question
The law of diminishing marginal utility implies that the marginal utility of my fifth waffle is less than the marginal utility of my friend's second waffle, other things constant.
True
False
True
False
answer
false
question
"The second glass of Evian water was very good. May I have another?" Which of the following is necessarily true regarding this statement?
The marginal utility of the second glass is negative.
The marginal utility of the second glass is less than the marginal utility of the first glass.
The marginal utility of the second glass is positive.
The water is free.
The marginal utility of the third glass is negative.
The marginal utility of the second glass is negative.
The marginal utility of the second glass is less than the marginal utility of the first glass.
The marginal utility of the second glass is positive.
The water is free.
The marginal utility of the third glass is negative.
answer
The marginal utility of the second glass is positive.
question
A utility-maximizing consumer equalizes marginal utilities across all goods.
True
False
True
False
answer
False
question
Newspaper vending machines illustrate that publishers believe
the average utility of two identical papers is zero or less
the total utility from two identical newspapers is zero or less
the marginal utility of a second identical newspaper is zero or less
the marginal utility of a second identical newspaper is greater than the marginal utility of the first newspaper
the total utility from two identical newspapers is less than the total utility from the first newspaper
the average utility of two identical papers is zero or less
the total utility from two identical newspapers is zero or less
the marginal utility of a second identical newspaper is zero or less
the marginal utility of a second identical newspaper is greater than the marginal utility of the first newspaper
the total utility from two identical newspapers is less than the total utility from the first newspaper
answer
the marginal utility of a second identical newspaper is zero or less
question
A consumer maximizes utility when the marginal utilities of all goods
having positive money prices that are equal to zero
are equal
are maximized
are equal to the opportunity costs for all goods that are considered necessities
are exactly proportional to their market prices
having positive money prices that are equal to zero
are equal
are maximized
are equal to the opportunity costs for all goods that are considered necessities
are exactly proportional to their market prices
answer
A consumer maximizes utility when the marginal utilities of all goods
having positive money prices that are equal to zero
are equal
are maximized
are equal to the opportunity costs for all goods that are considered necessities
are exactly proportional to their market prices
having positive money prices that are equal to zero
are equal
are maximized
are equal to the opportunity costs for all goods that are considered necessities
are exactly proportional to their market prices
question
As price falls along a given demand curve for pretzels,
quantity demanded, total utility, marginal utility, and consumer surplus increase; consumer expenditure decreases
quantity demanded, total utility, and consumer surplus increase; marginal utility and consumer surplus decrease
quantity demanded, total utility, consumer surplus, and consumer expenditure increase; marginal utility decreases
quantity demanded, total utility, and consumer surplus increase; marginal utility decreases; consumer expenditure might increase, decrease, or remain constant
quantity demanded, total utility, marginal utility, consumer surplus, and consumer expenditure all increase
quantity demanded, total utility, marginal utility, and consumer surplus increase; consumer expenditure decreases
quantity demanded, total utility, and consumer surplus increase; marginal utility and consumer surplus decrease
quantity demanded, total utility, consumer surplus, and consumer expenditure increase; marginal utility decreases
quantity demanded, total utility, and consumer surplus increase; marginal utility decreases; consumer expenditure might increase, decrease, or remain constant
quantity demanded, total utility, marginal utility, consumer surplus, and consumer expenditure all increase
answer
quantity demanded, total utility, and consumer surplus increase; marginal utility decreases; consumer expenditure might increase, decrease, or remain constant
question
If Debbye is willing to pay $50 for a pair of shoes but only has to pay $20 because the shoes are on sale, then her consumer surplus on that pair of shoes is
$50
$20
$70
$30
$25
$50
$20
$70
$30
$25
answer
$30
question
When price decreases, consumer surplus
increases
remains constant
decreases
becomes negative
may increase or decrease
increases
remains constant
decreases
becomes negative
may increase or decrease
answer
increases
question
The difference between the maximum amount a person is willing to pay for a given quantity of a good and the amount actually paid for that quantity is called
producer surplus
the substitution effect
price discrimination
the income effect
consumer surplus
producer surplus
the substitution effect
price discrimination
the income effect
consumer surplus
answer
consumer surplus
question
Consumers derive consumer surplus whenever
the monetary value of total utility equals total expenditure
the monetary value of total utility is greater than total expenditure
the monetary value of total utility is less than total expenditure
marginal utility is greater than total utility
marginal utility is less than total utility
the monetary value of total utility equals total expenditure
the monetary value of total utility is greater than total expenditure
the monetary value of total utility is less than total expenditure
marginal utility is greater than total utility
marginal utility is less than total utility
answer
the monetary value of total utility is greater than total expenditure
question
Which of the following people would be least likely to search the newspaper ads for bargains and clip store coupons?
