Microeconomics (OFFICIAL)

Question 1

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 1

a. a trade-off. Trade

Question 2

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 2

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

Question 3

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 3

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

Question 4

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 4

c. a result of more efficient resource allocation.

Question 5

Which of the following would not tend to lower the price of VCRs?

a. decreasing price 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 5

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

Question 6

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.

(On the EXAM)

Answer 6

c. the market price.

Question 7

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 7

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

Question 8

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.

(On the EXAM)

Answer 8

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

Question 9

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

(On the EXAM)

Answer 9

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

Question 10

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 10

c. $4,500

Total cost = variable cost + fixed cost

Question 11

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.

(On the EXAM)

Answer 11

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

Question 12

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.

(On the EXAM)

Answer 12

b. P < AVC at all levels of output.

Question 13

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.

(On the EXAM)

Answer 13

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

Question 14

Everything else the same, if the price level in Japan rises relative to the price level in the U.S:

a. the supply of dollars and the demand for yen in the foreign exchange market will decrease.
b. the supply of dollars and the demand for yen in the foreign exchange market will increase.
c. the demand for dollars and the supply of yen in the foreign exchange market will decrease.
d. the yen will appreciate.
e. the dollar will depreciate.

(On the EXAM)

Answer 14

e. the dollar will depreciate.

Question 15

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 15

d. $9.00

50+25=75
600+75 = 675

675/75 = 9

Question 16

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.
e. the value to Ross of riding his bike minus the value of watching the television show.

(On the EXAM)

Answer 16

c. the value of watching the television show plus the value of studying for the test.
d. the value of watching the

Question 17

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.

(On the EXAM)

Answer 17

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

Question 18

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 18

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

Question 19

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 19

e. 1/2 yards of cloth

12/24 = 1/2 cloth

Question 20

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 20

d. the sashimi demand curve will shift to the right

Question 21

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 21

e. All of the above.

Question 22

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 22

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

Question 23

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 23

a. 1.0

Question 24

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 24

b. 2.5

Question 25

Average fixed cost:

a. increases as output increases. 	
b. declines as output increases. 	
c. is always zero. 	
d. remains constant even if output increases. 	
e. decreases and then increases as output increases.

Answer 25

b. declines as output increases.

Question 26

Which of the following statements is true?

a. MC = ▲TC/ ▲Q 	 
b. MC = TFC/Q 	
c. MC = ATC/Q 	
d. MC = Q/L

Answer 26

a. MC = ▲TC/ ▲Q

Question 27

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 27

d. P = MC

Question 28

Refer to the figure above. Twelve units of this product are sold at $10 each. Producer surplus is equal to areas:

a. B+C 	
b. A+B+C 	
c. E+F 	 
d. D+G 	
e. E+B

Answer 28

c. E+F

Question 29

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 29

a. increase entrance fees.

Question 30

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 30

c. an American professor on a tour of Italian museums

Question 31

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 total consumer expenditures on CSUN sweatshirts to fall 	
e. none of the above

Answer 31

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

Question 32

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 32

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

Question 33

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 33

b. $550,000

Explicit + Implicit

Question 34

Comparative advantage is based on:

a. capital costs
b. labor costs
c. opportunity costs
d. dollar price
e. both labor and capital costs

Answer 34

c. opportunity costs

Question 35

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
d. 1 cheese
e. 1/4 cheese

Answer 35

a. 4 cheese

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

Question 36

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
e. price rises and quantity remains the same

Answer 36

a. price rises, quantity falls

Question 37

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 37

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

Question 38

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 arc elasticity.)

a. 2
b. .5
c. .05
d. 20
e. none of the above

Answer 38

b. 0.5

Q = 2600-2200/2600+2200/2 x 100 = 16.66

P = 70-50/70+50/2 x 100 = 33.33

Q/P = 16.66/33.33

= 0.5

Question 39

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

Answer 39

a. 1500

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

Question 40

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 40

c. $216,000

12,000 x 18 = 216,000

Question 41

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 41

b. higher, lower

Question 42

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 externalities

Answer 42

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

Question 43

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 43

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

Question 44

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 44

d. $30,000

Accounting profits: total revenue – explicit cost AP: 530,000 - 500,000 = 30,000

Question 45

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

Answer 45

Opportunity Cost

Question 46

In order to fix 1 car tire, jerry fixed 3 bicycle tires. In order to fix 1 car tire, berry fixes 5 bike tires, who has the comparative advantage

Answer 46

Jerry has the comparative advantage over Berry

Question 47

Milk can be used to make yogurt and cheese, other things equal, if consumption starts demanding more yogurt

a. Supply of milk will decrease.
b. Demand of milk will increase.
c. Answer was NONE are

Answer 47

c. Answer was NONE are

Question 48

Demand for cocaine is unit Elastic, price of cocaine were to rise 10%,

a. Quantity consumed would fall 10%
b. Dealer income from the sale of cocaine would fall 10%
c. ANSWER is both FALSE

