question
Every economy must answer each of the following questions except one. Which is the exception?
a. Which good will be produced?
b. Why are these particular goods produced?
c. Which resources should be used?
d. How should resources be combined to produce each product?
e. Who will actually consume the goods produced?
a. Which good will be produced?
b. Why are these particular goods produced?
c. Which resources should be used?
d. How should resources be combined to produce each product?
e. Who will actually consume the goods produced?
answer
B
question
Which of the following sentences is the best example of scarcity of time?
a. Peter buys a hamburger.
b. John-Michael wants to spend his money on a new hoverboard.
c. Alexander is doing homework instead of going to the movies with his friends.
d. Amanda, a geography teacher, is retired.
e. Bill is unemployed.
a. Peter buys a hamburger.
b. John-Michael wants to spend his money on a new hoverboard.
c. Alexander is doing homework instead of going to the movies with his friends.
d. Amanda, a geography teacher, is retired.
e. Bill is unemployed.
answer
C
question
Suppose you have a choice of working full-time during the summer or going full-time to summer school. Summer tuition and books are $2,200. If you worked, you could make $7,000. Your rent is $1,000 for the summer, regardless of your choice. IF these are hte only relevant costs to consider, the opportunity cost of going to summer school is:
a. $2,200
b. $7,000
c. $8,000
d. $9,200
e. $10,200
a. $2,200
b. $7,000
c. $8,000
d. $9,200
e. $10,200
answer
D
question
You currently subscribe to two magazines and are trying to decide whether you should subscribe to a third. What should determine your decision if you are economically rational?
a.The total cost of the magazines compared to the total satisfaction you would receive.
b. The total amount of satisfaction you would get from the magazines.
c. The enjoyment you would get from the third magazine.
d. The cost of the third magazine including the time it takes to read it.
e. The cost of the third magazine compared to the additional enjoyment you would get from it.
a.The total cost of the magazines compared to the total satisfaction you would receive.
b. The total amount of satisfaction you would get from the magazines.
c. The enjoyment you would get from the third magazine.
d. The cost of the third magazine including the time it takes to read it.
e. The cost of the third magazine compared to the additional enjoyment you would get from it.
answer
E
question
In a circular-flow-model, households supply all of the following except:
a. Labor
b. Goods and services
c. Capital
d. Entrepreneurial ability
e. natural resources.
a. Labor
b. Goods and services
c. Capital
d. Entrepreneurial ability
e. natural resources.
answer
B
question
Economic theories are:
a. useful because they are as exact as theories in the physical sciences.
b. Useless because they are based on abstractions.
c. useful because they allow us to make predictions.
d. Too complex to understand because they include all of reality.
e. useful in predicting events only if their assumptions are realistic.
a. useful because they are as exact as theories in the physical sciences.
b. Useless because they are based on abstractions.
c. useful because they allow us to make predictions.
d. Too complex to understand because they include all of reality.
e. useful in predicting events only if their assumptions are realistic.
answer
C
question
The U.S. economy is best characterized as a:
a. Barter economy
b. Command economy
c. Mercantile economy
d. Mixed economy
e. Traditional economy
a. Barter economy
b. Command economy
c. Mercantile economy
d. Mixed economy
e. Traditional economy
answer
D
question
Which of the following is an example of a positive economic statement?
a. Workers with families should be paid at least hte minimum wage.
b. If crime rates reduced , the world would be a better place to live in.
c. Marginal tax rates should be reduced for individuals in the highest tax bracket.
d. An increase in the price of gasoline will cause a reduction in the amount of gasoline purchased.
e. corrupt politicians ought to be voted out of office.
a. Workers with families should be paid at least hte minimum wage.
b. If crime rates reduced , the world would be a better place to live in.
c. Marginal tax rates should be reduced for individuals in the highest tax bracket.
d. An increase in the price of gasoline will cause a reduction in the amount of gasoline purchased.
e. corrupt politicians ought to be voted out of office.
answer
D
question
Adam Smith's term "the invisible hand" refers to:
a. The hidden riole of gbovernment in setting regulations that govern trading in market.
b. The most capable entrepreneurs in the economy.
c. Market forces
d. the unseen work of the financial markets that favilitates trade.
e. The role of technological change and random events in the economy.
a. The hidden riole of gbovernment in setting regulations that govern trading in market.
b. The most capable entrepreneurs in the economy.
c. Market forces
d. the unseen work of the financial markets that favilitates trade.
e. The role of technological change and random events in the economy.
answer
C
question
Which of the following is the best definition of economics?
a. An investigation of the quantities and prices of the various goods produced by the nations of the world.
b. A study of why inflation and unemployment periodically plague the U.S. economy
c. An analysis of how individuals and societies deal with the problem of scarcity.
d. An examination of the role that money plays in the economy.
a. An investigation of the quantities and prices of the various goods produced by the nations of the world.
b. A study of why inflation and unemployment periodically plague the U.S. economy
c. An analysis of how individuals and societies deal with the problem of scarcity.
d. An examination of the role that money plays in the economy.
answer
C
question
Environmentalists have continually argued for the use of alternatives to fossil fuels to generate energy. Harnessing wind power by setting up wind farms had been one alternative proposed and implemented. As it is now known that these wind farms lead to the sliving and dicing of migratory birds and the decimation of the local bat population, we could say that the environmentalists have committed the:
a. Fallacy of composition.
b. Fallacy that association is causation.
c. Fallacy of segmentation.
d. Mistake of ignoring secondary effects.
e. Mistake of ignoring the obvious
a. Fallacy of composition.
b. Fallacy that association is causation.
c. Fallacy of segmentation.
d. Mistake of ignoring secondary effects.
e. Mistake of ignoring the obvious
answer
D
question
If you enjoy playing golf, the opportunity of cleaning your room:
a. is greater on sunny days than it is on rainy days.
