Final- Microeconomics - Assignment Essays

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Use the following table to answer the question.
Jane should specialize in the production of which good?

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B) green beans

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2) In a market, buyers want to pay the ________ possible price and sellers want to charge the ________ possible price.

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D) lowest, highest

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3) The table below shows the weekly demand for hamburgers in a market where there are just three buyers.
Refer to the table. If the price of a hamburger decreases from $6 to $5, then the weekly market quantity demanded will

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C) increase from 17 to 24.

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4) The idea in economics that "there is no free lunch" means that:

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A) There are opportunity costs involved even in free lunches

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5) Which question is an illustration of a microeconomic question?

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B) Is the volume of wine produced in one year dependent upon the price of wine?

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6) From an economic perspective, when a consumer decides to buy more life insurance, the consumer has most likely concluded that the:

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A) Marginal benefit of more insurance coverage is greater than the marginal cost

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7) A higher price reduces the quantity of a product demanded because

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D) individuals will buy less of the product and more of its substitutes.

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8) The following graph is the production possibilities frontier of a nation:
Refer to the graph. The combination "5 drill presses and 2 units of bread" indicates an

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B) inefficient combination for the nation.

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If box A represents businesses or firms, B the resource market, and C households, and if flow (7) represents goods and services, then flow (6) would represent

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D) consumption expenditures (money).

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10) One basic difference between "land" and "capital" resources is that land is

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D) a gift of nature, while capital is manufactured.

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If the price in this market is $4 per bushel, there will be a

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A) surplus, and the price will tend to fall.

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2) Which of the following will cause the demand curve for product A to shift to the left?

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A) An increase in money income if A is an inferior good.

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3) Suppose that in each of four successive years producers sell more of their product and at higher prices. This could be explained

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C) in terms of a stable supply curve and increasing demand.

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4) All else held constant, if the government places a tax on each gallon of gasoline produced, then this would cause a
A) rightward shift in the current supply of gasoline.
B) leftward shift in the current supply of gasoline.
C) movement down along the current supply curve of gasoline.
D) movement up along the current supply curve of gasoline.

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B) leftward shift in the current supply of gasoline.

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5) If a price ceiling is set below the equilibrium price in a market
A) the quantity demanded will exceed the quantity supplied.
B) rationing will be unnecessary.
C) surpluses of the commodity will develop.
D) the quantity supplied will exceed the quantity demanded.

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A) the quantity demanded will exceed the quantity supplied.

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6) When an economist says that the demand for a product has increased, this means that:
A) the product has become particularly scarce for some reason.
B) product price has fallen and, as a consequence, consumers are buying a larger quantity of the product.
C) the demand curve has shifted to the left.
D) consumers are now willing to purchase more of this product at each possible price.

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D) consumers are now willing to purchase more of this product at each possible price.

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7) Which would be a likely cause of an increase in the demand for pizza?
A) a successful Instagram campaign stating that eating pizza reduces stress
B) a decrease in the price of pizza
C) the expectation that the price of pizza will decrease in the future
D) a reduced preference for take-out and fast-food dining

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A) a successful Instagram campaign stating that eating pizza reduces stress

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8) Which of the following will cause a decrease in market equilibrium price and an increase in equilibrium quantity?
A) A decrease in demand.
B) A decrease in supply.
C) An increase in supply.
D) An increase in demand.

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C) An increase in supply.

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Select the graph that best shows the changes in demand and supply in the beef market if a new diet fad favoring beef consumption becomes hugely popular, while cattle producers see steeply rising costs of cattle feed.
A) graph (1)
B) graph (2)
C) graph (3)
D) graph (4)

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D) graph (4)

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Assume the government imposes a $2.25 tax on suppliers, which results in a shift of the supply curve from S1 to S2. The amount of the tax paid by the seller is
A) $0.
B) $1.00.
C) $1.25.
D) $2.25.

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D) $2.25.

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What area represents tax revenue after the government imposes the $4 per unit tax on the market?
A) triangle $21a$13
B) triangle abc
C) triangle $1c$9
D) square $13ac$9

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D) square $13ac$9

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2) Which of the following is an example of a negative externality (additional social cost)?
A) falling property values in a neighborhood where a disreputable nightclub is operating
B) the costs paid by a company to build an automated factory
C) an increase in the value of land you own when a nearby development is completed
D) the higher price you pay when you buy a heavily advertised product

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A) falling property values in a neighborhood where a disreputable nightclub is operating

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3) Why does consumer surplus decrease when price increases?
A) Consumers buy less of the good at a higher price.
B) Producers cannot sell as much to the consumer.
C) Consumers buy less of the good at a lower price.
D) Consumers buy more of the good at a higher price.

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A) Consumers buy less of the good at a higher price.

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4) Why do private companies rarely provide public goods?
A) There is no way to force people to pay for the public good which increases free riders.
B) The consumers pay for the public good from the company they want to buy it from.
C) The public goods are consumed which doesn't allow others to consume them also.
D) The consumers do not actually want the public goods.

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A) There is no way to force people to pay for the public good which increases free riders.

