Questions que

1) Suppose that you purchased a ticket to the symphony for $40 from an online ticket broker. Once you arrived at the symphony, you discovered that parking costs you an additional $10. In this situation, the additional $10 you pay for parking is an example of

 

A) an inefficient cost.

B) marginal cost.

C) opportunity cost.

D) an economic loss.

 

2) Opportunity cost is

 

A) the additional cost incurred from the consumption of one more unit of output.

B) the cost involved when choosing between alternatives.

C) the cost of production which cannot be recaptured.

D) the total cost incurred from the consumption of additional output.

 

3) As an individual consumes ________ of a product within a given period of time, it is likely that each additional unit consumed will yield ________ satisfaction.

 

A) more; successively more

B) more; successively less

C) more; no additional

D) less; negative

 

Refer to the information provided in Figure 3.1 below to answer the questions that follow.

 

 

Figure 3.1

 

4) Refer to Figure 3.1. Which of the following would be most likely to cause the demand for Dr. Pepper to shift from D0 to D1?

 

A) an increase in income, assuming that Dr. Pepper is a normal good

B) a decrease in the price of 7-UP, assuming 7-UP is a substitute for Dr. Pepper

C) an increase in the price of Dr. Pepper

D) an increase in the price of sugar used to make Dr. Pepper

5) If the price of spinach decreases, there will be ________ of spinach enchiladas.

 

A) an increase in the supply

B) a decrease in the supply

C) an increase in the quantity supplied

D) a decrease in the quantity supplied

 

Refer to the information provided in Figure 3.15 below to answer the questions that follow.

 

 

Figure 3.15

 

6) Refer to Figure 3.15. A decrease in the wage rate of gardenburger makers will cause a movement from Point B on supply curve S2 to

 

A) Point A on supply curve S2.

B) Point C on supply curve S2.

C) supply curve S3.

D) supply curve S1.

 

Refer to the information provided in Table 3.2 below to answer the questions that follow.

 

Table 3.2

Price per Cheeseburger	Quantity Demanded (Cheeseburgers per Month)	Quantity Supplied (Cheeseburgers per Month)
$5	1,500	500
6	1,200	700
7	900	900
8	600	1,100
9	300	1,300

 

 

 

 

 

 

 

7) Refer to Table 3.2. This market will be in equilibrium if the quantity of cheeseburgers demanded is

 

A) 300.

B) 600.

C) 900.

D) 1,200.

 

8) Refer to Table 3.2. If the price per cheeseburger is $5, the price will

 

A) remain constant because the market is in equilibrium.

B) decrease because there is an excess demand in the market.

C) increase because there is an excess demand in the market.

D) decrease because there is an excess supply in the market.

 

Refer to the information provided in Figure 3.13 below to answer the questions that follow.

 

Figure 3.13

 

9) Refer to Figure 3.13. The market is initially in equilibrium at Point A. If supply shifts from S1 to S2 and there is an excess demand of 6 cheeseburgers, the price of cheeseburgers will have

 

A) moved from $5.00 to $7.00.

B) moved from $7.00 to $5.00.

C) remained constant at $5.00.

D) remained constant at $7.00.

 

10) Refer to Figure 3.13. The market is initially in equilibrium at Point A. If supply shifts from S1 to S2, the equilibrium price will change from ________ and the equilibrium quantity will change from ________.

 

A) $5.00 to $7.00; 10 to 7

B) $5.00 to $7.00; 4 to 7

C) $7.00 to $5.00; 7 to 4

D) $7.00 to $5.00; 7 to 10

 

 

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

 

Figure 4.2

 

11) Refer to Figure 4.2. The market is initially in equilibrium at the intersection of S2 and D, and supply shifts from S2 to S1. Which of the following statements is true?

 

A) Price will still serve as a rationing device causing quantity demanded to rise from 8 to 11 soft pretzels.

B) There is no need for price to serve as a rationing device in this case because the new equilibrium quantity is lower than the original equilibrium quantity.

C) Price will still serve as a rationing device causing quantity supplied to fall from 8 to 4 soft pretzels.

