Microeconomics- Quiz/exam questions- Scrogin

The four types of economic goods discussed at the beginning of the semester included:

A)club goods, public goods, service goods, and private goods
B)public goods, club goods, latent goods, and common property goods
C)private goods, club goods, public goods, and common property goods
D)service goods, public goods, private goods, and club goods
E)public goods, private goods, microeconomic goods, and macroeconomic goods
F)service goods, club goods, private goods, and common property goods

If a good is rival in consumption then:

A)there are no mechanisms that determine who gets to consume the good and who does not
B)one individuals consumption of the good does not affect the amount available for others to consume
C)one individuals consumption of the good results in less of it being available for others to consume
D)individuals who do not pay for the good are kept from enjoying its benefits
E)individuals who do not pay for the good can not be kept from enjoying its benefits

Interstate 4 (I-4) and State Road 408 are two major highways that affect traffic flows in Orlando. Motorists are not required to pay a toll (user fee) to drive on Interstate 4, whereas they are required to pay a toll (user fee) to drive on State Road 408. If at a given time of day Interstate 4 is highly congested, then it could be considered to possess the properties of a:

A)private good
B)club good
C)common property good
D)public good

In perfectly (or purely) competitive markets:
i. there are large numbers of independently acting buyers and sellers
ii. the good that is produced and traded is homogenous or standardized
iii. an individual seller can affect the market price whereas an individual buyer can not
iv. an individual buyer can affect the market price whereas an individual seller can not

A)i and ii
B)i and iii
C)i and iv
D)i, ii, and iii
E)i, ii, and iv
F)i, ii, iii, and iv

A fundamental characteristic of the demand side of markets for goods and services is given by the law of demand, which states that:
i. as the price of a good increases, demand will decrease
ii. as the price of a good decreases, demand will increase
iii. as the price of a good increases, quantity demanded will decrease, holding all other factors constant
iv. as the price of a good decreases, quantity demanded will increase, holding all other factors constant
v. as the price of a good increases, quantity demanded will decrease
vi. as the price of a good decreases, quantity demanded will increase
vii. as the price of a good increases, demand will decrease, holding all other factors constant
viii. as the price of a good decreases, demand will increase, holding all other factors constant

A)i and ii
B)iii and iv
C)v and vi
D)vii and viii

In considering consumer demand for a good it is reasonable to expect that:
i. demand curves for a given good are identical between consumers
ii. demand curves for a given good differ between consumers
iii. an individual has identical demand curves for different goods
iv. an individual has different demand curves for different goods

A)i
B)ii
C)iii
D)iv
E)i and iii
F)ii and iv

A goods choke price is the dollar amount at which none of the good will be purchased and below which units will be purchased. If an individuals demand function for a good is given by the linear equation Q = 80 - 0.25P, then the choke price is:

A)$10
B)$20
C)$40
D)$80
E)$160
F)$320

The substitution effect, income effect, and diminishing marginal utility are all explanations for:

A)why demand curves are upward sloping
B)why supply curves are downward sloping
C)the effect that changing a good from being rival to being non-rival has on quantity supplied
D)the effect that changing a good from being non-rival to being rival has on quantity demanded
E)none of the above are correct

Suppose the market demand curve for a good is represented by the linear equation Q = 100 - 0.5P. If the market price were to decrease from P = $50 to P = $40, then holding all other factors constant:

A)the quantity demanded would decrease by 5 units and total expenditures on the good would increase by $150
B)the quantity demanded would decrease by 15 units and total expenditures on the good would decrease by $450
C)the quantity demanded would decrease by 25 units and total expenditures on the good would increase by $750
D)the quantity demanded would increase by 10 units and total expenditures on the good would increase by $300
E)the quantity demanded would increase by 5 units and total expenditures on the good would decrease by $550
F)the quantity demanded would increase by 85 units and total expenditures on the good would increase by $2550

The demand for a good will decrease if there is:

A)an increase in consumer income if the good is a normal good
B)a decrease in the price of a substitute good
C)a decrease in the price of a complement good
D)an increase in the price of one of the inputs used to produce the good, such as the hourly wage rate
E)a favorable change in consumer tastes/preferences for the good

The determinants of supply are:
i. factors other than price that affect the quantity of a good or service a firm is willing and able to produce
ii. factors that affect a firms maximum willingness-to-accept (WTA) to produce various quantities of a good
iii. factors that affect a firms minimum willingness-to-accept (WTA) to produce various quantities of a good

A)i
B)ii
C)iii
D)i and ii
E)i and iii

If the level of technology used in the production of a good improves, and assuming the quality of the good does not change, then:
i. more output may be obtained with a given amount of inputs compared to before the technological improvement
ii. a given amount of output may be obtained with fewer inputs compared to before the technological improvement
iii. the firm will increase its use of other inputs, such as the number of workers it employs
iv. market demand for the good will increase

A)i
B)ii
C)iii
D)iv
E)i and ii
F)i, ii, and iii
G)i, ii, and iv
H)i, ii, iii, and iv

A fundamental characteristic of the supply side of markets for goods and services is given by the law of supply, which states that:
i. as the price of a good increases, quantity supplied will increase, holding all other factors constant
ii. as the price of a good decreases, quantity supplied will decrease, holding all other factors constant
iii. as the price of a good increases, supply will increase
iv. as the price of a good decreases, supply will decrease
v. as the price of a good increases, quantity supplied will increase
vi. as the price of a good decreases, quantity supplied will decrease
vii. as the price of a good increases, supply will increase, holding all other factors constant
viii. as the price of a good decreases, supply will decrease, holding all other factors constant

A)i and ii
B)iii and iv
C)v and vi
D)vii and viii

Consider a firm that produces and sells units of a good in a perfectly competitive market. The firm's supply curve identifies:
i. the minimum quantity supplied at each price, holding all other factors constant
ii. the maximum quantity supplied at each price, holding all other factors constant
iii. the firm's maximum willingness to accept for each incremental unit of the good (e.g., the first unit, second unit, etc.), holding all other factors constant
iv. the firm's minimum willingness to accept for each incremental unit of the good (e.g., the first unit, second unit, etc.), holding all other factors constant

A)i and iii
B)i and iv
C)ii and iii
D)ii and iv

If a firm's supply curve is vertical, then it may be concluded that:

A)the law of supply fails to hold, and producer output is highly sensitive to changes in price
B)the law of supply fails to hold, and producer output is completely insensitive to changes in price
C)the law of supply holds, and producer output is completely insensitive to changes in price
D)the law of supply holds, and producer output is highly sensitive to changes in price

Steel and plastic are substitutes in the production of the body panels used as inputs in the production of automobiles. If the price of plastics decreases due to technological improvements, then it is
reasonable to expect that:

A)the demand for plastic to increase
B)the demand for steel to decrease
C)the price of steel to increase
D)the demand for steel to increase
E)nothing will happen to the market for steel because it is a substitute for plastic, not a complement

From the competitive market framework discussed in class and chapters 3 and 4 of the text, it may be concluded that for a good to be exchanged between a seller and a buyer:

A)buyer maximum willingness-to-pay is greater than seller minimum willingness-to-accept
B)buyer maximum willingness-to-pay is greater than or equal to seller minimum willingness-to-accept
C)buyer minimum willingness-to-pay is greater than or equal to seller maximum willingness-to-accept
D)buyer minimum willingness-to-pay is greater than seller maximum willingness-to-accept

Suppose two identical buyers comprise the market for a good. If each buyer's demand function is given by P = 80 - 4Q, then the market demand function is:

A)P = 80 - 0.5Q
B)P = 80 - Q
C)P = 80 - 2Q
D)P = 160 - 0.5Q
E)P = 160 - Q
F)P = 160 - 2Q

In the market for a good, a surplus will exist if the price is:

A)above the equilibrium price, resulting in the quantity demanded exceeding the quantity supplied
B)above the equilibrium price, resulting in the quantity supplied exceeding the quantity demanded
C)below the equilibrium price, resulting in the quantity supplied exceeding the quantity demanded
D)below the equilibrium price, resulting in the quantity demanded exceeding the quantity supplied

Suppose the market for a good is perfectly competitive and that it is initially in equilibrium. If the supply of the good decreases and the demand for the good simultaneously increases, then equilibrium:

A)price will rise, but the equilibrium quantity may either rise, fall, or remain unchanged
B)price will fall, but the equilibrium quantity may either rise, fall, or remain unchanged
C)quantity will fall, but the equilibrium price may either rise, fall, or remain unchanged
D)quantity will rise, but the equilibrium price may either rise, fall, or remain unchanged
E)price will rise and the equilibrium quantity will fall
F)quantity will rise and the equilibrium price will fall

The impacts of sustained summer droughts on the domestic supply of wheat is of increasing concern. Noting that wheat is a primary ingredient in the production of bread and that potatoes are a substitute for bread, if the supply of wheat declines then it is reasonable to expect:

A)the price of wheat to fall, the supply of bread to increase, and the demand for potatoes to increase
B)the price of wheat to fall, the supply of bread to increase, and the demand for potatoes to decrease
C)the price of wheat to rise, the supply of bread to decrease, and the demand for potatoes to decrease
D)the price of wheat to rise, the supply of bread to decrease, and the demand for potatoes to increase
E)the price of wheat to rise, the supply of bread to increase, and the demand for potatoes to increase
F)the price of wheat to rise, the supply of bread to increase, and the demand for potatoes to decrease

Suppose the market supply of a good is given by P = 10 + 0.2Q, the market demand is given by P = 60 - 0.5Q, and the market is in equilibrium. If the government imposes a price restriction of P = $20 per unit, then subsequent to this market intervention there will be a:

A)shortage of 30 units
B)shortage of 50 units
C)shortage of 80 units
D)surplus of 30 units
E)surplus of 50 units
F)surplus of 80 units

In chapter 4, the economic concepts of producer surplus and consumer surplus are defined and discussed. The consumer surplus derived by an individual from a good or service:
i. is the difference between the maximum amount the consumer is willing to pay on each unit and the price he/she actually pays
ii. is the difference between the maximum amount the consumer is willing to pay on each unit and the minimum prices that producers are willing to accept
iii. is the difference between the minimum amount the consumer is willing to pay on each unit and the price he/she actually pays
iv. will decrease if price decreases

A)i
B)ii
C)iii
D)i and iv
E)ii and iv
F)iii and iv

Suppose the market demand for a good is described by the equation P = 120 - 0.5Q. If a change in market supply results in price decreasing from P0 = $60 to P1 = $50, then the resulting change in consumer surplus is:

A)Q = 0 units of the good, because in equilibrium there is not a surplus (nor a shortage) of units
B)$1300
C)$2600
D)$3600
E)$4900

A good is considered excludable in consumption if:

A)one individuals consumption of the good results in less of it being available for others to consume
B)one individuals consumption of the good has no affect on the amount available for others to consume
C)individuals who do not pay for the good can not be kept from enjoying its benefits
D)individuals who do not pay for the good are kept from enjoying its benefits
E)there are at least two firms who compete for buyers in the market for the good

Which of the following examples best represents a public good?

A)a lighthouse protecting ships from a rocky coastline
B)an underground water aquifer used by farmers, ranchers, and a local community
C)a lakefront residential property located next to a community lake
D)a subscription to Netflix allowing unlimited downloadable content

Which of the following is rival and non-excludable in consumption?

A)a public good
B)a private good
C)a club good
D)a common property good

Some sub-Saharan nations of Africa have resource stocks that have been depleted to the point where much of the landscape has turned from productive farmland to desert over time. This suggests that:

A)the production possibilities curves of such nations have shifted outward
B)the production possibilities curves of such nations have shifted inward
C)these nations are operating at points outside of their production possibilities curves
D)the concavity of the production possibilities curves of such nations has increased

If one individual has an absolute advantage over other individuals in completing a particular task, then this individual:

A)can complete the task using fewer resources than other individuals (e.g., time)
B)should perform only this task and let other individuals perform other tasks
C)can accomplish the task at a lower opportunity cost than other individuals
D)will also have a comparative advantage in completing the task

From a production possibilities curve (or frontier) it may be concluded that:

A)as more of one good is produced, smaller and smaller amounts of other goods must be sacrificed
B)an economy's capacity to produce increases in proportion to its population size
C)an economy will automatically obtain full employment of its resources
D)if an economys resources are fully employed, then production of some goods must be sacrificed if resources are allocated to the production of other goods

Consider a country that uses it resources to produce consumer goods (e.g., cars and housing) and to provide infrastructure (e.g., roads and bridges). If a change in government policy results in greater production of consumer goods and infrastructure with the same amount of available resources and technology, then:

A)the countrys production possibilities curve has shifted to the left as a result of the policy change
B)the countrys production possibilities curve has shifted to the right as a result of the policy change
C)the countrys resources were under-utilized or resources were being used inefficiently prior to the policy change
D)the countrys production possibilities curve is not subject to the law of increasing opportunity costs

Suppose that for each pound of wheat that country X produces it must forego the production of 25 pounds of coffee and that for each pound of wheat that country Y produces it must forego the production of 10 pounds of coffee. It follows that:

A)country X has a comparative advantage in the production of coffee
B)country X has a comparative advantage in the production of wheat
C)country Y has a comparative advantage in the production of coffee
D)country Y has a comparative advantage in the production of both coffee and wheat

A market:

A)is comprised of upward sloping demand and downward sloping supply curves
B)entails face-to-face interaction between buyers and sellers
C)entails the exchange of goods, but not services
D)is a mechanism or institution that brings buyers and sellers together for the purpose of trade

Markets for goods and services appear in a number of forms. In perfectly (or purely) competitive markets:
i. the goods that are produced and traded are homogenous or standardized
ii. there are large numbers of independently acting buyers and sellers
iii. an individual seller can affect the market price whereas an individual buyer can not
iv. an individual buyer can affect the market price whereas an individual seller can not

A) i and ii
B)i and iii
C)i and iv
D)i, ii, and iii
E)i, ii, and iv
F)i, ii, iii, and iv

The law of demand states that:
i. as the price of a good increases, demand will decrease
ii. as the price of a good decreases, demand will increase
iii. as the price of a good increases, demand will decrease, holding all other factors constant
iv. as the price of a good decreases, demand will increase, holding all other factors constant
v. as the price of a good increases, quantity demanded will decrease
vi. as the price of a good decreases, quantity demanded will increase
vii. as the price of a good increases, quantity demanded will decrease, holding all other factors constant
viii. as the price of a good decreases, quantity demanded will increase, holding all other factors constant

A)i and ii
B)iii and iv
C)v and vi
D)vii and viii

Which of the following may be determined from an individuals demand curve for a good?
i. the quantity demanded at a given price, holding all other factors constant
ii. the total expenditures on the good at a given price, holding all other factors constant
iii. how quantity demanded changes if the price of the good changes, holding all other factors constant

A)i
B)ii
C)iii
D)i and ii
E)i and iii
F)i, ii, and iii

An increase in the price of a good creates an incentive for consumers to shift their purchases away from the good to other goods whose prices are relatively lower. Such an effect of a price change is referred to as the:

A)substitution effect
B)cost effect
C)inflation effect
D)income effect
E)exchange rate effect

A consumers demand curve for a good indicates:
i. the maximum quantity demanded at each price, holding all other factors constant
ii. the minimum quantity demanded at each price, holding all other factors constant
iii. the consumers minimum willingness to pay for each incremental unit of the good (e.g., the first unit, second unit, etc.), holding all other factors constant
iv. the consumers maximum willingness to pay for each incremental unit of the good (e.g., the first unit, second unit, etc.), holding all other factors constant

A)i and iii
B)i and iv
C)ii and iii
D)ii and iv

If an individuals demand function for a good is given by the linear equation Q = 200 - 4P, then the choke price is:

A)$0
B)$50
C)$100
D)$200
E)$400

Suppose the market demand curve for a good is represented by the linear equation Q = 50 - 0.25P. If the market price were to increase from P = $40 to P = $60, then holding all other factors constant:

A)the quantity demanded would increase by 5 units and total expenditures on the good would increase by $300
B)the quantity demanded would increase by 15 units and total expenditures on the good would decrease by $900
C)the quantity demanded would increase by 25 units and total expenditures on the good would increase by $1500
D)the quantity demanded would decrease by 5 units and total expenditures on the good would increase by $500
E)the quantity demanded would decrease by 10 units and total expenditures on the good would decrease by $600
F)the quantity demanded would decrease by 35 units and total expenditures on the good would increase by $2100

If the demand curve for a good is vertical, then:

A)the law of demand fails to hold, and consumer purchases are completely insensitive to changes in price
B)the law of demand fails to hold, and consumer purchases are highly sensitive to changes in price
C)the law of demand holds, and consumer purchases are completely insensitive to changes in price
D)the law of demand holds, and consumer purchases are highly sensitive to changes in price

Using the demand framework discussed in class and chapters 3 and 4 of the text, if consumer tastes/preferences change favorably towards a good, say due to learning new information about the benefits that can be obtained from its consumption, then:
i. the minimum quantity demanded at each price will rise, holding all other factors constant
ii. the maximum quantity demanded at each price will rise, holding all other factors constant
iii. the consumers minimum willingness to pay for each incremental unit of the good (e.g., the first unit, second unit, etc.) will rise, holding all other factors constant
iv. the consumers maximum willingness to pay for each incremental unit of the good (e.g., the first unit, second unit, etc.) will rise, holding all other factors constant

A)i
B)ii
C)iii
D)iv
E)ii and iii
F)ii and iv

If an individual consumers income decreases and the demand for a particular good increases as a result, then it may be concluded that the good is:

A)an inferior good
B)a normal good
C)a substitute for all other goods
D)a complement for all other goods

The determinants of demand are:
i. factors that affect a consumers minimum willingness-to-pay for various quantities of a good or service
ii. factors other than price that affect the quantity of a good or service a consumer is willing and able to purchase
iii. factors that affect a consumers maximum willingness-to-pay for various quantities of a good or service

A)i
B)ii
C)iii
D)i and iii
E)ii and iii

Suppose the amount of good X that consumers purchase per period depends upon its price and the price of good Y, and the amount of good Y that consumers purchase per period depends upon its price and the price of good X. If the demand curves for goods X and Y are downward sloping, then which of the following is true?
i. if consumers confront a decrease in the price of X, the demand for X will increase
ii. if consumers confront a decrease in the price of X, the demand for Y will increase if X and Y are substitutes
iii. if consumers confront a decrease in the price of X, the demand for Y will decrease if X and Y are substitutes
iv. if consumers confront an increase in the price of X, the demand for Y will increase if X and Y are complement goods
v. if consumers confront an increase in the price of X, the demand for Y will decrease if X and Y are complement goods

A)ii and iv
B)i, ii, and iv
C)iii and v
D)i, iii, and v

A firms supply curve for a good indicates:
i. the minimum quantity supplied at each price, holding all other factors constant
ii. the maximum quantity supplied at each price, holding all other factors constant
iii. the firms minimum willingness to accept for each incremental unit of the good (e.g., the first unit, second unit, etc.), holding all other factors constant
iv. the firms maximum willingness to accept for each incremental unit of the good (e.g., the first unit, second unit, etc.), holding all other factors constant

A)i and iii
B)i and iv
C)ii and iii
D)ii and iv

As discussed in class, the determinants of supply include:
i. the level of technology used in production
ii. input prices
iii. taxes and subsidies
iv. the prices of substitutes in production
v. expectations about the future

A)i and ii
B)i, ii and iv
C)i, iii, and iv
D)i, iii, iv and v
E)i, ii, iii, and iv
F)i, ii, iii, iv and v

Which of the following will result in an increase in the supply of a good or service?
A)an increase in the price of the good or service
B)a reduction in the number of sellers producing the good or providing the service
C)an increase in government subsidies given to the producers of the good or providers of the service
D)an increase in taxes imposed upon producers of the good or providers of the service
E)an increase in the price of one or more of the inputs used to produce the good

Consider a market for a good that is comprised of two identical producers whose supply functions are P = 20 + Q. Given this information, the market supply function is:

A)P = 20 + 0.5Q
B)P = 20 + Q
C)P = 40 + Q
D)P = 40 + 2Q

Which of the following will not cause the supply of gasoline to change?