Answer 48

b. Dealer income from the sale of cocaine would fall 10%

Question 49

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 49

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

Question 50

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 50

a. 50,000
MC: ▲TC/ ▲Q MC:

(1,050,000 - 1,000,000) / (9 – 8) = 50,000

Question 51

Once it becomes obvious that a common resource is being overused

Answer 51

B. as a period of time when at least one of the four factors of production is fixed

Question 52

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

Answer 52

A) .05 (1 / 20 = 0.05)

Question 53

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

(On the EXAM)

Answer 53

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

Question 54

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 54

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

Question 55

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. (is correct in long-run)

Answer 55

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

Question 56

The table below shows a firms cost for range of quantity.  Find the value of X?
Q	TC	ATC	MC
100	500	  5
				X
120	720	  6

a. 11 MC: ▲TC/ ▲Q
b. 20
c. 1
d. 220
e. None of the above.

Answer 56

a. 11
MC: ▲TC/ ▲Q

(720-500_/(120-100) =
(220/20) = 11

Question 57

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 57

e. All of the above.

Question 58

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
e. Cannot be determined from the information given.

Answer 58

c. $7 (15 - 8 = 7)

Question 59

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 59

d. 2.67 pounds (4 / 1.50 = 2.67)

Question 60

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 60

B. What you must give up to get it.

Question 61

Helena does her bathroom Saturday night and she wants to see a movie and surf the web. If she doesn’t clean her bathroom and surf the web what is the value (note she cannot see the movie and surf the web).

A. The value of Helen of watching a movie.
B. The value of Helen of suffering the web.
C. The value of Helen surfing the web PLUS the value of watching a movie.
D. The value of cleaning her bathroom MINUS the value of surfing the web.
E. The value of cleaning her bathroom MINUS the value of surfing the web

Answer 61

b. Value to Helena of surfing the web.

Question 62

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 62

E. Jewelry

Question 63

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 63

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

Question 64

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 64

B. Demand Area; Price

Question 65

A negative consumption externality will cause a private market to produce:

a. more than is socially desirable.
b. less than is socially desirable.
c. less than is market optimal.
d. the socially desirable quantity.

Answer 65

a. more than is socially desirable.

Question 66

5. An unregulated negative production externality will cause a private market to :

A. Produce less than is socially optimal
B. Produce more than is socially optimal
C. Produce more than market equilibrium
D. Produce less than market equilibrium 
E. Produce the amount that is socially optimal

Answer 66

B. Produce more than is socially optimal

Question 67

n the figure shown, the deadweight loss caused by the tariff would be equal to:

a. B.
b. E.
c. D + F.
d. B + D + E + F.

Answer 67

c. D + F

Question 68

Private solutions may not always be possible if negotiating and enforcing these solutions involve high:

a. Pigovian taxes.
b. opportunity costs.
c. deadweight losses.
d. transaction costs.

Answer 68

d. transaction costs.

Question 69

An externality exists when:

a. a firm sells its product in a foreign market.
b. markets are not able to reach equilibrium.
c. the government intercedes in the operation of private markets by forcing the market to adjust to the balance of supply and demand.
d. a person engages in an activity that influences the well-being of a bystander and yet neither pays nor receives payment for that effect.

Answer 69

d. a person engages in an activity that influences the well-being of a bystander and yet neither pays nor receives payment for that effect.

Question 70

A market structure with a few firms is known as:

a. monopoly.
b. oligopoly.
c. monopolistic competition.
d. perfect competition.

Answer 70

b. oligopoly.

Question 71

6. On the foreign exchange market, an increase in a country’s exchange rate:

A. Decrease the quantity demand of its currency
B. Increase the quantity demand of its currency
C. Has no effect on the quantity demand of its currency
D. Decrease the quantity supplied of its currency
E. has no effect of the quantity supplied of its currency

Answer 71

not sure

Question 72

7. 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 72

C. Average total cost

Question 73

Bliff and Harvey in 1hr. what is the absolute advantage?
1 hr. Bliff Harvey
Martins 9 12
Gin 6 9

Answer 73

Harvey does has both absolute advantage

Question 74

Opportunity cost of producing 1 pound of meat
In 20 hrs. Pounds of meat Pounds of potatoes
Farmer 2 4
Rancher 5 20

Answer 74

½ of a potato

2/4 = 1/2

Question 75

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 75

c. Increase in price of heating oil

Question 76

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 76

d. All

Question 77

Price elasticity of demand:

Percentage change of Qd divide change in P

Answer 77

Percentage change of Qd divide change in P

Question 78

No doubt ticket is $45 and you want to illegally sell it (scalp) for $75 what is the opportunity cost?
	$30 
	$ 45 
	$ 75 
	$ 115

Answer 78

$ 45

Question 79

Law of demand states:

Price and quantity demand of a good are inverse related

Answer 79

Price and quantity demand of a good are inverse related

Question 80

More buyers enter a market Demand increases….
Quantity supply lends to increase
The products are able to use resourcing with higher opportunity cost
Price of good will raise (or increase)
………………..
All

Answer 80

All

Question 81

Good A has many substitutes and Good B has none what is true
Demand for Good B is likely to be elastic and Good A is inelastic
Demand for Good B is likely to be inelastic and Good A is elastic
Good A and B are elastic
Good A and B are inelastic

Answer 81

Demand for Good B is likely to be inelastic and Good A is elastic

Question 82

in a market economy?
A. Resources are distributed equal across the all possible users.
B. resources move to higher valued uses in respond to change in price.
C. Resources usage is independent of the price.
D. Most resources are distributed by the government.
E. All of the above.