b. is the same on sunny days as it is on rainy days.
c. is smaller on sunny days than it is on rainy days.
d. does not change with weather conditions.
e. is equal to the opportunity cost of any other chore you have to do that day.
a. is greater on sunny days than it is on rainy days.
b. is the same on sunny days as it is on rainy days.
c. is smaller on sunny days than it is on rainy days.
d. does not change with weather conditions.
e. is equal to the opportunity cost of any other chore you have to do that day.
answer
A
question
Which of the following would be a topic considered in the field of macroeconomics?
a. The study of the recent growth of the Chinese economy.
b. The study of the relocation of U.S. manufacturing firms to China.
c. The study of the differences in wages between men and women in the US.
d. The study of the effect of rent control on the housing market in NYC.
e. The study of the impact of environmental regulations on the well-being of human populations.
a. The study of the recent growth of the Chinese economy.
b. The study of the relocation of U.S. manufacturing firms to China.
c. The study of the differences in wages between men and women in the US.
d. The study of the effect of rent control on the housing market in NYC.
e. The study of the impact of environmental regulations on the well-being of human populations.
answer
A
question
Which of the following would an economist classify as physical capital?
a. 100 shares of microsoft stock.
b. a $50 bill
c. a credit card
d. a lawyers laptop
e. coal in the mountains of west virginia
a. 100 shares of microsoft stock.
b. a $50 bill
c. a credit card
d. a lawyers laptop
e. coal in the mountains of west virginia
answer
D
question
A major distinguishing feature between capitalist and socialist (or command) economies is that:
a. the average citizen is always wealthier in capitalist economies than in socialist economies.
b. Decision making is typically decentralized in socialist economies and is centralized in capitalist economies.
c. Resources are privately owned in capitalist economies and private property rights are enforces by a dictator in command economies.
d. Resources are publicl owned in capitalist economies.
e. Decision making is typically decentralized under capitalism, while it is centralized in command economies.
a. the average citizen is always wealthier in capitalist economies than in socialist economies.
b. Decision making is typically decentralized in socialist economies and is centralized in capitalist economies.
c. Resources are privately owned in capitalist economies and private property rights are enforces by a dictator in command economies.
d. Resources are publicl owned in capitalist economies.
e. Decision making is typically decentralized under capitalism, while it is centralized in command economies.
answer
E
question
Economists believe that:
a. people who chose to promote the interest of others cannot be acting rationally in their own self-interest.
b, People show concern only for those whom they know personally.
c. Charitable donations would disappear if tax deductions for caritable giving were eliminated.
d. the notion of self-interest rules out concern for others.
e. Concern for the welfare of others is consistent with the concept of self-interest.
a. people who chose to promote the interest of others cannot be acting rationally in their own self-interest.
b, People show concern only for those whom they know personally.
c. Charitable donations would disappear if tax deductions for caritable giving were eliminated.
d. the notion of self-interest rules out concern for others.
e. Concern for the welfare of others is consistent with the concept of self-interest.
answer
E
question
Which of the following is an accurate list, in order, of the steps of the scientific method?
a. Define variables; state assumptions; form a hypothesis; test
b. State assumption; define variables; form a hypothesis; test
c. Identify variables; state assumptions; test; form a hypothesis
d. Identify variables; form a hypothesis; form behavioral assumptions; test
e. define assumptions; form behavioral assumptions; form hypothesis; test
a. Define variables; state assumptions; form a hypothesis; test
b. State assumption; define variables; form a hypothesis; test
c. Identify variables; state assumptions; test; form a hypothesis
d. Identify variables; form a hypothesis; form behavioral assumptions; test
e. define assumptions; form behavioral assumptions; form hypothesis; test
answer
A
question
Suppose you have purchased a nonrefundable plane ticket and, at the last moment, cannot take the trip, You can however, sell the ticket. If you paid $700 for the ticket, the cost of sending the ticket to someone through overnight mail is $20, and you spend $10 on a courier to get the ticket to the post office for overnight delivery, what is the minimum you should accept for the ticket?
a. $700 because that is what the ticket cost
b. $720 because that is the cost of the ticket and of getting it to the buyer
c. $730 because that is the total cost of the ticket and getting it to the buyer
d. More than $730, so you can make a profit
e. $30 because the $700 is a sunk cost.
a. $700 because that is what the ticket cost
b. $720 because that is the cost of the ticket and of getting it to the buyer
c. $730 because that is the total cost of the ticket and getting it to the buyer
d. More than $730, so you can make a profit
e. $30 because the $700 is a sunk cost.
answer
E
question
Goods and services are exchanged in:
a. Product markets.
b. Resource markets.
c. inventory markets.
d. classified markets.
e. government markets.
a. Product markets.
b. Resource markets.
c. inventory markets.
d. classified markets.
e. government markets.
answer
A
question
If the price of Pepsi-Cola increases from 40 cents to 50 cents per can and the quantity demanded decreases from 100 cans to 50 cans, then the absolute value of hte price elasticity of demand for Pepsi-Cola is:
a. .5
b. .25
c. 1
d. 3
e. 2
a. .5
b. .25
c. 1
d. 3
e. 2
answer
D
question
Sugar and honey are viewed as substitutes for each other in many cooking applications. If the price of sugar rises, we would expect:
a. the demand for honey to increase
b. the demand for honey to decrease
c. the quantity demanded of honey to decrease
d. the price of honey to decrease.
e. the quantity demanded of honey to increase.
a. the demand for honey to increase
b. the demand for honey to decrease
c. the quantity demanded of honey to decrease
d. the price of honey to decrease.
e. the quantity demanded of honey to increase.
answer
A
question
Which of following is most likely to shift the supply curve for a product to the right?
