
total revenue.
question
The Carolina Christmas Tree Corporation grows and sells 500 Christmas trees. The average cost of production per tree is $50. Each tree sells for a price of $65. The Carolina Christmas Tree Corporation's total revenues are
answer
$32,500.
question
Explicit costs
answer
require an outlay of money by the firm.
question
An example of an explicit cost of production would be the
answer
lease payments for the land on which a firm's factory stands.
question
Which of the following is an example of an implicit cost?(i) the owner of a firm forgoing an opportunity to earn a large salary working for a Wall Street brokerage firm(ii) interest paid on the firm's debt(iii) rent paid by the firm to lease office space
answer
C
(i) only
(i) only
question
Jacqui decides to open her own business and earns $50,000 in accounting profit the first year. When deciding to open her own business, she withdrew $20,000 from her savings, which earned 5 percent interest. She also turned down three separate job offers with annual salaries of $30,000, $40,000, and $45,000. What is Jacqui's economic profit from running her own business?
answer
C
$4,000
$4,000
question
Walter used to work as a high school teacher for $40,000 per year but quit in order to start his own painting business. To invest in his painting business, he withdrew $20,000 from his savings, which paid 3 percent interest, and borrowed $30,000 from his uncle, whom he pays 3 percent interest per year. Last year Walter paid $25,000 for supplies and had revenue of $60,000. Walter asked Tyler the accountant and Greg the economist to calculate his painting business's costs.
answer
A
Tyler says his costs are $25,900, and Greg says his costs are $66,500.
Tyler says his costs are $25,900, and Greg says his costs are $66,500.
question
Economic profit
answer
will never exceed accounting profit
question
Accounting profit is equal to
answer
total revenue minus the explicit cost of producing goods and services
question
Scenario 13-1Korie wants to start her own business making custom furniture. She can purchase a factory that costs $400,000. Korie currently has $500,000 in the bank earning 3 percent interest per year.
Refer to Scenario 13-1. If Korie purchases the factory with her own money, what is the annual implicit opportunity cost of purchasing the factory?
Refer to Scenario 13-1. If Korie purchases the factory with her own money, what is the annual implicit opportunity cost of purchasing the factory?
answer
C
$12,000
$12,000
question
Scenario 13-1Korie wants to start her own business making custom furniture. She can purchase a factory that costs $400,000. Korie currently has $500,000 in the bank earning 3 percent interest per year.
Refer to Scenario 13-1. Suppose Korie purchases the factory using $200,000 of her own money and $200,000 borrowed from a bank at an interest rate of 6 percent. What is Korie's annual opportunity cost of purchasing the factory?
Refer to Scenario 13-1. Suppose Korie purchases the factory using $200,000 of her own money and $200,000 borrowed from a bank at an interest rate of 6 percent. What is Korie's annual opportunity cost of purchasing the factory?
answer
d
$18,000
$18,000
question
A production function is a relationship between inputs and
answer
A
quantity of output.
quantity of output.
question
Let L represent the number of workers hired by a firm, and let Q represent that firm's quantity of output. Assume two points on the firm's production function are (L = 12, Q = 122) and (L = 13, Q = 130). Then the marginal product of the 13th worker is
answer
A
8 units of output.
8 units of output.
question
Refer to Table 13-3. The marginal product of the second worker is
answer
c
80 units.
80 units.
question
Refer to Table 13-3. The marginal product of the fourth worker is
answer
A
10 units.
10 units.
question
Refer to Table 13-3. At which number of workers does diminishing marginal product begin?
answer
B - 2
question
Refer to Figure 13-2. The graph illustrates a typical
answer
B - production function.
question
Refer to Figure 13-2. As the number of workers increases,
answer
A - total output increases but at a decreasing rate.
question
Refer to Figure 13-2. As the number of workers increases,
answer
A - marginal product decreases.
question
Average total cost equals
answer
B - change in total costs divided by change in quantity produced.
question
Refer to Table 13-7. What is the value of A?
answer
B - $50
question
Refer to Table 13-7. What is the value of B?
answer
C - $100
question
Refer to Table 13-7. What is the value of C?
answer
C - $100
question
Refer to Table 13-7. What is the value of E?
answer
C - $100
question
Refer to Table 13-7. What is the value of F?
answer
C - c. $150
question
Refer to Table 13-7. What is the value of G?
answer
D - d. $270
question
Refer to Table 13-7. What is the value of H?
answer
B - $50
question
When marginal cost is greater than average cost, average cost is
answer
A - rising.
question
The minimum points of the average variable cost and average total cost curves occur where the
answer
B - marginal cost curve intersects those curves.
question
When a factory is operating in the short run,
answer
D - it cannot adjust the quantity of fixed inputs.
question
How long does it take a firm to go from the short run to the long run?
answer
D - It depends on the nature of the firm.
question
Refer to Table 13-7. What is the value of D?
answer
B
$50
$50
question
Refer to Table 13-7. What is the value of I?