A)an improvement in oil extraction and refining technologies
B)a decrease in the price of gasoline
C)an increase in the wage rates paid to gasoline refinery workers
D)the imposition of a federal gasoline tax aimed a decreasing the emission of greenhouse gases
E)a decrease in the price of crude oil, which is key input used in the production of gasoline

Using the demand and supply framework discussed in class and chapters 3 and 4 of the text, one can conclude that in order for a good to be exchanged between a seller and a buyer, it must be that:

A)buyer minimum willingness-to-pay is greater than or equal to seller maximum willingness-to-accept
B)buyer minimum willingness-to-pay is greater than seller maximum willingness-to-accept
C)buyer maximum willingness-to-pay is greater than or equal to seller minimum willingness-to-accept
D)buyer maximum willingness-to-pay is greater than seller minimum willingness-to-accept

If the market demand function is given by P = 80 - 0.1Q and the market supply function is given by P = 20 + 0.3Q, then the equilibrium price and quantity are:

A)P = $35 and Q = 150
B)P = $65 and Q = 150
C)P = $26 and Q = 60
D)P = $28 and Q = 80

If the government intervenes in a perfectly competitive market and imposes a price ceiling below the unregulated equilibrium price, then compared to the unregulated market:
i. the quantity of the good demanded will increase and the quantity supplied will decrease
ii. the quantity of the good demanded will decrease and the quantity supplied will increase
iii. a shortage of units will result in the market
iv. a surplus of units will result in the market

A)i
B)ii
C)iii
D)iv
E)i and iii
F)ii and iv

Consider a perfectly competitive market described by the demand function P = 80 - 0.3Q and supply function P = 30 + 0.2Q. Suppose the market is initially in equilibrium. If the government intervenes in the market and imposes of a price restriction of P = $65, the result rounded to the nearest unit will be a:
A)shortage of 50 units
B)shortage of 125 units
C)shortage of 150 units
D)surplus of 50 units
E)surplus of 125 units
F)surplus of 150 units

If the demand for a good increases and the supply of the good simultaneously increases, then equilibrium:

A)price will rise, but the equilibrium quantity may either rise, fall, or remain unchanged
B)quantity will rise, but the equilibrium price may either rise, fall, or remain unchanged
C)price will fall, but the equilibrium quantity may either rise, fall, or remain unchanged
D)quantity will fall, but the equilibrium price may either rise, fall, or remain unchanged

Suppose that both the demand for and supply of a product change simultaneously. You observe that the quantity of the good that is traded each period does not change, however, the equilibrium price increases. Which of the following has occurred?

A)demand and supply decreased by an equal amount
B)demand and supply increased by and equal amount
C)supply decreased and demand increased by an equal amount
D)supply increased and demand decreased by an equal amount

Suppose the market demand for a good is described by the equation P = 40 - 0.5Q. If a change in market supply results in price decreasing from P0 = $30 to P1 = $20, then the resulting change in consumer surplus is:

A)$100
B)$300
C)$400
D)$500
E)$700

Consumer surplus appears graphically as:

A)the area below the demand curve over the quantity of the good purchased
B)the area above the demand curve and below the price of the good
C)the area below the demand curve and above the supply curve over the quantity of the good purchased
D)the area below the demand curve and above the price of the good
E)the area above the supply curve and below the price

The producer surplus that results from a firm producing and selling some quantity of a good is the:

A)difference between the maximum amount the firm was willing to accept on each unit that it sold and the minimum amount that consumers were willing to pay on each unit purchased
B)difference between the minimum amount the firm was willing to accept on each unit that it sold and the price it actually received for each unit
C)difference between the maximum amount the firm was willing to accept on each unit that it sold and the price it actually received for each unit
D)difference between the minimum amount the firm was willing to accept on each unit that it sold and the maximum amount that consumers were willing to pay on each unit purchased

Maximum willingness-to-pay (WTP) is to ________________ , as consumer surplus is to ________________ .

A)total value (or total benefit), net value (or net benefit)
B)net value (or net benefit), total value (or total benefit)
C)minimum willingness to accept, demand
D)demand, minimum willingness to accept

Suppose the market supply for a good is described by the equation P = 30 + 0.5Q. If a change in market demand results in price increasing from P0 = $50 to P1 = $60, then the resulting change in producer surplus is:

A)$500
B)$900
C)$1000
D)$1500
E)$1800

If a tax authority imposes an ad valorem tax or specific tax upon sellers in a perfectly competitive market, then:

A)the equilibrium market price will rise
B)the equilibrium quantity of the good that is produced and traded will fall
C)total economic surplus (consumer surplus + producer surplus) will fall
D)a deadweight loss will result
E)tax revenue will be generated that may be used to fund public goods
F)all of the above are correct

An example of an ad valorem tax is:
i. a $2 per-pack tax imposed by a local municipality on the sale of cigarettes, irrespective of the cigarette brand
ii. a 6.5% sales tax charged by a local grocery store on products other than food
iii. the 18.3 cent federal tax charged on each gallon of gasoline purchased
iv. a residential property tax paid by a homeowner that depends upon the propertys market value as determined by a county tax appraiser

A)i and ii
B)i and iii
C)i and iv
D)ii and iii
E)ii and iv
F)iii and iv

Consider a perfectly competitive market described by the per-period demand function P = 80 - 0.3Q and per-period supply function P = 10 + 0.4Q. If the government intervenes in the market and imposes upon firms a specific tax of t = $14 per unit of output sold, then once the market achieves the new (regulated) market equilibrium:

A)$630 in tax revenues will be generated each period
B)$1120 in tax revenues will be generated each period
C)$1400 in tax revenues will be generated each period
D)$1620 in tax revenues will be generated each period
E)$1960 in tax revenues will be generated each period

Consider a perfectly competitive market described by the per-period demand function P = 80 - 0.3Q and per-period supply function P = 10 + 0.4Q. If the market is in equilibrium, then the per-period total economic surplus (i.e., consumer surplus + producer surplus) generated by the good each period is:

A)$1500
B)$3500
C)$4000
D)$4500
E)$7000

In economic research elasticities are a commonly used metric. An elasticity is:
i. a measure of the sensitivity of a variable to a change in another variable
ii. invariant (or insensitive) to the units in which variables are measured
iii. defined as the ratio of the percentage change in the affected variable to the percentage change in the affecting variable
iv. defined as the ratio of the percentage change in the affecting variable to the percentage change in the affected variable

A)i and ii
B)i and iii
C)ii and iii
D)ii and iv
E)i, ii, and iii
F)i, ii, and iv

The price elasticity of demand is defined as the:

A)percentage change in price divided by the percentage change in quantity demanded
B)percentage change in quantity demanded divided by the percentage change in price
C)change in price divided by the change in quantity demanded
D)change in quantity demanded divided by the change in price

To evaluate the sensitivity of changes in quantity demanded (or purchases) to changes in price, a researcher could evaluate the slope of the market demand curve or the price elasticity of demand. The price elasticity of demand may be favored over the slope because:
i. the slope of the demand curve can only be used if the demand curve is linear
ii. the price elasticity is not sensitive to the units in which price and quantity demanded are measured
iii. the price elasticity provides a better means for making cross-product comparisons (e.g., between goods X and Y) when the prices of the products differ

A)i
B)ii
C)iii
D)i and ii
E)i and iii
F)ii and iii
G)i, ii, and iii

If the demand for a good is elastic with respect to its price, then a:
i. percentage change in price will result in a smaller percentage change in quantity demanded
ii. percentage change in price will result in a greater percentage change in quantity demanded
iii. change in price will cause revenues (or consumer expenditures) to change in the same direction
iv. change in price will cause revenues (or consumer expenditures) to change in the opposite direction

A)i and iii
B)i and iv
C)ii and iii
D)ii and iv

If a good's price falls from $50 to $40 and as a result the per-period quantity demanded increases from 30 to 40 units, then it may be concluded that:

A)demand is unit elastic
B)demand is inelastic
C)demand is elastic
D)demand is either elastic or inelastic

If the demand for a good is price elastic at the current market price then:
i. the price elasticity is greater than one
ii. buyers are said to be relatively insensitive to changes in price
iii. total revenue will increase if price increases
iv. a percentage change in price will result in a smaller percentage change in quantity demanded

A)i
B)ii
C)iii
D)iv
E)i and ii
F)i, ii, and iii
G)i, ii, iii, and iv

If the demand for a good is given by the linear equation Q = 200 - 2P, then as price is lowered from the choke price to zero the total expenditures on the good:

A)decrease continuously
B)increase continuously
C)decrease initially and then increase
D)increase initially and then decrease
E)are constant

The more broadly a good is defined (for example, gasoline in general versus Wawa brand gasoline):

A)the larger the number of substitutes that exist and the smaller the price elasticity of demand
B)the smaller the number of substitutes that exist and the larger the price elasticity of demand
C)the larger the number of substitutes that exist and the larger the price elasticity of demand
D)the smaller the number of substitutes that exist and the smaller the price elasticity of demand

Which of the following statements is correct?
i. if a percentage change in price results in a greater percentage change in quantity demanded, then demand is elastic
ii. in the range of prices in which the demand for a good is elastic, total revenue (or expenditures) will decrease if price decreases
iii. along a linear demand curve, demand is elastic above the mid-point and inelastic below the mid-point
iv. total revenue will not change as a result of a change in price if demand is unit elastic

A)i
B)ii
C)iii
D)iv
E)i and ii
F)i and iii
G)i and iv
H)i, ii and iii
I)i, iii, and iv
J)i, ii, iii and iv

Suppose the market demand for a good is described by the demand function P = 80 - 0.25Q. It follows that the total revenue function relating the total revenues (TR) to the quantity sold (Q) is:

A)TR = 80Q - 4P
B)TR = 80Q^2 - 0.25Q
C)TR = 80Q - 4Q^2
D)TR = 80P - 4P^2
E)TR = 80P - 0.25P^2
F)TR = 80Q - 0.25Q^2

If the price elasticity of demand is 0.36, 2.58, 0.92, and 1.44 for products A, B, C, and D respectively, then a one percent decrease in price will increase total revenue (TR) in which of the following:

A)A and B
B)A and C
C)A and D
D)B and C
E)B and D
F)C and D

Suppose that an 8 percent decrease in the price of good X causes a 2 percent increase in the quantity demanded of good Y. The cross-price elasticity of demand is therefore:

A)negative and the goods are substitutes
B)negative and the goods are complements
C)positive and the goods are substitutes
D)positive and the goods are complements

If purchases of a good increase as a result of a decrease in household income, then:

A)the good is normal and the income elasticity of demand is positive
B)the good is inferior and the income elasticity of demand is positive
C)the good is normal and the income elasticity of demand is negative
D)the good is inferior and the income elasticity of demand is negative

The price elasticity of supply is defined as the:

A)change in quantity supply divided by the change in price
B)change in price divided by the change in quantity supplied
C)percentage change in quantity supplied divided by the percentage change in price
D)percentage change in price divided by the quantity supplied
E)percentage change in price divided by the percentage change in quantity supplied
F)percentage change in quantity supplied divided by the price

The demand for nuts, such as almonds, walnuts, and cashews, has increased sizably in recent years, however, it takes a considerable amount of time to increase their production. It follows that:

A)an increase in the demand for nuts will not affect their price over a short period (e.g., one year)
B)an increase in the demand for nuts will result in a larger increase in the quantity supplied over a short period (e.g., one year) compared to a long period (e.g., ten years)
C)the supply curve for nuts over a long period (e.g., ten years) is less elastic than the supply curve for nuts over a short period (e.g., one year)
D)the supply curve for nuts over a long period (e.g., ten years) is more elastic than the supply curve for nuts over a short period (e.g., one year)

In microeconomics the term utility references the:
i. relative scarcity of a good or service
ii. usefulness of a good or service
iii. satisfaction derived from consumption of a good or service
iv. slope of a consumers demand curve for a good or service

A)i
B)ii
C)iii
D)iv
E)ii and iii
F)iii and iv

The consumer choice models describes how an individual allocate his/her income over goods and services in order to maximize utility. One component of the consumer choice model is the individuals utility function. From the utility function alone, which of the following can be determined?
i. the utility derived from all bundles of goods and services
ii. the bundles of goods and services that yield the same level of utility
iii. the utility maximizing bundle of goods and services a consumer will choose to purchase

A)i
B)ii
C)iii
D)i and ii
E)ii and iii
F)i, ii, and iii

Punk-rocker Pete is feeling insecure about his long-term relationship with economist Elaine. At the conclusion of a recent date, he tells Elaine, "I feel that I derive much more utility from this relationship than you." Elaine tells him that his claim is ridiculous because:

A)Elaine knows Pete has spent more income on her than she has spent on him over the course of their relationship
B)Elaine knows she has spent more income on Pete than Pete has spent on her over the course of their relationship
C)Pete knows he has spent more income on Elaine than Elaine has spent on him over the course of their relationship
D)Elaine knows that utility is subjective and therefore it is not meaningful to make inter-personal utility comparisons
E)Pete knows Elaine has spent more income on him than he has spent on her over the course of their relationship
F)both Elaine and Pete know they have spent the same amount of income on each other over the course of their relationship

Marginal utility is the:

A)total utility from consuming a bundle of goods divided by the quantity of units consumed
B)change in total utility from consuming each additional unit of a good
C)change in total utility realized by consuming each additional unit of a good divided by the price of the good
D)sensitivity of consumer purchases of a good to changes in its price

Which of the following is statements is correct?

A)there is no relationship between marginal utility and total utility
B)if marginal utility is diminishing but positive as consumption increases, then total utility will increase
C)total utility is equal to the change in marginal utility from consuming each additional unit of a good
D)if marginal utility is diminishing as consumption increases, total utility will also be diminishing

The law of diminishing marginal utility states that:

A)the quantity of a good demanded will rise as price is lowered, holding all other factors constant
B)as more and more units of a good are consumed, utility will decline beyond a point
C)the demand for a good will rise as price is lowered, holding all other factors constant
D)in order to maximize utility, consumers will allocate their income such that marginal utility per dollar is equal across the goods purchased
E)none of the above options are correct

Pete likes pie. If he consumes 1 piece of pie, he obtains 8 units of utility, if he consumes 2 pieces he obtains 12 units of utility, and if he consumes 3 pieces he obtains 15 units of utility. It follows that:

A)total utility is increasing at an increasing rate and marginal utility is increasing
B)total utility is increasing at an increasing rate and marginal utility is decreasing
C)total utility is increasing at an increasing rate and marginal utility is constant
D)total utility is increasing at a decreasing rate and marginal utility is increasing
E)total utility is increasing at a decreasing rate and marginal utility is decreasing
F)total utility is increasing at a decreasing rate and marginal utility is constant

Suppose an individuals preferences are described by the Cobb-Douglass utility function U = X^0.5Y^0.5 and consider the following three combinations (or bundles) of X and Y: Bundle A (3,4); Bundle B (6,1); Bundle C (2,5). Given the individuals preferences, the bundles ranked from least-preferred to most-preferred are:

A)Bundle A, Bundle B, Bundle C
B)Bundle A, Bundle C, Bundle B
C)Bundle B, Bundle A, Bundle C
D)Bundle B, Bundle C, Bundle A
E)Bundle C, Bundle A, Bundle B
F)Bundle C, Bundle B, Bundle A

Suppose a consumers utility function is U = X^0.5Y^0.5. It follows that the indifference function associated with the bundle X = 8 and Y = 2 or (8, 2) is:

A)Y = 2/X
B)Y = 4/X
C)Y = 8/X
D)Y = 16/X
E)Y = 32/X
F)Y = 64/X

If an indifference curve relating X and Y slopes downward, then it may be concluded that:
i. both X and Y are bads
ii. both X and Y are goods
iii. X is a good and Y is a bad or X is a bad and Y is a good

A)i
B)ii
C)iii
D)i or ii
E)ii or iii

Consider an individual whose preferences are described by the utility function is U = X^0.5Y0.5. If she consumes 4 units of X and 3 units of Y, then some level of utility will be experienced. If the individual instead consumes 6 units of X, how much of good Y must she consume in order to attain the level of utility associated with 4 units of X and 3 units of Y?

A)Y = 1
B)Y = 2
C)Y = 3
D)Y = 4
E)Y = 5
F)Y = 6

Any bundle of goods located outside (versus inside) of a consumers budget constraint:
i. will yield more utility than any bundle located inside the budget constraint
ii. will yield more utility than any bundle located on the budget constraint
iii. implies the consumer is not spending all of his or her income
iv. is unobtainable, given the consumer's income

A)i
B)ii
C)iii
D)iv
E)i and iii
F)i and iv
G)ii and iii
H)ii and iv

If a consumers income is $300, the price of good X is PX = $3, and the price of good Y is PY = $6, then the algebraic expression for the consumers budget constraint is:

A)Y = 50 - 0.5X
B)Y = 100 - 0.5X
C)Y = 300 - 0.5X
D)Y = 50 - 2X
E)Y = 100 - 2X
F)Y = 300 - 2X

Suppose a consumer has an income of $15 that is spent on two goods: X and Y. The price of good X is $3.00 and the price of good Y is $1.00. Which of the following combinations (or bundles) of X and Y lie on the individuals budget constraint?

A)4X and 4Y
B)5X and 4Y
C)3X and 6Y
D)3X and 8Y

If the consumer is a utility maximizer in allocating income over goods and services, then income will be allocated such that:

A)the marginal utilities of the goods and services purchased are equal
B)marginal utility per dollar is equal over the goods and services purchased
C)the prices of the goods of the goods and services purchased are equal
D)an equal proportion of income is spent on each of the goods and services purchased

Consider the market demand for a given good. If ED = -0.25 at the current market price, then a 10 percent decrease in price will result in a:

A)0.25 percent increase in quantity demanded
B)0.4 percent increase in quantity demanded
C)2.5 percent increase in quantity demanded
D)4 percent increase in quantity demanded
E)25 percent increase in quantity demanded

If the price rises from $50 to $60 and as a result the per-period quantity demanded decreases from 20 to 10 units, then it may be concluded that over this price range:
i. demand has decreased
ii. demand is unit elastic
iii. demand is inelastic
iv. demand is elastic

A)i
B)ii
C)iii
D)iv
E)i and iii
F)i and iv

A local theme park has estimated that in order to increase revenues generated from ticket sales it must reduce ticket prices. It follows that the theme park has estimated the demand for visits to the park to be:

A)inelastic
B)elastic
C)unit elastic
D)to low given the capacity of the park

Which of the following is not characteristic of the demand for a commodity that is price inelastic?