a. An increase in the price of a resource used in the good's production
b. The expectation of a higher price in the near future.
c. An increase in the price of the product.
d. A decrease in the price of an alternative good.
e. An improvement in the technology for producing the good.
a. An increase in the price of a resource used in the good's production
b. The expectation of a higher price in the near future.
c. An increase in the price of the product.
d. A decrease in the price of an alternative good.
e. An improvement in the technology for producing the good.
answer
E
question
Given the availability of California oranges, the demand for Florida oranges will:
a. be less elastic than if there were no California oranges.
b. be more elastic than if there were nor California oranges.
c. have the same elasticity as it would if there were no California oranges.
d. be perfectly elastic
e. be perfectly inelastic
a. be less elastic than if there were no California oranges.
b. be more elastic than if there were nor California oranges.
c. have the same elasticity as it would if there were no California oranges.
d. be perfectly elastic
e. be perfectly inelastic
answer
B
question
When a surplus arises in the market for swimwear:
a. the price of swimwear will increase
b. the production of swimwear will increase
c. the supply of swimwear will increase.
d. the price of swimwear at retail outlets will fall.
e. the demand for swimwear will increase.
a. the price of swimwear will increase
b. the production of swimwear will increase
c. the supply of swimwear will increase.
d. the price of swimwear at retail outlets will fall.
e. the demand for swimwear will increase.
answer
D
question
If the price elasticity of demand is -.5, then a:
a. 1 percent decrease in quantity demanded leads to a .5 percent decrease in price.
b. 1 percent decrease in prices leads to a .5 percent increase in quantity demanded.
c. 50 percent decrease in price leads to a 1 percent increase in quantity demanded.
d. 50 percent decrease in price leads to a 100 percent increase in quantity demanded.
e. 50 percent decrease in quantity demanded leads to a 1 percent decrease in price.
a. 1 percent decrease in quantity demanded leads to a .5 percent decrease in price.
b. 1 percent decrease in prices leads to a .5 percent increase in quantity demanded.
c. 50 percent decrease in price leads to a 1 percent increase in quantity demanded.
d. 50 percent decrease in price leads to a 100 percent increase in quantity demanded.
e. 50 percent decrease in quantity demanded leads to a 1 percent decrease in price.
answer
B
question
Saccharin and aspartame are both low-calorie substitues for sugar. If saccharin is found to cause cancer, then:
a. the price of aspartame will increase.
b. the price of sugar will decrease.
c. the price of saccharin will increase.
d. the demand curve for saccharin will shift to the right.
e. the supply curve for aspartame will shift to the left.
a. the price of aspartame will increase.
b. the price of sugar will decrease.
c. the price of saccharin will increase.
d. the demand curve for saccharin will shift to the right.
e. the supply curve for aspartame will shift to the left.
answer
A
question
The cross-price elasticity of demand between milk and soft drinks is likely to be:
a. negative, because the goods are complements.
b. positive, because the goods are complements.
c. negative, because the goods are substitutes.
d. positive, because the goods are substitutes.
e. zero, because the goods are not usually consumed by the same person at one time.
a. negative, because the goods are complements.
b. positive, because the goods are complements.
c. negative, because the goods are substitutes.
d. positive, because the goods are substitutes.
e. zero, because the goods are not usually consumed by the same person at one time.
answer
D
question
If demand for personal computers increase as a result of an increase in income,
a. personal computers must be a normal good.
b. personal computers must be an inferior good.
c. personal computers must be a complement.
d. the substitutes for personal computers must be inferior goods.
e. the complements for personal computers must be inferior goods.
a. personal computers must be a normal good.
b. personal computers must be an inferior good.
c. personal computers must be a complement.
d. the substitutes for personal computers must be inferior goods.
e. the complements for personal computers must be inferior goods.
answer
A
question
In order to prove that macaroni is an inferior good, we could test the _______ of macaroni and get a ______.
a. cross-price elasticity; negative number
b. income elasticity; number less than 1.
c. income elasticity; positive number.
d. price elasticity of demand; number greater than negative 1.
e. income elasticity; negative number.
a. cross-price elasticity; negative number
b. income elasticity; number less than 1.
c. income elasticity; positive number.
d. price elasticity of demand; number greater than negative 1.
e. income elasticity; negative number.
answer
E
question
Consider a market for cookies that is initially in equilibrium. For a given upward-sloping supply curve, the equilibrium price and equilibrium quantity of cookies is most likely to decline when:
a. the price of milk, a complement, increases.
b. consumer income increases.
c. the number of consumers increases.
d. the price of coffee, a complement, decreases.
e. price of crackers, a substitute, increase.
a. the price of milk, a complement, increases.
b. consumer income increases.
c. the number of consumers increases.
d. the price of coffee, a complement, decreases.
e. price of crackers, a substitute, increase.
answer
A
question
Suppose Enid could increase her total utility by purchasing one more book and one less DVD. Which of the following is true?
a. The marginal utility of an additional DVD exceeds the marginal utility of an additional book.
b. The marginal utility of an additional book exceeds the marginal utility of an additional DVD.
c. The marginal utility of an additional DVD is negative.
d. The marginal utility of per dollar spent on books exceeds that of DVDs.
e. The marginal utility of per dollar spent on books equals that of DVDs.
a. The marginal utility of an additional DVD exceeds the marginal utility of an additional book.
b. The marginal utility of an additional book exceeds the marginal utility of an additional DVD.
c. The marginal utility of an additional DVD is negative.
d. The marginal utility of per dollar spent on books exceeds that of DVDs.
e. The marginal utility of per dollar spent on books equals that of DVDs.
answer
D
question
Which of the following is true in the short run at the output level where average total cost is at its minimum?
a. Marginal cost equals average total cost.
