question
(D) I and II only
answer
Scarcity is correctly described by which of the following statements?
I. Scarcity exists if there are more uses for resources than can be satisfied at one time.
II. Scarcity exists if decisions must be made about alternative uses for resources.
III. Scarcity would not exist in a society in which people wanted to help others instead of themselves.
(A) I only
(B) II only
(C) III only
(D) I and II only
(E) I, II, and III
I. Scarcity exists if there are more uses for resources than can be satisfied at one time.
II. Scarcity exists if decisions must be made about alternative uses for resources.
III. Scarcity would not exist in a society in which people wanted to help others instead of themselves.
(A) I only
(B) II only
(C) III only
(D) I and II only
(E) I, II, and III
question
(A) The wage paid to peach farm workers rises at the same time that medical researchers find that eating peaches reduces the chances of a person's developing cancer.
answer
Which of the following situations would necessarily lead to an increase in the price of peaches?
(A) The wage paid to peach farm workers rises at the same time that medical researchers find that eating peaches reduces the chances of a person's developing cancer.
(B) While the wages of peach farm workers fall drastically, the peach industry launches a highly successful advertising campaign for peaches.
(C) A breakthrough in technology enables peach farmers to use the same amount of resources as before to produce more peaches per acre.
(D) The prices of apples and oranges fall.
(E) Weather during the growing season is ideal for peach production.
(A) The wage paid to peach farm workers rises at the same time that medical researchers find that eating peaches reduces the chances of a person's developing cancer.
(B) While the wages of peach farm workers fall drastically, the peach industry launches a highly successful advertising campaign for peaches.
(C) A breakthrough in technology enables peach farmers to use the same amount of resources as before to produce more peaches per acre.
(D) The prices of apples and oranges fall.
(E) Weather during the growing season is ideal for peach production.
question
(A) consumers' incomes increased
answer
The diagram above shows the demand and supply curves for a product. The equilibrium price could rise from P1 to P2 if
(A) consumers' incomes increased
(B) P2 were set as a legal maximum
(C) subsidies for producers increased
(D) the price of a complementary product increased
(E) costs of production were substantially lowered
(A) consumers' incomes increased
(B) P2 were set as a legal maximum
(C) subsidies for producers increased
(D) the price of a complementary product increased
(E) costs of production were substantially lowered
question
(B) II only
answer
A perfectly competitive producer of steel rods and steel beams employs 100 workers with identical skills. If steel rods and steel beams sell for the same price, which of the following rules should the producer always follow to use the 100 workers efficiently?
I. Allocate workers so that the average cost of producing beams equals the average cost of producing rods.
II. Allocate workers so that the marginal product of labor is the same in both rod production and beam production.
III. Allocate half the workers to rod production and half the workers to beam production.
(A) I only
(B) II only
(C) III only
(D) II and III only
(E) I, II, and III
I. Allocate workers so that the average cost of producing beams equals the average cost of producing rods.
II. Allocate workers so that the marginal product of labor is the same in both rod production and beam production.
III. Allocate half the workers to rod production and half the workers to beam production.
(A) I only
(B) II only
(C) III only
(D) II and III only
(E) I, II, and III
question
(E) The consumer's demand for compact disks is unit price elastic.
answer
Assume a consumer finds that his total expenditure on compact disks stays the same after the price of compact disks declines, other things being equal. Which of the following is true for this price change?
(A) Compact disks are inferior goods to this consumer.
(B) The consumer's demand for compact disks increased in response to the price change.
(C) The consumer's demand for compact disks is perfectly price elastic.
(D) The consumer's demand for compact disks is perfectly price inelastic.
(E) The consumer's demand for compact disks is unit price elastic.
(A) Compact disks are inferior goods to this consumer.
(B) The consumer's demand for compact disks increased in response to the price change.
(C) The consumer's demand for compact disks is perfectly price elastic.
(D) The consumer's demand for compact disks is perfectly price inelastic.
(E) The consumer's demand for compact disks is unit price elastic.
question
(E) diminishing returns
answer
As output increases, a firm's short-run marginal cost will eventually increase because of
(A) diseconomies of scale
(B) a lower product price
(C) inefficient production
(D) the firm's need to break even
(E) diminishing returns
(A) diseconomies of scale
(B) a lower product price
(C) inefficient production
(D) the firm's need to break even
(E) diminishing returns
question
(A) marginal product
answer
For a firm hiring in a perfectly competitive labor market, the marginal revenue product curve slopes downward after some point because as more of a factor is employed, which of the following declines?