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The price elasticity of demand (based on the midpoint formula) when price decreases from $8 to $6 is
A) -1.37.
B) -3.29.
C) -0.33.
D) -1.

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C) -0.33.

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6) The price elasticity of demand is negative because of
A) the midpoint formula.
B) percent-changes being used in the formula.
C) scarcity.
D) the law of demand.

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D) the law of demand.

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7) The intention of a price floor is to help producers by setting a higher than equilibrium price. What is one unintended consequence of this policy?
A) Economic surplus decreases.
B) Consumer surplus increases.
C) Producer surplus increases.
D) There is more scarcity in the economy.

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A) Economic surplus decreases.

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8) Which of the following is key for the Coase Theorem to reach an optimal solution to an externality?
A) Both parties having property rights
B) A single party with property rights
C) Clearly defined property rights
D) No property rights

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C) Clearly defined property rights

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9) If a 5% cut in the price of a product causes the quantity demanded to rise by 10%, the demand is
A) inelastic.
B) perfectly elastic.
C) elastic.
D) unit elastic.

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C) elastic.

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If there are positive externalities from the consumption of product X, then the socially optimal demand curve would be
A) an upward-sloping line.
B) at the position of line D on the graph.
If there are positive externalities from the consumption of product X, then the socially optimal demand curve would be
A) an upward-sloping line.
B) at the position of line D on the graph.
C) to the right of line D on the graph.
D) to the left of line D on the graph.

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C) to the right of line D on the graph.

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1) The supply of product X is elastic if
A) a 5% increase in price generates a 7% increase in quantity supplied.
B) a 7% decrease in price generates a 5% decrease in quantity supplied.
C) a 10% decrease in price does not affect quantity supplied.
D) an 8% increase in price generates an 8% increase in quantity supplied.

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A) a 5% increase in price generates a 7% increase in quantity supplied.

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Using the regular percentage change formula, what is the price elasticity of supply when price increases from $15 to $20?
A) 0.6
B) 0.2
C) 0.5
D) 1

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A) 0.6

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3) Which of the following factors will make the demand for a product relatively elastic?
A) The good is considered a necessity.
B) There are few substitutes.
C) Purchases of the good require a small portion of consumers' budgets.
D) The time interval considered is long.

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D) The time interval considered is long.

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4) A firm produces and sells two goods, A and B. Good A is known to have many close substitutes; good B makes up a significant portion of most families' budgets. A price increase for each good would most likely cause total revenues from good A to
A) increase and total revenues from good B to increase.
B) decrease and total revenues from good B to increase.
C) increase and total revenues from good B to decrease.
D) decrease and total revenues from good B to decrease.

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D) decrease and total revenues from good B to decrease.

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Which product would be an inferior good?
A) product W
B) product X
C) product Y
D) product Z

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C) product Y

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6) Assume that Clara purchases a combination of products Y and Z such that, after she is done spending her limited income, MUy/Py = 25 and MUz/Pz= 15. Based on the equal marginal
principle, Clara
A) should have purchased more Y and less Z.
B) is maximizing her total utility.
C) should have purchased less Y and less Z.
D) should have purchased less Y and more Z.

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A) should have purchased more Y and less Z.

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7) When diminishing marginal utility starts happening as a person consumes more and more of a given good
A) total utility will decrease at a diminishing rate.
B) marginal utility will increase at a diminishing rate.
C) total utility will become negative.
D) total utility will increase at a diminishing rate.

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D) total utility will increase at a diminishing rate.

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The value for X is
A) 15.
B) 5.
C) 55.
D) 10.

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A) 15.

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9) Use the table below to answer this question, which provides information on the production of a product that requires one variable input.
With the addition of the second unit of input, the marginal product is ________ and the average product is ________.
A) 15; 10
B) 15; 20
C) 10; 15
D) 25; 10

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A) 15; 10

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10) Economic profit is equal to
A) accounting profit plus the explicit and implicit costs of production.
B) total revenue minus total fixed cost.
C) total revenue minus the cost of raw materials.
D) total revenue minus the explicit and implicit costs of production.

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D) total revenue minus the explicit and implicit costs of production.

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At the profit-maximizing level of output, the profit earned by the perfectly competitive firm is given by the area
A) ACFH.
B) BCFG.
C) 0AHE.
D) ABGH.

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D) ABGH.

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2) In perfect competition, the demand faced by a single firm is perfectly
A) inelastic, because the firm produces a differentiated product.
B) elastic, because the firm produces a differentiated product.
C) inelastic, because many other firms produce the same standardized product.
D) elastic, because many other firms produce the same standardized product.

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D) elastic, because many other firms produce the same standardized product.

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3) If the marginal cost curve is below the average variable cost curve
A) both average total cost and average variable cost are increasing.
B) average total cost is increasing but average variable cost is decreasing.
C) both average total cost and average variable cost are decreasing.
D) average variable cost is less than average fixed cost.

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C) both average total cost and average variable cost are decreasing.

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The diagram shows the short-run average total cost curves for five different plant sizes of a firm. If in the long run the firm should produce output x, it should do it with a plant of size
A) #4.
B) #3.
C) #2.
D) #1.

