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Question 1(4 points)Normal profit is:Question 1 options:a)determined by subtracting implicit costs from total revenue.

b)determined by subtracting explicit costs from total revenue.

c)the return to the entrepreneur when economic profits are zero.

d)the average profitability of an industry over the preceding 10 years.

SaveQuestion 2(4 points)Refer to the above diagram. The firm will realize an economic profit if price is:Question 2 options:a)P1.

b)P2.

c)P3.

d)P4.

SaveQuestion 3(4 points)Economies of scale are indicated by:Question 3 options:a)the rising segment of the average variable cost curve.

b)the declining segment of the long-run average total cost curve.

c)the difference between total revenue and total cost.

d)a rising marginal cost curve.

SaveQuestion 4(4 points)The French term "laissez-faire" means:Question 4 options:a)"there is no free lunch."

b)"let it be."

c)"circular flow."

d)"public ownership."

SaveQuestion 5(4 points)In a competitive market economy firms select the least-cost production technique because:Question 5 options:a)such choices will result in full employment of available resources.

b)to do so will maximize the firms' profits.

c)this will prevent new firms from entering the industry.

d)"dollar voting" by consumers mandates such a choice.

SaveQuestion 6(4 points)Productive efficiency refers to:Question 6 options:a)the use of the least-cost method of production.

b)the production of the product-mix most wanted by society.

c)the full employment of all available resources.

d)production at some point inside of the production possibilities curve.

SaveQuestion 7(4 points)Conspiracies to fix prices are:Question 7 options:a)illegal under the Clayton Act.

b)illegal under the Celler-Kefauver Act.

c)per se violations of the antitrust laws.

d)more tolerated by government today than two or three decades ago.

SaveQuestion 8(4 points)A positive statement is concerned primarily with:Question 8 options:a)some goal that is desirable to society.

b)what should be.

c)what is.

d)the formulation of economic policy.

SaveQuestion 9(4 points)Refer to the above short-run production and cost data. The curves of Figures A and B suggest that:Question 9 options:a)marginal product and marginal cost reach their maximum points at the same output.

b)marginal cost reaches a minimum where marginal product is at its maximum.

c)marginal cost and marginal product reach their minimum points at the same output.

d)AVC cuts MC at the latter's minimum point.

SaveQuestion 10(4 points)Specialization-the division of labor-enhances productivity and efficiency by:Question 10 options:a)allowing workers to take advantage of existing differences in their abilities and skills.

b)avoiding the time loss involved in shifting from one production task to another.

c)allowing workers to develop skills by working on one, or a limited number, of tasks.

d)all of the means identified in the other answers.

SaveQuestion 11(4 points)The MRP curve for labor:Question 11 options:a)intersects the firm's labor demand curve from above.

b)is the firm's labor demand curve.

c)lies below the firm's labor demand curve.

d)lies above the firm's labor demand curve.

SaveQuestion 12(4 points)Refer to the above short-run production and cost data. In Figure B curve (3) is:Question 12 options:a)AVC and curve (4) is MC.

b)MC and curve (4) is AVC.

c)MC and curve (4) is AFC.

d)AFC and curve (4) is MC.

SaveQuestion 13(4 points)Allocative efficiency occurs only at that output where:Question 13 options:a)marginal benefit exceeds marginal cost by the greatest amount.

b)consumer surplus exceeds producer surplus by the greatest amount.

c)the combined amounts of consumer surplus and producer surplus are maximized.

d)the areas of consumer and producer surplus are equal.

SaveQuestion 14(4 points)Which of the following isnotcharacteristic of the demand for a commodity that is elastic?Question 14 options:a)The relative change in quantity demanded is greater than the relative change in price.

b)Buyers are relatively sensitive to price changes.

c)Total revenue declines if price is increased.

d)The elasticity coefficient is less than one.

SaveQuestion 15(4 points)Refer to the above diagram. A price of $20 in this market will result in a:Question 15 options:a)shortage of 50 units.

b)surplus of 50 units.

c)surplus of 100 units.

d)shortage of 100 units.

SaveQuestion 16(4 points)Refer to the above diagram. AtP3, this firm will:Question 16 options:a)produce 14 units and realize an economic profit.

b)produce 62 units and earn only a normal profit.

c)produce 40 units and incur a loss.

d)shut down in the short run.

SaveQuestion 17(4 points)Jennifer buys a piece of costume jewelry for $33 for which she was willing to pay $42. The minimum acceptable price to the seller, Nathan, was $30. Jennifer experiences:Question 17 options:a)a consumer surplus of $12 and Nathan experiences a producer surplus of $3.

b)a producer surplus of $9 and Nathan experiences a consumer surplus of $3.

c)a consumer surplus of $9 and Nathan experiences a producer surplus of $3.

d)a producer surplus of $9 and Nathan experiences a producer surplus of $12.