(A) Marginal product
(B) marginal factor cost
(C) marginal cost
(D) total output
(E) Wage rates
(A) Marginal product
(B) marginal factor cost
(C) marginal cost
(D) total output
(E) Wage rates
question
(D) average variable costs are increasing when marginal costs are higher than average variable costs.
answer
Which of the following is always true of the relationship between average and marginal costs?
(A) Average total costs are increasing when marginal costs are increasing
(B) Marginal costs are increasing when average variable costs are higher than marginal costs
(C) average variable costs are increasing when marginal costs are increasing.
(D) average variable costs are increasing when marginal costs are higher than average variable costs
(E) average total costs are constant when marginal costs are constant.
(A) Average total costs are increasing when marginal costs are increasing
(B) Marginal costs are increasing when average variable costs are higher than marginal costs
(C) average variable costs are increasing when marginal costs are increasing.
(D) average variable costs are increasing when marginal costs are higher than average variable costs
(E) average total costs are constant when marginal costs are constant.
question
(B) ABKH
answer
At the price 0A, economic profits are
(A) ABJG
(B) ABKH
(C) ABLI
(D) ACMG
(E) C0FM
(A) ABJG
(B) ABKH
(C) ABLI
(D) ACMG
(E) C0FM
question
(D) 0D
answer
In the short run, the firm will stop production when the price falls below
(A) 0A
(B) 0B
(C) 0C
(D) 0D
(E) 0E
(A) 0A
(B) 0B
(C) 0C
(D) 0D
(E) 0E
question
(E) Price increase; Output decrease
answer
If the marginal cost curve of a monopolist shifts up, which of the following will occur to the monopolist's price and output?
(A) Price decrease; Output increase
(B) Price decrease; Output decrease
(C) Price increase; Output No change
(D) Price increase; Output increase
(E) Price increase; Output decrease
(A) Price decrease; Output increase
(B) Price decrease; Output decrease
(C) Price increase; Output No change
(D) Price increase; Output increase
(E) Price increase; Output decrease
question
(B) Output decrease; Price increase
answer
If firms in a perfectly competitive industry have been dumping toxic waste free of charge into a river, government action to ensure a more efficient use of resources would have which of the following effects on the industry's output and product price?
(A) Output decrease; Price decrease
(B) Output decrease; Price increase
(C) Output increase; Price decrease
(D) Output increase; Price increase
(E) Output increase; Price no change
(A) Output decrease; Price decrease
(B) Output decrease; Price increase
(C) Output increase; Price decrease
(D) Output increase; Price increase
(E) Output increase; Price no change
question
(A) price exceeds marginal cost
answer
A market is clearly NOT perfectly competitive if which of the following is true in equilibrium?
(A) price exceeds marginal cost
(B) price exceeds average variable cost
(C) price exceeds average fixed cost
(D) price equals opportunity cost
(E) Accounting profits are positive
(A) price exceeds marginal cost
(B) price exceeds average variable cost
(C) price exceeds average fixed cost
(D) price equals opportunity cost
(E) Accounting profits are positive
question
(B) P1 G I P
answer
The total amount of tax collected by the government is equal to
(A) P1 G Q1 0
(B) P1 G I P2
(C) P0 P1 J K
(D) P0 P1 G H
(E) P0 P2 I H
(A) P1 G Q1 0
(B) P1 G I P2
(C) P0 P1 J K
(D) P0 P1 G H
(E) P0 P2 I H
question
(C) the consumers and producers each bear a part of it
answer
Which of the following bears the total tax burden?
(A) the consumers bear it
(B) the producers bear it
(C) the consumers and producers each bear a part of it
(D) the group that legally pays the tax bears it
(E) the government bears it
(A) the consumers bear it
(B) the producers bear it
(C) the consumers and producers each bear a part of it
(D) the group that legally pays the tax bears it
(E) the government bears it
question
(D) G K I
answer
The DWL created by the tax is equal to
(A) P1 G H P0
(B) P1 G K P0
(C) G H K
(D) G K I
(E) zero
(A) P1 G H P0
(B) P1 G K P0
(C) G H K
(D) G K I
(E) zero
question
(C) firms are earning a return on investment that is equal to their opportunity costs
answer
If a perfectly competitive industry is in long-run equilibrium, which of the following is most likely true?