b. Average variable cost equals fixed cost.
c. Marginal cost equals average variable cost.
d. Average total cost equals average fixed cost.
e. Average total cost equals average variable cost.
a. Marginal cost equals average total cost.
b. Average variable cost equals fixed cost.
c. Marginal cost equals average variable cost.
d. Average total cost equals average fixed cost.
e. Average total cost equals average variable cost.
answer
A
question
Which of the following illustrates the law of diminishing marginal utility?
a. The marginal utility of Diane's second coke is greater than the marginal utility of her third pretzel, other things constant.
b. The marginal utility of Diane's second Coke is greater than the marginal utility of Ken's third pretzel, other things constant.
c. The marginal utility of Diane's second Coke is greater than the marginal utility of her third Coke, other thingds constant.
d. The total utility of one Coke is greater than the total utility of two Cokes, other things constant.
e. The marginal utility of Diane's second Coke is greater than the marginal utility of Ken's third Coke, other things constant.
a. The marginal utility of Diane's second coke is greater than the marginal utility of her third pretzel, other things constant.
b. The marginal utility of Diane's second Coke is greater than the marginal utility of Ken's third pretzel, other things constant.
c. The marginal utility of Diane's second Coke is greater than the marginal utility of her third Coke, other thingds constant.
d. The total utility of one Coke is greater than the total utility of two Cokes, other things constant.
e. The marginal utility of Diane's second Coke is greater than the marginal utility of Ken's third Coke, other things constant.
answer
C
question
In order to derive a demand curve for cheese, one would change:
a. income and hold other things constant
b. tastes and hold other things constant.
c. the price of other goods and hold everything else constant.
d. the price of cheese and hold other things constant.
e. the price of all goods, including cheese, and hold other things constant.
a. income and hold other things constant
b. tastes and hold other things constant.
c. the price of other goods and hold everything else constant.
d. the price of cheese and hold other things constant.
e. the price of all goods, including cheese, and hold other things constant.
answer
D
question
Suppose Ernie gives up his job as financial advisor for PETS where he earned $30,000 per year, to open up a store selling pet-care products. He invested $10,000 in the store, which were originally savings that earned 5 percent interest. This year, the revenue from the new business was $50,000 and the explicit costs were $10,000. The economic profict earned by Ernie was ____.
a. $10,000
b. $50,000
c. $20,000
d. $40,000
e. $9,500
a. $10,000
b. $50,000
c. $20,000
d. $40,000
e. $9,500
answer
E
question
Suppose Jason's marginal utility of the $50-per-serving caviar is 100 units and that hte $1-per-serving popcorn is 10 units. Which of the following combinations of snacks would he prefer to buy?
a. If he has $49, then he will buy one serving of caviar and zero servings of popcorn.
b. If he has $53, he will buy one serving of caviar and two servings of popcorn.
c. Irrespective of the amount of money he has, he will always buy popcorn.
d. If he has $50, then he will buy one serving each of the caviar and popcorn.
e. Irrespective of the amount of money he has, he will always buy caviar.
a. If he has $49, then he will buy one serving of caviar and zero servings of popcorn.
b. If he has $53, he will buy one serving of caviar and two servings of popcorn.
c. Irrespective of the amount of money he has, he will always buy popcorn.
d. If he has $50, then he will buy one serving each of the caviar and popcorn.
e. Irrespective of the amount of money he has, he will always buy caviar.
answer
C
question
If variable cost rises from $60 to $100 as output increases from 15 to 20 units, the marginal cost of the twntiest unit is ____.
a. $100
b. $5
c. $40
d. $8
e. $58
a. $100
b. $5
c. $40
d. $8
e. $58
answer
D
question
Marginal cost eventually increases as output increases due to the effect of ____.
a. Economies of scale
b. Increasing average cost
c. Increasing total cost
d. Diminishing marginal product of inputs
e. constant fixed cost
a. Economies of scale
b. Increasing average cost
c. Increasing total cost
d. Diminishing marginal product of inputs
e. constant fixed cost
answer
D
question
John moved his office form a building he was renting downtown to the carriage house he owns behind his house. Which of the following statements shows how his costs change?
a. Both his explicit and implicit costs will rise.
b. His explicit costs will rise, while his implicit costs will fall.
c. Both his explicit and implicit costs will fall.
d. His explicit costs fall, while his implicit costs will rise.
e. His explicit costs will rise, while his implicit costs will remain the same.
a. Both his explicit and implicit costs will rise.
b. His explicit costs will rise, while his implicit costs will fall.
c. Both his explicit and implicit costs will fall.
d. His explicit costs fall, while his implicit costs will rise.
e. His explicit costs will rise, while his implicit costs will remain the same.
answer
D
question
If marginal cost exceeds average variable cost, then:
a. average variable cost is negative.
b. average variable cost is increasing.
c. marginal cost is greater than average total cost.
d. average variable cost is decreasing.
e. average fixed cost is increasing,
a. average variable cost is negative.
b. average variable cost is increasing.
c. marginal cost is greater than average total cost.
d. average variable cost is decreasing.
e. average fixed cost is increasing,
answer
B
question
Suppose the marginal cost for the 1,000th unit of a monopolist's output is $40, marginal revenue is $30, the average variable cost of producing 1,000 units is $30, and the average total cost is $50. In order to maximize profit or minimize loss in the short run, the firm should:
a. Shut down
b. Continue to product 1,000 units.
c. product fewer than 1000 units but still operate
d. produce more than 1000 units
e. increase its plant size to gain economies of scale.
a. Shut down
b. Continue to product 1,000 units.
c. product fewer than 1000 units but still operate
d. produce more than 1000 units
e. increase its plant size to gain economies of scale.