answer
C
$220
$220
question
Refer to Table 13-7. What is the value of J?
answer
A
$25
$25
question
Refer to Table 13-7. What is the value of K?
answer
C
$110
$110
question
Refer to Table 13-7. What is the value of L?
answer
B
$135
$135
question
Refer to Table 13-7. What is the value of M?
answer
D
$410
$410
question
Refer to Table 13-7. What is the value of N?
answer
A
$50
$50
question
Refer to Table 13-7. What is the value of O?
answer
C
$360
$360
question
Refer to Table 13-7. What is the value of P?
answer
B
$140
$140
question
Refer to Table 13-7. What is the value of Q?
answer
A
$16.67
$16.67
question
Refer to Table 13-7. What is the value of R?
answer
C
$136.67
$136.67
question
Which of the following explains why long-run average cost at first decreases as output increases?
answer
D
gains from specialization of inputs
gains from specialization of inputs
question
Economies of scale occur when a firm's
answer
B
long-run average total costs are decreasing as output increases.
long-run average total costs are decreasing as output increases.
question
hen a firm's long-run average total costs do not vary as output increases, the firm exhibits
answer
B
constant returns to scale
constant returns to scale
question
Diseconomies of scale occur when a firm's
answer
C
long-run average total costs are increasing as output increases.
long-run average total costs are increasing as output increases.
question
.In the long run a company that produces and sells covers for cell phones incurs total costs of $2,500 when output is 1,250 covers and $4,000 when output is 1,500 covers. For this range of output, the cell phone cover company exhibits
answer
C
diseconomies of scale.
diseconomies of scale.
question
A restaurant that has market power can
answer
B
influence the market price for the meals it sells.
influence the market price for the meals it sells.
question
If your local gasoline station raised its price by 20 percent, its sales of gasoline would decrease substantially because your local gas station
answer
D
All of the above are correct.
All of the above are correct.
question
Which of the following is a characteristic of a competitive market?
answer
D
Buyers and sellers are price takers.
Buyers and sellers are price takers.
question
Competitive markets are characterized by
answer
D
free entry and exit by firms.
free entry and exit by firms.
question
Which of the following industries is most likely to exhibit the characteristic of free entry?
answer
C
dairy farming
dairy farming
question
Which of the following industries is least likely to exhibit the characteristic of free entry?
answer
B
satellite radio
satellite radio
question
Land of Many Lakes (LML) sells butter to a broker in Albert Lea, Minnesota. Because the market for butter is generally considered to be competitive, LML does not
answer
D
choose the price at which it sells its butter.
choose the price at which it sells its butter.
question
If a competitive firm is currently producing a level of output at which marginal revenue exceeds marginal cost, then
answer
A
a one-unit increase in output will increase the firm's profit.
a one-unit increase in output will increase the firm's profit.
question
The intersection of a firm's marginal revenue and marginal cost curves determines the level of output at which
answer
D
profit is maximized.
profit is maximized.
question
For a certain firm, the 100th unit of output that the firm produces has a marginal revenue of $7 and a marginal cost of $10. It follows that the
answer
C
firm's profit-maximizing level of output is less than 100 units.
firm's profit-maximizing level of output is less than 100 units.
question
Refer to Table 14-14. What is Bob's total fixed cost?
answer
C
$5
$5
question
Refer to Table 14-14. What is the total revenue from selling 5 units?
answer
D
$16.25
$16.25
question
Refer to Table 14-14. What is the marginal revenue of the 4th unit?
answer
B
$3.25
$3.25
question
Refer to Table 14-14. At what quantity will Bob maximize his profit?
answer
B
6 units
6 units
question
Refer to Table 14-14. Suppose that due to a decrease in the market demand for bread the market price of bread drops to $2.75. At this new price, if Bob produces and sells the profit-maximizing quantity, how much profit will he earn?
answer
B
$1.25
$1.25
question
Refer to Figure 14-10. If there are 700 identical firms in this market, what is the value of Q2?
answer
D
420,000
420,000
question
The entry of new firms into a competitive market will
answer
B
increase market supply and decrease market price.
increase market supply and decrease market price.
question
In the long run, each firm in a competitive industry earns
answer
B
zero economic profits.
zero economic profits.
question
Refer to Figure 14-13. If the price is $6 in the short run, what will happen in the long run?
answer
B
Individual firms will earn positive economic profits in the short run, which will entice other firms to enter the industry.
Individual firms will earn positive economic profits in the short run, which will entice other firms to enter the industry.
question
Refer to Figure 14-13. If the price is $4.50 in the short run, what will happen in the long run?
answer
A
Nothing. The price is consistent with zero economic profits, so there is no incentive for firms to enter or exit the industry.
Nothing. The price is consistent with zero economic profits, so there is no incentive for firms to enter or exit the industry.
question
Refer to Figure 14-13. If the price is $3.50 in the short run, what will happen in the long run?
answer
C
Individual firms will earn negative economic profits in the short run, which will cause some firms to exit the industry.
