Practice Quizecon

PRACTICE QUIZ - Attempt 1

Question1Marks: 1The post hoc fallacy is theChoose one answer.

a. conclusion that what is true for a part is necessarily true for the whole.

b. mistake of looking at the forest instead of the trees.

c. erroneous belief that if one event happens before another it must have caused the latter event to happen.

d. device of holding everything else constant in order to assess the impact of a change in one variable.

e. None of the above

Question2Marks: 1The difference between positive economics and normative economics is thatChoose one answer.

a. positive economics involves the collection of data and normative economics involves the interpretation of that data.

b. positive economics states what is and normative economics states what should be.

c. normative economics states what is and positive economics states what should be.

d. positive economics is concerned with household behavior and normative economics is concerned with national policy.

e. normative economics is concerned with household behavior and positive economics is concerned with national policy.

Question3Marks: 1A high school graduate must decide whether to go to college. The income he would earn by taking a full-time job is an example ofChoose one answer.

a. sunk costs.

b. opportunity cost.

c. efficient markets.

d. marginalism.

e. positive economics.

Question4Marks: 1Refer to Figure 1.1 below to answer the questions that

follow.Figure 1.1

Refer to Figure 1.1. For every hour that Sarah works (X), she makes exactly one circuit board (Y). This would be illustrated by the graph in panel

Choose one answer.

a. A

b. B

c. C

d. D


Question5Marks: 1Refer to Figure 1.1 below to answer the questions that follow.

Figure 1.1

Refer to Figure 1.1. The relationship between X and Y can be stated as Y = 5 + 2x. This would be illustrated by the graph in panel

Choose one answer.

a. A

b. B

c. C

d. D


Question6Marks: 1Economic decisions have affected theChoose one answer.

a. character of society.

b. nature and number of jobs.

c. level of material welfare.

d. physical environment.

e. All of the above

Question7Marks: 1Poverty is primarily a concern ofChoose one answer.

a. macroeconomics, but only from a global perspective.

b. macroeconomics.

c. neither microeconomics nor macroeconomics; it is a matter for normative economics.

d. both macroeconomics and microeconomics.

e. microeconomics.


Figure 1.1

Refer to Figure 1.1. A farmer has a small amount of acreage planted with tomatoes. The farmer is not sure how many workers to hire in total. To try to solve this problem, the farmer hires one worker at a time and measures the total output in terms of bushels of tomatoes picked after each new worker is added. The farmer finds that as more workers are hired (X) the output (Y) increases but by smaller and smaller amounts. This would be illustrated by the graph in panel

Choose one answer.

a. A

b. B

c. C

d. D


Question9Marks: 1I recently ordered stick-on return address labels from a printer. If I ordered 500 it would cost $6.95. However, if I ordered 1000 it would cost $9.95. One possible explanation of this pricing is thatChoose one answer.

a. the sunk costs increase as the quantity printed increases.

b. the average cost is the same for both quantities.

c. there are sunk costs in setting up the labels to be printed and marginal costs of printing an additional quantity.

d. the opportunity cost is less for the larger quantity.

e. the sunk costs decrease as the quantity printed increases.

Question10Marks: 1The central institution through which a laissez-faire system answers the basic economic questions is theChoose one answer.

a. practice of consumer sovereignty.

b. government.

c. market.

d. central planning body.

e. tribal council.

Question11Marks: 1The marginal rate of transformation is represented by theChoose one answer.

a. rate at which output increases when moving from a point of unemployment to a point of full employment.

b. rate at which the production possibility frontier shifts over time.

c. slope of the production possibility frontier.

d. horizontal intercept of the production possibility frontier.

e. rate at which labor is transformed into one unit of output.


Figure 2.1

Refer to Figure 2.1. Which of the following statements is TRUE?

Choose one answer.

a. The graph illustrates that in order to have more capital goods the society must give up consumer goods, and the amount of consumer goods sacrificed will decrease as the desired amount of consumer goods increases.

b. The graph illustrates that in order to have more consumer goods the society must give up capital goods, and the amount of capital goods sacrificed will decrease as the desired amount of consumer goods increases.

c. The graph illustrates that in order to have more capital goods the society must give up consumer goods, and the amount of capital goods sacrificed will decrease as the desired amount of consumer goods increases.

d. The graph illustrates that in order to have more consumer goods the society must give up capital goods, and the amount of capital goods sacrificed will increase as the desired amount of consumer goods increases.

e. None of the above statements are true.

