Question

19) Suppose that the elasticity of demand for newspapers is 2.0 and quantity demanded decreases by 40%. What must the percentage increase in price have been? 19) ______
A) 2% B) 20% C) 80% D) 200%

20) If the number of highway deaths among young people is roughly proportional to their beer consumption and young peoples' elasticity of demand for beer is 1.5, then to decrease highway deaths of young people by 15 percent, taxes would need to be increased enough to increase the price of beer by: 20) ______
A) 1%. B) 1.5%. C) 10%. D) 15%.

21) Figure 6.9 depicts a hypothetical fish market with a horizontal supply curve. Suppose the government imposes a tax of $2 per pound of fish, and the tax is paid in legal terms by producers. If the supply curve were positively sloped: 21) ______
A) consumers would bear the full cost of the tax. B) both producers and consumers share the tax. C) producers would bear the full cost of the tax. D) There is not sufficient information.

22) If the government imposes a maximum price in a market that is below the equilibrium price: 22) ______ A) total surplus in the market decreases. B) total surplus in the market does not change. C) total surplus in the market increases. D) total surplus may increase or decrease, depending on whether costs are increasing or decreasing in production.
23) If demand is elastic, and the government decides to raise the tax on new cars. Then the price for cars will increase by a ________ amount and car buyers will bear a ________ share of the tax. 23) ______
A) large; small B) small; large C) large; large D) small; small

24) Which of the following statements about consumer choice theory is TRUE? 24) ______ A) It helps us understand changes in consumption patterns. B) It provides insights into how consumers make decisions. C) Given the limitations dictated by people's incomes and prices, it helps the consumer choose a commodity bundle of the highest level of utility. D) All of the above are true about consumer choice theory.

25) Refer to Figure 7.7. Which of the following is true? 25) ______ A) A is preferred to C. B) C is preferred to A. C) B is preferred to D. D) D is preferred to B.

26) When at least one factor of production is fixed, firms require more and more workers to produce each additional unit
of output. This describes: 26) ______
A) learning by doing. B) diminishing marginal returns. C) increasing marginal returns. D) short-run adjustments.
Recall the Application about the reduction in costs of generating solar power to answer the following question(s).

27) Recall the Application. A tax levied on coal-fired plants that is based on the amount of carbon released in the atmosphere is considered by the firm as a: 27) ______
A) sunk cost. B) variable cost. C) source of revenue D) fixed cost.

28) Figure 8.2 presents a firm's marginal, average total, average fixed, and average variable cost curves. The firm minimizes average variable costs by producing ________ units. 28) ______
A) 50 B) 100 C) 150 D) 200

29) Figure 9.2 shows the cost structure of a firm in a perfectly competitive market. If the market price is $10 and the firm chooses the profit maximizing output level, its profit is: 29) ______
A) $1,000. B) $800. C) $720. D) $200.

30) Price discrimination is related to elasticity because: 30) ______ A) the firm can increase revenues by charging all customers higher prices. B) the firm can increase revenues by charging customers with elastic demands higher prices and charging customers with inelastic demands lower prices. C) the firm can increase revenues by charging customers with elastic demands lower prices and charging customers with inelastic demands higher prices. D) None of the above; elasticity and price discrimination are unrelated.

31) Figure 10.1 shows a monopolist's demand curve. If the monopolist increases output from four to five units, what is its marginal revenue? 31) ______
A) $16 B) $15 C) $3 D) -$1

32) Studies of real world markets suggest that prices and the number of firms of comparable size in a market are: 32) ______
A) negatively or inversely related. B) positively related. C) not related. D) sometimes negatively or inversely related, but usually positively related.

33) Under the conditions of monopolistic competition, if a firm is earning economic profits in the short run: 33) ______
A) long-run economic profits are positive. B) firm profits are higher in the long run than in the short run. C) prices are higher in the long run than in the short run. D) average costs of production are higher in the long run than in the short run.

34) The key feature of ________ is that firms act strategically. 34) ______ A) perfectly competition B) a natural monopoly C) a monopoly D) an oligopoly

35) Consider the game tree in Figure 12.8. If Store A and Store B make advertising decision independently, 35) ______
A) both stores choose to advertise. B) both stores choose not to advertise. C) only Store A chooses to advertise. D) only Store B chooses to advertise.

36) Suppose that there are five firms in a market, each controlling 20% of the market. The HHI would equal 36) ______
A) 10. B) 100. C) 1,000. D) 2,000.
Recall the Application about the government blocking the merger between baby food makers Heinz and Beech-Nut to
answer the following question(s).

37) Recall the Application. Heinz, the second largest baby food producer tried to buy the Beech-Nut brand. Even though the combined firm would be less than half the size of the market leader Gerber, the government blocked the merger because: 37) ______
A) the smaller the number of firms the more difficult it is for the government to regulate them. B) Gerber did not want a competitor as big as the combined firm would have been. C) most stores only stock two brands of baby food and Heinz and Beech vigorously compete. D) bigger firms have too much political clout.

38) Under a policy of average-cost pricing, a monopolist must charge the price at which its ________ cost curve intersects its ________ curve. 38) ______
A) marginal; demand B) average variable; demand C) average; demand D) marginal; marginal revenue
Recall the Application about how physical attractiveness affects wages to answer the following question(s).

39) Recall the Application. Relative to people of average appearance workers receive ________ wages if they are ________. 39) ______
A) the same; either attractive or unattractive B) higher; unattractive C) lower; more attractive than average D) higher; more attractive than average

40) If the equilibrium wage is above the actual wage: 40) ______ A) the wage rate will fall. B) the demand for labor will increase. C) the wage rate will rise. D) the demand for labor will decrease.

41) You are running a small yard maintenance business for the summer. What do you expect to happen to the number of yards you can maintain in a day as you add workers if you don't purchase more capital equipment (like mowers and leaf blowers)? 41) _____________

42) Gloria works for a museum in a large city with many other museums. Her boss proposes that the museum should raise the price of admission to increase revenues. Gloria was a good student in her economics principles course. How should she advise her boss? 42) _____________

43) "If the amount of product differentiation in a monopolistically competitive industry is very small, the outcome in that market will not be very different than if it were a perfectly competitive industry." Explain. 44) _____________

44) Explain what is meant by predatory pricing, and the inherent difficulties involved with predatory pricing from a firm's point of view. 44) _____________