a retired person
an unemployed person
a waitress earning $5 per hour
an attorney earning $100 per hour
a student on summer vacation
a retired person
an unemployed person
a waitress earning $5 per hour
an attorney earning $100 per hour
a student on summer vacation
answer
an attorney earning $100 per hour
question
Requiring Medicare participants to pay a small fraction of the cost of their medical care
reduces the quantity of health care they demand to zero
has no effect on the amount of health care they consume, but does generate revenue for the government
reduces their utilization of health care without compromising their health
actually increases the amount of consumer surplus they receive
amounts to a significant burden for most of those participants
reduces the quantity of health care they demand to zero
has no effect on the amount of health care they consume, but does generate revenue for the government
reduces their utilization of health care without compromising their health
actually increases the amount of consumer surplus they receive
amounts to a significant burden for most of those participants
answer
reduces their utilization of health care without compromising their health
question
When a service, such as medical care, is provided free of charge,
most people consume an infinite amount of it
most people do not much care about getting good value for their money
people do not derive any consumer surplus from it
we say that the demand for it is perfectly elastic
we say that the demand for it is perfectly inelastic
most people consume an infinite amount of it
most people do not much care about getting good value for their money
people do not derive any consumer surplus from it
we say that the demand for it is perfectly elastic
we say that the demand for it is perfectly inelastic
answer
most people do not much care about getting good value for their money
question
Opportunity cost is measurable only when prices are known
True
False
True
False
answer
False
question
Although some tastes do change over time, economists believe that tastes are relatively stable. If tastes were not mostly stable, then we
could not even draw a supply curve
could not reasonably make the other-things-constant assumption required for demand analysis
would not have any concerns about still drawing demand curves
could no longer eat food
would be basing economic models on real life instead of making impossible assumptions
could not even draw a supply curve
could not reasonably make the other-things-constant assumption required for demand analysis
would not have any concerns about still drawing demand curves
could no longer eat food
would be basing economic models on real life instead of making impossible assumptions
answer
could not reasonably make the other-things-constant assumption required for demand analysis
question
Marginal utility is a measure
of total utility derived from consuming a given amount of a good
of the total utility gained from consuming an extra unit of a good
computed by dividing total utility by the amount of a good consumed
determined by production conditions in a market
of the cost associated with consuming one more unit of a good
of total utility derived from consuming a given amount of a good
of the total utility gained from consuming an extra unit of a good
computed by dividing total utility by the amount of a good consumed
determined by production conditions in a market
of the cost associated with consuming one more unit of a good
answer
of the total utility gained from consuming an extra unit of a good
question
The law of diminishing marginal utility implies that the marginal utility of my fifth hot dog is less than the marginal utility of my second soft drink, other things constant.
True
False
True
False
answer
false
question
Marginal utility is defined as the
average amount of satisfaction gained from consuming a product
total amount of satisfaction gained from consuming a product
additional satisfaction gained from consuming one more unit of a product
total amount of satisfaction gained from consuming a product divided by the number of units consumed
total amount of satisfaction gained from consuming a product times the number of units consumed
average amount of satisfaction gained from consuming a product
total amount of satisfaction gained from consuming a product
additional satisfaction gained from consuming one more unit of a product
total amount of satisfaction gained from consuming a product divided by the number of units consumed
total amount of satisfaction gained from consuming a product times the number of units consumed
answer
additional satisfaction gained from consuming one more unit of a product
question
The law of diminishing marginal utility implies it is possible that the marginal utility of my tenth pistachio nut is less than the marginal utility of my third pistachio nut, other things constant.