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C) #2.

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5) A firm sells a product in a perfectly competitive market. The marginal cost of the product at the current output level of 200 units is $4. The minimum possible average variable cost is $3.50. The market price of the product is $3. To maximize profits or minimize losses, the firm should
A) continue producing 200 units.
B) decrease production to less than 200 units.
C) increase production to more than 200 units.
D) shut down.

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D) shut down.

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6) Which of the following statements about perfect competition is true?
A) In the long run, the entry and exit of firms will generate economic profits for firms.
B) In the long run, the entry and exit of firms will generate normal profits for firms.
C) In the long run, the entry and exit of firms will generate losses for firms.
D) In the short run, firms can only generate economic profits.

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B) In the long run, the entry and exit of firms will generate normal profits for firms.

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7) Use the following table to answer the next question and assume that the total fixed cost incurred by the firm is $500.
The total cost associated with the production of 5 units of output is
A) $2,000. B) $3,000. C) $1,500. D) $2,500.

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D) $2,500

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8) If you know that total fixed cost is $200, total variable cost is $600, and total product is 4 units, then average total cost must be
A) $800. B) $200. C) $250. D) $3,200.

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B) $200.

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The table shows cost data for a perfectly competitive firm. If the market price for the firm's product is $6, what output level will the firm produce to maximize profits?
A) 12 B) 14 C) 16 D) 0

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B) 14

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10) A firm doubles the quantity of all resources it employs and, as a result, total output doubles. Which of the following is correct?
A) There are increasing returns to scale.
B) The long-run average total cost is horizontal.
C) The law of diminishing returns is proven wrong.
D) The example is for the short run rather than the long run.

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B) The long-run average total cost is horizontal.

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1) A nondiscriminating pure monopoly must decrease the price on all units of a product to sell more units. This explains why ________.
A) total revenues are greater than total costs at the profit maximizing level of output
B) a pure monopoly's marginal revenue curve is below its demand curve
C) there are barriers to entry in pure monopoly
D) a pure monopoly has a perfectly elastic demand curve

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B) a pure monopoly's marginal revenue curve is below its demand curve

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What price will this pure monopoly charge?
A) $40 B) $35 C) $50 D) $45

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D) $45

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3) A pure monopoly can sell 20 toys per day for $8 each. To sell 21 toys per day, the price must be cut to $7. The marginal revenue of the 21st toy is
A) +$21. B) -$10. C) -$13. D) +$7.

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C) -$13.

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4) A third-degree price-discriminating pure monopoly will follow a system where ________.
A) buyers with relatively more inelastic demands are charged higher prices than buyers with relatively more elastic demands
B) all buyers are charged the same price regardless of their elasticity of demand
C) the price of the product is held the same even if the demand changes
D) buyers with relatively more inelastic demands are charged lower prices than buyers with relatively more elastic demands

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A) buyers with relatively more inelastic demands are charged higher prices than buyers with relatively more elastic demands

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5) Answer the next question based on the following payoff matrix for two oligopolistic firms in which the numbers indicate the profit in thousands of dollars for a high-price or a low-price strategy.
If both firms collude to maximize joint profits, the total profits for the two firms will be
A) $1,250,000. B) $1,400,000. C) $1,200,000. D) $1,500,000.

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A) $1,250,000

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6) A monopolistically competitive firm is producing at a short-run output level where average total cost is $10.00, marginal cost is $5.00, marginal revenue is $6.00, and price is $12.00. In the short run, the firm should
A) decrease the level of output.
B) increase product price.
C) increase the level of output.
D) make no change in the level of output.

answer

C) increase the level of output.

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7) In which set of market models are there the most significant barriers to entry?
A) monopolistic competition and pure competition
B) oligopoly and pure monopoly
C) monopolistic competition and pure monopoly
D) oligopoly and monopolistic competition

answer

B) oligopoly and pure monopoly

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8) When compared with a perfectly competitive market with identical costs of production, a pure monopoly will produce ________.
A) less output and charge the same price
B) more output and charge a higher price
C) less output and charge a higher price
D) more output and charge the same price

answer

C) less output and charge a higher price

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9) The demand curve faced by a monopolistically competitive firm
A) will shift outward as new firms enter the industry.
B) is less elastic than the monopolist's demand curve.
C) is more elastic than the monopolist's demand curve.
D) is more elastic than the demand curve faced by the purely competitive firm.

answer

C) is more elastic than the monopolist's demand curve.

