Micro COPY

Question 1

Suppose the price elasticity of supply for a product is zero. This means that: a.There is a shortage. b.The firm makes the same amount of product even if the price changes some. c.The firm makes the same amount of revenue even if the price changes some. d.No one wants to buy the good. e.The supply curve is horizontal.

Answer 1

b. The firm makes the same amount of product even if the price changes some.

Question 2

Tony is a wheat farmer, but he spends part of his day teaching guitar lessons. He has more students requesting lessons than he has time to teach and still maintain his farm. Tony charges $25/hr for guitar lessons. One spring day he spends 10 hours in his field planting $130 worth of seeds, which he expects will produce $300 worth of wheat. What will Tony’s economic profit equal? a.-$80 b.$130 c.$170 d.$300 e.$140

Answer 2

a.-$80

Question 3

Which of the following most resembles a perfectly competitive market? a.wheat industry b.publishing industry c.oil industry d.automobile industry e.electricity industry

Answer 3

a. wheat industry

Question 4

If supply and demand both shift to the right at the same time, what can we say about equilibrium price and quantity? a.both will increase b.price will increase, quantity may increase or decrease c.both will decrease d.quantity will increase, price may increase or decrease e.price will decrease, and quantity will increase

Answer 4

d.quantity will increase, price may increase or decrease

Question 5

Following the events of 9/11, the airlines have been forced to increase security at a cost of $800 million per year. The number of inspectors and machines does not vary with the number of passengers – the airlines must have sufficient staff to handle the full-capacity load. These security expenditures will a.increase MC and ATC. b.increase MC and leave ATC unchanged. c.increase ATC and leave MC unchanged. d.increase MC and AVC. e.increase MC and leave AVC unchanged.

Answer 5

c. increase ATC and leave MC unchanged.

Question 6

Suppose it is discovered that drinking cranberry juice prevents the common cold. What effect do you predict this discovery will have on the price and quantity of cranberry juice sold, other things equal? a.both price and quantity will increase b.both price and quantity will decrease c.price will increase while quantity will decrease d.price will decrease while quantity will increase e.price and quantity will both remain constant

Answer 6

a. both price and quantity will increase

Question 7

Other things remaining the same, as Japanese imports from the U.S. increase, the quantity of a.U.S. dollars supplied increases. b.U.S. dollars demanded increases. c.yen supplied decreases. d.U.S. dollars demanded decreases. e.none of the above.

Answer 7

b. U.S. dollars demanded increases.

Question 8

Four consumers, A, B, C, and D, are each willing to pay $9, $8, $7, and $6, respectively, to buy one unit of some good. Four producers, E, F, G, and H, are each able to produce one unit of that good at a cost of $3, $4, $5, and $6, respectively. At a price of $6, what is the combined total of consumer surplus and producer surplus in this market? a.$8 b.$9 c.$10 d.$11 e.$12

Answer 8

e.$12

Question 9

Suppose the world’s iron mines are running out of ore, and new sources of iron are not being discovered. In a market system, the users of iron (such as auto manufacturers who buy steel) will a.continue buying the same amount of iron. b.be surprised when the world suddenly runs out of iron. c.increase their buying of iron in the long run. d.decrease their use of iron in response to rising iron prices. e.need a government agency to inform them of the impending iron shortage.

Answer 9

d. decrease their use of iron in response to rising iron prices.

Question 10

Jane spends an hour studying instead of working at her part time job which pays $5/hour. The opportunity cost to her of studying is a.the improvement in her grades from studying for the hour. b.the difference between the value she places on the improvement in her grades and the $5 she would have earned if she had worked instead of studying. c.the $5 she would have earned if she worked for another hour instead of studying. d.zero since it costs nothing to study. e.the increase in her earning power from getting an education.

Answer 10

c. the $5 she would have earned if she worked for another hour instead of studying.

Question 11

A lighthouse is typically considered a good example of a public good because a.the owner of the lighthouse is able to exclude beneficiaries from enjoying the lighthouse. b.there is rarely another lighthouse nearby to provide competition. c.a nearby port authority cannot avoid paying fees to the lighthouse owner. d.all passing ships are able to enjoy the benefits of the lighthouse without paying. e.the more ships there are, the less light each ship gets.

