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11 Dec 2019

1. Which of the following is a positive externality?

a. Inoculations against a disease that reduce the likelihood of transmitting it to others

b. phosphate from laundry detergents

c. litter from fast food containers

d. ozane depletion due to the production of fast containers

e. the greenhouse effect

2. If the minimum efficient scale in microwave oven production is 100,000 units per year, it implies that:

a. the average cost of producing 50,000 microwave ovens is greater than the average cost of producing 100,000 microwave ovens

b. the average cost of producing 50,000, microwave ovens is equal to the average cost of producing 100,000 microwave ovens

c. the total cost of producing 50,000 microwave ovens is greater than the total cost of producing 100,000 microwave ovens

d. the firm should not produce more than 50,000 microwave ovens

e. marginal cost exceeds average cost at 100,000 microwave ovens

3. One result of asymmetric information in the market for used cars is that:

a. few used cars are offered for sale

b. few lemons are offered for sale

c. more lemons may be offered for sale than good cars

d. buyers benefit at the expense of sellers

e. good cars sell at a price that is higher than their market value

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Keith Leannon
Keith LeannonLv2
13 Dec 2019
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Related textbook solutions

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Related questions

25) Suppose that at Jones & Smith Shoe Factory, the marginal cost of making a pair of shoes is $15 and average variable
cost is $15. For the next pair of shoes produced marginal cost will be ________ $15 and average variable cost will be
________ $15. 25) ______
A) greater than; less than B) less than; greater than
C) less than; less than D) greater than; greater than


26) The added revenue that a firm earns from selling an additional unit of output is: 26) ______
A) marginal revenue. B) total revenue.
C) variable revenue. D) fixed revenue.


27) If a restaurant charges seniors one price and nonseniors another price, the restaurant will apply the marginal
principle: 27) ______
A) once, because the two groups have the same demands.
B) twice, because the two groups have different demands.
C) only to the seniors because they consume the most.
D) by averaging the price charged to both groups.


28) At the market equilibrium, resources are allocated efficiently because:28) ______
A) the price buyers pay accurately reflects the marginal cost of the resources used to produce the good.
B) the price buyers pay is greater than sellers' willingness to sell.
C) the marginal cost of producing another unit is equal to zero.
D) all of the above


29) Suppose that the quantity supplied of cars exceeds the quantity of cars demanded. We would expect that: 29)
______
A) the demand will decrease to meet the supply.
B) the price of cars will increase.
C) the supply will increase to meet the demand.
D) the price of cars will decrease.

1. Most people would prefer to drive a luxury car that has all the options, but more people buy less expensive cars even though they could afford the luxury car because:

A. luxury cars cost a lot more than non-luxury cars.

B. the total utility of less expensive cars is greater than that of luxury cars.

C. car buyers are irrational.

D. the marginal utility per dollar spent on the less expensive car is higher than that spent on luxury cars.

2. The labor market is considered as one of the more important markets in an economy because

A. most people typically earn the bulk of their income from wages and salaries.

B. the usual market forces do not hold in the labor market.

C. the labor market does not reach an equilibrium.

D. most people are concerned that wages determined in the labor market are unfair.

3. Table 17-1
Quantity of Labor Output (units)
1 80
2 170
3 240
4 300
5 350
6 390
7 420


Refer to Table 17-1. The marginal product of the fourth unit of labor is

A. 300.

B. 75.

C. 60.

D. 15.

4. Carolyn spends her income on popular magazines and music CDs. If the price of a CD is four times the price of a magazine and if Carolyn is maximizing her utility, she buys:

A. both goods until the marginal utility of the last CD purchased is four times the marginal utility of the last magazine purchased.

B. both goods until the marginal utility of the last magazine purchased is four times the marginal utility of the last CD purchased.

C. four times as many magazines as CDs.

D. four times as many CDs as magazines.

5. Marginal utility is the:

A. average satisfaction received from consuming a product.

B. total satisfaction received from consuming a given number of units of a product.

C. extra satisfaction received from consuming one more unit of a product.

D. satisfaction achieved when a consumer has had enough of a product.

6. What is behavioral economics?

A. the study of how people behave in the face of scarcity

B. the study of how people make decisions at the margin

C. the study of situations in which people act in ways that are not economically rational

D. the study of how people make wealth-maximizing decisions

7. Suppose a competitive firm is paying a wage of $12 an hour and sells its product at $3 per unit. Assume that labor is the only input. If hiring another worker would increase output by three units per hour, then to maximize profits the firm should:

A. not hire an additional worker.

B. hire another worker.

C. not change the number of workers it currently hires.

D. There is not enough information to answer the question.

8. Consumers have to make tradeoffs in deciding what to consume because:

A. they are limited by a budget constraint.

B. there are not enough of all goods produced.

C. not all goods give them the same amount of satisfaction.

D. the prices of goods vary.

9. Table 17-1
Quantity of Labor Output (units)
1 80
2 170
3 240
4 300
5 350
6 390
7 420


Refer to Table 17-1. If the output price is $3, what is the marginal revenue product of the fifth unit of labor?