A)the price elasticity is less than one
B)total revenue declines if price is increased
C)the percentage change in quantity demanded is less than than the percentage change in price
D)buyers are relatively insensitive to price changes

Which of the following generalizations is not correct?

A)the price elasticity of demand is greater for necessities than luxuries
B)the greater the share of a good in one's budget, the greater the price elasticity of demand
C)the larger the number of close substitutes for a good, the greater the price elasticity of demand
D)the price elasticity of demand for a good is greater the longer the time period under consideration

The more narrowly a good is defined (for example, Coca Cola or Pepsi versus soft drinks in general):

A)the larger the number of substitutes that exist and the smaller the price elasticity of demand
B)the smaller the number of substitutes that exist and the larger the price elasticity of demand
C)the larger the number of substitutes that exist and the larger the price elasticity of demand
D)the smaller the number of substitutes that exist and the smaller the price elasticity of demand

If a firm finds that it can generate $10,000 of revenue when the price of the good its sells is $6 per unit and $8,000 of revenue when the price of the good it sells is $5 per unit, then:
i. the demand for the good will be greater at the lower price than the higher price
ii. the demand for the good is elastic in the $5-$6 price range
iii. the demand for the good is inelastic in the $5-$6 price range
iv. the demand for the good is unit elastic in the $5-$6 price range

A)i
B)ii
C)iii
D)iv
E)i and ii
F)i and iii

The U.S. Department of Energy reported that it estimates that the average household can expect to spend about $750 less on gasoline in 2015 compared to 2014 as a result of the decline in the price of crude oil. Given this information, it may be concluded that for the average household:

A)ED < 1 within the range over which the price of gasoline has varied (e.g., between $3 and $2 per gallon)
B)ED > 1 within the range over which the price of gasoline has varied (e.g., between $3 and $2 per gallon)
C)ED = 1 within the range over which the price of gasoline has varied (e.g., between $3 and $2 per gallon)

Suppose that at the current prices the price elasticity of demand is 0.56, 0.92, 1.75, and 2.42 for products A, B, C, and D respectively. A one percent decrease in price will decrease total revenue (TR) in which of the following:

A)A and B
B)A and C
C)B and C
D)C and D

An individuals total expenditures on a good per-period are equal to the price of the good times the number of units of the good purchased. If an individuals demand function for a good is given by the linear equation Q = 20 - 0.5P, then as price decreases from the choke price to zero his/her total expenditures:

A)decrease continuously
B)decrease initially and then increase
C)increase continuously
D)increase initially and then decrease
E)are constant

Suppose good A and good B are substitutes for one another and both are normal goods. The quantity of each good demanded (or purchased) is a function of its price (e.g, PA), the price of the substitute (e.g. PB ), and consumer income (I). Given this information, how many total demand elasticities can be calculated for goods A and B?

A)2
B)4
C)5
D)6

Suppose the market demand for a good is described by the demand function P = 160 - 2Q. It follows that the total revenue function relating the total revenues (TR) to the quantity sold (Q) is:

A)TR = 160P - 2P^2
B)TR = 160Q - 2Q^2
C)TR = 160Q - 0.5P
D)TR = 160Q^2 - 2Q
E)TR = 160Q - 0.5Q

Consider a perfectly competitive market described by the supply function P = 10 + 0.2Q and demand function P = 60 - 0.3Q. Using the standard formula (versus the mid-point formula) for calculating elasticities, it may be concluded that at the equilibrium price and quantity:

A)ES = 0.66 and ED = 0.09
B)ES = 0.66 and ED = 1
C)ES = 1.5 and ED = 1
D)ES = 1.5 and ED = 0.09
E)ES = 1.8 and ED = 1.6
F)ES = 1.8 and ED = 2.2

Suppose that a 5 percent decrease in the price of good X causes an 8 percent increase in the quantity demanded of good Y. The cross-price elasticity of demand is therefore:

A)negative and the goods are substitutes
B)negative and the goods are complements
C)positive and the goods are substitutes
D)positive and the goods are complements

The income elasticity of demand is a measure of:

A)how demand for a product changes when the price of a substitute or complement product changes
B)how responsive consumers are to changes in income
C)how responsive consumers are to changes in the price of a good
D)how responsive suppliers are to changes in the price of a good

If purchases of a good increase as a result of a decrease in household income, then:

A)the good is normal and the income elasticity of demand is negative
B)the good is inferior and the income elasticity of demand is negative
C)the good is normal and the income elasticity of demand is positive
D)the good is inferior and the income elasticity of demand is positive

The income elasticity of demand for food (e.g., measured by daily calories consumed) can reasonably be expected to be:

A)larger than the income elasticity of demand for foreign vacation travel
B)smaller than the income elasticity of demand for foreign vacation travel
C)incomparable to the income elasticity of demand for foreign vacation travel
D)none of the above

The primary determinant of the price elasticity of supply is the:

A)number of close substitutes for the product available to consumers
B)amount of time the producer has to adjust inputs in response to a price change
C)urgency of consumer wants for the product
D)number of uses for the product

It takes a considerable amount of time to increase the supply of housing within a local housing market (e.g., Orlando) as a result of an increase in the demand for housing. Defining the short-run as a period of time less than six months and the long-run as a period of time greater than six months, it follows that:

A)the long-run supply of housing is less price elastic than the short-run supply of housing
B)a change in the demand for housing will not affect housing prices in the short-run
C)the long-run supply of housing is more price elastic than the short-run supply of housing
D)an increase in the demand for housing will result in a larger supply response in the short run than in the long run

In economics the term utility refers to the:
i. relative scarcity of a good or service
ii. usefulness of a good or service
iii. satisfaction that a consumer derives from a good or service
iv. slope of a consumers demand curve

A)i
B)ii
C)iii
D)iv
E)ii and iii
F)iii and iv

From a utility function, which of the following may be determined?
i. the utility maximizing bundle of goods and services a consumer will purchase
ii. the utility derived from all combinations of goods and services
iii. the bundles that yield a given level of (or the same amount of) utility

A)i
B)ii
C)iii
D)i and ii
E)ii and iii

Which of the following statements is correct?

A)utility and usefulness are synonymous (i.e., they have equivalent meanings)
B)a good may yield utility but not be functionally useful
C)because utility is not measurable, the consumer choice model provides no useful insight about consumer behavior
D)the marginal utility derived from successive units of a good that are consumed are the same over individuals

The law of diminishing marginal utility states that:

A)to maximize utility, income should be allocated such that marginal utility per dollar is equal across the goods purchased
B)as more and more of a good is consumed, beyond a point total utility will decline
C)the quantity of a good demanded will rise as price is lowered, holding all other factors constant
D)the demand for a good will rise as price is lowered, holding all other factors constant
E)none of the above options are correct

Suppose that total utility increases as consumption of a good increases. It follows that the marginal utility from each successive unit of the good consumed:

A)is positive, but it may be either increasing or decreasing
B)may be either positive or negative
C)must also be increasing
D)is negative

Suppose that if an individual consumes 1 unit of good X she obtains 4 units of utility, if she consumes 2 units of good X she obtains 10 units of utility, and if she consumes 3 units of good X she obtains 18 units of utility. It follows that:

A)total utility is increasing at an increasing rate and marginal utility is increasing
B)total utility is increasing at an increasing rate and marginal utility is decreasing
C)total utility is increasing at a decreasing rate and marginal utility is decreasing
D)total utility is increasing at a decreasing rate and marginal utility is increasing

Which of the following is statements is correct?

A)if marginal utility is diminishing but positive as consumption increases, then total utility will increase
B)if marginal utility is diminishing as consumption increases, total utility will also be diminishing
C)there is no relationship between marginal utility and total utility
D)total utility is equal to the change in marginal utility from consuming an additional unit of a product

Marginal utility is the:

A)change in total utility from consuming each additional unit of a good
B)total utility from consumption of a certain number of units of a good divided by the number of units consumed
C)change in total utility realized by consuming another unit of a good divided by the change in the price of that good
D)sensitivity of consumer purchases of a good to changes in the price of that good

A critical component of the consumer choice model are indifference curves. In moving upward or downward along a given indifference curve:

A)consumer income is constant
B)total utility is constant
C)the prices of the goods are constant
D)the marginal utilities of the goods are constant

If an indifference curve relating X and Y slopes downward, then it may be concluded that:
i. both X and Y are goods
ii. both X and Y are bads
iii. X is a good and Y is a bad or X is a bad and Y is a good

A)i
B)ii
C)iii
D)i or ii
E)ii or iii

Consider an individual whose utility function is utility function U = X^0.5Y^0.5. Given this information, the indifference function associated with the bundle X = 2 and Y = 4 or (2, 4):

A)Y = 2/X
B)Y = 4/X
C)Y = 6/X
D)Y = 8/X
E)Y = 16/X

Assuming there are no quantity discounts or penalties, in moving downward or upward along a budget constraint:
i. consumer income varies but the prices of the goods are constant
ii. consumer income is constant but the prices of the goods vary
iii. consumer income is constant
iv. the prices of the goods are constant

A)i
B)ii
C)iii
D)iv
E)iii and iv

Which of the following does the budget constraint alone not indicate?
i. the various combinations of goods and services an individual consumer may purchase
ii. the utility maximizing bundle of goods and services a consumer will purchase
iii. how the prices of the goods and services were determined

A)i
B)ii
C)iii
D)i and ii
E)ii and iii

Suppose a consumer has an income of $15 that is spent on two goods: X and Y. The price of good X is $1.00 and the price of good Y is $3.00. Which of the following combinations (or bundles) of X and Y lie on the individuals budget constraint?