D) The market cannot move to a new equilibrium until there is also a change in supply.

 

12) An example of an effective price ceiling would be the government setting the price of wheat at ________ per bushel when the market price is at $4.25 per bushel.

 

A) $3.75

B) $5.00

C) $7.75

D) $12.00

 

Refer to the information provided in Figure 4.6 below to answer the questions that follow.

Equilibrium in this market occurs at the intersection of curves S and D.

 

 

Figure 4.6

 

13) In figure 4.6, the area of [A + B + C] represents

 

A) producer surplus.

B) consumer surplus.

C) consumer surplus plus producer surplus.

D) consumer surplus minus producer surplus.

 

14) The total of consumer plus producer surplus is ________ at the market equilibrium.

A) greatest

B) smallest

C) zero

D) negative

 

Refer to the information provided in Figure 4.5 below to answer the questions that follow.

 

Figure 4.5

 

15) Refer to Figure 4.5. The United States imports 9 million CD-Rom drives at a world price of ________ per CD-Rom drive.

 

A) $15

B) $25

C) between $15 and $25

D) >$25

16) Refer to Figure 4.5. The United States will import 3 million CD-Rom drives if ________ tax per CD-Rom drive is levied on imported CD-Rom drives.

 

A) no

B) a $10

C) a $15

D) a $25

 

17) A government wants to reduce electricity consumption by 20%. The price elasticity of demand for electricity is -5. The government must ________ the price of electricity by ________.

 

A) raise; 4.0%

B) raise; 0.25%

C) raise; 1.25%

D) lower; 0.25%

 

18) The price elasticity of demand for bottled water in New York is -3, and the price elasticity of demand for bottled water in Florida is -0.6. In other words, demand in New York is ________, and demand in Florida is ________.

 

A) elastic; inelastic

B) inelastic; elastic

C) elastic; unit elastic

D) inelastic; unit inelastic

 

Refer to the information provided in Figure 5.3 below to answer the questions that follow.

 

 

Figure 5.3

 

 

 

 

 

 

 

19) Refer to Figure 5.3. Use the midpoint formula. If the price of a gardenburger decreases from $10 to $8, the price elasticity of demand equals ________ and demand is ________.

 

A) 4.5; elastic

B) -0.5; inelastic

C) -4.5; elastic

D) -9.0; inelastic

 

20) Refer to Figure 5.3. Use the midpoint formula. If the price of a gardenburger decreases from $8 to $6, the price elasticity of demand equals ________, and demand is ________.

 

A) -0.57; inelastic

B) -1.75; elastic

C) -1.9; inelastic

D) -2.0; elastic

 

21) Assume you earn $75,000 a year and your favorite entertainment magazine costs you $25 a year. Your demand for the entertainment magazine is likely to be

 

A) elastic.

B) inelastic.

C) perfectly elastic.

D) perfectly inelastic.

 

22) Darius has $1,200 a month to spend on clothing (c) and food (f). The price of clothing is $60 and the price of food is $10. What is the equation for Darius’s budget constraint?

 

A) c + f < $1,200

B) $60 × c + $10 × f ≤ $1,200

C) $60 × c + $10 × f > $1,200

D) $60 × c + $10 × f = $1,200

 

Refer to the information provided in Table 6.1 below to answer the questions that follow.

 

Table 6.1

Dozens of Oysters per Day	Total Utility	Marginal Utility
1	60
2	104
3	134
4	152
5		8
Number of Beers per Day	Total Utility	Marginal Utility
1	40
2	70
3	94
4	114
5		14

 

 

23) Refer to Table 6.1. The marginal utility of the second dozen oysters per day is

 

A) 20.

B) 30.

C) 44.

D) 104.

 

24) Refer to Table 6.1. The marginal utility of the third dozen oysters per day is

 

A) 10.

B) 30.

C) 44.

D) 134.

 

25) A fall in the price of 7-UP that causes a household to shift its purchasing pattern away from Sprite and toward 7-UP is the ________ effect of a price change.