answer
C
question
_____ is the change in total cost from producing one more unit of the output.
a. Marginal cost
b. Variable cost
c. Opportunity cost
d. Average cost
e. Fixed cost
a. Marginal cost
b. Variable cost
c. Opportunity cost
d. Average cost
e. Fixed cost
answer
A
question
A firm in a perfectly competitive market:
a. Can raise the price of its product and sell more output
b. hast o lower the price of its product to sell more output.
c. can increase it supply to lower the market price.
d. can decrease its supply to increase the market price.
e. has to accept the market price for its product.
a. Can raise the price of its product and sell more output
b. hast o lower the price of its product to sell more output.
c. can increase it supply to lower the market price.
d. can decrease its supply to increase the market price.
e. has to accept the market price for its product.
answer
E
question
In the long run, the entry of new firms in a competitive industry:
a. drives up the equilibrium price.
b. eliminates economic profits
c. reduces the equilibrium quantity.
d. makes the demand curve facing each firm more inelastic.
e. makes the market demand curve steeper.
a. drives up the equilibrium price.
b. eliminates economic profits
c. reduces the equilibrium quantity.
d. makes the demand curve facing each firm more inelastic.
e. makes the market demand curve steeper.
answer
B
question
At its present rate of output, Barrel O' Biscuits, a perfectly competitive firm, finds that its marginal cost exceeds its marginal revenue and its price exceeds its average variable cost. To maximize profit, the firm should ____.
a. lower the price
b. increase the price.
c. increase output
d. decrease output
e. product at its current level of output
a. lower the price
b. increase the price.
c. increase output
d. decrease output
e. product at its current level of output
answer
D
question
When compard to firms in perfect competition, monopolists tend to charge:
a. lower prices and offer lower quantities of output
b. higher prices and offer lower quantities of output
c. lower prices and offer higher quantities of output
d. higher prices and offer high quantities of output
e. higher prices but offer the same quantity of output.
a. lower prices and offer lower quantities of output
b. higher prices and offer lower quantities of output
c. lower prices and offer higher quantities of output
d. higher prices and offer high quantities of output
e. higher prices but offer the same quantity of output.
answer
B
question
Which of the following conditions is true at the profit-maximizing output for both a perfectly competitiive firm and a monopoly?
a. Price equal marginal cost
b. price is greater than marginal cost.
c. Marginal revenue equals marginal cost
d. marginal revenue is less than marginal cost
e. marginal revenue is greater than average revenue.
a. Price equal marginal cost
b. price is greater than marginal cost.
c. Marginal revenue equals marginal cost
d. marginal revenue is less than marginal cost
e. marginal revenue is greater than average revenue.
answer
C
question
Due to the ease of entry of new firms into monopolistically competitive markets in the long run, existing firms in these markets:
a. produce at the lowest average total cost
b. charge a price equal to marginal cost
c. earn no economic profit in the long run.
d. take advantage of economies of scope.
e. earn no economic profit in the short run.
a. produce at the lowest average total cost
b. charge a price equal to marginal cost
c. earn no economic profit in the long run.
d. take advantage of economies of scope.
e. earn no economic profit in the short run.
answer
C
question
A cartels marginal cost curve is the:
a. highest of all the individuals firms' marginal cost curves.
b. lowest of all the individual firms' marginal cost curves.
c. horizontal sum of all the individual firms' marginal cost curves.
d. same as the market supply curve
e. same as the marginal cost curve faced by all firms in the market.
a. highest of all the individuals firms' marginal cost curves.
b. lowest of all the individual firms' marginal cost curves.
c. horizontal sum of all the individual firms' marginal cost curves.
d. same as the market supply curve
e. same as the marginal cost curve faced by all firms in the market.
answer
C
question
The law of comparative advantage states that:
a. each country should specialize in producing the good with the lowest opportunity cost.
b. a country able to product something using fewer resources than other countries would gain from specialization and trade.
c. international trade barriers slow the introduction of new goods and better technologies.
d. countries can gain from trade if production is subject to economies of scale.
e. countries must agree on how much of one good exchanges for another.
a. each country should specialize in producing the good with the lowest opportunity cost.
b. a country able to product something using fewer resources than other countries would gain from specialization and trade.
c. international trade barriers slow the introduction of new goods and better technologies.
d. countries can gain from trade if production is subject to economies of scale.
e. countries must agree on how much of one good exchanges for another.
answer
A
question
If oligopolists engaged in some sort of collusion, industry output would be _____ and price would be ____ than under perfect competition.
a. smaller; lower
b. smaller; higher
c. smaller; no different
d. greater; lower
e. greater; higher
a. smaller; lower
b. smaller; higher
c. smaller; no different
d. greater; lower
e. greater; higher
answer
B
question
The production possibilities curve of a country will be a straight line if:
a. the production of each commodity is subject to economies of scale
b. the country completely specializes in the production of the good with the highest opportunity cost.
c. the country has an absolute advantage in the production of each commodity.
d. the resources in the country are equally adaptable to the production of each commodity.
e. the country completely specializes in the production of the good with the lowest opportunity cost.
a. the production of each commodity is subject to economies of scale
b. the country completely specializes in the production of the good with the highest opportunity cost.
c. the country has an absolute advantage in the production of each commodity.
d. the resources in the country are equally adaptable to the production of each commodity.
e. the country completely specializes in the production of the good with the lowest opportunity cost.
answer
D
question
For each watch Marina produces, it gives up the opportunity to make 50 pounds of cheese. Cambria can product one watch for every 100 pounds of cheese it produces. IF specialization and trade were to occur between these two countries, which of the following is true with regard to opportunity costs in the two countries?
a. The opportunity cost of producing watches is higher in Marina than Cambria.
b. The opportunity cost of producing cheese is higher in Marina than Cambria.
c. The opportunity cost of producing cheese is identical in both countries.