A)6X and 3Y
B)8X and 3Y
C)4X and 4Y
D)4X and 5Y

Any bundle of goods located inside (versus outside) of a consumers budget constraint:
i. is unobtainable with the consumers income
ii. implies the consumer is not spending all of her income on goods and services
iii. will yield less utility than any bundle located on the budget constraint
iv. will yield less utility than any bundle located outside of the budget constraint

A)i
B)ii
C)iii
D)iv
E)ii and iii
F)ii and iv

Suppose an individual exhausts his income on goods X and Y. If his income is $100, the price of good X is PX = $4, and the price of good Y is PY = $2, then the algebraic expression for his budget constraint is:

A)Y = 25 - 0.5X
B)Y = 50 - 0.5X
C)Y = 100 - 0.5X
D)Y = 25 - 2X
E)Y = 50 - 2X
F)Y = 100 - 2X

Suppose a quantity discount applies on purchases of a good. Specifically, the pricing arrangement is such that a consumer can purchase the first 20 units of the good for $5 each and all additional units (i.e., the 21st, 22nd, etc.) can be purchased for $3 each. If the consumer has an income of $250, what is the maximum number of units of the good that can be purchased?

A)40 units
B)60 units
C)70 units
D)80 units
E)100 units

If a consumer is maximizing utility then income is allocated over goods such that:

A)the marginal utilities of the goods are equal
B)marginal utility per dollar (i.e., marginal utility divided by price) is equal over the goods
C)the prices of the goods are equal
D)an equal proportion of income is allocated over the goods

Suppose an individual is allocating income over goods X and Y such that MUx/Px < MUY/PY . The consumer can increase total utility by purchasing:

A)more of X and less of Y
B)more of Y and less of X
C)more of X only if its price increases
D)less of Y only if its price decreases
E)none of the above options are correct

Consider a consumer who maximizes utility subject to a budget constraint. If her income increases, then:

A)the budget constraint will shift inward, the consumer will move to a new equilibrium along a lower indifference curve, and the level of total utility will increase
B)the budget constraint will shift outward, the consumer will move to a new equilibrium along a lower indifference curve, and the level of total utility will increase
C)the budget constraint will shift outward, the consumer will move to a new equilibrium along a higher indifference curve, and the level of total utility will decrease
D)the budget constraint will shift outward, the consumer will move to a new equilibrium along a higher indifference curve, and the level of total utility will increase
E)the budget constraint will shift outward, the consumer will move to a new equilibrium along a lower indifference curve, and the level of total utility will decrease

In economics, the difference between the short run and the long run is that:

A)in the short run all inputs are fixed whereas in the long run no inputs are fixed
B)in the short run all inputs are variable whereas in the long run all inputs are fixed
C)in the short run at least one input is fixed whereas in the long run no inputs are fixed
D)in the short run at least one input is fixed whereas in the long run all inputs are fixed

An important relationship between variable inputs and output in the short run is given by the law of diminishing marginal product (or returns). The law states that as more of a variable input, such as labor, is employed:

A)beyond a point output will increase at an increasing rate
B)beyond a point output will decrease at a decreasing rate
C)beyond a point output will decrease at an increasing rate
D)beyond a point output will increase at a decreasing rate
E)none of the above

Suppose an entrepreneur rents a facility at which she bakes pizzas using labor, machinery, and ingredients. Which of the following best describes one of the entrepreneurs short run fixed inputs?

A)the baking supplies (e.g., dough, sauce, cheese, etc.)
B)the monthly rental payments made to the owner of the facility
C)the facility where the pizzas are baked
D)the hourly wage rate paid to workers
E)total weekly payments made to laborers

If a firm employs 1 unit of labor, then 10 units of output will be produced; if it employs 2 units of labor, then 16 units of output will be produced; and if it employs 3 units of labor, then 20 units of output will be produced. It follows that:

A)total output is increasing at an increasing rate and the marginal product of labor is increasing
B)total output is increasing at an increasing rate and the marginal product of labor is decreasing
C)total output is increasing at an increasing rate and the marginal product of labor is constant
D)total output is increasing at a decreasing rate and the marginal product of labor is decreasing
E)total output is increasing at a decreasing rate and the marginal product of labor is increasing
F)total output is increasing at a decreasing rate and the marginal product of labor is constant

Suppose a firms production function is Q = 2K^0.5L^0.5. If the level of capital is fixed at 16 units, then the firms short run production function is:

A)Q = 2L^0.5
B)Q = 4L^0.5
C)Q = 8L^0.5
D)Q = 10L^0.5
E)Q = 16L^0.5
F)Q = 20L^0.5

The marginal product of labor (MPL) is:

A)total output divided by the number of workers employed
B)the change in total cost attributed to the increased output from employing an additional worker
C)the change in total revenue attributed to the increased output from employing an additional worker
D)the change in total output attributed to employing an additional worker
E)the change in total output attributed to producing an extra unit of a good
F)total output divided by the quantity of units produced

As noted in class, marginals and averages are closely related. Which of the following is correct regarding the relationship between the average product of labor and the marginal product of labor?
i. if marginal product is greater than average product, then average product will be increasing
ii. if marginal product is less than average product, then average product will be decreasing
iii. if average product is less than marginal product, then marginal product will be decreasing
iv. if average product is greater than marginal product, then marginal product will be increasing

A)i
B)ii
C)iii
D)iv
E)i and ii
F)iii and iv

If a production process undergoes a technological improvement then:

A)a given amount of inputs will yield more output
B)a given amount of output may be produced with fewer inputs
C)total variable cost and average variable cost will be reduced at all positive levels of output
D)the short run production function (or total product curve) will rotate upward
E)all of the above

The relationship between inputs and outputs in the short run is described by the law of diminishing marginal product (or returns). The shapes of which cost curves can be attributed to the law?

A)total fixed cost, total variable cost, average variable cost, marginal cost, and average total cost
B)total variable cost, total cost, average variable cost, average total cost, and marginal cost
C)total cost, average variable cost, average fixed cost, average total cost, and marginal cost
D)total variable cost, total cost, average fixed cost, marginal cost, and average variable cost

Consider a firm whose production function is Q = 0.4K^0.5 L^0.5. Its level of capital is fixed at 100 units, the price of labor is PL = $4 per unit, and the price of capital is PK = $2 per unit. Given this information, the firms total cost function is:

A)TC = 200 + Q^2/2
B)TC = 200 + Q^2/4
C)TC = 200 + Q^2/8
D)TC = 200 + Q^2/16
E)TC = 200 + Q^2/32

Suppose that workers at a firm shirk and management does not discourage them from doing so. It follows that:
i. the level of output produced per period will be less than the level of output if laborers do not shirk
ii. more time will be required to produce a given level of output than if laborers do not shirk
iii. the total labor costs required to produce a given level of output will be greater than if laborers do not shirk but total fixed costs will be unaffected

A)i
B)ii
C)iii
D)i and ii
E)i and iii
F)ii and iii
G)i, ii, and iii

A fixed cost is:

A)the cost of producing each additional unit of output
B)average total cost (or cost per unit) multiplied by the number of units produced
C)any cost which does not change when the firm changes the amount of output it produces
D)usually zero in the short run

The total variable cost incurred by a firm will depend upon:

A)the prices of its variable inputs (e.g., the hourly wage rate that workers are paid)
B)the production techniques that are used (i.e., its short run production function)
C)the amount of output produced
D)all of the above

If the price of one of the firm's variable inputs increases, such as the hourly wage rate, then:

A)marginal cost would increase, but average variable cost would be unchanged
B)average variable cost would increase, but marginal cost would be unchanged
C)marginal cost, average variable cost, and average fixed cost would increase at all levels of output
D)marginal cost, average variable cost, and average total cost would increase at all levels of output
E)one could not predict how unit costs of production would be affected

A firms marginal cost of production is the:
i. change in total variable cost that results from producing each additional unit of output
ii. change in total cost that results from producing each additional unit of output
iii. change in total fixed cost that results from producing each additional unit of output
iv. change in average total cost that results from producing each additional unit of output
iv. change in average variable cost that results from producing each additional unit of output
vi. change in average fixed cost that results from producing each additional unit of output

A)i
B)ii
C)iii
D)iv
E)v
F)vi
G)i and ii
H)iv and v

As opposed to the long run, if a perfectly competitive firm or a monopolist is in the short run, then:

A)barriers to entry exist that prevent new firms from entering the industry
B)the firm is not able to cut its rate of output to zero
C)the firm is not able to change the level of any of the inputs it uses
D)the firm is not able to change the level of all of the inputs it uses
E)none of the above

The market demand curve for a good that is produced and traded in a perfectly competitive market is ______, while the demand curve for a single competitive firm's good is ______.