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Suppose that this pure monopoly is subjected to a regulatory commission. If the commission seeks to achieve the most efficient allocation of resources for this industry, it should set the price at ________.
A) P1 B) P2 C) P3 D) 0

answer

B) P2

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1) Use the following information to answer the next question.
Harvey quit his job at State University where he earned $45,000 a year. He figures his entrepreneurial talent or forgone entrepreneurial income to be $5,000 a year. In the first year, the firm sold 11,000 units of software at $75 each. Of the $75, $55 goes for the costs of production, packaging, marketing, employee wages and benefits, and rent on a building.
The implicit costs of Harvey's firm in the first year were A) $50,000. B) $150,000. C) $100,000. D) $60,000.

answer

A) $50,000

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2) Use the following table to answer the question below. Cloe is given $4 of pocket money to be spent on either hard candies or chocolates. Chocolates cost 40 cents and hard candies 80 cents each. The marginal utilities derived from the consumption of each product are as shown in the following table
Based on taste and preference alone, which good does Cloe prefer?
A) One cannot tell from the given data.
B) chocolates
C) Cloe equally likes chocolates and hard candies.
D) hard candies

answer

D) hard candies

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3) The table below shows the weekly supply for hamburgers in a market where there are just three sellers.
1 If there were 300 sellers in the market, each with a supply schedule identical to seller 1 in the table above, then the weekly quantity of hamburgers supplied in the market at a price of $2 would be
A) 900. B) 200. C) 600. D) 1,500.

answer

C) 600.

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4) If in the short run the demand for mass transit is relatively inelastic and in the long run the demand is relatively elastic, then a price ________ will ________ total revenue in the short run but ________ total revenue in the long run.
A) decrease; increase; decrease
B) increase; increase; decrease
C) decrease; decrease; decrease
D) increase; decrease; increase

answer

B) increase; increase; decrease

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5) To answer the next question, use the following table, which shows the demand schedule faced by Ninaskets, a pure monopoly selling baskets.
What is the change in total revenue if the pure monopoly lowers the price from $20 to $18?
A) $10 B) $20 C) $30 D) $40

answer

C) $30

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6) A large increase in the supply of TVs occurs simultaneously with a smaller decrease in its demand. As a result, the equilibrium price will ________ and the equilibrium quantity will ________.
A) decrease, increase
B) increase, increase
C) increase, decrease
D) decrease, decrease

answer

A) decrease, increase

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7) Assume that Nation A's production possibilities are either 30 units of bricks or 50 units of wheat. Nation B's production possibilities are 20 units of bricks and 40 units of wheat. Which of the following is true?
A) According to the principle of comparative advantage, Nation B should specialize in the production of bricks.
B) The opportunity cost of wheat production is lower in Nation B.
C) Nation A is the least-cost producer of wheat.
D) The high-cost producer of bricks is Nation A

answer

B) The opportunity cost of wheat production is lower in Nation B.

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Refer to the diagrams for two separate product markets. Assume that society's optimal level of output in each market is Q0 and that government purposely shifts the market supply curve from S
to S1 in diagram (a) on the left and from S to S2 in diagram (b) on the right. The shift of the supply curve from S to S1 in diagram (a) might be caused by a per-unit:
A) subsidy paid to the buyers of this product.
B) subsidy paid to the producers of this product.
C) tax on the buyers of this product.
D) tax on the producers of this product.

answer

D) tax on the producers of this product.

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The letters A, B, and C designate three successively larger plant sizes. In the long run, the firm should use plant size "A" for the production of
A) all possible levels of output.
B) 10 to 30 units of output.
C) 30 to 60 units of output.
D) all levels of output greater than or equal to 40.

answer

B) 10 to 30 units of output.

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10) Which of the following is a reason why individual firms under perfect competition would not find it profitable to advertise their product?
A) Firms do not make long-run profits.
B) The market demand curve cannot be increased.
C) Firms produce a homogeneous product.
D) The quantity of the product demanded is very large.

answer

C) Firms produce a homogeneous product.

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If both players operate independently and do not collude, the most likely economic outcome is:
A) Player 1 will Move A and Player 2 will Move A
B) Player 1 will Move A while Player 2 will Move B
C) Player 1 will move B and Player 2 will Move B
D) Player 1 will Move B while Player 2 will Move B

answer

A) Player 1 will Move A and Player 2 will Move A

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12) An increase in the quantity demanded means that:
A) the demand curve has shifted to the right.
B) given supply, the price of the product can be expected to decline.
C) price has declined and consumers therefore want to purchase more of the product.
D) the demand curve has shifted to the left.

answer

C) price has declined and consumers therefore want to purchase more of the product.

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13) If the price of product X increases, then the resulting decline in the amount purchased will
A) increase the marginal utility of the last unit consumed of this good.
B) increase the total utility from purchases of this good.
C) reduce the marginal utility of the last unit consumed of this good.
D) necessarily increase the consumer's total utility from his total purchases.

answer

A) increase the marginal utility of the last unit consumed of this good.

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14) Which statement concerning monopolistic competition is false?
A) Firms may experience losses in the short run.
B) Firms differentiate their products, but the products are relatively substitutable.
C) In the long run P = AC > MC.
D) Firms may experience positive economic profits in the long run.

answer

D) Firms may experience positive economic profits in the long run.

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15) Why does producer surplus decrease as price decreases?
A) Consumers buy more of the good at the lower price.
B) Producers sell less of the good while consumers buy even more of the good.
C) Producers sell less of the good and receive less from the lower price.
D) Producers sell more of the good but receive less from the lower price.

answer

C) Producers sell less of the good and receive less from the lower price.