Answer 11

d. all passing ships are able to enjoy the benefits of the lighthouse without paying.

Question 12

The U.S. and China produce guns and rice. The country with the lowest opportunity cost of guns (in terms of rice) will a.import guns. b.have an absolute advantage in guns. c.export rice. d.have a comparative advantage in rice. e.have a comparative advantage in guns.

Answer 12

e.have a comparative advantage in guns.

Question 13

Which of the following is a correct statement about marginal cost (MC)? a.Marginal cost is the same as average total cost. b.Marginal cost is the same as variable cost. c.Marginal cost is the same as fixed cost. d.Marginal cost is the difference between fixed and variable cost. e.none of the above

Answer 13

e.none of the above

Question 14

When one person uses a common pool resource, a.an externality arises. b.other people are worse off. c.it is difficult to charge him or her for usage of it. d.that person gets the benefits of usage. e.all of these answers are correct.

Answer 14

e.all of these answers are correct.

Question 15

Producer surplus is measured by a.profits. b.the area above the supply curve but below the price. c.the area below the demand curve but above the price. d.the area below the supply curve. e.the area above the average cost curve but below the price

Answer 15

b.the area above the supply curve but below the price.

Question 16

If the price elasticity of demand for radios is 2.5, then a 50 percent reduction in the price of radios will lead to a.the sale of 200 additional radios. b.the sale of 125 percent more radios than before. c.the sale of 150 percent more radios than before. d.the sale of 50 percent more radios than before. e.the sale of 25 percent more radios than before.

Answer 16

b.the sale of 125 percent more radios than before. 50*2.5=125

Question 17

An important implicit cost of almost every business is a.the cost of accounting services. b.the cost of compliance with government regulations. c.the return capital invested in the business could have earned elsewhere. d.interest payments on debt. e.payments to outside contractors.

Answer 17

c.the return capital invested in the business could have earned elsewhere.

Question 18

Other things remaining the same, as U.S. imports increase, the quantity of a.U.S. dollars demanded increases. b.foreign currency demanded decreases. c.U.S. dollars supplied decreases. d.foreign currency demanded increases. e.none of the above

Answer 18

d.foreign currency demanded increases.

Question 19

In 1862, the Homestead Act made land available to farmers at a price of zero. Yet many farmers preferred to purchase land along the rail line from the railroad. The farmers a.were fooled by the railroad owners. b.did not understand supply and demand analysis. c.knew the soil was better near the railroad tracks. d.realized it would be less costly to grow and transport crops on land near railroads. e.were bribed by the railroad owners.

Answer 19

d.realized it would be less costly to grow and transport crops on land near railroads.

Question 20

A firm’s total cost is $10,957 when it produces a quantity of 50. Rounded to the nearest dollar, what is the firm’s average total cost at this quantity? a.413 b.250 c.219 d.187 e.none of the above

Answer 20

c.219 10957/50=219.14

Question 21

Wendy sells motor homes in the retail market. She buys the motor homes from the manufacturer for a cost that does not vary with the number she purchases. She can sell six per week at $20,000 each. If she limits sales to five, she can charge $21,000 each. She will sell six per week if the cost of buying each motor home from the manufacturer is no more than a.$20,000 b.$10,000 c.$15,000 d.$21,000 e.$30,000

Answer 21

c.$15,000

Question 22

Suppose the price elasticity of demand for a product is infinite. This means that: a.if you increase the price 1%, revenues will increase. b.if you increase the price 1%, revenues will stay the same. c.if you increase the price 1%, revenues will fall to zero. d.if you increase the price 1%, profit will increase. e.none of the above

Answer 22

c.if you increase the price 1%, revenues will fall to zero.

Question 23

Which of these would cause a leftward shift of the demand for tongue piercings? a.a tongue ring fad b.discovery that tongue piercings can lead to infections c.lower price of tongue rings d.higher incomes among young people e.higher wages for tongue pierces

Answer 23

b.discovery that tongue piercings can lead to infections

Question 24

In a market-based economic system, the use of scarce resources a.occurs in an essentially random manner. b.is determined primarily by consumer demand. c.does not respond to changes in preferences. d.is fixed by the appropriate government agency. e.depends entirely on the whims of wealthy capitalists

Answer 24

b.is determined primarily by consumer demand.