A)perfectly inelastic, downward sloping
B)perfectly elastic, downward sloping
C)downward sloping, perfectly inelastic
D)downward sloping, perfectly elastic

Consider a perfectly competitive market described by the demand function P = 80 - 0.4Q and supply function P = 20 + 0.2Q. If the market is in equilibrium, then an individual firm's total revenue (TR), average revenue (AR) and marginal revenue (MR) functions are:

A)TR = 40Q, AR = 40, and MR = 40
B)TR = 50Q, AR = 50, and MR = 50
C)TR = 63Q, AR = 63, and MR = 63
D)TR = 80 - 0.4Q, AR = 80 - 0.8Q, and MR = 80 - 0.2Q
E)TR = 80Q - 0.4Q2 , AR = 80 - 0.4Q, and MR = 80 - 0.2Q

For a uniform-price monopolist _______________; and for a perfectly competitive firm _______________ :

A)P = MR < AR; P = MR = AR
B)P = AR > MR; P > MR = AR
C)P = AR < MR; P = MR = AR
D)P = AR > MR; P = MR = AR
F)P = MR = AR; P = AR > MR

Consider a perfectly competitive firm that produces and sells 40 units of output per-period (e.g., weekly) at the market price of $6. If average fixed cost is $2, average variable cost is $1, and marginal cost is $6, then the firm:
i. is maximizing total profit by producing and selling 40 units of output
ii. is earning a per-period total profit of $240
iii. is earning a per-period total profit of $120
iv. should close down in the short run and suffer a loss equal to $80

A)i
B)ii
C)iii
D)iv
E)i and ii
F)i and iii

Suppose a perfectly competitive firm is confronted with deciding whether to operate or shut down. Its average fixed cost function is AFC = 30/Q, its average variable cost function is AVC = 6 + 0.1Q, and its marginal cost function is MC = 6 + 0.2Q. The firm optimizes by producing the level of output that maximizes profit or minimizes loss. If the market price of the good is P = $12, then the firm will:

A)produce 30 units of output and earn a total profit of $60
B)produce 30 units of output and earn a total profit of $360
C)produce 60 units of output and suffer a total loss of $360
D)produce 60 units of output and suffer a total loss of $720
E)produce 0 units of output (shut down) and suffer a total loss of $30

A 'natural' monopoly, such as a local electricity provider, is the result of:
i. a firm owning or controlling a key input used in the production process
ii. long-run total costs declining continuously as output increases
iii. long-run average total costs declining continuously as output increases
iv. economies of scale existing over a wide range of output

A)i
B)ii
C)iii
D)iv
E)ii and iv
F)iii and iv
G)i, ii, and iv
H)i, iii, and iv
I)i, ii, iii, and iv

What do economies of scale, the exclusive ownership of essential raw materials used in the production process, and patents have in common?

A)they are all barriers to entry
B)they all help explain why a monopolist's demand and marginal revenue curves are identical
C)they must all be present before a monopolist can employ a discriminatory pricing strategy
D)they all help explain why a firm's short run average total cost curve is U-shaped

If a monopolist's demand curve for the good it produces is not changing over time (i.e., shifting outward or inward), then under uniform pricing the monopolist:

A)must lower price if it wants to sell more units of output versus fewer units of output
B)can increase price and increase output simultaneously because it dominates the market
C)increases its total revenues by an amount equal to the price it charges as it increases output
D)should produce in the segment of the demand curve where marginal revenue is negative

The principle that a firm should produce up to the point where the marginal revenue from the sale of an extra unit of output is equal to the marginal cost of producing the extra unit is known as the:

A)output maximization rule
B)break even rule
C)shut down rule
D)profit maximization rule
E)utility maximization rule

Consider a perfectly competitive firm that is producing a level of output such that marginal revenue is equal to marginal cost. The firm is selling its output at a price of $10 per unit and is incurring average variable costs of $5 per unit and average total costs of $8 per unit. Given this information, it may be concluded that the firm:

A)is operating at maximum total profit
B)is operating at a loss that could be reduced by shutting down
C)is operating at a profit that could be increased by producing more output
D)is operating at a loss that is less than the loss incurred by shutting down

If a perfectly competitive firm is producing and selling that level of output such that P = ATC, we can conclude that:

A)it will earn zero profit
B)it will suffer a loss
C)it will be producing less than the profit-maximizing level of output
D)it will earn positive profit

The principle that a firm should produce up to the point where the marginal revenue from the sale of an extra unit of output is equal to the marginal cost of producing the extra unit applies:

A)to both perfectly competitive firms and monopolies
B)only to monopolies
C)only to perfectly competitive firms
D)only to firms that can employ discriminatory pricing strategies

Similar to a monopoly that is operating in the short run, if a perfectly competitive firm wants to know how much additional cost it will incur by producing an extra unit of output, then it will evaluate its:

A)marginal product function
B)average product function
C)marginal cost function
D)average variable cost function
E)average total cost function

Suppose a monopoly is operating in the short run. Under which of the following situations would it increase its per-period total profits by lowering price and increasing output:

A)if it were producing a level of output such that MC < MR
B)if it were producing a level of output such that MC > MR
C)if it were producing a level of output such that MC = MR
D)none of the above

In considering the behavior of firms in the marketplace, we differentiate between the short run and the long run. The distinction between these two time horizons is that:

A)in the long run no inputs are fixed whereas in the short run at least one input is fixed
B)in the long run all inputs are fixed whereas in the short run at least one input is fixed
C)in the long run no inputs are fixed whereas in the short run all inputs are fixed
D)in the long run all inputs are fixed whereas in the short run all inputs are variable

Consider a local bakery that rents a facility at which it bakes loaves of bread using machinery (ovens, etc.) and labor. Which of the following best describes one of its fixed costs in the short run?

A)the facility where the loaves of bread are baked
B)the monthly rental payments it makes to the owner of the facility
C)the baking supplies (e.g., flour, eggs, salt, etc.)
D)the hourly wage rate paid to its workers
E)total per-period (e.g., weekly) payments made to laborers

Consider a firm's per-period (e.g., hourly) production process. If it employs 1 unit of labor, then 6 units of output will be produced; if it employs 2 units of labor, then 10 units of output will be produced; and if it employs 3 units of labor, then 12 units of output will be produced. It follows that:

A)total output is increasing at an increasing rate and the marginal product of labor is decreasing
B)total output is increasing at an increasing rate and the marginal product of labor is increasing
C)total output is increasing at an increasing rate and the marginal product of labor is constant
D)total output is increasing at a decreasing rate and the marginal product of labor is increasing
E)total output is increasing at a decreasing rate and the marginal product of labor is decreasing
F)total output is increasing at a decreasing rate and the marginal product of labor is constant

The law of diminishing marginal product (or returns) states that:

A)as more and more of a variable input, such as labor, is employed to a short-run production process, beyond a point output will decrease at a decreasing rate
B)as more and more of a variable input, such as labor, is employed to a short-run production process, beyond a point output will increase at a decreasing rate
C)as more and more of a variable input, such as labor, is employed to a short-run production process, beyond a point output will decrease at an increasing rate
D)as more and more of a good is consumed, beyond a point utility will increase at a decreasing rate
E)the quantity of a good supplied will rise as price increases, holding all other factors constant

A firm's total variable costs will depend upon:

A)the production techniques that are used
B)the prices of its variable inputs
C)the amount of output produced
D)all of the above are correct

The shapes of which cost curves can be attributed to the law of diminishing marginal product (or returns)?

A)total fixed cost, total variable cost, average variable cost, marginal cost, and average total cost
B)total variable cost, total cost, average variable cost, average total cost, and marginal cost
C)total cost, average variable cost, average fixed cost, average total cost, and marginal cost
D)total variable cost, total cost, average fixed cost, marginal cost, and average variable cost

All other factors held constant, if the price of one of the firm's variable inputs decreases, such as the hourly wage rate, then:

A)marginal cost, average variable cost, and average total cost would all fall
B)marginal cost would fall, but average variable cost would be unchanged
C)marginal cost, average variable cost, and average fixed cost would all fall
D)average variable cost would fall, but marginal cost would be unchanged

If a technological improvement occurs in a production process, then:

A)a given amount of inputs will yield more output
B)the total product curve will rotate upward
C)total variable cost and average variable cost will be reduced at all positive levels of output
D)a given amount of output may be produced with fewer inputs
E)all of the above

The average product of labor (APL) is:

A)total output divided by the number of workers employed
B)the change in total output attributed to employing an additional worker
C)the change in total output attributed to producing an extra unit of a good
D)total output divided by the quantity of units produced
E)the change in total revenue attributed to the increased output from employing an additional worker
F)the change in total cost attributed to the increased output from employing an additional worker

Which of the following is not correct regarding a short run production process?

A)if marginal product is greater than average product, then average product is increasing
B)if total product is at a maximum, then average product is also at a maximum
C)if marginal product is zero, then total product is at a maximum
D)if marginal product is less than average product, then average product is decreasing

A fixed cost is:

A)the cost of producing one more unit of capital
B)average total cost multiplied by the firm's output
C)any cost which does not change when the firm changes its output
D)usually zero in the short run
E)both C and D are correct

Suppose a firm's production function is Q = 4K0.5 L0.5. Its level of capital is fixed at 1 unit, the price of labor is PL = $32 per unit, and the price of capital is PK = $400 per unit. Given this information, its short run production function and average product of labor function may be determined. Which of the following is correct?
i. Q = 2L0.5
ii. Q = 4L0.5
iii. APL = 2L-0.5
iv. APL = 4L-0.5

A)i
B)ii
C)iii
D)i and iii
E)ii and iv

Suppose a firm's production function is Q = 4K^0.5 L^0.5. Its level of capital is fixed at 1 unit, the price of labor is PL = $32 per unit, and the price of capital is PK = $400 per unit. Given this information, its total fixed cost function is:

A)TFC = 400
B)TFC = 400Q
C)TFC = 400L
D)TFC = 400Q^2
E)TFC = 400L^2

Suppose a firm's production function is Q = 4K^0.5 L^0.5. Its level of capital is fixed at 1 unit, the price of labor is PL = $32 per unit, and the price of capital is PK = $400 per unit. Given this information, its total variable cost function is:

A)TVC = 2Q
B)TVC = 2Q^2
C)TVC = 32Q
D)TVC = 2L
E)TVC = 2L^2
F)TVC = 32L

Which of the following is not a characteristic of a perfectly competitive market?