Question13Marks: 1Which of the following statements is TRUE?Choose one answer.

a. Leisure time has an opportunity cost only in the form of foregone capital investment.

b. Leisure time is a free good.

c. Leisure time has an opportunity cost because you could have been doing something else.

d. Leisure time has an opportunity cost only for those who are employed.

e. Leisure time has an opportunity cost because you typically pay to be entertained.

Question14Marks: 1Society answers the question "For whom?" when it choosesChoose one answer.

a. its resources.

b. the mix of outputs.

c. the level of output.

d. the mix of inputs.

e. the distribution of output.

Question15Marks: 1The term resources refers toChoose one answer.

a. land and minerals only.

b. all usable inputs to the production process that are not manufactured.

c. all usable inputs to the production process owned by the private sector.

d. usable products.

e. all usable inputs to the production process.

Question16Marks: 1The term producers refers toChoose one answer.

a. those who transform resources into usable products.

b. private manufacturing firms only.

c. the public sector.

d. those who take resources and transform them into usable inputs.


Question17Marks: 1Refer to Scenario 1 below to answer the questions that follow.SCENARIO 1: Mary and Tom both volunteer at a food pantry that serves the poor in their town. They both pack bags for distribution and make sandwiches. The table below shows what they can each do in one hour:

For Tom, the opportunity cost of a bag packed is

Choose one answer.

a. 16 sandwiches.

b. 2 sandwiches.

c. greater than it is for Mary.

d. the same as it is for Mary.



Figure 2.2

The law of increasing opportunity cost is illustrated by every panel in Figure 2.2 EXCEPT:

Choose one answer.

a. b

b. a

c. f

d. e

e. c

Question19Marks: 1A live play performed at the theater is an example ofChoose one answer.

a. a resource.

b. production.

c. a scarce resource.

d. None of the above because nothing is actually being produced

e. None of the above unless there is an audience

Question20Marks: 1Sarah has 3 hours that she can choose to spend either studying for a test or baby-sitting. If she spends all of her time studying, she can score an 85 on the test. If she baby-sits for 1 hour, her test grade falls 3 points. If she baby-sits for a second hour, her test grade will fall by another 5 points. If she baby-sits for a third hour, her test grade falls by another 7 points. Which of the following points is NOT attainable?Choose one answer.

a. 1 hour baby-sitting and a test score of 77

b. 0 hours baby-sitting and a test score of 82

c. 2 hours baby-sitting and a test score of 77

d. 0 hours baby-sitting and a test score of 100

e. 3 hours baby-sitting and a test score of 70

Question21Marks: 1Refer to the information provided below in Table 3.1 to answer the following questions.Table 3.1 provides data on the demand for and supply of eggs in the United States.

Table 3.1

Refer to Table 3.1 A scare of salmonella in eggs would likely cause the market price to

Choose one answer.

a. fall due to a decrease in demand.

b. remain unchanged.

c. fall due to an increase in supply.

d. rise due to a decrease in demand.

e. rise due to a decrease in supply.

Question22Marks: 1The law of diminishing marginal utilityChoose one answer.

a. is the explanation of "ceteris paribus."

b. helps to explain why demand curves are very likely to slope downward.

c. was discovered by Alfred Marshall.

d. explains why consumers are better off when prices of goods decrease.


Question23Marks: 1A decrease in the equilibrium quantity of a normal good could be the result ofChoose one answer.

a. an increase in the price of a substitute.

b. a decrease in the price of a complement.

c. a decrease in income.

d. a growing population.


Question24Marks: 1Which of the following statements is FALSE?Choose one answer.

a. Wealth is the same as savings.

b. Wealth affects household demand.

c. Wealth is the total value of what a household owns less what it owes.

d. Wealth is a stock measure.

e. All of the above are true.

Question25Marks: 1Most economists do not treat __________ as a separate factor of production because they implicitly assume that it is in plentiful supply.Choose one answer.

a. entrepreneurship

b. capital

c. land

d. labor

e. air

Question26Marks: 1In response to higher profits in the oats market, many farmers increase the acreage of oats planted. As a result, the equilibrium price of oats would __________, and the equilibrium quantity of oats would __________.Choose one answer.

a. increase; decrease

b. increase; increase

c. decrease; increase

d. decrease; decrease

e. decrease; not change

Question27Marks: 1A household's decision about what quantity of a particular output, or product, to demand depends on all of the following factors EXCEPT theChoose one answer.

a. household's expectations.

b. technologies available to produce the product.

c. price of the product itself.

d. tastes and preferences of the household.

e. income available to the household.

Question28Marks: 1HouseholdsChoose one answer.

a. are the consuming units of the economy.

b. in a diverse society such as ours have nothing in common.

c. depend on individual preferences with no constraints.

d. have no control of their incomes.

e. are defined as consisting of more than one person.