Question 25

Because of scarcity, every economic decision involves a. a trade-off. b. a trade-in. c. an increasing cost. d. a money payment. e. a tax or tariff.

Answer 25

a. a trade-off.

Question 26

Ryan spends an hour studying instead of going for a bike ride. Assume studying and bike riding were Ryan’s only options for that hour. The opportunity cost to him of studying is Choose one answer. a. the improvement in his grades from studying for the hour. b. the difference between the improvement in his grades and the enjoyment from bike riding. c. the enjoyment and exercise he would have received from bike riding. d. zero since neither activity required Ryan to spend any money. e. the value of the knowledge he gained by studying.

Answer 26

c. the enjoyment and exercise he would have received from bike riding.

Question 27

Which of the following is a false statement about absolute and comparative advantage? a. Comparative advantage is the basis for gains from trade. b. It is possible for one country to have the absolute advantage in all goods. c. It is possible for one country to have the comparative advantage in all goods. d. To find comparative advantage, you need to consider opportunity cost. e. All of these statements are true.

Answer 27

c. It is possible for one country to have the comparative advantage in all goods.

Question 28

The gains from trade are a. limited to trade between nations with similar levels of wealth. b. always based on different wage rates between nations. c. a result of more efficient resource allocation. d. based on the principle of absolute advantage. e. none of the above

Answer 28

c. a result of more efficient resource allocation.

Question 29

Which of the following would not tend to lower the price of VCRs? a. decreasing pri ce of DVD players b. increasing price of video cassettes c. improvement in VCR production technology d. reduced price of raw materials used in making VCRs e. increasing price of pay-per-view movies on cable TV

Answer 29

e. increasing price of pay-per-view movies on cable TV

Question 30

In a market economy, the allocation of the quantity supplied of any good among demanders is determined by a. the needs of the individuals. b. the sellers. c. the market price. d. government regulations. e. a random process.

Answer 30

c. the market price.

Question 31

Milk can be used to make yogurt or cheese. Other things equal, if consumers start demanding more yogurt, a. the price of milk will fall. b. less milk will be used in cheese and more will be used in yogurt. c. the supply of milk will decrease. d. the price of cheese will fall. e. all of the above.

Answer 31

b. less milk will be used in cheese and more will be used in yogurt.

Question 32

The price elasticity of demand a. is determined by the Federal Reserve Bank at a monthly meeting. b. only works well in competitive markets. c. intersects with the price elasticity of supply to determine the market equilibrium. d. is equal to the slope of the demand curve. e. varies from one point to another on a typical demand curve.

Answer 32

e. varies from one point to another on a typical demand curve.

Question 33

Which of the following statements is true? a. The elasticity of demand for a product cannot change over time. b. Elasticity is useful in theory but cannot be measured in real life. c. The elasticity of demand will be larger if there are good substitutes available. d. If I can’t live without the product, my demand will be elastic. e. none of these are true

Answer 33

c. The elasticity of demand will be larger if there are good substitutes available.

Question 34

A firm’s total cost is $10,000. Its variable cost is $5,500. What is the firm’s fixed cost? a. $2.22 b. $3,500 c. $4,500 d. $5,500 e. none of the above

Answer 34

c. $4,500 10000-5500=4500

Question 35

Which of the following is a correct definition of marginal cost (MC)? a. It is the added cost that results from hiring one more employee. b. It is the increase in the average cost that results from producing one more unit of a good. c. It is the decrease in profits that results from selling another unit of a good. d. It is the cost per unit of a good produced -- i.e., total cost divided by quantity. e. It is the added cost that results from producing one more unit of a good.

Answer 35

e. It is the added cost that results from producing one more unit of a good.

Question 36

A firm will shut down if a. P \> AVC at all levels of output. b. P \< AVC at all levels of output. c. AVC \> AFC at all levels of output. d. TR \> TC at all levels of output. e. P \< TVC at all levels of output.

Answer 36

b. P \< AVC at all levels of output.