True
False
True
False
answer
True
question
Utility is
easily measured because all people derive the same utility from consumption
easily measured because it is an objective concept
easily measured because it is a subjective concept
hard to measure because it is a subjective concept
hard to measure because it is an objective concept
easily measured because all people derive the same utility from consumption
easily measured because it is an objective concept
easily measured because it is a subjective concept
hard to measure because it is a subjective concept
hard to measure because it is an objective concept
answer
hard to measure because it is a subjective concept
question
Elasticity is always
measured in dollars
measured in dollars per unit of quantity
measured in units of quantity
measured in units of quantity per dollar
independent of the units of measurement
measured in dollars
measured in dollars per unit of quantity
measured in units of quantity
measured in units of quantity per dollar
independent of the units of measurement
answer
independent of the units of measurement
question
The general term elasticity refers to a relationship between
quantity demanded and price only
quantity supplied and price only
quantity supplied or demanded and price only
quantity supplied or demanded and anything other than price
percentage changes in any two variables
quantity demanded and price only
quantity supplied and price only
quantity supplied or demanded and price only
quantity supplied or demanded and anything other than price
percentage changes in any two variables
answer
percentage changes in any two variables
question
If the value of the price elasticity of demand is -0.2, this means that a
20 percent decrease in price causes a 1 percent increase in quantity demanded
0.2 percent decrease in price causes a 1 percent increase in quantity demanded
5 percent decrease in price causes a 1 percent increase in quantity demanded
0.2 percent decrease in price causes a 0.2 percent increase in quantity demanded
100 percent decrease in price causes a 200 percent increase in quantity demanded
20 percent decrease in price causes a 1 percent increase in quantity demanded
0.2 percent decrease in price causes a 1 percent increase in quantity demanded
5 percent decrease in price causes a 1 percent increase in quantity demanded
0.2 percent decrease in price causes a 0.2 percent increase in quantity demanded
100 percent decrease in price causes a 200 percent increase in quantity demanded
answer
5 percent decrease in price causes a 1 percent increase in quantity demanded
question
The greater the availability of close substitutes for a product, the greater the price elasticity of demand for that product.
True
False
True
False
answer
true
question
Given the availability of California oranges, demand for Florida oranges will
be less elastic than if there were no California oranges
be more elastic than if there were no California oranges
have the same elasticity as it would if there were no California oranges
be perfectly elastic
be perfectly inelastic
be less elastic than if there were no California oranges
be more elastic than if there were no California oranges
have the same elasticity as it would if there were no California oranges
be perfectly elastic
be perfectly inelastic
answer
be more elastic than if there were no California oranges
question
Which of the following describes a situation in which demand must be inelastic?
The price of pens rises by 10 cents, and quantity of pens demanded falls by 50.
The price of pens rises by 10 cents, and total revenue rises.
A 20 percent increase in the price of pens leads to a 20 percent decrease in the quantity of pens demanded.
Total revenue does not change when the price of pens rises.
Total revenue decreases when the price of pens rises.
The price of pens rises by 10 cents, and quantity of pens demanded falls by 50.
The price of pens rises by 10 cents, and total revenue rises.
A 20 percent increase in the price of pens leads to a 20 percent decrease in the quantity of pens demanded.
Total revenue does not change when the price of pens rises.
Total revenue decreases when the price of pens rises.
answer
The price of pens rises by 10 cents, and total revenue rises.