Individual firms will earn negative economic profits in the short run, which will cause some firms to exit the industry.
question
Refer to Figure 14-13. If the price is $2 in the short run, what will happen in the long run?
answer
D
Because the price is below the firm's average variable costs, the firms will shut down.
Because the price is below the firm's average variable costs, the firms will shut down.
question
Which of the following is not a characteristic of a monopoly?
answer
C
free entry and exit
free entry and exit
question
The fundamental source of monopoly power is
answer
D
barriers to entry.
barriers to entry.
question
A benefit of a monopoly is
answer
C
question
Suppose ABC Aluminum Inc. owns 80% of the world's bauxite, a mineral used in the production of aluminum. Which of the following reasons describes the fundamental barrier to entry for the aluminum industry?
answer
A
monopoly resources
monopoly resources
question
Which of the following is not a reason for the existence of a monopoly?
answer
D
diseconomies of scale
diseconomies of scale
question
Which of the following would be most likely to have monopoly power?
answer
B
a local cable TV provider
a local cable TV provider
question
Which of the following would be most likely to have monopoly power?
answer
B
a municipal water company
a municipal water company
question
Which of the following is not an example of a barrier to entry?
answer
C
An entrepreneur opens a cupcake bakery.
An entrepreneur opens a cupcake bakery.
question
Price discrimination adds to social welfare in the form of(i) increased total surplus.(ii) reduced costs of production.(iii) increased consumer surplus.
answer
A
(i) only
(i) only
question
If a monopolist can practice perfect price discrimination, the monopolist will
answer
D
all of the above
all of the above
question
In studying oligopolistic markets, economists assume that outcome.
answer
C
each oligopolist cares only about its own profit.
each oligopolist cares only about its own profit.
question
A special kind of imperfectly competitive market that has only two firms is called
answer
D
a duopoly.
a duopoly.
question
If four firms comprise the entire golf club industry, the market would be
answer
B
characterized by interdependence of firms.
characterized by interdependence of firms.
question
An agreement among firms in a market about quantities to produce or prices to charge is called
answer
A
collusion.
collusion.
question
Suppose that Bieber and Rihanna are duopolists in the music industry. In May, they agree to work together as a monopolist, charging the monopoly price for their music and producing the monopoly quantity of songs. By June, each singer is considering breaking the agreement. What would you expect to happen next?
answer
B
Bieber and Rihanna will each break the agreement. Both singers' profits will decrease.
Bieber and Rihanna will each break the agreement. Both singers' profits will decrease.
question
As the number of firms in an oligopoly increases, the
answer
A
price approaches marginal cost, and the quantity approaches the socially efficient level.
price approaches marginal cost, and the quantity approaches the socially efficient level.
question
If a certain market were a monopoly, then the monopolist would maximize its profit by producing 4,000 units of output. If, instead, that market were a duopoly, then which of the following outcomes would be most likely if the duopolists successfully collude?
answer
C
One duopolist produces 2,400 units of output and the other produces 1,600 units of output.
One duopolist produces 2,400 units of output and the other produces 1,600 units of output.
question
In markets characterized by oligopoly.
answer
A
the oligopolists earn the highest profit when they cooperate and behave like a monopolist.
the oligopolists earn the highest profit when they cooperate and behave like a monopolist.
question
Because each oligopolist cares about its own profit rather than the collective profit of all the oligopolists together
answer
A
they are unable to maintain the same degree of monopoly power enjoyed by a monopolist.
they are unable to maintain the same degree of monopoly power enjoyed by a monopolist.
question
Assuming that oligopolists do not have the opportunity to collude, once they have reached the Nash equilibrium, it
answer
C
is always in their best interest to leave their quantities supplied unchanged.
is always in their best interest to leave their quantities supplied unchanged.
question
As the number of firms in an oligopoly market
answer
C
increases, the market approaches the competitive market outcome.
increases, the market approaches the competitive market outcome.
question
If a market is a duopoly and additional firms enter and do not cooperate, then
answer
C
price falls and quantity rises.
price falls and quantity rises.
question
If duopolists colluded but then stopped colluding,
answer
C
price would fall and quantity would rise
price would fall and quantity would rise
question
Cartels are difficult to maintain because
answer
each firm has an incentive to deviate from its agreed output level.
question
In an oligopoly market, the Nash Equilibrium
answer
A
is a stable outcome despite providing a lower total profit level.
is a stable outcome despite providing a lower total profit level.
question
Refer to Table 16-1. Suppose that Abby and Brad work together to operate as a profit-maximizing monopolist. What price will they charge for water?
answer
C
$6
$6
question
Refer to Table 16-1. Suppose that Abby and Brad work together to operate as a profit-maximizing monopolist. How many gallons of water will be produced and sold?
answer
C
6 gallons
6 gallons
question
Refer to Table 16-1. If this market for water were perfectly competitive instead of monopolistic, what would be the price for water?
answer
A
$0
$0
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