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16) When a competitive market maximizes economic surplus, it implies that the
A) buyers are getting the maximum consumer surplus from the product.
B) marginal benefit of having the product is greater than the marginal cost.
C) combined consumer and producer surplus is maximized.
D) quantity demanded is lower than the quantity supplied.

answer

C) combined consumer and producer surplus is maximized.

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17) Which of the following will cause a decrease in market equilibrium price and a decrease in equilibrium quantity?
A) a decrease in supply B) an increase in demand
C) a decrease in demand D) an increase in supply

answer

C) a decrease in demand

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18) Which of the following best illustrates the circular flow model in action?
A) Boeing experiences a surge in orders for new airplanes, prompting the company to hire more workers.
B) Bobbie goes to work and builds cars, and uses the income she receives to buy food at the grocery store.
C) Evan buys a new couch; the owner of the furniture store uses some of the money from the sale to pay her supplier, and uses the rest to take her family out to dinner.
D) All of these answers illustrate the workings of the circular flow model.

answer

D) All of these answers illustrate the workings of the circular flow model.

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19) Answer the next question using data in the following tables showing production possibilities for units of food and clothing for two regions, East and West, of a hypothetical world.
The mutually beneficial terms of trade will be
A) between 4 and 5 units of food for 1 unit of clothing. B) between 2 and 3 units of food for 1 unit of clothing. C) less than 2 units of food for 1 unit of clothing.
D) greater than 4 units of food for 1 unit of clothing.

answer

B) between 2 and 3 units of food for 1 unit of clothing.

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20) Which of the following is a possible consequence of free riders?
A) The government always steps in to produce the good or service.
B) The good or service is produced regardless.
C) The good or service is never produced or underproduced because not enough people paid to use it.
D) Consumers are better off by not having the good or service be produced.

answer

C) The good or service is never produced or underproduced because not enough people paid to use it.

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21) Which of the following statements about tariffs is true?
A) U.S. producers gain more from tariffs than U.S. consumers lose.
B) The costs of tariffs are proportionately higher for high-income groups than for low-income groups.
C) The revenue gained from tariffs equals the total cost that tariffs impose on consumers.
D) U.S. consumers lose more from tariffs than U.S. producers gain.

answer

D) U.S. consumers lose more from tariffs than U.S. producers gain.

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22) We would expect the cross-price elasticity of demand between dress shirts and ties to be ________, indicating that they are ________
A) positive; complements.
B) negative; substitutes.
C) positive; secondary goods.
D) negative; complements.

answer

D) negative; complements.

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23) Use the following figure showing the domestic demand and supply curves for product B in a hypothetical economy to answer the next question.

After trade, at a world price of Pw, consumer surplus equals area(s)
A) A.
B) A + B + C.
C) A + B + C + D.
D) A + D.

answer

A) A.

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24) Which of the following statements about perfect competition is true?
A) In the long run, the entry and exit of firms will generate normal profits for firms.
B) In the long run, the entry and exit of firms will generate losses for firms.
C) In the long run, the entry and exit of firms will generate economic profits for firms.
D) In the short run, firms can only generate economic profits.

answer

A) In the long run, the entry and exit of firms will generate normal profits for firms.

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Suppose that market demand is represented by two demanders in columns (1) and (2) and market supply is represented by two suppliers in columns (4) and (5). If the price were artificially set at $9
A) the market would clear.
B) a surplus of 20 units would occur.
C) a shortage of 20 units would occur.
D) demand would change from columns (3) and (2) to columns (3) and (1).

answer

B) a surplus of 20 units would occur.

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26) What is the best economic explanation for why a person would drop out of college to take a job or start a business?
A) the expected future benefits from starting a business now are greater than the costs
B) he has a good idea for starting a business
C) the opportunity cost of starting a business is high now, but will be low later in life
D) he has to pay a higher tuition to attend college

answer

A) the expected future benefits from starting a business now are greater than the costs

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27) The concept of price elasticity of supply measures the
A) slope of the supply curve.
B) sensitivity of sellers to price changes.
C) number of sellers in a market.
D) extent to which the supply curve shifts as the result of a price decline.

answer

B) sensitivity of sellers to price changes.

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What is the average variable cost of the 4th unit of production?
A) $7.50 B) $24.00 C) $6.00 D) $13.50

answer

A) $7.50

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29) Which of the following is an example of a positive externality (additional social benefit)?
A) the higher price you pay when you buy a heavily advertised product
B) an increase in the value of land you own when a nearby development is completed
C) falling property values in a neighborhood where a disreputable nightclub is operating
D) the costs paid by a company to build an automated factory

answer

B) an increase in the value of land you own when a nearby development is completed

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If the firm was operating as a perfectly competitive firm, what level of output would they produce to maximize profits?
A) Qc
B) Qo
C) Somewhere between Qc and Qo
D) Somewhere greater than Qc

answer

A) Qc

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31) In 2007, the price of oil increased, which in turn caused the price of natural gas to rise. This can best be explained by saying that oil and natural gas are:
A) substitute goods and the higher price for oil decreased the supply of natural gas.
B) substitute goods and the higher price for oil increased the demand for natural gas.
C) complementary goods and the higher price for oil increased the demand for natural gas.
D) complementary goods and the higher
price for oil decreased the supply of natural gas.