A. $1,050

B. $360

C. $210

D. $150

10. At low wages, the labor supply curve for most people slopes upward because:

A. as wages increase income also increases unless hours worked decrease.

B. the demand for labor is perfectly elastic at low wages.

C. as wages increase the opportunity cost of leisure increases.

D. the supply of labor is perfectly inelastic at low wages.

11. A negative externality exists if:

A. the marginal social cost of producing a good or service exceeds the private cost.

B. the marginal private cost of producing a good or service exceeds the social cost.

C. there are quantity controls in a market.

D. there are price controls in a market.

4. Decisions made “at the margin” entail a choice based upon_____________ of a decision.

a. the additional benefits
b. the total costs
c. comparing the total benefits and costs
d. comparing the additional benefits and costs
5. 100 units of Good X are available but individuals desire 500units. ______________ will determine who attains Good X, and whodoes not.

a. A rationing device
b. Opportunity Cost
c. Utility
d. Natural Selection


6. Individuals will continue consuming so long as:

a. The price of a good continues to decrease
b. The marginal costs of consuming are outweighed by the marginalbenefits
c. The individual seeks additional utility
d. The individual is willing and able

8. If the cross-price elasticity of two goods is positive, thenthose two goods are
a. substitutes.
b. complements.
c. normal goods.
d. inferior goods.

11. The basic reason most supply curves are upward sloping isthat:

a. More firms are in the market, therefore more goods areproduced.
b. Because more quantity is being demanded, suppliers raise theprice.
c. Producers face higher opportunity costs when producing higherlevels of quantity, so they must receive a higher price.
d. Producers seek to maximize total revenue.


18. When the price of bubble gum is $0.60, the quantity demanded is500 packs per day. When the price falls to $0.50, the quantitydemanded increases to 900. The demand for gum would beconsidered:

a. inelastic.
b. elastic.
c. unit elastic.
d. perfectly inelastic.



20. Inefficient Production implies which of the following:

a. it is impossible to produce more of one good without producingless of another
b. there are too few resources
c. there are too many resources
d. it is possible to produce more of one good without producingless of another

21. Workers at a bicycle assembly plant currently make minimumwage. If the federal government increases the minimum wage by $1.00an hour it is likely that the

a. demand for bicycle assembly workers will increase.
b. supply of bicycles will shift to the right.
c. supply of bicycles will shift to the left.
d. firm must increase output to maintain profit levels.


24. Suppose at a price of $5 and at a price of $9, John purchases40 units of good X. Given this information, we know that John’sdemand for good X is
a. perfectly elastic at all prices.
b. inelastic at all prices.
c. unit elastic between the prices of $5 and $9.
d. perfectly elastic between the prices of $5 and $9.
e. perfectly inelastic between the prices of $5 and $9.


25. If the price of good A decreases by 10 percent and the quantitydemanded of good B decreases by 10 percent, this is evidence that Aand B are
a. substitute goods.
b. complement goods.
c. inferior goods.
d. normal goods.
e. not related.


6. For an individual to achieve consumer equilibrium when consumingtwo goods, A and B, the individual must satisfy the followingcondition:

a. TUA = TUB
b. TUA/PA = TUB/PB
c. MUA = MUB
d. MUA/PA = MUB/PB
e. MUA/PB = MUB/PA

7. Which of the following statements is correct regarding a firm'sdecision making?
a. The decision to shut down and the decision to exit are bothshort-run decisions.
b. The decision to shut down and the decision to exit are bothlong-run decisions.
c. The decision to shut down is a short-run decision, whereas thedecision to exit is a long-run decision.
d. The decision to exit is a short-run decision, whereas thedecision to shut down is a long-run decision.

Table 1

Output Total Cost
0 $20
1 $30
2 $41
3 $51
4 $65
5 $75
6 $84
7 $105

13. Refer to Table 1. The marginal cost of producing the fifth unitof output is
a. $55.00
b. $15.00
c. $9.00
d. $10.00

21. A perfectly competitive firm can produce its current level ofoutput at an average total cost of $10 and a marginal cost of $8.If the market price of the product is currently $8, what should thefirm do?

a. The firm should definitely shut down since average total costexceeds price.
b. The firm should shut down if average variable cost is $8 orgreater, but the firm should continue to produce the current levelof output if average variable cost is less than $8.
c. The firm should increase production in order to increaseprofit.
d. The firm should continue to produce, but it should decreaseproduction in order to increase profit.
24. In the long run all costs are variable. Thus, aprofit-maximizing firm may exit:

a. When Price < Average Total Cost
b. When Price > Average Total Cost
c. When Average Revenue > Average Fixed Cost
d. When Average Revenue > Marginal Cost

25. Marginal cost tells us the
a. value of all resources used in a production process.
b. marginal increment to profitability when price isconstant.
c. amount by which total cost rises when output is increased by oneunit.
d. amount by which output rises when labor is increased by oneunit.

26. For a perfectly competitive firm:
a. marginal revenue is equal to price.
b. price is equal to marginal cost at the output level thatmaximizes profit.
c. selling an additional unit of the good it produces increasestotal revenue by the price of the good.
d. a and b
e. a, b, and c

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