A)the ability of an individual firm to affect the market price
B)the absence of barriers to entering the market
C)a large number of buyers and sellers
D)a standardized or homogeneous product

Which of the following is characteristic of a perfectly competitive firm's demand curve?
i. it is the same as the market demand curve
ii. it lies above the firm's marginal revenue curve
iii. it is equal to the firm's marginal revenue and average revenue curves
iv. it is perfectly inelastic at all points

A)i
B)ii
C)iii
D)iv
E)i and ii
F)iii and iv

Consider a perfectly competitive firm that sells all units of its output for the market price. The total revenue generated by the firm:
i. increases initially, reaches a maximum, and then decreases as the quantity of output produced and sold increases
ii. increases by a constant amount as the quantity of output produced and sold increases
iii. appears graphically as an upward sloping straight line from the origin

A)i
B)ii
C)i and iii
D)ii and iii

If a competitive firm's total output increases as the quantity of labor that it employs increases, then the:

A)marginal product of labor could be increasing or decreasing
B)average product of labor is also increasing
C)marginal product of labor is also increasing
D)marginal product of labor is decreasing

If a firm is producing and selling a level of output that maximizes total profit, then it will be:

A)maximizing the difference between total revenue and total cost
B)maximizing profit per unit of output
C)minimizing total cost
D)maximizing total revenue
E)minimizing average total cost

Consider a profit-maximizing firm operating in a perfectly competitive industry. If the equilibrium market price of the good falls below the minimum of the firm's average total cost curve but is greater than the minimum of its average variable cost curve, the firm:

A)should increase the price of its product in order to increase profits
B)should increase the price of its product in order to sell more units of output
C)should shut down and suffer a loss equal to its total fixed costs
D)will experience a loss but should continue to operate in the short-run

Suppose a perfectly competitive firm produces and sells 15 units of output per-period (e.g., daily) for the market price of $8. If its average fixed costs are $2 and its average variable costs are $3, then the firm:
i. is maximizing total profit by producing and selling 15 units of output
ii. earns a per-period total profit of $45
iii. earns a per-period total profit of $120
iv. should close down in the short run and suffer a loss equal to $30

A)i
B)ii
C)iii
D)iv
E)i and ii
F)i and iii

The principle that a firm should produce up to the point where the marginal revenue from the sale of an extra unit of output is equal to the marginal cost of producing the extra unit is known as the:

A)output maximization rule
B)break even rule
C)shut down rule
D)profit maximization rule
E)utility maximization rule

In which of the following situations would a perfectly competitive firm increase its per-period total profits by increasing output:

A)if it were producing a level of output such that MR > MC
B)if it were producing a level of output such that MR < MC
C)if it were producing a level of output such that MR = MC
D)none of the above

A firm that is confronted with fixed costs in the short run should produce versus shut down if the total revenue generated from the sales of its output is sufficient to cover its:

A)total variable costs
B)total fixed costs
C)total costs
D)marginal costs

If production is occurring where price exceeds marginal cost, the purely competitive firm will:

A)fail to maximize profits and inputs will be overallocated to production of the good (i.e., too much output is produced)
B)fail to maximize profits and inputs will be underallocated to production of the good (i.e., not enough output is produced)
C)maximize profits, but inputs will be underallocated to production of the good (i.e., not enough output is produced)
D)maximize profits, but inputs will be overallocated to production of the good (i.e., too much output is produced)

If a competitive firm or a monopolist is producing a level of output such that P < ATC, it may be concluded that:

A)it will be incurring a loss
B)its profits will be zero
C)it will be incurring a profit
D)it should shut down and only pay its fixed costs

Similar to a monopoly that is operating in the short run, if a perfectly competitive firm wants to know how much additional cost it will incur by producing an extra unit of output, then it will evaluate its:

A)marginal cost function
B)average variable cost function
C)average total cost function
D)marginal product function
E)average product function

Suppose a firm is producing a level of output such that marginal revenue is equal to marginal cost. The firm is selling its output at a price of $7 per unit and is incurring average variable costs of $6 per unit and average total costs of $8 per unit. Given this information, it may be concluded that the firm:

A)is operating at maximum total profit
B)is operating at a loss that could be reduced by shutting down
C)is operating at a profit that could be increased by producing more output
D)is operating at a loss that is less than the loss incurred by shutting down

A perfectly competitive firm's average fixed cost function is AFC = 30/Q, its average variable cost function is AVC = 6 + 0.1Q, and it marginal cost function is MC = 6 + 0.2Q. The firm optimizes by producing the level of output that maximizes profit or minimizes loss. If the market price of the good is P = $4, then the firm will:

A)produce 10 units of output and earn a profit of $10
B)produce 10 units of output and earn a profit of $40
C)produce 6 units of output and suffer a loss of $6
D)produce 6 units of output and suffer a loss of $24
E)produce 0 units of output (shut down) and suffer a loss of $30

Suppose the firms comprising the supply-side of a perfectly competitive market are earning economic profits, creating the incentive for new firms to enter the market and compete. Which of the following best describes the effect on the market resulting from the entry of new firms?

A)the market demand increases, causing price and the total output produced and sold to increase
B)the market demand increases, causing price and the total output produced and sold to decrease
C)the market supply increases, causing price to decrease and the total output produced and sold to increase
D)the market supply increases, causing price to increase and the total output produced and sold to decrease

If a competitive firm or a monopoly has closed down in the short run and is producing no output, then:


A)TVC is positive, but TFC and TC are zero
B)TFC and TC are positive, but TVC is zero
C)TFC is positive, but TVC and TC are zero
D)TFC, TVC, and TC will all be positive

For a purely competitive firm _______________, and for a uniform-price monopolist _______________ :
A)P = AR > MR; P > MR = AR
B)P = MR = AR; P = MR > AR
C)P = MR = AR; P = AR > MR
D)P > MR = AR; P = AR > MR

A patent or copyright is a barrier to entry based on:

A)ownership of a key input used in the production process
B)large economies of scale as output increases
C)widespread network externalities
D)government action to encourage and protect private research and development efforts

A 'natural' monopoly, such as a local electricity provider, is the result of:
i. a firm owning or controlling a key input used in the production process
ii. long-run average total costs declining continuously as output increases
iii. long-run total costs declining continuously as output increases
iv. economies of scale existing over a wide range of output

A)i
B)ii
C)iii
D)iv
E)ii and iv
F)iii and iv
G)i, ii, and iv
H)i, iii, and iv
I)i, ii, iii, and iv

For a monopolist, marginal revenue is less than price under uniform pricing because:

A)the monopolist's demand curve is perfectly inelastic
B)the monopolist's demand curve is perfectly elastic
C)the monopolist's total revenue curve is linear and upward sloping
D)when a monopolist lowers price to sell more output, the lower price applies to all units sold

In contrast to a perfectly competitive firm, the demand curve faced by a monopoly is:

A)less elastic at all levels of output
B)perfectly elastic
C)perfectly inelastic
D)the same as its marginal revenue curve

Similar to a firm operating in a perfectly competitive industry, a monopolist that chooses to produce in the short-run:
i. will produce that level of output where marginal cost exceeds marginal revenue by the greatest amount
ii. will produce that level of output where marginal revenue exceeds marginal cost by the greatest amount
iii. is always able to earn profits
iv. may incur losses

A)i
B)ii
C)iii
D)iv
E)i and iv
F)ii and iv

If a profit maximizing monopolist is producing a level of output such that marginal cost is $8 and its marginal revenue is $12, it will increase its profits by:

A)reducing price and increasing output
B)increasing price and reducing output
C)reducing both price and output
D)increasing both price and output
E)raising price while keeping output unchanged

Consider a monopolist whose total cost function is TC = 30 + 2Q + 0.5Q2 and whose marginal cost function is MC = 2 + Q. The demand function for the firm's good is P = 110 - 0.25Q. The firm optimizes by producing the level of output that maximizes total profit or minimizes total loss. If the firm uses a uniform pricing strategy, then rounded to the nearest unit and nearest dollar, the firm will:

A)produce 43 units of output, charge a price of $99, and earn a profit of $3653
B)produce 43 units of output, charge a price of $99, and earn a profit of $4257
C)produce 72 units of output, charge a price of $92, and earn a profit of $3858
D)produce 72 units of output, charge a price of $92, and earn a profit of $4012
E)shut down and suffer a loss of $1072

The price that a profit maximizing monopolist charges for its product is:

A)less than the price that would prevail if the industry were perfectly competitive
B)greater than the price that would prevail if the industry were perfectly competitive
C)the same as the price that would prevail if the industry were perfectly competitive
D)none of the above

Consider a monopolist that employs a uniform pricing strategy, whereby all units are sold for the same price. The price that will yield the firm the maximum total profit is:

A)the price at which demand is unit-elastic
B)the highest price consumer are willing to pay for units of the good
C)the price at which marginal revenue equals marginal cost
D)a price that maximizes the quantity of output the firm sells

If the monopolist is producing and selling a level of output in the inelastic segment of its demand curve, it can:

A)raise total revenue by raising price
B)reduce total costs by raising price
C)raise profits by raising price
D)all of the above