answer

B) substitute goods and the higher price for oil increased the demand for natural gas.

question

The table shows cost data for a perfectly competitive firm. If the market price for the firm's product is $80, the firm will
A) produce 4 units to maximize profits.
B) produce 5 units to maximize profits.
C) produce 6 units to maximize profits.
D) shut down.

answer

A) produce 4 units to maximize profits

question

33) Suppose that at prices of $1, $2, $3, $4, and $5 for product Z, the corresponding quantities supplied are 3, 4, 5, 6, and 7 units, respectively. Which of the following would increase the quantities supplied of Z to, say, 6, 8, 10, 12, and 14 units at these prices?
A) Increases in the incomes of the buyers of Z.
B) An increase in the excise tax on product Z.
C) An increase in the prices of the resources used to make Z.
D) Improved technology for producing Z.

answer

D) Improved technology for producing Z.

question

34) Assume that Clara purchases a combination of products Y and Z such that, after she is done spending her limited income, MUy/Py = 25 and MUz/Pz= 15. Based on the equal marginal
principle, Clara
A) should have purchased less Y and less Z.
B) should have purchased more Y and less Z.
C) should have purchased less Y and more Z.
D) is maximizing her total utility.

answer

B) should have purchased more Y and less Z.

question

35) The minimum acceptable price for a product that producer Sam is willing to receive is $15. The price he could get for the product in the market is $18. How much is Sam's producer surplus?
A) $3 B) $270 C) $45 D) $33

answer

A) $3

question

36) Answer the next question based on the demand and cost schedules for a monopolistically competitive firm given in the table below.
At the profit-maximizing level of output, marginal revenue is
A) $8. B) $5. C) $0. D) $4.

answer

D) $4.

question

37) If a third-degree price-discriminating pure monopoly sells the same product in two markets but charges a higher price in market X and a lower price in market Y, the pricing difference indicates that demand is ________.
A) relatively more elastic in market X than market Y
B) relatively less elastic in market X than market Y
C) the same in both market X and Y
D) relatively less elastic in market Y than market X

answer

B) relatively less elastic in market X than market Y

question

38) The scarcity problem
A) has been eliminated in affluent societies such as the United States and Canada.
B) has been solved in all industrialized nations.
C) persists because economic wants exceed available productive resources.
D) persists only because countries have failed to achieve continuous full employment.

answer

C) persists because economic wants exceed available productive resources.

question

Assume the government imposes a $2.25 tax on suppliers, which results in a shift of the supply curve from S1 to S2. The price the seller receives for the product after paying the tax is
A) $3.50. B) $2.50. C) $2.25. D) $1.25.

answer

D) $1.25.

question

If the government regulated the pure monopoly and made it set a normal profit price, what price and quantity of output levels would we observe in the short run?
A) P1 and Q1 B) P2 and Q3 C) P3 and Q2 D) P4 and Q1

answer

C) P3 and Q2

question

1) Which of the following does not contribute to higher wages?
A) technological improvements
B) higher prices for the good being produced
C) reductions in demand for the good being produced D) greater educational attainment by the labor force

answer

C) reductions in demand for the good being produced

question

2) Assume labor is the only variable input and that an additional input of labor increases total output from 72 to 78 units. If the product sells for $6 per unit in a purely competitive market, the MRP of this additional worker is
A) $12. B) $36. C) $6. D) $72.

answer

B) $36

question

The tactics of inclusive unionism are shown in figure(s)
A) 1 only. B) 3 only. C) 4 only. D) 1 and 2.

answer

C) 4

question

4) If robotics and factory automation become more widespread in an industry and all else is held constant
A) the demand for labor should increase in that industry and the wage rate should decrease.
B) both the demand for labor in that industry and the wage rate should decrease.
C) both the demand for labor in that industry and the wage rate should increase.
D) the demand for labor should decrease in that industry and the wage rate should increase.

answer

C) both the demand for labor in that industry and the wage rate should increase.

question

5) Suppose the demand for strawberries rises sharply, resulting in an increased price for strawberries. As it relates to strawberry pickers, we could expect the
A) MP curve to shift downward.
B) MRP curve to shift to the left.
C) MRP curve to shift to the right.
D) MRC curve to shift downward.

answer

C) MRP curve to shift to the right.

question

6) The following table is for a purely competitive market for resources.
At a wage rate of $23 per worker, the firm will choose to employ
A) 2 workers. B) 3 workers. C) 4 workers. D) 5 workers.

answer

B) 3 workers.

question

7) When economists say that the demand for labor is a derived demand, they mean that it is
A) based on the desire of businesses to exploit labor by paying below equilibrium wage rates.
B) based on the assumption that workers are trying to maximize their money incomes.
C) dependent on government expenditures for public goods and services.
D) related to the demand for the product or service labor is producing.

answer

D) related to the demand for the product or service labor is producing.