Question29Marks: 1Demands for most goods are limited, if only by time, even at a zero price. As a result demand curves typicallyChoose one answer.

a. intersect the vertical axis.

b. intersect the horizontal axis.

c. do not intersect the price axis.

d. are straight lines.

e. have a positive slope.

Question30Marks: 1Refer to the information provided in Figure 4.2 below to answer the questions that follow.

Figure 4.2

Refer to Figure 4.2. Which of the following areas represents deadweight loss?

Choose one answer.

a. B

b. C

c. A

d. There is no deadweight loss in this market.


Figure 4.1

Figure 4.1 shows the supply and demand curves for human kidneys. Because the government does not allow a person to sell one of her kidneys,

Choose one answer.

a. 0 kidneys are donated.

b. 50 kidneys are donated.

c. 20 kidneys are donated.

d. 30 kidneys are donated.

e. then kidney transplants are illegal.

Question32Marks: 1Refer to the information provided below in Table 4.1 to answer the following questions.Table 4.1 (following) indicates the demand and supply schedules for oil in the United States.

Table 4.1

Suppose also that the world price of oil is $16 per barrel and that the United States can buy all the oil it wants at that price.Refer to Table 4.1. If the United States imposed a tax of $2 per barrel on imported oil, the effect would be toChoose one answer.

a. keep the price at $16.

b. raise the price to $20.

c. raise the price to $22.

d. raise the price to $18.


Question

33Marks: 1Which of the following statements is TRUE?Choose one answer.

a. "Willingness to pay" means that only the very rich will continue to buy some goods when their prices rise.

b. To say that there is some price that will clear any market is to say that everything has its price.

c. One example in which the market does not work is the case of items with sentimental value.

d. If a product is in fixed supply changes in its price will be determined solely and exclusively by demand.


Question34Marks: 1Attempts to keep prices from rising to equilibrium are based on perceptionsChoose one answer.

a. that some items are necessities and should be available to everyone at a reasonable price.

b. of injustice.

c. that price gouging is bad.

d. that income is unfairly distributed.

e. All of the above


Figure 4.1

Figure 4.1 shows the supply and demand curves for human kidneys. If the government did allow a person to sell one of her kidneys in a free market,

Choose one answer.

a. a kidney would sell for $2,500.

b. a kidney would sell for $5,000.

c. the demand for kidneys would shift to the left due to outrage.

d. both B and C


Question

36Marks: 1Refer to the information provided below in Table 4.1 to answer the following questions.Table 4.1 (following) indicates the demand and supply schedules for oil in the United States.

Table 4.1

Suppose also that the world price of oil is $16 per barrel and that the United States can buy all the oil it wants at that price.Refer to Table 4.1. Allowing for free trade, Americans would pay __________ per barrel for their oil.Choose one answer.

a. $22

b. $16

c. $18

d. $20


Question37Marks: 1Every year during the holidays one toy seems to become extremely popular and hard to find. Parents have been known to attempt to bribe toy store employees to call them as soon as a new shipment arrives. This is an example ofChoose one answer.

a. favored customers.

b. queuing.

c. ration coupons.

d. a surplus.

e. the price rationing function at work.

Question38Marks: 1Which of one of the following statements is TRUE?Choose one answer.

a. The budget constraint illustrates a consumer's individual preferences and tastes.

b. The consumer's choice about what to buy and not buy is based only on the budget constraint and is unrelated to tastes and preferences.

c. The consumer's choice about what to buy and not buy is based only on tastes and preferences and is unrelated to the budget constraint.

d. A change in the price of a single good may change the entire allocation of income.

e. None of the above statements are true.

Question39Marks: 1Peter has $10 to spend on either ice cream cones or pretzels. Pretzels cost $1 each and ice cream cones cost $2 each. The opportunity cost of an ice cream cone isChoose one answer.

a. 5 pretzels.

b. 1/2 pretzel.

c. 10 pretzels.

d. 2 pretzels.


Question40Marks: 1Refer to the information provided in Table 5.3 below to answer the following questions.Table 5.3Refer to Table 5.3. Pete has $10 to spend. He buys two cookies and two candies. Which of the following is true?

Choose one answer.

a. Pete could make himself better off by buying less candy and more cookies.

b. Pete is not spending the entire $10.

c. That is impossible, as that bundle costs more than $10.

d. Pete could make himself better off by buying less cookies and more candy.

e. Pete is maximizing his utility.