SaveQuestion 18(4 points)The above diagram portrays:Question 18 options:a)a competitive firm that should shut down in the short run.

b)the equilibrium position of a competitive firm in the long run.

c)a competitive firm that is realizing an economic profit.

d)the loss-minimizing position of a competitive firm in the short run.

SaveQuestion 19(4 points)The two basic markets shown by the simple circular flow model are:Question 19 options:a)capital goods and consumer goods.

b)free and controlled.

c)product and resource.

d)household and business.

SaveQuestion 20(4 points)Suppose that two firms in an industry with a Herfindahl index of 5,000 announce a merger. The U.S. Justice Department concludes the merger will boost the index to 5,500. The antitrust authorities will most likely:Question 20 options:a)ignore this merger because of the relatively small increase in the Herfindahl index.

b)allow the merger but watch the new firm carefully for future violations of the antitrust laws.

c)allow the merger if foreign entry to the industry is possible.

d)prevent the merger, contending that it violates the Clayton Act.

SaveQuestion 21(4 points)The supply curve shows the relationship between:Question 21 options:a)price and quantity supplied.

b)production costs and the amount demanded.

c)total business revenues and quantity supplied.

d)physical inputs of resources and the resulting units of output.

SaveQuestion 22(4 points)If a monopolist engages in price discrimination, it will:Question 22 options:a)realize a smaller profit.

b)charge a higher price where individual demand is inelastic and a lower price where individual demand is elastic.

c)produce a smaller output than when it did not discriminate.

d)charge a competitive price to all its customers.

SaveQuestion 23(4 points)Economic profits are calculated by subtracting:Question 23 options:a)explicit costs from total revenue.

b)implicit costs from total revenue.

c)implicit costs from normal profits.

d)explicit and implicit costs from total revenue.

SaveQuestion 24(4 points)Refer to the above diagram. Assuming equilibrium priceP1, consumer surplus is represented by areas:Question 24 options:a)a+b.

b)a+b+c+d.

c)c+d.

d)a+c.

SaveQuestion 25(4 points)Ben is exhausting his money income consuming products A and B in such quantities that MUa/Pa= 5 and MUb/Pb= 8. Ben should purchase:Question 25 options:a)more of A and less of B.

b)more of B and less of A.

c)more of both A and B.

d)less of both A and B.

SaveQuestion 26(4 points)The labor demand curve of a firm:Question 26 options:a)will shift to the left if the price of the product the labor is producing falls.

b)is perfectly elastic if the firm is selling its product in a purely competitive market.

c)reflects a direct relationship between the number of workers hired and the money wage rate.

d)is the same as its marginal product curve.

SaveQuestion 27(4 points)The basic purpose of the other-things-equal assumption (also termedceteris paribus)is to:Question 27 options:a)allow one to reason about the relationship between variablesXandYwithout the intrusion of variableZ.

b)allow one to focus upon micro variables by ignoring macro variables.

c)allow one to focus upon macro variables by ignoring micro variables.

d)determine whetherXcausesYor vice versa.

SaveQuestion 28(4 points)Refer to the above diagrams. Firm A is a:Question 28 options:a)pure competitor and Firm B is a pure monopoly.

b)pure competitor, as is Firm B.

c)pure monopoly and Firm B is a pure competitor.

d)pure monopoly, as is Firm B.

SaveQuestion 29(4 points)The price elasticity of demand of a straight-line demand curve is:Question 29 options:a)elastic in high-price ranges and inelastic in low-price ranges.

b)elastic, but does not change at various points on the curve.

c)inelastic, but does not change at various points on the curve.

d)1 at all points on the curve.

SaveQuestion 30(4 points)An improvement in production technology will:Question 30 options:a)increase equilibrium price.

b)shift the supply curve to the left.

c)shift the supply curve to the right.

d)shift the demand curve to the left.

SaveQuestion 31(4 points)Refer to the above diagram. Assuming equilibrium priceP1, producer surplus is represented by areas:Question 31 options:a)a+b.

b)a+b+c+d.

c)c+d.

d)a+c.

SaveQuestion 32(4 points)The alternative combinations of two goods which a consumer can purchase with a given money income is shown by:Question 32 options:a)a production possibilities curve.

b)a demand curve.

c)consumer expenditure line.

d)a budget line.

SaveQuestion 33(4 points)The law of demand states that, other things equal:Question 33 options:a)price and quantity demanded are inversely related.

b)the larger the number of buyers in a market, the lower will be product price.

c)price and quantity demanded are directly related.

d)consumers will buy more of a product at high prices than at low prices.

