MICROECONOMICS FINAL MULTIPLE CHOICE

Economics is the study of:

a. the institutional structure through which governments coordinate the wants and

desires of individuals.

b. the institutional structure through which individuals in a society coordinate their

diverse wants and desires.

c. how societies coordinate production so that all its participants' diverse wants and

desires are met.

d. how governments coordinate production so that all its participants' diverse wants

and desires are met.

the institutional structure through which individuals in a society coordinate their

diverse wants and desires.

The following table represents the choice faced by policy makers given the current set of U.S. institutions and technology. What is the opportunity cost of reducing the rate of inflation from 7 percent to 5 percent?

a. 1 percentage point increase of the unemployment rate.

b. 2 percentage points increase of the unemployment rate.

c. 1 percentage point decrease of the inflation rate.

d. 2 percentage points increase of the inflation rat

1 percentage point increase of the unemployment rate.

Which of the following statements about the characteristics of a capitalist system is

FALSE?

a. The questions of what, how, and for whom to produce are reflections of the

desires of individuals.

b. Distribution is to each individual according to his or her ability, effort, and

inherited property.

c. Market forces of supply and demand coordinate economic activity.

d. Political, social, and historical forces play very little role in the coordination of

economic decisions.

Political, social, and historical forces play very little role in the coordination of

economic decisions.

To engage in economic reasoning, you must compare:

a. total cost and total benefit.

b. marginal cost, sunk cost, and total benefit.

c. sunk cost and marginal cost.

d. marginal cost and marginal benefit.

marginal cost and marginal benefit.

An economic theory is:

a. a generalizations about the workings of an abstract economy.

b. a physical or mental structure that significantly influences economic decisions. c. an action taken to influence the course of economic events.

d. an absolute truth concerning the workings of the real world.

a generalizations about the workings of an abstract economy.

Mexico has a comparative advantage in producing corn:

a. if its opportunity cost of producing corn is higher than the opportunity cost in

other countries.

b. if its opportunity cost of producing corn is lower than the opportunity cost in other

countries.

c. if its opportunity cost of producing corn is the same as the opportunity cost in

other countries.

d. if it can produce more corn that other countries.

if its opportunity cost of producing corn is lower than the opportunity cost in other

countries.

All of the following are examples of government's role as referee except:

a. collecting social security taxes from workers' paychecks.

b. setting minimum safety regulations for the workplace.

c. prohibiting two competitors from meeting in order to fix prices of their products. d. setting limitations on when someone can be fired.

collecting social security taxes from workers' paychecks.

Households are on the:

a. supply side of factor markets and the demand side of goods markets.

b. demand side of factor markets and the supply side of goods markets.

c. supply side of both factor markets and goods markets.

d. demand side of both factor markets and goods markets.

supply side of factor markets and the demand side of goods markets.

Which of the following statements is a normative economic statement?

a. Free trade tends to decrease the price of imported goods.

b. Socialism answers the three basic economic questions differently than capitalism.

c. Individuals with higher incomes ought to pay more in taxes than individuals with

lower incomes.

d. Minimum wage laws do not adversely affect teenage employment levels.

Individuals with higher incomes ought to pay more in taxes than individuals with

lower incomes.

Currently the firm pictured in Figure 1 is producing 6 cars and 80 pizzas.

a. The firm cannot increase its car or pizza production unless it changes its

technology or gets more resources.

b. The opportunity cost of 20 additional pizzas is 2 cars.

c. The opportunity cost of 2 additional cars is 20 pizzas.

d. The firm does not have to sacrifice pizzas to make more cars because it is

currently not producing efficiently.

The opportunity cost of 2 additional cars is 20 pizzas.

If officials impose a price ceiling in a market, economists will point out that:

A. society as a whole will benefit more (in terms of changes in comsumer and

producer surplus) with the price ceiling than it would without the price

ceiling.

B. the price ceiling will encourage producers to produce more of the good

than they would without the price ceiling.

C. the price ceiling will discourage producers from producing as much of the

product than they would without the price ceiling.

D. consumers will want less of the good with the price ceiling than they

would without the price ceiling.

the price ceiling will discourage producers from producing as much of the

product than they would without the price ceiling.