question
If an increase in the price of peanut butter causes a decline in the demand for jelly, then
the goods are substitutes
jelly is an inferior good
the goods are complements
both goods are inelastic
peanut butter is an inferior good
the goods are substitutes
jelly is an inferior good
the goods are complements
both goods are inelastic
peanut butter is an inferior good
answer
the goods are complements
question
The cross-price elasticity of demand between milk and soft drinks is likely to be
negative because the goods are complements
positive because the goods are complements
negative because the goods are substitutes
positive because the goods are substitutes
0 because the goods are not usually consumed by the same person at one time
negative because the goods are complements
positive because the goods are complements
negative because the goods are substitutes
positive because the goods are substitutes
0 because the goods are not usually consumed by the same person at one time
answer
positive because the goods are substitutes
question
If a tripling of price triples the quantity of a good supplied, the price elasticity of supply is
3
300
1
-1
-3
3
300
1
-1
-3
answer
1
question
If supply is perfectly elastic, the supply curve is
vertical
horizontal
any straight-line supply curve
any supply curve intersecting a perfectly elastic demand curve
any supply curve intersecting a demand curve which is unit elastic
vertical
horizontal
any straight-line supply curve
any supply curve intersecting a perfectly elastic demand curve
any supply curve intersecting a demand curve which is unit elastic
answer
horizontal
question
The supply of paintings by Van Gogh is most likely to be
of infinite elasticity because supply is limited
of high elasticity because supply is limited
elastic because the paintings are luxury goods
inelastic because supply is limited
unit elastic
of infinite elasticity because supply is limited
of high elasticity because supply is limited
elastic because the paintings are luxury goods
inelastic because supply is limited
unit elastic
answer
inelastic because supply is limited
question
As DVDs become popular substitutes for video cassettes, demand for video cassettes is likely to
become less price elastic
become more price elastic
increase
stay the same
become unit elastic
become less price elastic
become more price elastic
increase
stay the same
become unit elastic
answer
become more price elastic
question
If demand is elastic, a decrease in price leads to a decrease in total revenue.
True
False
True
False
answer
false
question
If an increase in the price of a product from $100 to $200 per unit leads to a decrease in the quantity demanded from 10 to 8 units, then demand is
elastic
inelastic
unit elastic
0
inferior
elastic
inelastic
unit elastic
0
inferior
answer
inelastic
question
A perfectly elastic demand curve is
a vertical straight line
a horizontal straight line
a downward-sloping straight line
an upward-sloping straight line
not a straight line
a vertical straight line
a horizontal straight line
a downward-sloping straight line
an upward-sloping straight line
not a straight line
answer
a horizontal straight line
question
Suppose the income elasticity of demand for a private college education is equal to 1.5. This means that
every $1 increase in income provides an incentive for a $1.50 increase in expenditures on private college education
every $1.50 increase in income provides an incentive for a $1 increase in expenditures on private college education
a 10 percent increase in income causes a 15 percent increase in the demand for a private college education
a 15 percent increase in income causes a 10 percent increase in the demand for a private college education
a 10 percent decrease in private college tuition will have a large enough income effect to increase spending on private college education by 15 percent
every $1 increase in income provides an incentive for a $1.50 increase in expenditures on private college education
every $1.50 increase in income provides an incentive for a $1 increase in expenditures on private college education
a 10 percent increase in income causes a 15 percent increase in the demand for a private college education
a 15 percent increase in income causes a 10 percent increase in the demand for a private college education
a 10 percent decrease in private college tuition will have a large enough income effect to increase spending on private college education by 15 percent
answer
a 10 percent increase in income causes a 15 percent increase in the demand for a private college education
question
Demand for a necessity, such as food, is
both income and price inelastic
income inelastic and price elastic
income elastic and price inelastic
both income and price elastic
income elastic and perfectly price inelastic
both income and price inelastic
income inelastic and price elastic
income elastic and price inelastic
both income and price elastic
income elastic and perfectly price inelastic
answer
both income and price elastic
question
The demands for wheat, soybeans, milk, and eggs tend to be
price inelastic
price elastic
price inelastic only in the long run
price elastic only in the short run
price elastic only in the long run