d. The opportunity cost of producing watches is lower in Cambria than Marina
e. In both countries combined, the opportunity cost of one watch is 150 pounds of cheese.
a. The opportunity cost of producing watches is higher in Marina than Cambria.
b. The opportunity cost of producing cheese is higher in Marina than Cambria.
c. The opportunity cost of producing cheese is identical in both countries.
d. The opportunity cost of producing watches is lower in Cambria than Marina
e. In both countries combined, the opportunity cost of one watch is 150 pounds of cheese.
answer
B
question
Any movement along a bowed-out-production possibilities frontier involves the production of:
a. more of both goods.
b. more of one good and less of the other.
c. less of both goods.
d. more resources.
e. better technology
a. more of both goods.
b. more of one good and less of the other.
c. less of both goods.
d. more resources.
e. better technology
answer
B
question
If Sam can chop up more carrots per minute than Joe can, then:
a. Joe has an absolute advantage in carrot chopping.
b. Joe must have a comparative advantage in carrot chopping.
c. Sam has an absolute advantage in carrot chopping.
d. Sam must have a comparative advantage in carrot chopping
e. we can conclude nothing about absolute advantage.
a. Joe has an absolute advantage in carrot chopping.
b. Joe must have a comparative advantage in carrot chopping.
c. Sam has an absolute advantage in carrot chopping.
d. Sam must have a comparative advantage in carrot chopping
e. we can conclude nothing about absolute advantage.
answer
C
question
If Helen can paint one room in the time it takes her to bake 40 cakes and Josh can paint one room in the time it takes him to bake 60 cakes, Josh's opportunity cost of baking one cake is:
a. painting one room.
b. painting 1/40 of a room.
c. painting 1/60 of a room.
d. painting 2/3 of a room.
e. painting 3/2 of a room
a. painting one room.
b. painting 1/40 of a room.
c. painting 1/60 of a room.
d. painting 2/3 of a room.
e. painting 3/2 of a room
answer
C
question
T/F A payoff matric is a table listing the expected economic profit resulting from different possible strategies
answer
True
question
When drawing a production possibilities frontier for two goods, all of the following are usually assumed except one. Which one is the exception?
a. The quantity of resources is rapidly growing.
b. Technology is fixed.
c. Resources can be shifted from the production of one good to the other.
d. The production possibilities frontier is drawn for a particular time period.
e. Resources are fully and efficiently employed.
a. The quantity of resources is rapidly growing.
b. Technology is fixed.
c. Resources can be shifted from the production of one good to the other.
d. The production possibilities frontier is drawn for a particular time period.
e. Resources are fully and efficiently employed.
answer
A
question
A monopolistic competitor's demand curve is
a. perfectly elastic
b. less than a monopolist's but more elastic than a perfect competitor's demand curve.
c. as elastic as an oligopolist's demand curve.
d. more elastic than a monopolist's or oligopolist's but less elastic than a perfect competitor's demand curve.
e. perfectly inelastic.
a. perfectly elastic
b. less than a monopolist's but more elastic than a perfect competitor's demand curve.
c. as elastic as an oligopolist's demand curve.
d. more elastic than a monopolist's or oligopolist's but less elastic than a perfect competitor's demand curve.
e. perfectly inelastic.
answer
D
question
If a monopolistically competitive firm raises its price, it:
a. earns a higher economic profit.
b. loses some, but not all, of its customers.
c. shuts down.
d. has to pay higher taxes.
e. gains customers.
a. earns a higher economic profit.
b. loses some, but not all, of its customers.
c. shuts down.
d. has to pay higher taxes.
e. gains customers.
answer
B
question
1. The opportunity cost of installing a traffic light at a dangerous intersection is:
a. Negative, since it will reduce the number of traffic accidents
b. The next-best alternative that must be given up in order to install the traffic light
c. The time lost by drivers who approach the intersection when the light is red
d. The cost of cameras the city will install to catch those who run the traffic light
a. Negative, since it will reduce the number of traffic accidents
b. The next-best alternative that must be given up in order to install the traffic light
c. The time lost by drivers who approach the intersection when the light is red
d. The cost of cameras the city will install to catch those who run the traffic light
answer
B
question
2. Which of the following is not an example of one of the three basic economic questions?
a. Should we produce more military goods or more consumer goods?
b. Which level of output should we produce so our company can earn the highest profit?
c. Should everyone get the same amount of goods and services?
d. Is it wrong for farmers to contaminate waterways with fertilizer?
a. Should we produce more military goods or more consumer goods?
b. Which level of output should we produce so our company can earn the highest profit?
c. Should everyone get the same amount of goods and services?
d. Is it wrong for farmers to contaminate waterways with fertilizer?
