U1 Basic
U2 S & D
U3 Perfect Comp
U4 Imperfect Competition
U5 Factor Market
U6 Market Failure & Gov Role
100
Cindy and Martin both sew t-shirts in a small factory. Using the same resources, Martin can sew twelve t-shirts and Cindy can sew nine t-shirts in one day. Which of the following can be concluded from the given information?
A- Martin has a higher opportunity cost of sewing t-shirts than Cindy does.
B- Cindy has a comparative advantage in sewing t-shirts.
C- Martin has a comparative advantage in sewing t-shirts.
D- Martin has an absolute advantage in sewing t-shirts.
D- Martin has an absolute advantage in sewing t-shirts.
100
A change in which of the following will cause a change in the supply of personal computers (PC’s) in the short run?
A- Technology
B- Demand for PC’s
C- Price of disks, which are a complement to PC’s
D- Price of PC’s
A- Technology
100
The table above shows the amount of labor inputs necessary to produce given levels of output. If the cost of a unit of labor is $20 and total fixed cost is $100, the average total cost of producing 20 units of output is
A- $1
B- $2
C- $7
D- $40
D- $40
100
The payoff matrix below gives the profits associated with the strategic choices of two firms in an oligopolistic industry. The first entry in each cell is the profit to Firm A and the second to Firm B.
If the two firms collude, Firm A’s and Firm B’s profits would be which of the following?
Responses
A- Firm A $150, Firm B $50
B- Firm A $100, Firm B $100
C- Firm A $100, Firm B $150
D- Firm A $50, Firm B $100
D- Firm A $50, Firm B $100
100
ABC Limited, Inc., sells its product in a perfectly competitive market for a price of $15 per unit and hires workers at a daily wage of $75. Labor is the only factor cost, and the firm is currently earning profits. If ABC hires one more worker and output increases by 5 units per day, the firm's profits will
A- remain unchanged
B- decrease by $75
C- increase by $75
D- increase by $15
A- remain unchanged
100
The surgeon general has determined that smoking causes cancer and heart disease for both smokers and passive smokers, nonsmokers who breathe smoke-filled air. If cigarette prices are determined in a free market, which of the following will be true?
A- The price of cigarettes will be too low and the quantity sold will be too high.
B- The price of cigarettes will be efficient but the quantity sold will be too high.
C- The market will be efficient because markets always equate marginal benefits and marginal costs.
D- The price of cigarettes will reflect the marginal social benefit received by nonsmokers.
A- The price of cigarettes will be too low and the quantity sold will be too high.
100
The table provided shows Ricardo’s marginal utility of the last unit consumed of apples and bananas and the price of each good. Ricardo has $125 to spend on apples and bananas. He currently buys 10 apples and 25 bananas. Assuming that he remains within his budget constraint, Ricardo should do which of the following to increase his utility?
A- Buy more of both goods
B- Buy fewer of both goods
C- Buy more bananas and fewer apples
D- Buy more apples and fewer bananas
C- Buy more bananas and fewer apples
100
If the market demand for a good is inelastic and the supply is elastic, which of the following is true when there is an increase in sales tax?
A- Consumers will bear most of the burden of the tax.
B- Producers will bear all of the burden of the tax.
C- Producers will bear most of the burden of the tax or risk losing sales.
D- Both consumers and producers will share the burden of the tax equally.
A- Consumers will bear most of the burden of the tax.
100
If there are many firms in an industry and each firm’s product is indistinguishable from the products of all other firms, the individual firm’s demand curve will be
A- downward sloping and different for each firm
B- downward sloping and identical for every firm
C- horizontal and different for each firm
D- horizontal and identical for every firm
D- horizontal and identical for every firm
100
The economic profit of the profit-maximizing monopolist is given by the area
Responses
A- RSJI
B- R0Q1I
C- RULI
D- RVNI
C- RULI
100
The graph above shows a monopsony labor market. In the absence of any regulations, which of the following represents the number of workers the firm will hire and the wage rate it will offer to those workers?
Responses
- Number of Workers 15, Wage Rate $30
- Number of Workers 20, Wage Rate $20
- Number of Workers 20, Wage Rate $40
- Number of Workers 30, Wage Rate $30
- Number of Workers 20, Wage Rate $20
100
Public goods are typically provided by the government, because private markets tend to
A- produce them at higher cost
B- produce less than the socially optimum quantity
C- produce more than the socially optimum quantity
D- charge a monopoly price that is greater than the marginal social cost
B- produce less than the socially optimum quantity
100
Dr. Art and Dr. Zed jointly own an outpatient surgery practice. Dr. Art takes 2 hours to perform knee surgery and 1 hour to perform elbow surgery. Dr. Zed takes 4 hours to perform knee surgery and 1 hour to perform elbow surgery. Which of the following conclusions is supported by the information provided?