price inelastic
price elastic
price inelastic only in the long run
price elastic only in the short run
price elastic only in the long run
answer
price inelastic
question
As the economy recovers from a recession, we should expect that
demand for inferior goods will fall and demand for normal goods will rise
demand for both inferior and normal goods will rise
demand for inferior goods will rise and demand for normal goods will fall
demand for both inferior and normal goods will fall
demand for complements will fall
demand for inferior goods will fall and demand for normal goods will rise
demand for both inferior and normal goods will rise
demand for inferior goods will rise and demand for normal goods will fall
demand for both inferior and normal goods will fall
demand for complements will fall
answer
demand for inferior goods will fall and demand for normal goods will rise
question
Substitutes are pairs of products with
positive cross-price elasticity of demand
negative cross-price elasticity of demand
positive income elasticity of demand
negative income elasticity of demand
positive price elasticity of demand
positive cross-price elasticity of demand
negative cross-price elasticity of demand
positive income elasticity of demand
negative income elasticity of demand
positive price elasticity of demand
answer
positive cross-price elasticity of demand
question
A 10 percent increase in the price of root beer causes a 5 percent increase in the quantity demanded of orange soda. This means that
root beer and orange soda are substitutes
root beer and orange soda are complements
the cross-price elasticity of demand is elastic
the cross-price elasticity of demand is equal to 2
the cross-price elasticity of demand is equal to -2
root beer and orange soda are substitutes
root beer and orange soda are complements
the cross-price elasticity of demand is elastic
the cross-price elasticity of demand is equal to 2
the cross-price elasticity of demand is equal to -2
answer
the cross-price elasticity of demand is equal to 2
question
The cross-price elasticity of demand between rifles and bullets is likely to be
negative because the goods are complements
positive because the goods are complements
negative because the goods are substitutes
positive because the goods are substitutes
0 because the goods are not substitutes
negative because the goods are complements
positive because the goods are complements
negative because the goods are substitutes
positive because the goods are substitutes
0 because the goods are not substitutes
answer
negative because the goods are complements
question
The demand for firewood is likely to be more elastic in the summer than in the winter.
True
False
True
False
answer
true
question
The more broadly a good is defined,
the more substitutes it has so the more elastic is its demand
the fewer substitutes it has so the more elastic is its demand
the more substitutes it has so the less elastic is its demand
the fewer substitutes it has so the less elastic is its demand
the more complements it has so the more elastic is its demand
the more substitutes it has so the more elastic is its demand
the fewer substitutes it has so the more elastic is its demand
the more substitutes it has so the less elastic is its demand
the fewer substitutes it has so the less elastic is its demand
the more complements it has so the more elastic is its demand
answer
the fewer substitutes it has so the less elastic is its demand
question
Perfectly elastic demand curves are
downward sloping
upward sloping
vertical
horizontal
steep
downward sloping
upward sloping
vertical
horizontal
steep
answer
horizontal
question
Elasticity measures
whether a price increase causes quantity demanded to increase or decrease
the strength of an economy's tendency to recover from recession
the responsiveness of decision makers to changes in prices, income, or other variables
the profitability of investment in an industry
the long-run flexibility of prices in the economy
whether a price increase causes quantity demanded to increase or decrease
the strength of an economy's tendency to recover from recession
the responsiveness of decision makers to changes in prices, income, or other variables
the profitability of investment in an industry
the long-run flexibility of prices in the economy
answer
the responsiveness of decision makers to changes in prices, income, or other variables
question
Another word for elasticity is
responsiveness
happiness
bonus
profit
surplus
responsiveness
happiness
bonus
profit
surplus
answer
responsiveness
question
Price elasticity of demand is useful because it measures __________ responsiveness to changes in __________.
taxpayers'; demand
producers'; supply
consumers'; price
consumers'; demand
producers'; income
taxpayers'; demand
producers'; supply
consumers'; price
consumers'; demand
producers'; income
answer
consumers'; price
question
The demand curve for a good that has many perfect substitutes in consumption is likely to be
upward sloping
steep
highly inelastic
horizontal
vertical
upward sloping
steep
highly inelastic
horizontal
vertical
answer
horizontal
question
As consumers have a longer time period to respond, the demand for a product typically becomes more inelastic.