Question 37

A negative externality exists when a. Jack buys a good from Bill, and this makes Bill worse off. b. Jack buys a good from Bill, and this makes Jack worse off. c. Jack buys a good from Bill, and this makes Todd better off. d. Jack buys a good from Bill, and this makes both of them worse off. e. Jack buys a good from Bill, and this makes Todd worse off.

Answer 37

e. Jack buys a good from Bill, and this makes Todd worse off.

Question 38

Hannah runs a manicuring shop. Currently, her shop provides 50 manicures per day, and the shop’s daily total cost (TC) is $600. If Hannah decides to provide 25 more manicures per day, the total cost will rise by $75 per day. If Hannah does decide to increase production by this much, what will the shop’s daily average total cost (ATC) be? a. $12.00 b. $3.00 c. $8.00 d. $9.00 e. $13.50

Answer 38

d. $9.00 ATC: TC / ≠ unit (TC: 600+75=675 ≠ unit: 50+25=75) 675 / 75 = 9

Question 39

If Ross decides to ride his bike this afternoon, he will miss his favorite television show, and he won’t have time to study for his economics test. If Ross doesn’t ride his bike, he’ll choose to watch the television show instead. (He cannot both watch television and study for the test.) Ross’s opportunity cost of riding the bike is a. the value to Ross of watching the television show. b. the value to Ross of studying for the test. c. the value of watching the television show plus the value of studying for the test. d. the value of watching the television show minus the value of studying for the test.

Answer 39

a. the value to Ross of watching the television show.

Question 40

The opportunity cost of purchasing an item is a. the number of hours needed to earn money to buy it. b. the next best thing you could have done with the time and money spent. c. always less than the dollar value of the item. d. always equal to the dollar value of the item. e. just the time required to buy it.

Answer 40

b. the next best thing you could have done with the time and money spent.

Question 41

Alternative Outputs from One Day of Labor Wheat (in bushels) Textiles (in yards) United States 12 3 Great Britain 3 12 According to the table above, the United States a. has an absolute advantage over Great Britain in the production of textiles. b. has an absolute advantage over Great Britain in the production of wheat. c. has a comparative advantage in the production of textiles. d. should export textiles to Great Britain. e. none of the above

Answer 41

b. has an absolute advantage over Great Britain in the production of wheat.

Question 42

Perfume (bottles) Cloth (yards) Nancy 20 15 Roger 24 12 The table above shows how much each of two people can produce in 40 hours. (For example, Nancy can produce 20 bottles of perfume in 40 hours.) For Roger, what is the opportunity cost of producing 1 bottle of perfume? a. 3 yards of cloth b. 2 yards of cloth c. 1 yard of cloth d. 1/3 yards of cloth e. 1/2 yards of cloth

Answer 42

e. 1/2 yards of cloth (OC = give up / produce 12 / 24 = ½)

Question 43

Most residents of Los Angeles think sushi and sashimi are very similar foods. What effect will an increase in the price of sushi have on the demand curve for sashimi in Los Angeles? a. there will be a movement down the sashimi demand curve b. the sashimi demand curve will not be affected c. there will be a movement up the sashimi demand curve d. the sashimi demand curve will shift to the right e. the sashimi demand curve will shift to the left

Answer 43

d. the sashimi demand curve will shift to the right

Question 44

Economists can be college professors or business analysts. If there is an increase in businesses’ need for economic analysis, a. the wage of economists will tend to decrease. b. colleges will have to pay less money to hire economists as professors. c. more economists will decide to become professors. d. fewer economists will decide to become business analysts. e. All of the above.

Answer 44

e. All of the above.

Question 45

In a market economy, a. resources are distributed equally across the all possible uses. b. resources move to higher valued uses in response to changes in price. c. resource usage is independent of the price. d. most resources are distributed by the government. e. all of the above.

Answer 45

b. resources move to higher valued uses in response to changes in price.

Question 46

At a price of $4.50/pound, people buy 55 pounds of chocolate cream candy. At a price of $5.50/pound, people buy 45 pounds of chocolate cream candy. What is the arc elasticity of demand for chocolate cream candy in this price range? a. 1.0 b. 10.0 c. 0.1 d. 0.67 e. none of the above

Answer 46

a. 1.0

Question 47

At a price of $9.50/pound, people buy 45 pounds of lamb. At a price of $10.50/pound, people buy 35 pounds of lamb. What is the arc elasticity of demand for lamb in this price range? a. 1.0 b. 2.5 c. 0.4 d. 3.0 e. none of the above

Answer 47

b. 2.5

Question 48

Average fixed cost a. increases as output increases. b. declines as output increases. c. is always zero. d. remains constant even if output increases.