answer
B
question
3. Economics
a. looks at human behavior when scarcity exists and choices have to be made
b. provides the only reasonable explanation for people's decision making on issues
c. can accurately explain all human behavior since it is based on the assumption of rationality
d. is better at showing the way things ought to be than the other social sciences are
a. looks at human behavior when scarcity exists and choices have to be made
b. provides the only reasonable explanation for people's decision making on issues
c. can accurately explain all human behavior since it is based on the assumption of rationality
d. is better at showing the way things ought to be than the other social sciences are
answer
A
question
4. Goods and services are scarce because
a. people are greedy
b. they are produced using scarce resources
c. firms keep production low in order to earn higher profits
d. government wants to maintain its power over the economy
a. people are greedy
b. they are produced using scarce resources
c. firms keep production low in order to earn higher profits
d. government wants to maintain its power over the economy
answer
B
question
5. Economic theories are
a. useless because they are based on abstractions
b. useful because they allow us to make predictions
c. too complex to understand because they include all of reality
d. useful in predicting events only if their assumptions are detailed and specific
a. useless because they are based on abstractions
b. useful because they allow us to make predictions
c. too complex to understand because they include all of reality
d. useful in predicting events only if their assumptions are detailed and specific
answer
B
question
6. Opportunity cost is defined
a. only in terms of money spent
b. as the value of all alternatives not chosen
c. as the value of the best alternative not chosen
d. as the difference between the benefits from your choice and the benefits from the next best alternative
a. only in terms of money spent
b. as the value of all alternatives not chosen
c. as the value of the best alternative not chosen
d. as the difference between the benefits from your choice and the benefits from the next best alternative
answer
C
question
7. The "invisible hand" described by Adam Smith refers to the
a. allocative role of markets and market forces
b. importance of government intervention and central planning
c. role of monopolized industries in leading the nation
d. value of religious belief in creating an ideal economy
a. allocative role of markets and market forces
b. importance of government intervention and central planning
c. role of monopolized industries in leading the nation
d. value of religious belief in creating an ideal economy
answer
A
question
8. In a command economy
a. a dictator makes every economic decision
b. owners can sell their resources to the highest bidder
c. in theory, individual choices are reflected in collective decisions, and decisions are made by central planners
d. public ownership of resources is combined with free markets to direct economic activity
a. a dictator makes every economic decision
b. owners can sell their resources to the highest bidder
c. in theory, individual choices are reflected in collective decisions, and decisions are made by central planners
d. public ownership of resources is combined with free markets to direct economic activity
answer
C
question
9. Which of the following is correct when a price for a good is set below the market's equilibrium price?
a. quantity demanded exceeds quantity supplied at the set price
b. quantity demanded is less than quantity supplied at the set price
c. quantity demanded is equal to quantity supplied at the set price
d. at the set price there is a surplus
a. quantity demanded exceeds quantity supplied at the set price
b. quantity demanded is less than quantity supplied at the set price
c. quantity demanded is equal to quantity supplied at the set price
d. at the set price there is a surplus
answer
A
question
A decrease in the price of peanuts will cause a leftward shift in the supply curve of peanut butter.
a. True
b. False
a. True
b. False
answer
B
question
If a surplus exists in the market for swimwear, an economist would predict that
a. the price of swimwear will rise
b. the supply of swimwear will increase
c. the price of swimwear at retail outlets will begin to fall
d. buyers will react to the surplus by increasing their demand for swimwear
a. the price of swimwear will rise
b. the supply of swimwear will increase
c. the price of swimwear at retail outlets will begin to fall
d. buyers will react to the surplus by increasing their demand for swimwear
answer
C
question
An increase in demand for chocolate chips would usually result in a(n)
a. higher equilibrium price and a lower equilibrium quantity
b. lower equilibrium price and a higher equilibrium quantity
c. higher equilibrium price and a higher equilibrium quantity
d. increase in the supply of chocolate chips
a. higher equilibrium price and a lower equilibrium quantity
b. lower equilibrium price and a higher equilibrium quantity
c. higher equilibrium price and a higher equilibrium quantity
d. increase in the supply of chocolate chips
answer
C
question
What is the effect of a reduction in the price of steel on the equilibrium price and quantity of automobiles?
a. Both equilibrium price and equilibrium quantity fall.
b. Equilibrium price rises and equilibrium quantity falls.
c. Equilibrium price falls and equilibrium quantity rises.
d. Both equilibrium price and equilibrium quantity remain unchanged.
a. Both equilibrium price and equilibrium quantity fall.
b. Equilibrium price rises and equilibrium quantity falls.
c. Equilibrium price falls and equilibrium quantity rises.
d. Both equilibrium price and equilibrium quantity remain unchanged.
answer
C
question
If both demand and supply increase, price will
a. always increase
b. always decrease
c. increase only if supply increases more than demand does
d. increase only if demand increases more than supply does
a. always increase
b. always decrease
c. increase only if supply increases more than demand does
d. increase only if demand increases more than supply does
answer
D
question
Suppose the income elasticity of demand for a private college education is equal to 1.5. This means that
a. every $1.50 increase in income provides an incentive for a $1 increase in expenditures on private college education
b. a 10 percent increase in income causes a 15 percent increase in the demand for a private college education
c. a 15 percent increase in income causes a 10 percent increase in the demand for a private college education
d. 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
a. every $1.50 increase in income provides an incentive for a $1 increase in expenditures on private college education
b. a 10 percent increase in income causes a 15 percent increase in the demand for a private college education
c. a 15 percent increase in income causes a 10 percent increase in the demand for a private college education
d. 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
B
question
If the cross-price elasticity of demand is -3, then.
a. the goods are substitutes
b. one good is price inelastic
c. one good is an inferior good
d. the goods are complements
a. the goods are substitutes
b. one good is price inelastic
c. one good is an inferior good
d. the goods are complements
answer
D
question
If price elasticity of demand is -0.5,
a. a 1% decrease in quantity demanded leads to a 0.5% decrease in price
b. a 1% decrease in price leads to a 0.5% increase in quantity demanded
c. a 50% decrease in price leads to a 100% increase in quantity demanded
d. demand is elastic
a. a 1% decrease in quantity demanded leads to a 0.5% decrease in price
b. a 1% decrease in price leads to a 0.5% increase in quantity demanded
c. a 50% decrease in price leads to a 100% increase in quantity demanded
d. demand is elastic
answer
B
question
The cross-price elasticity of demand between milk and soft drinks is likely to be
a. negative because the goods are complements
b. positive because the goods are complements
c. negative because the goods are substitutes
d. positive because the goods are substitutes
a. negative because the goods are complements
b. positive because the goods are complements
c. negative because the goods are substitutes
d. positive because the goods are substitutes
answer
D
question
A 5 percent increase in income leads to a 10 percent decrease in quantity demanded for a service. This service is a __________ good and demand is __________.