Question41Marks: 1The graph of a budget constraint shows the quantities of two goods, X on the horizontal axis and Y on the vertical axis, that a consumer can purchase given the consumer's income and the prices of the two goods. If the consumer's income increases, the slope of the budget line will

Choose one answer.

a. become flatter or steeper depending on which good is more expensive.

b. become flatter.

c. not change, but the line shifts to the right.

d. not change, but the line shifts to the left.

e. become steeper.

Question42Marks: 1The newspaper vending machine boxes at the train station near my home work as follows: when someone deposits the correct amount of change, the door of the box opens and the consumer can take a paper from the stack in the box. There is nothing to prevent the consumer from taking more than one paper. These machines are designed that way becauseChoose one answer.

a. for most people, the marginal utility of one more paper is zero.

b. the companies that produce and sell newspapers believe in people's honesty.

c. newspapers are so cheap.

d. most people do not buy papers from these machines.


Question43Marks: 1The graph of a budget constraint shows the quantities of two goods, X on the horizontal axis and Y on the vertical axis, that a consumer can purchase given the consumer's income and the prices of the two goods. If the price of the good Y increases, the budget line willChoose one answer.

a. pivot outward and to the right along the X-axis indicating a greater quantity of

b. pivot inward and to the left along the Y-axis indicating a smaller quantity of

c. shift inward and to the left.

d. shift outward and to the right.


Question44Marks: 1Refer to the information provided in Table 5.2 below to

answer the following questions.Table 5.2 Refer to Table 5.2. If the price of books fell to $10, the consumer would purchase

Choose one answer.

a. more books and fewer movies.

b. the same amounts of the two goods.

c. more books and more movies.

d. more books but the same amount of movies.

e. fewer books because of the income effect.

Question45Marks: 1Sarah derives more utility from her first novel read in a week than her second. From this information, we can conclude that Sarah'sChoose one answer.

a. total utility is diminishing.

b. marginal utility is negative.

c. marginal utility is diminishing.

d. All of the above


Question46Marks: 1All of the following are forms of industry structure EXCEPTChoose one answer.

a. corporations.

b. monopolistic competition.

c. monopoly.

d. perfect competition.

e. oligopoly.

Question47Marks: 1Refer to Table 6.2 below to answer the following questions.Table 6.2Refer to Table 6.2. If three workers are hired, then

Choose one answer.

a. average product is maximized on the table.

b. marginal product equals five.

c. diminishing marginal returns have started.

d. All of the above


Question48Marks: 1Refer to the information provided in Table 6.4 below to answer the following questions.Table 6.4 Refer to Table 6.4. Suppose capital costs $100 per unit per day and labor costs $80 per worker per day. For an output level of 100, the cheapest technology is

Choose one answer.

a. 2.

b. 1.

c. 3.

d. None of the above; they all cost the same.

e. Cannot be determined from the information given.

Question49Marks: 1Refer to Table 6.1 below to answer the following questions.Table 6.1 Refer to Table 6.1. Suppose Mr. B withdrew $50,000 from his account that earned 10% to invest into this business. He quit his full-time job that paid $40,000 to manage this business. If Mr. B is excited about his $45,000 profit, an economist would

Choose one answer.

a. tell him that he can ignore the maintenance expense.

b. celebrate with him.

c. tell him he made zero economic profit.

d. mention the $90,000 he has given up.

e. tell him his economic profit is indeed positive but not as big as $45,000.

Question50Marks: 1Refer to Table 6.2 below to answer the following questions.Table 6.2Refer to Table 6.2. Negative returns to labor occur when the number of workers is

Choose one answer.

a. 4.

b. 6.

c. 3.

d. 0


Question51Marks: 1The continued building of taller and taller buildings in cities is an example ofChoose one answer.

a. an optimal method of production that is labor intensive.

b. the substitution of capital for labor.

c. the substitution of capital for land.

d. All of the above


Question52Marks: 1When looking at a graph of average fixed costs, the AFC curve isChoose one answer.

a. negatively sloped then positively sloped.

b. horizontal.

c. negatively sloped and becoming increasingly negative.

d. upward sloping.

e. negatively sloped but becoming less negative as output increases.

Question53Marks: 1

If short-run marginal cost is rising, thenChoose one answer.

a. marginal product of labor is also rising.

b. marginal product is falling.

c. fixed costs are increasing.

d. average cost is rising.


Question54Marks: 1Refer to the information provided below in Table 7.1 to answer the following questions.

Table 7.1

Suppose that the producer operates with two machines, which it leases for $100 per day. The firm can hire a worker for $50 per day.Refer to Table 7.1. Average total cost is minimized at __________ units of output, (remember that the firm is using 2 machines and the cost of each machine is $100).Choose one answer.

a. 25

b. 45

c. 60

d. 70

e. 10

Question55Marks: 1If average variable cost decreases as output increases, thenChoose one answer.

a. marginal cost is decreasing.

b. marginal cost is less than average cost.

c. marginal cost is negative.

d. All of the above


Question56

Marks: 1Refer to the information provided below in Table 7.1 to answer the following questions.