SaveQuestion 34(4 points)Any combination of goods lying outside of the budget line:Question 34 options:a)implies that the consumer is not spending all his income.

b)yields less utility than any point on the budget line.

c)yields less utility than any point inside the budget line.

d)is unattainable, given the consumer's income.

SaveQuestion 35(4 points)People enjoy outdoor holiday lighting displays, and would be willing to pay to see these displays, but can't be made to pay. Because those who put up lights are unable to charge others to view them, they don't put up as many lights as people would like. This is an example of a:Question 35 options:a)negative externality

b)supply-side market failure

c)demand-side market failure

d)government failure

SaveQuestion 36(4 points)Which of the following is most likely to be an inferior good?Question 36 options:a)fur coats

b)ocean cruises

c)used clothing

d)steak

SaveQuestion 37(4 points)Refer to the above diagram. A price of $60 in this market will result in:Question 37 options:a)equilibrium.

b)a shortage of 50 units.

c)a surplus of 50 units.

d)a surplus of 100 units.

SaveQuestion 38(4 points)If two goods J and K, are complements, then which of the following statements is false?Question 38 options:a)They are consumed together

b)An increase in the price of J causes the demand for K to decrease

c)An increase in the price of J causes the demand for K to increase

d)an increase in the price of J will have no effect on the demand for K

SaveQuestion 39(4 points)The demand for a product is inelastic with respect to price if:Question 39 options:a)consumers are largely unresponsive to a per unit price change.

b)the elasticity coefficient is greater than 1.

c)a drop in price is accompanied by a decrease in the quantity demanded.

d)a drop in price is accompanied by an increase in the quantity demanded.

SaveQuestion 40(4 points)"Consumer sovereignty" means that:Question 40 options:a)buyers can dictate the prices at which goods and services will be purchased.

b)advertising is ineffective because consumers already know what they want.

c)buyers control the quality of goods and services through regulatory agencies.

d)buyers determine what will be produced based on their "dollar votes" for the goods and services offered by sellers.

SaveQuestion 41(4 points)If opportunity costs are constant thenQuestion 41 options:a)the production possibilities curve does not exist

b)the production possibilities curve is concave

c)the production possibilities curve is concave

d)the production possibilities curve is a straight line

SaveQuestion 42(4 points)DVD players and DVDs are:Question 42 options:a)complementary goods.

b)substitute goods.

c)independent goods.

d)inferior goods.

SaveQuestion 43(4 points)While eating at Alex's "Pizza by the Slice" restaurant, Kara experiences diminishing marginal utility. She gained 10 units of satisfaction from her first slice of pizza consumed, and would only receive 5 units of satisfaction from consuming a second slice. Based on this information we can conclude that:Question 43 options:a)Alex may have to lower the price to convince Kara to buy a second slice.

b)Kara will not eat a second slice, even if it is given to her at no charge.

c)Kara will definitely want to buy a second slice of pizza.

d)even if Kara buys a second slice, she will not buy a third slice.

SaveQuestion 44(4 points)The elasticity of supply of product X is unitary if the price of X rises by:Question 44 options:a)5 percent and quantity supplied rises by 7 percent.

b)8 percent and quantity supplied rises by 8 percent.

c)10 percent and quantity supplied stays the same.

d)7 percent and quantity supplied rises by 5 percent.

SaveQuestion 45(4 points)In which of the following cases will total revenue increase?Question 45 options:a)price falls and demand is inelastic

b)price falls and supply is elastic

c)price rises and demand is inelastic

d)price rises and demand is elastic

SaveQuestion 46(4 points)A market:Question 46 options:a)reflects upsloping demand and downsloping supply curves.

b)entails the exchange of goods, but not services.

c)is an institution that brings together buyers and sellers.

d)always requires face-to-face contact between buyer and seller.

SaveQuestion 47(4 points)The market system:Question 47 options:a)produces considerable inefficiency in the use of scarce resources.

b)effectively harnesses the incentives of workers and entrepreneurs.

c)is not consistent with freedom of choice in the long run.

d)has slowly lost ground to emerging command systems.

SaveQuestion 48(4 points)Refer to the above diagram. If this industry is comprised of only one seller, the profit-maximizing price and quantity will be:Question 48 options:a)P3andQ3.

b)P1andQ3.

c)P2andQ2.

d)indeterminate on the basis of the information given.

SaveQuestion 49(4 points)If a firm decides to produce no output in the short run, its costs will be:Question 49 options:a)its marginal costs.

b)its variable costs.

c)its fixed costs.

d)zero.

SaveQuestion 50(4 points)Suppose you find that the price of your product is less than minimum AVC. You should:Question 50 options:a)minimize your losses by producing whereP= MC.

b)maximize your profits by producing whereP= MC.

c)close down because, by producing, your losses will exceed your total fixed costs.

d)close down because total revenue exceeds total variable cost.

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