If the (inverse) demand for Cuisinart coffee bean grinders is (MB=) P=60 - 0.02×QD and the current market price is $40.00, the quantity demanded for Cuisinart coffee bean grinders is:

A. 10,000 coffee grinders.

B. 4,000 coffee grinders.

C. 3,000 coffee grinders.

D. 1,000 coffee grinders.

1,000 coffee grinders.

Which scenario below best describes Figure 1?

A. The price of an important input in a production process increases.

B. an increase in income impacts the sales of normal goods

C. Anewtechnologydecreasesthecostofproduction.

D. A decrease in the price of a good impacts the sales of a substitute good.

an increase in income impacts the sales of normal goods

The (inverse) supply and demand equations for Little Debbie Oatmeal Cream cookies are given by (MC=) P= 1.0 + 0.0075×QS and (MB=) P= 7.0 - 0.0075×QD respectively, where price is in dollars per box and quantity is in thousands of boxes. The equilibrium market price and quantity is:

A. P = $2.50, Q = 200 thousand boxes.

B. P = $4.00, Q = 400 thousand boxes.

C. P=$5.50,Q=200thousandboxes.

D. P = $2.50, Q = 600 thousand boxes.

P = $4.00, Q = 400 thousand boxes.

When the price of yucca falls by 10% sales of potatoes fall by 2%. We might reasonable conclude that:

A. yucca and potatoes are substitutes.

B. yucca and potatoes are complements

C. yucca and potatoes are normal goods.

D. yucca and potatoes are inferior goods.

yucca and potatoes are substitutes.

As the manager of a golf resort, you want to increase the number of tee times sold by 6.0%. Your staff economist (and junior caddy) has determined that the price elasticity of demand for tee times is |-1.5|. To increase sales by the desired amount, you should decrease the price of a tee time by how much?

A. 9%.

B. 6%.

C. 4%.

D. 3%.

4%

An economist recently estimated that for every 10% increase in the price of a fast food restaurant meal 12.2% fewer fast food meals are sold. This indicates that the demand for fast food meals is:

A. inelastic.

B. elastic.

C. unitelastic.

D. perfectlyinelastic.

elastic

At the current market price of pomegranates the quantity demanded exceeds the quantity supplied. As a result,

A. the price is above equilibrium.

B. equilibrium will be reestablished as the demand curve shifts to the left.

C.a shortage exists and the price will rise overtime as buyer scompetitively

bid up the price.

D. excess quantity supplied exists and the price will fall over time as sellers

competitively bid down the price.

a shortage exists and the price will rise overtime as buyer scompetitively

bid up the price.

Table 1 shows the demand schedule of three people who make up the market for lobsters.

If the market price for lobsters is $8.00, what is the market quantity demanded?

A. 3.3 lobsters.

B. 7 lobsters.

C. 14 lobsters.

D. 66 lobsters.

14 lobsters

10. In the long run, the price elasticity of demand is generally:

A. of equal elasticity in the short run.

B. unrelated to the elasticity in the short run.

C. less elastic than in the short run.

D. more elastic than in the short run.

more elastic than in the short run.

Refer to Table 1 below. What is the marginal utility of the fourth slice of Aunt June's Pecan Pie?

A. 690 utils.

B. 175 utils.

C. 90 utils.

D. 70 utils.

90 utils.

To rationally maximize the happiness a person can derive from allocating income among potential consumption choices the individual should:

A. purchase the goods that cost the least.

B. purchase the goods that offer the highest total utility.

C. purchase the goods with the highest average utility per dollar spent.

D. purchase the goods with the highest marginal utility per dollar spent.

purchase the goods with the highest marginal utility per dollar spent.

Average revenue minus average total cost equals:

A. Profit.

B. Marginal revenue.

C. Profit divided by output.

D. Average variable cost.

Profit divided by output

Ling can hand-craft 50 toques in a 40 hour week. He could have earned $20 an hour working for the Lumber Jack Toque Company. If each toque sells for $30 and the explicit total cost of producing toques is $400 per week, Ling's weekly economic profit equals:

A. $400.

B. $300.

C. $0

D. - $400.

$300

Short-run decisions are ____ while long-run decisions are _____.

