Econ Week 8 Quiz
The General Agreement on Tariffs and Trade (GATT) is
A) legislation that substantially increased tariffs in the early 1930s. Refer to Figure 17-10. With the tariff, the domestic price and domestic quantity demanded are A) P1 and Q1. Figure 17-13 In Figure 17-13, the world price of a baseball is $3. With free trade, how many baseballs will the United States import? A) 4,000 4. A nation can gain from international trade when A) its relative production costs are the same as those of other countries The benefit (or satisfaction) that an individual expects to derive from an activity is called A) opportunity cost 6. When economists say an individual displays economizing behavior, they simply mean that she is A) making a lot of money 7. When economists say an individual has made a rational choice, they mean the individual has A) made the choice by weighing their own subjective costs and benefits 8. Which of the following is not scarce? A) an individual’s time 9. Which of the following statements about exchange is false? A) The expectation of gain motivates people to engage in trade. 10. Use the production possibilities data below for Lebos and Slavia to answer the following question(s). Refer to Table 2-1. Which of the following would be a mutually agreeable rate of exchange? A) 1F = 1C 11. Which of the following is NOT true of opportunity cost? A) Opportunity costs are subjective because they depend upon how the decision-maker values his or her options. . . . 30. The marginal value of a commodity to a consumer A) increases as more of the good is consumed. 31. If Mr. Smith thinks the last dollar spent on shirts yields more satisfaction than the last dollar spent on cola, and Smith is a utility-maximizing consumer, he should A) decrease his spending on cola. 32. Consider a consumer who purchases two goods, X and Y. If the price of good Y falls, then the substitution effect by itself will A) cause the consumer to buy more of good Y and less of good X. 33. Muriel’s income elasticity of demand for football tickets is 1.5. All else equal, this means that if her income increases by 20 percent, she will buy A) 150 percent more football tickets. 34. The price elasticity of supply A) will be positive when supply is elastic and negative when it is inelastic. 35. Figure 7-13 Refer to Figure 7-13. A decrease in price from $15 to $10 leads to A) a decrease in total revenue of $10, so the price elasticity of demand is greater than 1 in this price range. 36. Since it is costly for stockholders to monitor corporate managers, managers may be able to achieve personal perks and pursue other policies that conflict with profit maximization. This is an example of A) an external benefit. 37. Use the table below to answer the following question. What is the marginal cost of producing the third unit of output? A) $22 38. In the short run, which are most important in determining changes in output? A) marginal costs and marginal revenue. 39. Use the table below to answer the following question. Average total cost is at a minimum when output is A) 2 units. 40. Mr. Hudson notes that if he produces 10 pairs of shoes per day, his average fixed cost (AFC) is $14 and his marginal cost $8; if he produces 20 pairs of shoes per day, his MC is $15. What is his AFC when output is 20 pairs of shoes per day? A) $5 When firms in a price-taker market are temporarily able to charge prices that exceed their production costs, A) the firms will earn long-run economic profit. 42. Scenario 9-1Assume a certain competitive price-taker firm is producing Q = 1,000 units of output. At Q = 1,000, the firm’s marginal cost equals $15 and its average total cost equals $11. The firm sells its output for $12 per unit.Refer to Scenario 9-1. At Q = 1,000, the firm’s profit amounts to A) −$200. 43. Use t’he table of expected cost and revenue data for the Tuckers Tomato Farm below to answer the following question(s). The Tuckers produce tomatoes in a greenhouse and sell them wholesale in a competitive pricetaker market. Table 9-1 Refer to Table 9-1. If the Tuckers are profit maximizers, how many tomatoes should they produce when the market price is $500 per ton? A) 6 44. A firm is currently operating where the MC of the last unit produced is $84, and the MR of this unit is $70. What would you advise this firm to do? A) Shut down 45. In a constant-cost industry, an increase in output that increases the demand for resources used by the industry A) is likely to result in higher prices for at least some resources. 46. Use the figure to answer the following question(s). Figure 9-3 Figure 9-3 depicts the cost curves of a firm in a price-taker industry. At what output would the firm’s per-unit cost be at a minimum? A) 100 47. Use the figure to answer the following question(s). Figure 9-11 If the current market price for the firm depicted in Figure 9-11 is A, given the firm’s cost conditions, which output should it produce? A) OM 48. The long-run supply curve is A) a horizontal line for a constant-cost industry. 49. If Dell Computer finds that its marginal cost exceeds its marginal revenue on a model of laptop, then to maximize profit, it will A) increase output if it is a price searcher, but this may not be proper if it is a price taker. 50. Many small U.S. cities are served by only one or two airlines. If a price increase in these markets allows other airlines to quickly and easily enter the market and compete, economists would call these markets A) contestable markets. 51. In the real world, business decisions must be made through insight, trial, and error, without perfect knowledge about demand and costs. Will the profit-maximizing prices and levels of output from the simple economic models still be good guides to real outcomes? A) No, because the simple economic models ignore the opportunity cost of resources. 52. Use the figure to answer the following question(s). Figure 10-2 What is the maximum economic profit this firm depicted in Figure 10-2 will be able to earn? A) zero Which of the following is a true statement about the difference between a price-taker firm and a competitive price-searcher firm in the long run? A) Both will sell their products at a price equal to average total cost, but only the price taker will produce at minimum average total cost. 54. If the firms in an oligopolistic industry can collude effectively (from the firms’ viewpoints), the resulting price and output in the market will be most similar to that of A) a competitive price-searcher market. 55. The prisoners’ dilemma is used to illustrate the basic idea that A) oligopolistic firms would be better off if they collude, but each has an incentive to cheat on the collusive agreement. 56. Assuming that firms maximize profits, how will the price and output policy of an unregulated monopolist compare with ideal market efficiency? A) The output of the monopolist will be too large and the price too high. 57. Figure 11-18 The total revenue for the firm in Figure 11-18, a monopolist that maximizes profit while charging all customers the same price, is A) $2,574 58. The profit-maximizing price the monopoly will charge in Figure 11-20 is A) irrelevant since the firm should shut down 59. An increase in the price of a resource would cause A) producers to substitute other inputs for the resource. 60. Refer to Table 12-2. This table describes the number of baseballs a manufacturer can produce per day with different quantities of labor. Each baseball sells for $5 in a competitive market. If the firm is maximizing the marginal product of labor, what is the firm’s marginal revenue product? A) 140 baseballs. |
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