question

8) Assume that your nominal wage was fixed at $15 an hour, and the price of a gallon of gasoline rose from $1.00 to $1.05. In this case, your real wage (in terms of gasoline) has
A) increased to $20.
B) decreased to $10.
C) increased to $15.75.
D) decreased to $14.28.

answer

D) decreased to $14.28.

question

Which of the following statements about this market is correct?
A) At a wage rate less than $5, more than 500 workers would be employed.
B) At a wage rate greater than $5, more than 500 workers would be employed.
C) Employers would benefit from a higher wage since they could profitably attract more workers.
D) At a wage rate of $5, the number of workers employed is maximized.

answer

D) At a wage rate of $5, the number of workers employed is maximized.

question

10) As the baby boomers in America grow old, how would the market for health-care workers be affected?
A) Supply decreases and wages increase.
B) Supply increases and wages decrease.
C) Demand decreases and wages decrease.
D) Demand increases and wages increase.

answer

D) Demand increases and wages increase.

1 of 110

question

Use the following table to answer the question.
Jane should specialize in the production of which good?

answer

B) green beans

question

2) In a market, buyers want to pay the ________ possible price and sellers want to charge the ________ possible price.

answer

D) lowest, highest

question

answer

C) increase from 17 to 24.

question

4) The idea in economics that "there is no free lunch" means that:

answer

A) There are opportunity costs involved even in free lunches

question

5) Which question is an illustration of a microeconomic question?

answer

B) Is the volume of wine produced in one year dependent upon the price of wine?

question

6) From an economic perspective, when a consumer decides to buy more life insurance, the consumer has most likely concluded that the:

answer

A) Marginal benefit of more insurance coverage is greater than the marginal cost

question

7) A higher price reduces the quantity of a product demanded because

answer

D) individuals will buy less of the product and more of its substitutes.

question

8) The following graph is the production possibilities frontier of a nation:
Refer to the graph. The combination "5 drill presses and 2 units of bread" indicates an

answer

B) inefficient combination for the nation.

question

If box A represents businesses or firms, B the resource market, and C households, and if flow (7) represents goods and services, then flow (6) would represent

answer

D) consumption expenditures (money).

question

10) One basic difference between "land" and "capital" resources is that land is

answer

D) a gift of nature, while capital is manufactured.

question

If the price in this market is $4 per bushel, there will be a

answer

A) surplus, and the price will tend to fall.

question

2) Which of the following will cause the demand curve for product A to shift to the left?

answer

A) An increase in money income if A is an inferior good.

question

3) Suppose that in each of four successive years producers sell more of their product and at higher prices. This could be explained

answer

C) in terms of a stable supply curve and increasing demand.

question

answer

B) leftward shift in the current supply of gasoline.

question

answer

A) the quantity demanded will exceed the quantity supplied.

question

answer

D) consumers are now willing to purchase more of this product at each possible price.

question

answer

A) a successful Instagram campaign stating that eating pizza reduces stress

question

answer

C) An increase in supply.

question

answer

D) graph (4)

question

Assume the government imposes a $2.25 tax on suppliers, which results in a shift of the supply curve from S1 to S2. The amount of the tax paid by the seller is
A) $0.
B) $1.00.
C) $1.25.
D) $2.25.

answer

D) $2.25.

question

What area represents tax revenue after the government imposes the $4 per unit tax on the market?
A) triangle $21a$13
B) triangle abc
C) triangle $1c$9
D) square $13ac$9

answer

D) square $13ac$9

question

answer

A) falling property values in a neighborhood where a disreputable nightclub is operating

question

answer

A) Consumers buy less of the good at a higher price.

question

answer

A) There is no way to force people to pay for the public good which increases free riders.

question

The price elasticity of demand (based on the midpoint formula) when price decreases from $8 to $6 is
A) -1.37.
B) -3.29.
C) -0.33.
D) -1.

answer

C) -0.33.

question

6) The price elasticity of demand is negative because of
A) the midpoint formula.
B) percent-changes being used in the formula.
C) scarcity.
D) the law of demand.

answer

D) the law of demand.

question

answer

A) Economic surplus decreases.

question

answer

C) Clearly defined property rights

question

9) If a 5% cut in the price of a product causes the quantity demanded to rise by 10%, the demand is
A) inelastic.
B) perfectly elastic.
C) elastic.
D) unit elastic.

answer

C) elastic.

question

answer

C) to the right of line D on the graph.

question

answer

A) a 5% increase in price generates a 7% increase in quantity supplied.

question

Using the regular percentage change formula, what is the price elasticity of supply when price increases from $15 to $20?
A) 0.6
B) 0.2
C) 0.5
D) 1

answer

A) 0.6

question

answer

D) The time interval considered is long.

question

answer

D) decrease and total revenues from good B to decrease.

question

Which product would be an inferior good?
A) product W
B) product X
C) product Y
D) product Z

answer

C) product Y

question

answer

A) should have purchased more Y and less Z.

question

answer

D) total utility will increase at a diminishing rate.

question

The value for X is
A) 15.
B) 5.
C) 55.
D) 10.