Table 7.1

Suppose that the producer operates with two machines, which it leases for $100 per day. The firm can hire a worker for $50 per day.Refer to Table 7.1. Diminishing returns to labor occur from units __________ of labor.Choose one answer.

a. 0

b. 6

c. 5

d. 4

e. 3

Question57Marks: 1The term overhead refers toChoose one answer.

a. average variable cost.

b. total variable cost.

c. marginal cost.

d. total fixed cost.

e. average total cost.

Question58Marks: 1The widget market is perfectly competitive and in long-run equilibrium. A permanent decrease in demand for widgets will result inChoose one answer.

a. a long-run decrease in the number of firms.

b. a short-run decrease in profit .

c. a short-run decrease in price.

d. All of the above


Question59Marks: 1All firms must decideChoose one answer.

a. how much of each input to demand.

b. how much output to supply.

c. how to produce their output.

d. All of the above


Question60Marks: 1If a firm's production process exhibits constant returns to scale for all levels of output, then the firm's long-run average cost curve will beChoose one answer.

a. horizontal.

b. positively sloped.

c. vertical.

d. negatively sloped.

e. U-shaped.

Question61Marks: 1In short-run equilibrium, which of the following is always true for a perfectly competitive firm?Choose one answer.

a. P = MR

b. Profit = 0

c. AVC = ATC

d. AFC = 0


Question62Marks: 1Economies of scale can result fromChoose one answer.

a. increased specialization.

b. technology.

c. sheer size.

d. All of the above


Question63Marks: 1Which input(s) are supplied by households?Choose one answer.

a. Land

b. Capital

c. Labor

d. All of the above

e. A and C only

Question64Marks: 1Refer to the information provided in Table 9.1 below to answer the following questions.Table 9.1 The data above refer to a firm that produces in the short run with only one variable input, which is labor. Refer to Table 9.1. If the market price of the product is $2 and the firm can hire as many workers as it wants at a wage of $30, the firm should hire __________ workers.

Choose one answer.

a. 0

b. 2

c. 3

d. 4

e. 5

Question65Marks: 1If a firm is maximizing profit, which of the following is TRUE?Choose one answer.

a. MPL is maximized.

b. MPL = APL

c. MRPL = w

d. All of the above



a. When a firm has a choice among alternative technologies, the choice it makes depends to some extent on relative input prices.

b. A new technology may increase the productivity of labor, raising its marginal product and therefore its marginal revenue product.

c. The marginal productivity theory of income distribution states that if markets are competitive, at equilibrium each factor ends up receiving rewards determined by its productivity as measured by marginal revenue product.

d. The productivity of, and thus the demand for, any one factor of production depends on the quality and quantity of the other factors with which it works.

e. All of the above

Question67Marks: 1The income received by owners of land is calledChoose one answer.

a. purity.

b. interest.

c. profit.

d. wage.

e. rent.

Question68Marks: 1Refer to the information provided in Table 9.1 below to answer the following questions.Table 9.1 The data above refer to a firm that produces in the short run with only one variable input, which is labor. Refer to Table 9.1. Diminishing returns occur after the __________

worker.

Choose one answer.

a. third

b. fourth

c. fifth

d. second

e. first

Question69Marks: 1A monopoly by virtue of government directive is an example of the type of barrier to entry calledChoose one answer.

a. government franchise.

b. ownership of a scarce factor of production.

c. patents.

d. economies of scale.


Question70Marks: 1Natural monopoliesChoose one answer.

a. are allowed to exist as monopolies, but the government regulates the prices they can charge for their services.

b. have very high fixed costs and relatively low marginal costs.

c. are often public utilities.

d. All of the above


Question71Marks: 1Comparing long-run equilibrium in monopoly to that in a perfectly competitive industry we findChoose one answer.

a. output is greater in the perfectly competitive equilibrium.

b. the monopolist can earn positive profits.

c. the monopolist charges higher prices.

d. All of the above

e. A and C only

Question72Marks: 1In game theory, a strategy that is the best thing for a firm to do no matter what the other firm does is termed aChoose one answer.

a. maximin strategy.

b. dominant strategy.

c. rivalry.

d. Nash equilibrium.

e. cartel.

Question73Marks: 1By touting the quality of its brand name product, a firm is attempting to establishChoose one answer.

a. collusion.

b. economies of scale.

c. product differentiation.

d. monopsony power.

e. patent protection.

