#1

According to the law of demand, an increase in the price of grape juice will result inA.A rightward shift in the demand curve for grape juiceB.A leftward shift in the demand curve for grape juiceC.A decrease in the demand for orange juice, a substituteD.A decrease in the quantity of grape juice demandedE.An increase in the quantity of grape juice supplied

Answer to Question #1

D

#2

For a competitive labor market, an increase in which of the following will lead to an increase in the demand for labor?A.The supply of laborB.The minimum wageC.The cost of medical benefits provided to the labor hired by the firmD.Labor union duesE.The demand for the good that labor produces

Answer to Question #2

E

#3

Which of the following segments of the marginal cost curve lies entirely on the firm’s short-run supply curve?A.TUVB.STUC.RSTUD.RSTUVE.RS

#3

#3

Which of the following segments of the marginal cost curve lies entirely on the firm’s short-run supply curve?A.TUVB.STUC.RSTUD.RSTUVE.RS

Answer to Question #3

A

#4

If the government imposes a tariff on imports of cheese, the price and quantity of imported cheese will most likely change in which of the following ways?

Price QuantityA.Decrease DecreaseB.Decrease IncreaseC.Increase Not changeD.Increase DecreaseE.Increase Increase

Answer to Question #4

D

#5

Which of the following best represents a positive externality?A.Purchasing a pass for an amusement parkB.Dining at a favorite restaurantC.Being disturbed by neighboring construction noiseD.Enjoying watching birds at a neighbor’s bird feederE.Dumping waste on someone else’s property

Answer to Question #5

D

#6Jane spends all her weekly allowance to buy only two goods: soda and apples. According to the table, if her preferences are characterized by the law of diminishing marginal utility, then which of the following statements is correct? A.Jane is maximizing her utilityB.Jane can buy more apples and less soda to maximize her utilityC.Jane can buy more soda and fewer apples to maximize her utilityD.Jane can buy more apples and the same amount of soda to maximize her utilityE.Jane can buy more soda and the same amount of apples to maximize her utility

#6

Goods Price

Quantity Purchased (units)

Marginal Utility (utils)

Soda $1 10 10Apple

s$2 5 25

#6Jane spends all her weekly allowance to buy only two goods: soda and apples. According to the table, if her preferences are characterized by the law of diminishing marginal utility, then which of the following statements is correct? A.Jane is maximizing her utilityB.Jane can buy more apples and less soda to maximize her utilityC.Jane can buy more soda and fewer apples to maximize her utilityD.Jane can buy more apples and the same amount of soda to maximize her utilityE.Jane can buy more soda and the same amount of apples to maximize her utility

Answer to Question #6

B

#7Suppose that at the current output level the marginal social cost of producing a good is greater than its marginal private cost, and that the marginal social benefit associated with production of the good is equal to its marginal private benefit. Which of the following government actions would most likely increase efficiency?A.Taxing the production of the goodB.Taxing the production of substitute goodsC.Giving tax rebates to people who purchase the goodD.Subsidizing production of complementary goodsE.Subsidizing consumption of the good

Answer to Question #7

A

#8

The diagram above shows the demand curve for a good. If the price increases from P1 to P2, and quantity consumed decreases from Q2 to Q1, consumer surplus decreases by the areaA.BDCB.P1P2BC

C.P1P2BD

D.Q1DCQ2

E.P2P3B

#8

#8

The diagram above shows the demand curve for a good. If the price increases from P1 to P2, and quantity consumed decreases from Q2 to Q1, consumer surplus decreases by the areaA.BDCB.P1P2BC

C.P1P2BD

D.Q1DCQ2

E.P2P3B

Answer to Question #8

B

#9

If a perfectly competitive firm is producing where marginal cost is rising and greater than marginal revenue, to maximize profits it should A.Increase the level of productionB.Decrease the level of productionC.Maintain current level of productionD.Increase priceE.Decrease price

Answer to Question #9

B

#10Assume that, for a perfectly competitive firm, marginal cost equals average variable cost at $10, marginal cost equals average total cost at $15, and marginal revenue equals marginal cost at $12. On the basis of this information, the firm shouldA.Close down in the short runB.Operate in the short run, because it will make an economic profit of $3 per unitC.Operate in the short run, even though it will sustain a lossD.Operate in the short run, but decrease output to decrease its costE.Operate in the long run, because it will make an economic profit of $3 per unit

Answer to Question #10

C