 

A) income

B) substitution

C) complementary

D) diminishing marginal utility

 

26) For normal goods, the substitution and income effects of a price increase will do which of the following?

 

A) Both will decrease the quantity of the good demanded.

B) Both will increase the quantity of the good demanded.

C) The substitution effect will increase the quantity of the good demanded while the income effect will decrease the quantity of the good demanded.

D) The substitution effect will decrease the quantity of the good demanded while the income effect will increase the quantity of the good demanded.

 

27) Which of the following in NOT a decision that must be made by perfectly competitive firms?

 

A) how much output to supply

B) which production technology to use

C) how much of each input to demand

D) what price to charge for its output

 

28) Economic costs include

 

A) both a normal rate of return on investment and the opportunity cost of each factor of production.

B) the direct costs of hiring all factors of production.

C) the opportunity cost of each factor of production minus any interest charges paid on borrowed funds.

D) total revenue minus accounting profit.

 

SCENARIO 7.1: You own and are the only employee of a company that writes computer software that gamblers use to collect sports data. Last year your total revenue was $90,000. Your costs for equipment, rent, and supplies were $50,000. To start this business you invested an amount of your own capital that could pay you a $40,000 a year return.

 

29) Refer to Scenario 7.1. During the year your economic costs were

 

A) $40,000.

B) $60,000.

C) $90,000.

D) $100,000.

 

30) To determine the optimal method of production for a good or service, a firm needs to know

 

A) the market price of output.

B) the technologies of production that are available to the firm.

C) the prices of inputs.

D) All of the above are correct.

 

Use the information provided in Table 7.1 below to answer the questions that follow.

 

Table 7.1

Inputs Required to Produce a Product Using Alternative Technologies

Technology	Units of Capital	Number of Employees
A	8	36
B	12	24
C	16	16
D	24	12

 

31) Refer to Table 7.1 above. Which technology is the most labor intensive?

 

A) A

B) B

C) C

D) D

 

32) Refer to Table 7.1 above. Which technology is the most capital intensive?

 

A) A

B) B

C) C

D) D

 

 

 

 

 

Refer to the information provided in Figure 7.2 below to answer the questions that follow.

 

 

Figure 7.2

 

33) Refer to Figure 7.2. The marginal product of the first worker is ________ lawns mowed.

 

A) 3

B) 4

C) 5

D) 11

 

34) Refer to Figure 7.2. The average product of the first worker is ________ lawns mowed.

 

A) 3

B) 4

C) 5

D) 11

 

35) Costs of production are determined

 

A) only by the technologies that are available.

B) only by the input prices that are available.

C) by the technologies that are available and by input prices.

D) by the technologies that are available and by the demand for the output.

 

 

 

 

 

 

 

 

 

 

 

 

 

Refer to the information provided in Figure 7.8 below to answer the question that follows.

 

Figure 7.8

 

36) Refer to Figure 7.8 above. If Roller Skates Unlimited moves from isoquant A to isoquant B, the number of roller skates produced

 

A) decreases.

B) increases.

C) remains constant, but Roller Skates Unlimited uses more capital and more labor.

D) remains constant, but input prices have risen.

 

37) Isoquants slope downward because as a firm uses more

 

A) units of an input to produce a product, total cost increases.

B) units of an input to produce a product, the input’s marginal productivity increases.

C) of one input, then to keep output constant it needs less of the other input.

D) both B and C

 

38) A dairy company, Farley Farm, has total costs of $10,000 and total variable costs of $3,000. Farley Farm’s total fixed costs are

 

A) $0.

B) $7,000.

C) $13,000.

D) indeterminate because the firm’s output level is not known.

 

39) Wilbur’s Widgets, a widget company, produces 100 widgets. Its average fixed cost is $6 and its total variable cost is $400. The total cost of producing 100 widgets is

 

A) $306.

B) $400.

C) $600.

D) $1,000.

 

 

Refer to the information provided in Figure 8.1 below to answer the question that follows.

 

 

Figure 8.1

 

40) Refer to Figure 8.1 above. If Cyndy’s Floral Arrangements produces 200 silk flower arrangements, the average fixed costs are

 

A) $0.20.