True
False
True
False
answer
false
question
If people have more time to adjust to a price change, the price elasticity of demand for that good is likely to
increase
decrease
fall to zero
become equal to -1
remain unchanged
increase
decrease
fall to zero
become equal to -1
remain unchanged
answer
increase
question
If price increases from $45 to $55, the market quantity supplied increases from 20 units per week to 30 units per week. The price elasticity of supply is
1/2 = 0.5
1.0
11/6 = 1.8333
9/4 = 2.25
2.0
1/2 = 0.5
1.0
11/6 = 1.8333
9/4 = 2.25
2.0
answer
2.0
question
If the demand for a good is elastic, then total revenue
increases as price increases
remains constant as quantity demanded increases
increases as price decreases
decreases as quantity demanded increases
decreases as price decreases
increases as price increases
remains constant as quantity demanded increases
increases as price decreases
decreases as quantity demanded increases
decreases as price decreases
answer
increases as price decreases
question
Demand is inelastic if
the percentage change in price is greater than the percentage change in quantity demanded
the percentage change in price is less than the percentage change in quantity demanded
the percentage change in price is equal to the percentage change in quantity demanded
the value of price elasticity is equal to -1
the value of price elasticity is less than -1 (e.g., -3)
the percentage change in price is greater than the percentage change in quantity demanded
the percentage change in price is less than the percentage change in quantity demanded
the percentage change in price is equal to the percentage change in quantity demanded
the value of price elasticity is equal to -1
the value of price elasticity is less than -1 (e.g., -3)
answer
the percentage change in price is greater than the percentage change in quantity demanded
question
If price elasticity of demand is -0.5,
a 1% decrease in quantity demanded leads to a 0.5% decrease in price
a 1% decrease in price leads to a 0.5% increase in quantity demanded
a 50% decrease in price leads to a 1% increase in quantity demanded
a 50% decrease in price leads to a 100% increase in quantity demanded
demand is elastic
a 1% decrease in quantity demanded leads to a 0.5% decrease in price
a 1% decrease in price leads to a 0.5% increase in quantity demanded
a 50% decrease in price leads to a 1% increase in quantity demanded
a 50% decrease in price leads to a 100% increase in quantity demanded
demand is elastic
answer
a 1% decrease in price leads to a 0.5% increase in quantity demanded
question
Luxury goods are
price inelastic
income inelastic
income elastic
goods with negative income elasticity
goods with positive price elasticity
price inelastic
income inelastic
income elastic
goods with negative income elasticity
goods with positive price elasticity
answer
income elastic
question
Inferior goods have an income elasticity of demand that is
positive
negative
0
greater than 1 in absolute value
equal to 1 in absolute value
positive
negative
0
greater than 1 in absolute value
equal to 1 in absolute value
answer
negative
question
An inferior good is one for which demand increases as
price decreases
price increases
income increases
income decreases
the price of a related good decreases
price decreases
price increases
income increases
income decreases
the price of a related good decreases
answer
income decreases
question
For which of the following goods is the income elasticity of demand likely to be largest?
paperback mystery stories
best-selling hardcover novels
used textbooks
children's books
leather-bound editions of Shakespeare
paperback mystery stories
best-selling hardcover novels
used textbooks
children's books
leather-bound editions of Shakespeare
answer
leather-bound editions of Shakespeare
question
Unlike implicit costs, explicit costs
reflect opportunity costs
include the value of the owner's time
are not included in a firm's accounting statements
are actual cash payments
do not change as a firm's output changes
reflect opportunity costs
include the value of the owner's time
are not included in a firm's accounting statements
are actual cash payments
do not change as a firm's output changes
answer
are actual cash payments
question
Accounting profit equals
explicit costs minus implicit costs
economic profit minus implicit costs
economic profit minus explicit costs
economic profit minus explicit costs and implicit costs
economic profit plus implicit costs
explicit costs minus implicit costs
economic profit minus implicit costs
economic profit minus explicit costs
economic profit minus explicit costs and implicit costs
economic profit plus implicit costs
answer
economic profit plus implicit costs
question
Which of the following are implicit costs for a typical firm?
insurance costs
electricity costs
opportunity costs of capital owned and used by the firm
cost of labor hired by the firm
the cost of raw materials
insurance costs
electricity costs
opportunity costs of capital owned and used by the firm
cost of labor hired by the firm
the cost of raw materials
answer
opportunity costs of capital owned and used by the firm
question
If a firm is experiencing diseconomies of scale, its long-run marginal cost curve is upward sloping.