Answer 48

b. declines as output increases.

Question 49

Which of the following statements is true? a. MC = ▲TC/ ▲Q b. MC = TFC/Q c. MC = ATC/Q d. MC = Q/L

Answer 49

a. MC = ▲TC/ ▲Q

Question 50

A perfectly competitive firm maximizes its profits using what rule? a. P = ATC b. MR = ATC c. Q = MC d. P = MC e. MR = AVC

Answer 50

d. P = MC

Question 51

When U.S. residents buys goods from Europe, this gives rise to a. demand for dollars. 
 b. demand for euros. 
 c. supply of dollars. 
 d. supply of euros. 
 e. both demand for euros and supply of dollars.

Answer 51

e. both demand for euros and supply of dollars.

Question 52

It is common knowledge that many U.S. national parks have become overused. One possible solution to this problem is to a. increase entrance fees. b. increase advertising for the national parks. c. reduce the national park service budget. d. subsidize park admissions. e. all of these are possible solutions.

Answer 52

a. increase entrance fees.

Question 53

Who among the following is most likely to favor an appreciation of the U.S. dollar? a. a British professor visiting New York b. an American farmer whose business depends on exports c. an American professor on a tour of Italian museums d. Disneyland in Los Angeles, California, a popular destination for foreign tourists e. a Japanese retailer whose business depends on imports from the U.S.

Answer 53

c. an American professor on a tour of Italian museums

Question 54

If the price elasticity of demand for CSUN sweatshirts is 1.5, then a. an increase in price will cause total consumer expenditures on CSUN sweatshirts to fall b. an increase in price will cause total consumer expenditures on CSUN sweatshirts to increase c. an increase in price will cause total consumer expenditures on CSUN sweatshirts to stay the same d. a decrease in price will cause totalconsumer expenditures on CSUN sweatshirts to fall e. none of the above

Answer 54

a. an increase in price will cause total consumer expenditures on CSUN sweatshirts to fall

Question 55

Economic profit is equal to a. total revenue minus the explicit cost of producing goods and services. b. total revenue minus the implicit cost of producing goods and services. c. total revenue minus the opportunity cost of producing goods and services. d. average revenue minus the average cost of producing the last unit of a good or service. e. total revenue minus depreciation.

Answer 55

c. total revenue minus the opportunity cost of producing goods and services.

Question 56

Your friend is thinking of opening a video store. She estimates it would cost $500,000 a year to rent the store and buy video stock. She is planning to quit her $50,000 a year job as an accountant to run the store. Her opportunity cost of opening the store is a. $500,000 b. $550,000 c. $50,000 d. $450,000 e. $60,000

Answer 56

b. $550,000 OC = both explicit & implicit costs OC = 500,000 + 50,000 = 550,000

Question 57

Comparative advantage is based on a. capital costs b. labor costs c. opportunity costs d. dollar price e. both labor and capital costs

Answer 57

c. opportunity costs

Question 58

Cheese Bread England 40 20 Spain 20 5 The table above shows how much each of two countries can produce in 40 hours. (For example, England can produce 40 units of cheese in 40 hours.) For Spain, what is the opportunity cost of producing 1 unit of bread? a. 4 cheese b. 2 cheese c. 1/2 cheese

Answer 58

a. 4 cheese OC: give up / produce OC: 20 cheeses / 5 breads = 4 cheeses

Question 59

Americans love to eat peanut butter & jelly sandwiches. If the price of jelly increases (while other things remain constant), what effect will this have on the market for peanut butter? a. price rises, quantity falls b. price falls, quantity rises c. both price and quantity fall d. both price and quantity rise

Answer 59

c. both price and quantity fall

Question 60

If resources are owned by individuals instead of government, a. resources will be used less efficiently. b. resource use will tend to be unchanging and determined by historical usage patterns. c. resource use will be guided by changing relative prices as owners attempt to maximize self-interest. d. market prices will not reflect changing values of different uses of the resources. e. none of the above answers are correct.