B) $5.

C) $20.

D) $50.

 

41) All of the following statements are true EXCEPT:

 

A) The total variable cost curve increases as output increases.

B) The total variable cost curve shows the variable costs of production given current factor prices.

C) The total variable cost curve starts at the origin.

D) The total variable cost curve is a horizontal line.

 

 

42) If scarcity were eliminated,

 

A) trade would become unnecessary.

B) opportunity costs would increase.

C) all nations would have an absolute advantage in producing all products.

D) the concept of trade-offs would become irrelevant.

 

43) A point on a total variable cost curve shows the ________ variable cost a firm will bear to produce a certain output.

 

A) highest

B) lowest

C) change in

D) average

 

 

Refer to the information provided in Table 8.2 below to answer the questions that follow.

 

Table 8.2

Number of Earnings	TVC	MC	AVC	TFC	TC	AFC	ATC
0					50
1		25
2							47.50
3			23.33
4					150
5	135

 

44) Refer to Table 8.2. If Danica produces zero earrings, her total fixed costs are

 

A) $0.

B) $25.

C) $50.

D) indeterminate from this information.

 

45) Refer to Table 8.2. If Danica produces one pair of earrings, her total variable costs are

 

A) $25.

B) $50.

C) $75.

D) indeterminate from this information.

 

46) If an individual perfectly competitive firm charges a price ________ the industry equilibrium price while competitors charge the equilibrium price, the firm will not sell any of what it produces.

 

A) above

B) below

C) equal to

D) More information is needed to answer the question.

 

47) Any firm’s ________ equals P × q.

 

A) total cost

B) total revenue

C) marginal revenue

D) marginal cost

 

48) The ________ that a firm takes in when it increases output by one additional unit is marginal revenue.

 

A) total revenue

B) added revenue

C) extra resources

D) additional labor

 

Refer to the information provided in Table 8.5 below to answer the following questions.

 

Table 8.5

Number of Fruit Baskets	TFC	TVC	TC	MC
0	$100	$0	$100	—
1	100	20	120	20
2	100	30	130	10
3	100	42	142	12
4	100	62	162	20
5	100	92	192	30
6	100	136	236	44

 

 

49) Refer to Table 8.5. Assume that Polynesian Fruit sells fruit baskets in a perfectly competitive market. The market price of a fruit basket is $44. To maximize profits, Polynesian Fruit should sell ________ fruit baskets and their profit is ________.

 

A) three; $10

B) four; $14

C) five; $28

D) six; $28

 

50) Refer to Table 8.5. Assume that Polynesian Fruit sells fruit baskets in a perfectly competitive market. The market price of a fruit basket is $30. To maximize profits, Polynesian Fruit should sell ________ fruit baskets and their profit it ________.

 

A) zero; $0

B) two; -$70

C) three; -$52

D) five; -$42

 

Refer to Scenario 9.1 below to answer the questions that follow.

 

SCENARIO 9.1: Amy borrowed $40,000 from her parents to open a bagel shop. She pays her parents a 5% yearly return on the money they lent her. Her other yearly fixed costs equal $18,000. Her variable costs equal $40,000. In her first year, Amy sold 40,000 dozen at a price of $2.50 per dozen.

 

51) Refer to Scenario 9.1. Amy’s total fixed costs equal

 

A) $2,000.

B) $18,000.

C) $20,000.

D) $22,000.

 

 

 

 

52) Refer to Scenario 9.1. Amy’s total costs equal

 

A) $20,000.

B) $40,000.

C) $60,000.

D) $100,000.

 

Refer to the information provided in Figure 9.1 below to answer the questions that follow.

 

 

Figure 9.1

 

 

53) Refer to Figure 9.1. The profit maximizing quantity of wheat is ________ bushels.

 

A) 6

B) 9

C) 12

D) 16

 

54) Refer to Figure 9.1. If this farmer maximizes profits, his average total cost will be

 

A) $7.

B) $9.

C) $11.

D) $15.