Question74Marks: 1Refer to the information provided in Figure 13.1 below to answer the questions that follow.

Figure 13.1

Refer to Figure 13.1. For the monopolistically competitive firm depicted in the graph, the profit-maximizing level of output is

Choose one answer.

a. 40.

b. 30.

c. 20.

d. 45.


Question75Marks: 1Which of the following best explains why a monopolistically competitive firm has monopoly power?Choose one answer.

a. Product differentiation

b. Many buyers

c. Economies of scale

d. Barriers to entry

e. All of the above

Question76Marks: 1A statement or set of related statements about cause and effect, action and reaction isChoose one answer.

a. an economic theory.

b. normative.

c. a model.

d. a variable.

e. ceteris paribus.

Question77Marks: 1Normative economicsChoose one answer.

a. is an approach to economics that seeks to understand behavior.

b. is value-free economic analysis.

c. is often called policy economics.

d. examines the outcomes of economic systems without making judgments about whether they are good or bad.

e. considers questions like "What would happen if we abolished the corporate income tax?"

Question78Marks: 1If we wish to observe the effect that an increase in X has on Y as long as nothing else is changing, then we are making the assumption ofChoose one answer.

a. composition.

b. opportunity cost.

c. false cause.

d. Ockham's razor.

e. ceteris paribus.


Figure 2.1

Refer to Figure 2.1. If society currently produces 1,100 units of consumer goods and 800 units of capital goods, the opportunity cost of making 200 more units of consumer goods is

Choose one answer.

a. 550 units of capital goods.

b. 1300 units of consumer goods.

c. not possible to calculate from the information provided.

d. 800 units of capital goods.

e. 250 units of capital goods.


Figure 2.2

Panel e in the Figure 2.2 illustrates

Choose one answer.

a. inefficient production of meat and fish.

b. the law of increasing opportunity costs.

c. technological advances in the production of meat and fish.

d. productive efficiency.

e. an impossible combination of meat and fish.

Question81Marks: 1Economic growth is difficult for poor countries becauseChoose one answer.

a. governments must fund capital production and research out of tax revenues.

b. resources must be taken away from consumer goods to pay for capital goods.

c. resources must be taken away from consumer goods to pay for technology.

d. those wealthy enough to invest in domestic industries may choose to invest abroad instead.

e. All of the above

Question82Marks: 1In output marketsChoose one answer.

a. households supply resources that firms demand.

b. households supply goods and services that businesses demand.

c. households supply inputs that firms demand.

d. firms supply products that households demand.

e. households demand inputs that firms supply.

Question83Marks: 1Land, labor, and capital are three examples ofChoose one answer.

a. inputs.

b. resources.

c. factors of production.

d. All of the above


Question84Marks: 1Which of the following would NOT cause the supply of a good or service to increase?Choose one answer.

a. There is an increase in the price of the product.

b. Prices of required inputs fall.

c. The technology available to produce the product improves.

d. The prices of related goods that the firm could produce instead decrease.

e. None of the above; All of the above would cause an increase in supply.

Question85Marks: 1An increase in the equilibrium price of a good could be the result ofChoose one answer.

a. a decrease in supply.

b. a shortage

c. a decrease in demand.

d. an increase in supply.


Question86Marks: 1"Willingness to pay" means thatChoose one answer.

a. reduced supply causes the price of a good to rise.

b. only the very rich will be able to buy certain goods.

c. the distribution of available supply will depend on consumers' tastes and preferences and their incomes.

d. everything has its price.


Question87Marks: 1In 1973 and 1974 OPEC imposed an embargo on shipments of crude

oil to the United States. This resulted in a drastic reduction in the quantity of gasoline available, and in response CongressChoose one answer.

a. imposed a price ceiling.

b. created ration coupons similar to those that were used during World War II.

c. created a queuing system.

d. declared war.

e. allowed the price rationing function of the market to work.

Question88Marks: 1Larry's savings goal is to have exactly $500,000 in his savings account when he retires in 20 years. He budgets himself accordingly. If interest rates rise, how will Larry react?Choose one answer.

a. He will save less than he did before because of the income effect.

b. He will save less than he did before because of the substitution effect.

c. He will save more than he did before because of the substitution effect.

d. He will not change the amount he saves.

e. He will save more than he did before because of the income effect.

Question89Marks: 1What impact do interest rates have on saving behavior?Choose one answer.

a. It depends on the relative size of the income and substitution effects.

b. An increase in interest rates means that the consumer will earn more on savings and therefore the consumer will save more due to the income effect.

c. An increase in interest rates means that current spending costs more in terms of foregone future spending, resulting in a decrease in saving.

d. Higher interest rates always result in more saving because the income and substitution effects work in the same direction.