True
False
True
False
answer
True
question
Someone once said that Chevrolet is so large that if it shakes its tail, its takes two years for its head to notice it. This is an example of
profit centers
economies of scale
diseconomies of scale
diminishing marginal returns
diminishing marginal cost
profit centers
economies of scale
diseconomies of scale
diminishing marginal returns
diminishing marginal cost
answer
diseconomies of scale
question
Increasing marginal returns are generally the result of
diseconomies of scale
increasing costs
specialization and division of labor
labor unions
technology
diseconomies of scale
increasing costs
specialization and division of labor
labor unions
technology
answer
specialization and division of labor
question
The additional output obtained by adding another unit of labor to the production process is called
the marginal cost of labor
the average output of labor
a variable cost
the marginal product of labor
the marginal utility of labor
the marginal cost of labor
the average output of labor
a variable cost
the marginal product of labor
the marginal utility of labor
answer
the marginal product of labor
question
Which of the following is most likely to be a fixed resource for Paul's Country Fresh Pies, Inc.?
berries
flour
bakers
eggs
ovens
berries
flour
bakers
eggs
ovens
answer
ovens
question
If a firm is experiencing diminishing marginal returns, its marginal product is negative.
True
False
True
False
answer
False
question
In the short run, all costs are fixed.
True
False
True
False
answer
False
question
In the short run, which of the following is likely to be a variable cost to a physician?
office space
computers
liability insurance
insurance forms
examining table
office space
computers
liability insurance
insurance forms
examining table
answer
insurance forms
question
When diminishing marginal returns set in, marginal product is
positive and increasing
positive and decreasing
negative and increasing
negative and decreasing
zero
positive and increasing
positive and decreasing
negative and increasing
negative and decreasing
zero
answer
positive and decreasing
question
Which of the following best explains why marginal cost eventually increases as output increases?
economies of scale occur
average cost increases
total cost increases
marginal product decreases
fixed cost is constant
economies of scale occur
average cost increases
total cost increases
marginal product decreases
fixed cost is constant
answer
marginal product decreases
question
A variable cost is one that changes
in the long run only
in the short run only
year to year
month to month
as output changes
in the long run only
in the short run only
year to year
month to month
as output changes
answer
as output changes
question
The short-run average variable cost curve
is always downward-sloping
starts at the origin and always slopes upward
starts above the origin and always slopes upward
is a horizontal line intersecting the vertical axis
slopes downward at low rates of output, then slopes upward at higher rates of output
is always downward-sloping
starts at the origin and always slopes upward
starts above the origin and always slopes upward
is a horizontal line intersecting the vertical axis
slopes downward at low rates of output, then slopes upward at higher rates of output
answer
The short-run average variable cost curve
is always downward-sloping
starts at the origin and always slopes upward
starts above the origin and always slopes upward
is a horizontal line intersecting the vertical axis
slopes downward at low rates of output, then slopes upward at higher rates of output
is always downward-sloping
starts at the origin and always slopes upward
starts above the origin and always slopes upward
is a horizontal line intersecting the vertical axis
slopes downward at low rates of output, then slopes upward at higher rates of output
question
What is the relationship between marginal cost and marginal product?
The two are not related.
When marginal product increases, marginal cost increases.
When marginal product increases, marginal cost falls.
When marginal product is negative, marginal costs are negative.
When diminishing marginal returns set in, marginal costs fall.
The two are not related.
When marginal product increases, marginal cost increases.
When marginal product increases, marginal cost falls.
When marginal product is negative, marginal costs are negative.
When diminishing marginal returns set in, marginal costs fall.
answer
When marginal product increases, marginal cost falls.
question
If marginal cost exceeds average variable cost,
average variable cost is negative
average variable cost is increasing
marginal cost is greater than average total cost
average variable cost is decreasing
average fixed cost is increasing
average variable cost is negative
average variable cost is increasing
marginal cost is greater than average total cost
average variable cost is decreasing
average fixed cost is increasing
answer
average variable cost is increasing
question
If a firm is producing at its minimum efficient scale, increasing its output slightly will lead to diseconomies of scale.