(A) some firms can be expected to leave the industry
(B) individual firms are not operating at the minimum points on their ATC curves
(C) firms are earning a return on investment that is equal to their opportunity costs
(D) some factors are not receiving a return equal to their opportunity costs
(E) consumers can anticipate price increases
(A) some firms can be expected to leave the industry
(B) individual firms are not operating at the minimum points on their ATC curves
(C) firms are earning a return on investment that is equal to their opportunity costs
(D) some factors are not receiving a return equal to their opportunity costs
(E) consumers can anticipate price increases
question
(D) too little of a good and charges too high of a price
answer
From the point of view of economic efficiency, a monopolist produces
(A) too much of a good and charges too low of price
(B) too much of a good and charges too high of price
(C) to little of a good and charges too low of a price
(D) too little of a good and charges too high of a price
(E) the socially optimal amount of a good
(A) too much of a good and charges too low of price
(B) too much of a good and charges too high of price
(C) to little of a good and charges too low of a price
(D) too little of a good and charges too high of a price
(E) the socially optimal amount of a good
question
(E) Bright- No dominant strategy; Sparkle- Strategy 1
answer
The payoff matrix above shows the profits associated with the strategic decisions of two oligopoly firms, Bright Company and Sparkle Company. What are the dominant strategies for Bright and Sparkle, respectively?
(A) Bright- Strategy 1; Sparkle- Strategy 1
(B) Bright- Strategy 1; Sparkle- Strategy 2
(C) Bright- Strategy 2; Sparkle- Strategy 1
(D) Bright- Strategy 2; Sparkle- no dominant strategy
(E) Bright- No dominant strategy; Sparkle- Strategy 1
(A) Bright- Strategy 1; Sparkle- Strategy 1
(B) Bright- Strategy 1; Sparkle- Strategy 2
(C) Bright- Strategy 2; Sparkle- Strategy 1
(D) Bright- Strategy 2; Sparkle- no dominant strategy
(E) Bright- No dominant strategy; Sparkle- Strategy 1
question
(A) $4
answer
The marginal cost of producing the fourth unit of output is
(A) $4
(B) $11
(C) $19
(D) $32
(E) impossible to determine from the information given
(A) $4
(B) $11
(C) $19
(D) $32
(E) impossible to determine from the information given
question
(C) $30
answer
The total variable cost of producing five units of output is
(A) $6
(B) $11
(C) $30
(D) $43
(E) impossible to determine from the information given
(A) $6
(B) $11
(C) $30
(D) $43
(E) impossible to determine from the information given
question
(E) impossible to determine from the information given
answer
The profit-maximizing level of output for this firm is
(A) 2
(B) 3
(C) 4
(D) 5
(E) impossible to determine from the information given
(A) 2
(B) 3
(C) 4
(D) 5
(E) impossible to determine from the information given
question
(A) CS- A; PS- G; DWL- D+E
answer
If the government imposes a excise tax of t dollars on each unit of good X, which of the following represents the consumer surplus, producer surplus, and DWL after the imposition of the tax?
(A) CS- A; PS- G; DWL- D+E
(B) CS- A; PS- F+E; DWL- D+E
(C) CS- A+B; PS- G+F+E; DWL- C+D
(D) CS- A+B+H; PS- G+F; DWL- D+E
(E) CS- A+B+H; PS- G+F+C; DWL-E
(A) CS- A; PS- G; DWL- D+E
(B) CS- A; PS- F+E; DWL- D+E
(C) CS- A+B; PS- G+F+E; DWL- C+D
(D) CS- A+B+H; PS- G+F; DWL- D+E
(E) CS- A+B+H; PS- G+F+C; DWL-E
question
(D) the degree of equity in income distribution
answer
A Lorenz curve can be used to evaluate which of the following economic issues?
(A) The allocative and technical efficiency of markets
(B) the comparative advantage of trading partners and the terms of trade
(C) the degree of specialization and growth within countries
(D) the degree of equity in income distribution
(E) the equilibrium of market prices and quantities throughout the world
(A) The allocative and technical efficiency of markets
(B) the comparative advantage of trading partners and the terms of trade
(C) the degree of specialization and growth within countries
(D) the degree of equity in income distribution
(E) the equilibrium of market prices and quantities throughout the world
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