Answer 60

c. resource use will be guided by changing relative prices as owners attempt to maximize self-interest.

Question 61

At a price of $50 for a CD player, firms are willing to produce and sell 2200 CD players. At a price of $70 for a CD player, firms are willing to produce and sell 2600 CD players. What is the price elasticity of supply in this range? (Use price elasticity.) a. 2 b. .5 c. .05 d. 20

Answer 61

b. .5

Question 62

Quantity TC MC 10 10,000 X 20 25,000 The table above shows a firm's total cost and marginal cost for a range of output. What is X equal to? a. 1500 b. 1000 c. 35,000 d. 1750 e. 15,000

Answer 62

a. 1500 MC: ▲TC/ ▲Q MC: (25,000 - 10,000) / (20 – 10) = 1500

Question 63

Acme, Inc. is currently producing 12,000 gadgets per year. Acme’s average total cost (ATC) is $18 per year. What is Acme’s total cost (TC) per year? a. $667 b. $108,000 c. $216,000 d. $500 e. $1500

Answer 63

c. $216,000 ATC: TC / ≠ units 18 = TC / 12,000 TC = 18 \* 12,000 TC = 216,000

Question 64

As compared to monopoly, a perfectly competitive market typically produces a(n) ______ quantity at a(n) _______ price. a. higher, higher b. higher, lower c. lower, higher d. lower, lower e. identical, lower

Answer 64

b. higher, lower

Question 65

Which of the following would not be a negative production externality associated with tire production? a. smoke from the tire factory worsens the city’s air quality b. toxins from the tire-making process seep into the area’s ground water c. neighbors experience the bad smells that come from the tire factory d. the rubber used to make tires could be used to make something else e. all of these are negative production externalizes

Answer 65

d. the rubber used to make tires could be used to make something else

Question 66

Everything else the same, if income in Japan rises while income in the U.S. remains unchanged, a. the supply of dollars in the foreign exchange market will increase. b. the demand for yen in the foreign exchange market will decrease. c. the supply of yen in the foreign exchange market will decrease. d. the demand for dollars in the foreign exchange market will increase. e. the demand for dollars in the foreign exchange market will decrease.

Answer 66

d. the demand for dollars in the foreign exchange market will increase.

Question 67

Your friend is thinking of opening a video store. She estimates it would cost $500,000 a year to rent the store and buy video stock. She is planning to quit her $50,000 a year job as an accountant to run the store. If there are no other costs of operation and the store’s revenue is $530,000, the accounting profits will be a. $50,000 b. $20,000 c. -$20,000 d. $30,000 e. $530,000

Answer 67

d. $30,000 Accounting profits: total revenue – explicit cost AP: 530,000 - 500,000 = 30,000 (Salary is not include when it says accounting profit. Only explicit costs are included.)

Question 68

The term which means whatever must be given up to obtain an item is

Answer 68

Opportunity Cost

Question 69

5. Price for a 27 TV = $450. Consumers buy 1000 of them, prices rises to $550 by 600 of them. What is the price elasticity of demand in this range?

Answer 69

Answer is 2.5

Question 70

In economics “short run” is defined as a. as a period of time when at least one of the four factors of production is fixed in supply b. A period of time during which at least one production input is fixed while others are variable.

Answer 70

b. A period of time during which at least one production input is fixed while others are variable.

Question 71

The total cost to build 8 tract houses is $1,000,000. Total cost to build 9 tract houses $1,050,000. What is the Margin cost of the 9th tract house?

Answer 71

50,000 MC: ▲TC/ ▲Q MC: (1,050,000 - 1,000,000) / (9 – 8) = 50,000

Question 72

If the equilibrium of a dollar in terms of pesos is 20. what is the equilibrium price in terms of dollars

Answer 72

.05 (1 / 20 = 0.05)

Question 73

Accounting profit is equal to? A. Total revenue minus the explicit cost of producing goods and services. B. Total revenue minus the opportunity cost of producing goods and service. C. Average revenue minus the average cost of products the last unit of a good or service. D. Marginal revenue minus marginal cost. E. Total revenue minus depreciation.