a. normal; elastic
b. normal; inelastic
c. inferior; elastic
d. inferior; inelastic
a. normal; elastic
b. normal; inelastic
c. inferior; elastic
d. inferior; inelastic
answer
C
question
Suppose that for Merv the marginal utility of $50-per-serving caviar is 100 and the marginal utility of $1-per-serving popcorn is 10. For his snack, Merv should buy
a. the caviar if he has the $50, otherwise the popcorn
b. the popcorn, whether he has the $50 or not
c. one serving each of the caviar and popcorn, if he has $51
d. five servings of popcorn for each serving of caviar
a. the caviar if he has the $50, otherwise the popcorn
b. the popcorn, whether he has the $50 or not
c. one serving each of the caviar and popcorn, if he has $51
d. five servings of popcorn for each serving of caviar
answer
B
question
If MUx/Px > MUy/Pyx, the consumer can increase utility by buying more of good x.
a. True
b. False
a. True
b. False
answer
A
question
Amanda, age 6, opens a lemonade stand. She makes all the lemonade from a mix she found in her parents' pantry. Her stand in an old box she found in the garage. The pitcher and paper cups were taken from the kitchen. Which of the following is true?
e. The opportunity cost of the lemonade is zero
f. The only opportunity cost of the lemonade is Amanda's time
g. Amanda's explicit costs are zero
h. The implicit costs of Amanda's lemonade are zero
i. Whatever revenue Amanda gets will be pure economic profit
e. The opportunity cost of the lemonade is zero
f. The only opportunity cost of the lemonade is Amanda's time
g. Amanda's explicit costs are zero
h. The implicit costs of Amanda's lemonade are zero
i. Whatever revenue Amanda gets will be pure economic profit
answer
C
question
Which of the following best explains why marginal cost eventually increases as output increases?
a. economies of scale occur
b. average cost increases
c. total cost increases
d. marginal product decreases
e. fixed cost is constant
a. economies of scale occur
b. average cost increases
c. total cost increases
d. marginal product decreases
e. fixed cost is constant
answer
D
question
If total cost at Q=0 is $100 and total cost at Q=10 is $500, then average variable cost at Q=10 is
a. $500
b. $400
c. $50
d. $40
e. $10
a. $500
b. $400
c. $50
d. $40
e. $10
answer
D
question
Consider the following information:
Quantity of Output 0 10 20 30 40 50
Total Cost $50 $85 $150 $220 $305 $455
If the market price is $8.50, what is the profit maximizing output and profit?
a. output=40; profit=$35
b. output=40; profit=$0
c. output=0; profit= - $50
d. output and profit can't be determined because marginal revenue can't be calculated
e. output and profit can't be determined because average variable cost can't be calculated
Quantity of Output 0 10 20 30 40 50
Total Cost $50 $85 $150 $220 $305 $455
If the market price is $8.50, what is the profit maximizing output and profit?
a. output=40; profit=$35
b. output=40; profit=$0
c. output=0; profit= - $50
d. output and profit can't be determined because marginal revenue can't be calculated
e. output and profit can't be determined because average variable cost can't be calculated
answer
A
question
Farmer Fanny sells her crops in a perfectly competitive market. If she produces 500 bushels for total revenue of $3,000 and if harvesting the 501st bushel would raise her total cost from $2,500 to $2,510, her
a. revenue will increase by $4 if she harvests the 501st bushel
b. revenue will fall by $4 is she harvests the 501st bushel
c. average fixed cost will rise if she harvests the 501st bushel
d. profit will fall by $10 if she harvests the 501st bushel
e. profit will fall by $4 if she harvests the 501st bushel
a. revenue will increase by $4 if she harvests the 501st bushel
b. revenue will fall by $4 is she harvests the 501st bushel
c. average fixed cost will rise if she harvests the 501st bushel
d. profit will fall by $10 if she harvests the 501st bushel
e. profit will fall by $4 if she harvests the 501st bushel
answer
E
question
At its present rate of output, Barrel O'Biscuits, a perfectly competitive firm, finds that its marginal cost exceeds its marginal revenue and price exceeds average variable cost. To maximize profit, the firm should
a. lower the price
b. raise the price
c. increase output
d. reduce output
e. maintain its current rate of output
a. lower the price
b. raise the price
c. increase output
d. reduce output
e. maintain its current rate of output
answer
D
question
A monopolist sets price at a point on the _______ curve, corresponding to the rate of output determined by the intersection of _______.
a. Demand; marginal revenue and marginal cost
b. Marginal revenue; marginal revenue and marginal cost
c. Average total cost; price and marginal cost
d. Demand; average total cost and marginal cost
a. Demand; marginal revenue and marginal cost
b. Marginal revenue; marginal revenue and marginal cost
c. Average total cost; price and marginal cost
d. Demand; average total cost and marginal cost
answer
A
question
Suppose a monopoly firm produces software and can sell 10 items per month at a price of $50 each. In order to increase sales by one item per month, the monopolist must lower the price of its software by $1 to $49. The marginal revenue of the 11th item is:
a. $1
b. $39
c. $49
d. $50
a. $1
b. $39
c. $49
d. $50
answer
B
question
A monopolist earning short-run economic profit determines that at its present level of output, marginal revenue is $23 and marginal cost is $30. Which of the following should the firm do to increase profit?
a. Raise price and lower output.
b. Lower price and lower output.
c. Raise price and raise output.
d. Lower output but leave price unchanged.
a. Raise price and lower output.
b. Lower price and lower output.
c. Raise price and raise output.
d. Lower output but leave price unchanged.
answer
A
Order an Essay Now & Get These Features For Free:
Turnitin Report
Formatting
Title Page
Citation
Outline