True
False
True
False
answer
true
question
When a firm is experiencing diminishing marginal returns, marginal cost is
rising
falling
constant
rising at first, then falling
zero
rising
falling
constant
rising at first, then falling
zero
answer
falling
question
Which of the following is a fixed cost for Wendy's Hamburgers?
the cost of beef
electricity to light up the Wendy's sign
gasoline for the trucks that deliver supplies to the various franchises
interest on funds borrowed to build new facilities
expenditures on paper and plastic for packaging
the cost of beef
electricity to light up the Wendy's sign
gasoline for the trucks that deliver supplies to the various franchises
interest on funds borrowed to build new facilities
expenditures on paper and plastic for packaging
answer
interest on funds borrowed to build new facilities
question
Which of the following is a fixed cost of preparing meals?
dishwasher detergent
chicken
salad
a microwave oven
electricity
dishwasher detergent
chicken
salad
a microwave oven
electricity
answer
a microwave oven
question
Fixed costs are defined as
the total costs of a firm's production
the additional cost of the last unit produced
costs that increase proportionately as the quantity produced increases
costs that do not vary as quantity produced increases
implicit costs only
the total costs of a firm's production
the additional cost of the last unit produced
costs that increase proportionately as the quantity produced increases
costs that do not vary as quantity produced increases
implicit costs only
answer
costs that do not vary as quantity produced increases
question
Which of the following is most likely to be a fixed resource for the Speedy Word Processing and Résumé Company?
floppy disks
typists
computer terminals
electricity
paper
floppy disks
typists
computer terminals
electricity
paper
answer
computer terminals
question
The short run is a period of time
equal to or less than six months
during which all resources may be varied
during which all resources are fixed
during which at least one resource is fixed
during which at least one resource may be varied
equal to or less than six months
during which all resources may be varied
during which all resources are fixed
during which at least one resource is fixed
during which at least one resource may be varied
answer
during which at least one resource is fixed
question
In the long run, all inputs are variable.
True
False
True
False
answer
True
question
An implicit cost is
any cost a firm cannot avoid in the short run
any expenditure a firm makes
an opportunity cost
accurately measured in accounting statements
ignored by economists
any cost a firm cannot avoid in the short run
any expenditure a firm makes
an opportunity cost
accurately measured in accounting statements
ignored by economists
answer
an opportunity cost
question
Economic profit is defined as
total revenue minus implicit costs
total revenue plus explicit costs
total revenue plus implicit costs
wages plus interest minus rent
total revenue minus implicit and explicit costs
total revenue minus implicit costs
total revenue plus explicit costs
total revenue plus implicit costs
wages plus interest minus rent
total revenue minus implicit and explicit costs
answer
total revenue minus implicit and explicit costs
question
Implicit cost involves a direct cash payment for the use of a resource.
True
False
True
False
answer
False
question
Economies of scale can be caused by
all of the following
short-run increases in marginal productivity
the use of larger, more specialized machines
higher information costs as a firm expands
bureaucratic red tape as a firm expands
all of the following
short-run increases in marginal productivity
the use of larger, more specialized machines
higher information costs as a firm expands
bureaucratic red tape as a firm expands
answer
the use of larger, more specialized machines
question
Total cost is calculated as
average fixed cost plus average variable cost
fixed cost plus variable cost
the additional cost of the last unit produced
marginal cost plus variable cost
marginal cost plus fixed cost
average fixed cost plus average variable cost
fixed cost plus variable cost
the additional cost of the last unit produced
marginal cost plus variable cost
marginal cost plus fixed cost
answer
fixed cost plus variable cost
question
The law of diminishing returns explains why
monopolies have a guaranteed profit margin
short-run MC and AVC curves are U-shaped
the production possibilities curve is bowed out
long run supply curves are downward sloping
total product is a straight line
monopolies have a guaranteed profit margin
short-run MC and AVC curves are U-shaped
the production possibilities curve is bowed out
long run supply curves are downward sloping
total product is a straight line
answer
short-run MC and AVC curves are U-shaped
question
Diseconomies of scale are pictured on a graph by the upward-sloping portion of the
marginal product curve
short-run marginal cost curve
long-run marginal cost curve
short-run average cost curve
long-run average cost curve
marginal product curve
short-run marginal cost curve
long-run marginal cost curve
short-run average cost curve
long-run average cost curve
answer
long-run average cost curve
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