Answer 73

A. Total revenue minus the explicit cost of producing goods and services.

Question 74

Fresh tuna can be canned or used to make sushi. Other things equal, if consumers start demanding more sushi? a. The price of tuna will fall. b. Less tuna will be canned and more will be used in tuna sushi. c. The supply of fresh tuna will decrease. d. The price of tuna sushi will fall. e. None of the above.

Answer 74

b. Less tuna will be canned and more will be used in tuna sushi.

Question 75

In economics, short run is defined as? a. A period of time less than a year. b. A period of time during which at least one production input is fixed. c. A period of time less than one month. d. A period of time during which all production inputs are fixed. e. A period of time during which all production inputs are variable.

Answer 75

b. A period of time during which at least one production input is fixed.

Question 76

Compared to perfect competition, monopoly in the long run? a. Restricts outputs b. Changes a higher price. c. Produces at greater than the minimum average total cost. d. Is able to make greater profits. e. All of the above.

Answer 76

e. All of the above.

Question 77

A foot-Loofah is worth $15 to Edna. But she buys one on sale at Bath and Body works for just $8 what is the consumer surplus that results from Edna’s purchase? a. $8 b. $15 c. $7 d. $23

Answer 77

c. $7 (15 - 8 = 7)

Question 78

If purchases power parity exists and the exchange rate is 1.50 u.s. dollars per British pound, then a latte that has a price of $4.00 in Northridge, California, has a price of _ in London, England? a. 8.00 pounds b. 4.00 pounds c. 6.00 pounds d. 2.67 pounds e. .38 pounds

Answer 78

d. 2.67 pounds (4 / 1.50 = 2.67)

Question 79

In economics, the cost of something is? A. The out-of-pocket expense of obtaining it. B. What you must give up to get it. C. Always measured in units of time. D. Always higher than people think.

Answer 79

B. What you must give up to get it.

Question 80

19. Which of the following goods will have the most elastic demand at any time? A. Cigarettes B. Electricity C. Gasoline D. Water E. Jewelry

Answer 80

E. Jewelry

Question 81

Airline knows from exp. Vacation travel has elastic demand for travel whereas business travels have an inelastic demand for travel in order maximizes the airline should? A. Offer everyone a discount to increase sales. B. Increase price to everyone. C. Try to increase price for vacation travelers and decrease price for business travelers. D. Try to decrease price for vacation travelers and increase price for business travelers. E. Ignore this information.

Answer 81

D. Try to decrease price for vacation travelers and increase price for business travelers.

Question 82

Consumer surplus is equal the area below the _________ and above\_\_\_\_\_\_\_\_\_\_\_ A. Price; Supply Curve B. Demand Area; Price C. Demand Curve; Supply Curve D. Price; Demand Curve E. Supply Curve; Demand Curve

Answer 82

B. Demand Area; Price

Question 83

If you want to know the long-run equilibrium output of one perfectly competitive firm, and you are permitted to see only one curve, which one below is most helpful? A. Demand B. Marginal Cost C. Average total cost D. Average Fixed cost E. Average Variable cost

Answer 83

C. Average total cost

Question 84

What will cause outward shift of the Demand curve for electricity? a. decrease in price of electricity b .increase in price of A/C c. Increase in price of heating oil d. decrease in price of natural gas e. increase in price of electricity

Answer 84

c. Increase in price of heating oil

Question 85

A raise in the demand for a resource to produce some product (x) will a. Raise the cost of using the resource for an alt. product b. Reduce the use of that resource in alt lower valued production c. Increase the value of the resource d. All

Answer 85

d. All

Question 86

The entry of new firms into a competitive industry will very likely a. shift the short run industry supply curve to the right b. cause the market price to fall c. reduce the profits of firms in the industry d. cause the market quantity sold to rise e. all of the above

Answer 86

e. all of the above

Question 87

Which of the following would cause an increase in the demand for us dollars? a. An interest rate cut in the US b. An interest rate cut in Europe c. An interest rate increase in Europe d. A recession in Europe e. Less desire by Europeans for US goods

Answer 87

b. An interest rate cut in Europe

Question 88

The opportunity cost of going to college is a. the total spent on food, clothing, books, transportation, tuition and other expenses. b. zero for students who are fortunate enough to have all their college expenses paid by someone. c. the value of the next best opportunity a student gives up to attend college. d. zero, since a college education will allow a student to earn a larger income after graduation. e. infinite, because there’s no way you can ever get your time back.