answer

A) 15.

question

answer

A) 15; 10

question

answer

D) total revenue minus the explicit and implicit costs of production.

question

At the profit-maximizing level of output, the profit earned by the perfectly competitive firm is given by the area
A) ACFH.
B) BCFG.
C) 0AHE.
D) ABGH.

answer

D) ABGH.

question

answer

D) elastic, because many other firms produce the same standardized product.

question

answer

C) both average total cost and average variable cost are decreasing.

question

answer

C) #2.

question

answer

D) shut down.

question

answer

B) In the long run, the entry and exit of firms will generate normal profits for firms.

question

answer

D) $2,500

question

8) If you know that total fixed cost is $200, total variable cost is $600, and total product is 4 units, then average total cost must be
A) $800. B) $200. C) $250. D) $3,200.

answer

B) $200.

question

The table shows cost data for a perfectly competitive firm. If the market price for the firm's product is $6, what output level will the firm produce to maximize profits?
A) 12 B) 14 C) 16 D) 0

answer

B) 14

question

answer

B) The long-run average total cost is horizontal.

question

answer

B) a pure monopoly's marginal revenue curve is below its demand curve

question

What price will this pure monopoly charge?
A) $40 B) $35 C) $50 D) $45

answer

D) $45

question

3) A pure monopoly can sell 20 toys per day for $8 each. To sell 21 toys per day, the price must be cut to $7. The marginal revenue of the 21st toy is
A) +$21. B) -$10. C) -$13. D) +$7.

answer

C) -$13.

question

answer

A) buyers with relatively more inelastic demands are charged higher prices than buyers with relatively more elastic demands

question

answer

A) $1,250,000

question

answer

C) increase the level of output.

question

answer

B) oligopoly and pure monopoly

question

answer

C) less output and charge a higher price

question

answer

C) is more elastic than the monopolist's demand curve.

question

answer

B) P2

question

answer

A) $50,000

question

answer

D) hard candies

question

answer

C) 600.

question

answer

B) increase; increase; decrease

question

answer

C) $30

question

answer

A) decrease, increase

question

answer

B) The opportunity cost of wheat production is lower in Nation B.

question

answer

D) tax on the producers of this product.

question

answer

B) 10 to 30 units of output.

question

answer

C) Firms produce a homogeneous product.

question

answer

A) Player 1 will Move A and Player 2 will Move A

question

answer

C) price has declined and consumers therefore want to purchase more of the product.

question

answer

A) increase the marginal utility of the last unit consumed of this good.

question

answer

D) Firms may experience positive economic profits in the long run.

question

answer

C) Producers sell less of the good and receive less from the lower price.

question

answer

C) combined consumer and producer surplus is maximized.

question

answer

C) a decrease in demand

question

answer

D) All of these answers illustrate the workings of the circular flow model.

question

answer

B) between 2 and 3 units of food for 1 unit of clothing.

question

answer

C) The good or service is never produced or underproduced because not enough people paid to use it.

question

answer

D) U.S. consumers lose more from tariffs than U.S. producers gain.

question

answer

D) negative; complements.

question

answer

A) A.

question

answer

A) In the long run, the entry and exit of firms will generate normal profits for firms.

question

answer

B) a surplus of 20 units would occur.

question

answer

A) the expected future benefits from starting a business now are greater than the costs

question

answer

B) sensitivity of sellers to price changes.

question

What is the average variable cost of the 4th unit of production?
A) $7.50 B) $24.00 C) $6.00 D) $13.50

answer

A) $7.50

question

answer

B) an increase in the value of land you own when a nearby development is completed

question

If the firm was operating as a perfectly competitive firm, what level of output would they produce to maximize profits?
A) Qc
B) Qo
C) Somewhere between Qc and Qo
D) Somewhere greater than Qc

answer

A) Qc

question

answer

B) substitute goods and the higher price for oil increased the demand for natural gas.

question

answer

A) produce 4 units to maximize profits

question

answer

D) Improved technology for producing Z.

question

answer

B) should have purchased more Y and less Z.

question

answer

A) $3

question

answer

D) $4.

question

answer

B) relatively less elastic in market X than market Y

question

answer

C) persists because economic wants exceed available productive resources.

question

answer

D) $1.25.

question

answer

C) P3 and Q2

question

answer

C) reductions in demand for the good being produced

question

answer

B) $36

question

The tactics of inclusive unionism are shown in figure(s)
A) 1 only. B) 3 only. C) 4 only. D) 1 and 2.

answer

C) 4

question

answer

C) both the demand for labor in that industry and the wage rate should increase.

question

answer

C) MRP curve to shift to the right.

question

6) The following table is for a purely competitive market for resources.
At a wage rate of $23 per worker, the firm will choose to employ
A) 2 workers. B) 3 workers. C) 4 workers. D) 5 workers.

answer

B) 3 workers.

question

answer

D) related to the demand for the product or service labor is producing.

question

answer

D) decreased to $14.28.

question

answer

D) At a wage rate of $5, the number of workers employed is maximized.

question

answer

D) Demand increases and wages increase.

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