Question90Marks: 1Refer to Table 6.2 below to answer the following questions.Table 6.2

Refer to Table 6.2. Marginal product starts to diminish after the __________ worker.

Choose one answer.

a. third

b. seventh

c. sixth

d. second


Question91Marks: 1In the short runChoose one answer.

a. firms may curtail operations but they are still locked into some costs.

b. there is no entry into or exit from the industry.

c. a factor of production is fixed.

d. All of the above


Question92Marks: 1If marginal product equals average product, thenChoose one answer.

a. average product remains constant.

b. marginal product is rising.

c. marginal product is maximized.

d. average product is rising.



a. The marginal cost curve of a perfectly competitive firm is the firm's short-run supply curve.

b. The profit-maximizing perfectly competitive firm will produce up to the point where the price of its output is just equal to short-run marginal cost.

c. There is some price below which the firm will shut down its operations and simply bear losses equal to fixed costs even if price is above marginal cost.

d. The profit-maximizing output level for all firms is the output level where marginal revenue equals marginal cost.

e. All of the above

Question94Marks: 1Total variable costChoose one answer.

a. decreases as output increases.

b. includes only the cost of labor.

c. is lowest for labor-intensive technologies.

d. increases as output increases.

e. is constant as output increases.

Question95Marks: 1The assumption that a factor of production is fixed in the short run implies that as a firm tries to increase its outputChoose one answer.

a. marginal cost will eventually rise with output.

b. variable costs will stay constant.

c. fixed costs will increase.

d. diminishing returns will not set in.

e. marginal cost will immediately increase.

Question96Marks: 1The long run differs from the short run in that in the long runChoose one answer.

a. the firm can operate at a loss.

b. there are no fixed costs.

c. the firm can earn a profit.

d. the number of firms is fixed.


Question97Marks: 1As a result of diminishing returns, theChoose one answer.

a. marginal product of variable inputs decreases as more of them are added to a fixed input.

b. marginal revenue product of the variable inputs will eventually decrease.

c. total product will increase at a decreasing rate.

d. All of the above


Question98Marks: 1In analyzing monopoly behavior we assume all the following EXCEPT thatChoose one answer.

a. a monopolist faces a known demand curve.

b. many substitutes are available.

c. entry to the market is blocked.

d. firms act to maximize profit.


Question99Marks: 1Refer to Figure 12.3 below to answer the following questions.

Figure 12.3

Refer to Figure 12.3. The firm would produce the greatest level of output if it is

Choose one answer.

a. regulated and the government sets the efficient price.

b. regulated and allowed to earn a normal rate of return on invested capital.

c. allowed to maximize profits.

d. Either B or C; they are the same.


Question100Marks: 1Refer to the information provided in Table 13.1 below to answer the questions that follow.

Table 13.1

Table 13.1 shows the payoff matrix from setting price for the only two firms in a market. How many Nash equilibria are there?

Choose one answer.

a. 0

b. 3

c. 4

d. 1

e. 2

Question101Marks: 1Ceteris paribus means thatChoose one answer.

a. irrelevant detail should be cut away.

b. in weighing the costs and benefits of a decision it is important to weigh only the costs and benefits that arise from the decision.

c. there's no such thing as a free lunch.

d. whenever someone makes a choice or decision they give something else up.

e. everything else is held unchanged.

Question102Marks: 1Refer to Scenario 1 below to answer the questions that follow.SCENARIO 1: Congress voted down a proposal that would have raised the minimum wage one dollar above its present level of $5.15, beginning with a 50 cent raise next January. Proponents of the legislation contended that the increase was needed to improve the living standards of low-wage workers. Opponents argued that the increase would likely lead to greater unemployment, particularly among teenagers.

Refer to Scenario 1. This is an example of economic policy. Proponents of the legislation were arguing in its favor on the basis ofChoose one answer.

a. efficiency.

b. growth.

c. stability.

d. equity.


Question103Marks: 1National defense isChoose one answer.

a. an input of the public sector.

b. not an example of production because it is provided by the government.

c. an example of production.

d. not an example of production because nothing is actually produced.


Question104Marks: 1Which of the following statements about firms is TRUE?Choose one answer.

a. A firm exists when a person or group of people decides to produce a product.

b. The Colorado Symphony Orchestra is an example of a firm.

c. Firms can be large, small, or in between.

d. Some firms produce products whereas others produce services.

e. All of the above

Question105Marks: 1In recent years one toy has seemed to become extremely popular as a holiday gift and therefore hard to find. As a result, some people have tried to "spot" which toy will be the "hot" item and buy some of them ahead of time hoping to sell them closer to the holidays at a much higher price. This is an example ofChoose one answer.

a. the price rationing function at work.

b. queuing.

c. ration coupons.

d. favored customers.

e. a black market.