A. constrained, unconstrained

B. unconstrained, constrained

C. constrained, constrained

D. unconstrained, unconstrained

constrained, unconstrained

A firm has four possible ways it can produce 200 units of output per week: it can use 25 workers and 5 machines, 20 workers and 6 machines, 15 workers and 8 machines, or 16 workers and 9 machines. If each worker costs $10 per week and each machine is rented for $40 a week, the most economically efficient combination is:

A. 25 workers and 5 machines.

B. 20 workers and 6 machines.

C. 15 workers and 8 machines.

D. 16 workers and 9 machines.

20 workers and 6 machines.

A downward sloping long-run average total cost curve implies that:

A. a firm is experiencing diseconomies of scale.

B. a firm is experiencing diminishing marginal productivity.

C. a firm is experiencing economies of scope.

D. a firm is experiencing economies of scale.

a firm is experiencing economies of scale.

Refer to Table 2: If the market price is currently $6.75 per unit and the profit maximizing firm is in a perfectly competitive market, the manager should produce ____ units of the good and will make a profit of ____.

A. 400, $400

B. 500, $800

C. 600, $1,650

D. 700, $1,897

700, $1,897

A person is currently consuming a bundle of goods (x and y) such that she has no money left over and MUx/Px < MUy/Py. To maximize her utility she should:

A. consume more of good x and less of good y.

B. consume more of good y and less of good x.

C. consume more of both goods x and y.

D. consume less of both goods x and y.

consume more of good y and less of good x.

10. Refer to Table 3 below. If labor costs $12 per hour, what is the marginal cost of the 24th unit of output?

A. $2.00

B. $1.00

C. $0.50

D. $0.25

$2.00

Many firms are operating in a market where there is easy entry and firms attempt to fill niches by offering differentiated products. This market is most likely:

a. a monopoly.

b. a competitive market.

c. a monopolistically competitive market. d. an oligopolistic market.

a monopolistically competitive market

Firms in an oligopolistic market:

a. earn zero economic profits in both the short-run and the long-run.

b. can earn economic profits or losses in both the short-run and the long-run.

c. can earn either profits or losses in the short-run, but earn zero economic profits in

the long-run.

d. earn economic profits in the short-run but zero economic profits in the long-run.

can earn economic profits or losses in both the short-run and the long-run.

A monopolist faces a downward sloping demand curve described by the (inverse) demand equation: P = 1,000 - 2QD and has and has a marginal cost function of: MC = 50 + 6QS. Determine the equilibrium monopoly price and quantity (remember that the marginal revenue curve of a linear demand curve is described by a straight line that is twice as steep as the demand curve. You might want to sketch this one.).

a. P = 950, Q = 150

b. P = 100, Q = 450

c. P = 910, Q = 45

d. P = 810, Q = 95

P = 810, Q = 95

If a monopolist has the ability to price discriminate, generally:

a. consumer surplus will fall, profits will rise, and output will increase.

b. consumer surplus will increase, profits will fall, and output will fall.

c. consumer surplus will fall, profits will fall, and output will increase.

d. consumer surplus will fall, profits will rise, and output will fall.

consumer surplus will fall, profits will rise, and output will increase.

If a judge is using the Herfindahl Index as the primary evidence when deciding if an industry in monopolistic we might reasonable conclude she is judging based on:

a. market performance.

b. market structure.

c. nefarious business practices.

d. strategic decision making.

market structure

If a monopolist increases sales from 600 to 640 by lowering its price from $20 to $19, marginal revenue is:

a. $160.

b. $16.

c. $4.

d. $-1.