Answer 88

c. the value of the next best opportunity a student gives up to attend college.

Question 89

Professional baseball teams in the United States use only wooden bats. If aluminum bats were permitted, the likely result would be a. a shift in the supply curve for aluminum bats. b. a shift in the supply curve for wooden bats. c. a shift in the demand curve for aluminum bats. d. a persistent shortage of aluminum bats. e. a persistent shortage of wooden bats.

Answer 89

c. a shift in the demand curve for aluminum bats.

Question 90

Good A has many close substitutes, while good B has no close substitutes. Which of the following is true? a. the demand for both goods is likely to be inelastic. b. the demand for both goods is likely to be elastic. c. the demand for good A is likely to be elastic, the demand for good B inelastic. d. the demand for good B is likely to be elastic, the demand for good A inelastic. e. both goods will have elasticity of 1.

Answer 90

c. the demand for good A is likely to be elastic, the demand for good B inelastic.

Question 91

A firms’ total cost is $500 when its quantity is 80 units. Its total cost increases to $510 when its quantity increases to 81 units. What is the firm’s marginal cost? a. 6.25 b. 10 c. 5 d. 6.29 e. none of the above

Answer 91

b. 10 (500-510) / (80-81) = 10/1 = 10

Question 92

A monopoly maximizes its profits using what rule? a. P = ATC b. MR = ATC c. Q = MC d. MR = MC

Answer 92

d. MR = MC

Question 93

What are the two defining features of a public good? a. excludability and rivalrous consumption b. common pool consumption and positive externalities . negative externalities and excludability d. rivalrous consumption and common pool consumption e. non-excludability and non-rivalrous consumption

Answer 93

e. non-excludability and non-rivalrous consumption

Question 94

In the long-run, the price elasticity of demand is usually a. smaller than in the short-run. b. bigger than in the short-run. c. the same as in the short run. d. equal to zero. e. can’t tell from the information given.

Answer 94

b. bigger than in the short-run.

Question 95

Which of the following would be not considered a common pool resource? a. a lake where anyone can fish b. an oyster bed that anyone can take oysters from c. a congested public park d. a public pasture where anyone can graze their cattle e. a strip mine owned and operated by a coal-mining company

Answer 95

e. a strip mine owned and operated by a coal-mining company

Question 96

If a road is congested, then use of that road by an additional person would lead to a. a negative externality. b. a positive externality. c. a natural monopoly. d. a free-rider problem with rush hour drivers stuck in traffic. e. none of the above.

Answer 96

a. a negative externality.

Question 97

In an attempt to boost enrollment, in January 1996, a private college in Iowa offered free tuition for seniors graduating from high school in the county where it is located. For students who accept the offer, how does this offer affect the opportunity cost of attending college? a. The opportunity cost is not changed, since lost earnings are still a factor.. 
b. The opportunity cost is now zero for the typical student. 
 c. The opportunity cost is very low, because the only cost is for books and school supplies. 
d. The opportunity cost is not changed, since tuition is not a factor in computing opportunity cost. 
 e. The opportunity cost is lower than if tuition were charged, but there is still a cost. 


Answer 97

e. The opportunity cost is lower than if tuition were charged, but there is still a cost. 


Question 98

A technological breakthrough in the production of computers creates a __________ and causes the price of computers to \_\_\_\_\_\_\_\_\_\_. a. leftward shift of supply, rise 
 b. rightward shift of supply, fall 
 c. rightward shift of demand, rise 
 d. rightward shift of supply, rise 
 e. leftward shift of demand, rise

Answer 98

b. rightward shift of supply, fall 


Question 99

Monopolist sets price a $12 and sells 250 units. The marginal revenue cost corresponding to this level of output are $6 and $8 respectively. What recommendation would you give this monopolist? A. Lower price. B. Raise the price C. Raise the output level D. Keep the same price E. Keep the same output level

Answer 99

C. Raise the output level