Answer 82

B. resources move to higher valued uses in respond to change in price.

Question 83

An increase in demand for a product will:

a. not affect the value of resources.
b. reduce the production of the good as the price rises.
c. decrease the profits of sellers.
d. draw more resources into the production of the good.
e. not affect the rate of production since production is fixed

Answer 83

d. draw more resources into the production of the good.

Question 84

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 84

e. all of the above

Question 85

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 85

a. An interest rate cut in the US

Question 86

Bob could do 3 broken legs and 7 bandage wounds, James can do 2 broken legs and 5 bandages wounds:

Answer 86

Bob has both absolute advantages

Question 87

A positive consumption externality occurs when;

a. When jack receives a benefit from john’s consumption of a certain good
b. When jack receives personal benefit from his own consumption of a certain good
c. When jack benefits exceed johns benefits wo…………
d. When jack consumes of a good is not beneficial to john

Answer 87

a. When jack receives a benefit from john’s consumption of a certain good

Question 88

Video store gave an estimate it will cost 500,000 and to quit her job she makes 50,000 and the revenue will be 530,000 what is her econ profit?
50 k
20k 	
30k
None

Answer 88

Econ profit: total revenue – OP EP: 530,000 – (500,000 + 50,000) = 20,000 because it is an econ profit, we add salary

Question 89

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 89

d. The opportunity cost is not changed, since tuition is not a factor in computing opportunity cost.

Question 90

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 90

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

Question 91

Cheese (units) Bread (units)
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.) England has an absolute advantage in __________ and the Spain has an absolute advantage in __________.

a. bread, cheese
b. both goods, neither good
c. cheese, both goods
d. both goods, cheese
e. neither good, bread

Answer 91

e. neither good, bread

Question 92

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 92

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

Question 93

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 93

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

Question 94

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 94

b. 10

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

Question 95

Average total cost is

a. AFC + (TVC/Q)
b. TC/Q
c. (TFC/Q) + (TVC/Q)
d. AFC + AVC
e. all of the above

Answer 95

e. all of the above

Question 96

A monopoly maximizes its profits using what rule?

a. P = ATC
b. MR = ATC
c. Q = MC
d. MR = MC
e. pick the highest price possible, as long as some units still sell

Answer 96

d. MR = MC

Question 97

What are the two defining features of a public good?

a. excludability and rivalrous consumption
b. common pool consumption and positive externalities
c. negative externalities and excludability
d. rivalrous consumption and common pool consumption
e. non-excludability and non-rivalrous consumption

Answer 97

e. non-excludability and non-rivalrous consumption

Question 98

Itchy Scratchy
Bombs 10 8
Missiles 6 4

The table above shows how many bombs or missiles Itchy and Scratchy can produce in one year. (For example, Itchy could produce 10 bombs or 6 missiles in a year.) Which of the following is an accurate statement about comparative advantage?

a. Itchy has the comparative advantage in both goods.
b. Scratchy has the comparative advantage in both goods.
c. No one has the comparative advantage in missiles.
d. Itchy has the comparative advantage in bombs, while Scratchy has the comparative advantage in missiles.
e. Itchy has the comparative advantage in missiles, while Scratchy has the comparative advantage in bombs.

Answer 98

e. Itchy has the comparative advantage in missiles, while Scratchy has the comparative advantage in bombs.

Question 99

A technological breakthroughs 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 99

b. rightward shift of supply, fall

Question 100

When the price of hamburgers is $3.50, consumers buy 1100 hamburgers. When the price is $4.50, consumers buy 900. What is the price elasticity of demand in this range? (Use arc elasticity.)

a. 0.8
b. 200
c. 1.25
d. 0.005
e. none of the above

Answer 100

a. 0.8

Question 101

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 101

b. bigger than in the short-run.

Question 102

Gary is a tailor who creates custom-made business suits. His yearly total cost (TC) is $28,000. His average total cost (ATC) for the year is $400. How many business suits does Gary’s business make in a year?

a. 50
b. 20
c. 30
d. 70
e. none of the above

Answer 102

d. 70

ATC: TC / ≠ units 400 = 28,000 / Q Q = 28,000 / 400 = 70

Question 103

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 103

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

Question 104

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 104

a. a negative externality.