A- Dr. Art has a comparative advantage in elbow surgery.
B- Dr. Zed has a comparative advantage in elbow surgery.
C- Dr. Zed does not have a comparative advantage in performing either procedure.
D- Dr. Art does not have a comparative advantage in performing either procedure.
B- Dr. Zed has a comparative advantage in elbow surgery.
100
If a normal good is produced in a competitive market, which of the following combination of events could cause the price of the good to increase and the quantity to decrease?
A- An increase in the average income of consumers and an increase in the number of producing firms
B- An increase in the average income of consumers and an increase in the price of a variable input
C- An increase in the price of a substitute good an an increase in the number of producing firms
D- A decrease in the number of consumers and a decrease in the price of a variable input
B- An increase in the average income of consumers and an increase in the price of a variable input
100
If the product price is $85, how many units of output must the firm produce in order to maximize profits?
A- 0
B- 3
C- 4
D- 5
D- 5
100
Monopolies are inefficient compared to perfectly competitive firms because monopolies
A- produce output with average total cost exceeding average revenue
B- produce more output than is social desirable
C- charge a price less than marginal revenue
D- charge a price greater than marginal cost
D- charge a price greater than marginal cost
100
The concept of derived demand is described by which of the following?
A- A decrease in the demand for theater tickets will decrease the demand for actresses and actors.
B- If the salaries of basketball players increase, the quantity of basketball players demanded will decrease.
C- An increase in the income of consumers will increase the demand for opera tickets.
D- An increase in the demand for movie tickets will decrease the demand for video rentals.
A- A decrease in the demand for theater tickets will decrease the demand for actresses and actors.
100
Based on the information in the Lorenz curve above, which of the following is true?
A- People in Country X make more money than people in Country Z.
B- Income is more equally distributed in Country X than in Country Z.
C- The top 20 percent of households in Country X received 60 percent of the total income.
D- The top 20 percent of households in Country Z received 40 percent of the total income.
B- Income is more equally distributed in Country X than in Country Z.
100
The graph provided shows the production possibilities curve for a country’s economy. The economy is currently producing at point Z. What is the opportunity cost of changing production to point M?
A- 3 units of Good Y
B- 8 units of Good Y
C- 3 units of Good X
D- 2 units of Good X
D- 2 units of Good X
100
Assume that a monopolist is producing in the inelastic portion of its demand curve. Which of the following will occur if the monopolist decreases its price?
A- Marginal revenue will decrease, but profits will increase.
B- Marginal revenue will increase, but profits will decrease.
C- Total revenue will decrease, but profits will increase.
D- Both total revenue and profits will decrease.
D- Both total revenue and profits will decrease.
100
Which of the following statements about cost is always true for both monopolies and perfectly competitive firms?
A- Average total cost equals marginal cost when average total cost is a minimum.
B- Marginal cost decreases as production increases.
C- Average fixed cost is equal to marginal cost when average fixed cost is a minimum.
D- Average variable cost is equal to marginal cost when marginal cost is a minimum.
A- Average total cost equals marginal cost when average total cost is a minimum.
100
Which of the following statements about the firm whose cost and revenue curves are shown above is correct?
A- Its profit-maximizing price is $5.
B- Its profit-maximizing output level is 200 units.
C- Its maximum profit is $4,000.
D- If it produces 250 units, it will earn no economic profits.
B- Its profit-maximizing output level is 200 units.
100
Assume that the last worker a firm hired produces 60 additional units of output per hour and the last machine rented produces 6,000 units of output per hour. A worker’s hourly wage rate is $12, and the rental cost of a machine is $1,000 per hour. In order to minimize the cost of its current output, the firm should
A- do nothing, because the costs of production are minimized
B- increase the use of labor and decrease the use of capital
C- increase the use of capital and decrease the use of labor
D- increase the use of labor and increase the use of capital
C- increase the use of capital and decrease the use of labor
100
A society that wishes to achieve greater income equality is most likely to have which of the following?
A- A regressive income tax system and high estate and gift taxes
B- A regressive income tax system and low estate and gift taxes
C- A progressive income tax system and high estate and gift taxes
D- A progressive income tax system and low estate and gift taxes
C- A progressive income tax system and high estate and gift taxes