Question106Marks: 1Positive economic profitsChoose one answer.

a. attract new firms into an industry.

b. cause existing firms to expand.

c. result in a better-than-normal rate of return.

d. All of the above


Question107Marks: 1The vertical distance between the ATC curve and the AVC curve equalsChoose one answer.

a. zero.

b. marginal cost.

c. average fixed cost.

d. the level of output.


Question108Marks: 1When an increase in a firm's scale of production has no effect on average costs it is referred to asChoose one answer.

a. constant returns to scale.

b. diseconomies of scale.

c. decreasing returns to scale.

d. economies of scale.

e. spreading the overhead.

Question109Marks: 1Capital and labor are inputs that can beChoose one answer.

a. varied in the long run.

b. substitutes.

c. complements.

d. All of the above


Question110Marks: 1Which of the following is a characteristic of monopolistic competition?Choose one answer.

a. Firms compete both in price and quality.

b. Competitors have some price-setting power but it is limited because of the many close substitutes available.

c. Many firms compete for essentially the same customers, but each firm produces a slightly different product.

d. Entry is relatively inexpensive.

e. All of the above

Question111Marks: 1The concerns of microeconomics include all of the following EXCEPTChoose one answer.

a. poverty.

b. employment by individual businesses and industries.

c. levels of consumer prices in the economy.

d. the distribution of income and wealth.

e. production/output in the individual industries and businesses of the economy.

Question112Marks: 1

Refer to Figure 2.1 below to answer the questions that follow.

Figure 2.1

Refer to Figure 2.1. If society moved from point E to point F, then they would be

Choose one answer.

a. giving up some capital goods to have more consumer goods.

b. giving up some consumer goods to have more capital goods.

c. creating unemployment.

d. unable to do so because of scarce resources.

e. enjoying more of both capital goods and consumer goods.

Question113Marks: 1Suppose that drought kills half of the nation's corn crop. As a result, the equilibrium price of corn would __________, and the equilibrium quantity of corn would __________.Choose one answer.

a. decrease; not change

b. increase; decrease

c. decrease; decrease

d. decrease; increase

e. increase; increase

Question114Marks: 1On those occasions when both governments and private firms decide to use some mechanism other than the market system to ration an item, the rationale most often isChoose one answer.

a. fairness.

b. willingness to pay.

c. price gouging.

d. queuing.


Question

115Marks: 1Refer to the information provided in Table 5.2 below to answer the following questions.Table 5.2 Refer to Table 5.2. The effect of the law of diminishing marginal utility is seen after

Choose one answer.

a. the point where the MU/P is equal for books and movies.

b. the first movie and the first book.

c. the eighth move and eighth book.

d. the fifth movie and the second book.

e. None of the above; this is a case where the law does not apply.

Question116Marks: 1With capital on the vertical axis and labor on the horizontal axis, the slope of the isocost line meansChoose one answer.

a. how much capital costs relative labor.

b. how much labor must be given up to buy one unit of capital without changing total cost.

c. how much costs increase when capital and labor increase by one unit each.

d. how much capital must be given up to buy one unit of labor without changing total cost.

e. that capital and labor are hired in equal proportions.

Question117Marks: 1In which type of industry structure must firms make the decisions of how much output to supply given the market price?Choose one answer.

a. Perfect competition

b. Oligopoly

c. Monopolistic Competition

d. Monopoly

e. All of the above

Question118

Marks: 1Any time that price is below the minimum point on the AVC curveChoose one answer.

a. the firm will stop producing and bear losses equal to its fixed costs.

b. operating profit will be negative.

c. total revenue will be less than total variable cost.

d. All of the above


Question119Marks: 1Refer to the information provided in Table 9.1 below to answer the following questions.Table 9.1 The data above refer to a firm that produces in the short run with only one variable input, which is labor. Refer to Table 9.1. The firm would hire six workers if the market price of the product were

Choose one answer.

a. low and the wage rate was high.

b. low and the wage rate was low.

c. high and the wage rate was low.

d. high and the wage rate was high.

e. None of the above; in the example given the firm would never hire six workers.

Question120Marks: 1Which of the following is NOT an assumption of the model of perfect competition?Choose one answer.

a. A large number of firms and households interact in each output market.

b. Firms in a given market produce differentiated products.

c. New firms are free to enter.

d. The market determines output price.


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