$4

According to Figure 1, if the firm is a monopolistically competitive firm it should produce roughly ___ units and charge a price of ___ to maximize profits.

b. 120, $61

c. 90, $55

d. 60, $70

e. 60, $40

60, $70

Examine the prisoner's dilemma game depicted in Figure 2. Each prisoner is offered the choice of confessing to the crime of which they are jointly accused or not confessing. They are not allowed to consult with each other. Which of the following is a Nash equilibrium of the game?

a. A: Not Confess, B: Not Confess

b. A: Confess, B: Confess

c. A: Not Confess, B: Confess

d. A: Confess, B: Not Confess

A: Confess, B: Confess

Refer to Table 1: If the market price is currently $5.75 per unit and the profit maximizing firm is in a perfectly competitive market, the manager should produce ____ units of the good and will make a profit of (roughly) ____.

a. 400, $800

b. 500, $800

c. 600, $1,300

d. 700, $1,400

600, $1,300

The firm depicted in Table 1 is currently in the ____ run and should expect firms to ____ and the market price to ____.

a. Long, enter, rise.

b. Long, enter, fall.

c. Short, enter, fall.

d. Short, exit, rise.

Short, enter, fall.

The following table represents the choices faced by a feudal lord in ancient China. What is the opportunity cost of producing the 8th terra-cotta statue (TABLE)

A. 2.5 porcelain vases

B. 5.0 porcelain vases

C. 10.o porcelain vases

D. 20.0 porcelain vases

5.0 porcelain vases

Given the information in table 2, the opportunity cost of producing duck decoys:

A. is higher at Gander Mountain

B. is the same for both producers

C. cannot be determined with the information given

D. is higher at Bass Pro Shop

is higher at Bass Pro Shop

Given the information in table 2, we can determine that:

A. Gander mountain has a comparative advantage in producing both goods

B. Bass Pro shop has a comparative advantage in producing both goods

C. Gander mountain has a comparative advantage in producing fishing lures

D. Bass Pro Shop has a comparative advantage in producing fishing lures

Bass Pro Shop has a comparative advantage in producing fishing lures

Economic reasoning is based on the premise that:

A. only non-economic decisions or actions have a cost associated with them

B. all decisions or actions are costless

C. all decision or actions have a cost associated with them

D. only economic decisions or actions have a cost associated with them

all decision or actions have a cost associated with them

Which of the following statements about the characteristics of a capitalist system is true?

A. the distribution of resources is allocated fairly to all individuals based on what is necessary for survival

B. Market forces of supply and demand are the primary coordinating forces behind economic forces behind economic activity

C. the question of what how, and for whom to produce are reflections of the desires of business

D. political, social and historical forces play little or no role in the coordination of economic decisions

Market forces of supply and demand are the primary coordinating forces behind economic forces behind economic activity

Which of the following best represents the opportunity cost of attending a free poetry slam at the blackbird Cafe

A. the value of the ticket of the poetry slam

B. the coffee you buy at the poetry slam

C. Not being able to go hang out with your friends at the Brick that night

D. all of the above

Not being able to go hang out with your friends at the Brick that night

Which of the following best exemplifies the invisible hand at work?

A. people who object the Exxons business practices boycott it'd products

B. A shortage of soybeans causes the price of bacon to rise.

C. The government requires automobile manufacturers to install airbags in cars

D. Church officials demand their adherent abstain from alcohol consumption

A shortage of soybeans causes the price of bacon to rise.

Trade can benefit a country because with trade:

A. the citizens of a country can learn about the citizens of other countries

B a country can obtain products it could not easily produce without trade

C. a country can obtain more goods than it could otherwise produce it own

D all of the above are benefits of trade

all of the above are benefits of trade

Which of the following statements is a normative economic statement?

A. the sole proprietorship is the best form of business for new entrepreneurs

B. The state ought too let individuals determine what is best for themselves in free markets

C. the Kibbuts is an example go socialism in practice that has survived over the years

D. Higher taxes discourage some people from working as much as they would otherwise

The state ought too let individuals determine what is best for themselves in free markets

The best economic explanation for why Hewlett-Packard opened a call center in India in 2004 is that:

A. India had a comparative advantage in supplying technical information over the phone

B. India had more people with technical decrees than the US

C. the managers at Hewlett-Packard really wanted to move to india

D. costumers preferred to speak to people from different places

India had a comparative advantage in supplying technical information over the phone

You have determined that the demand for you product is price inelastic. Therefore:

A. decreasing the price you charge for your good will decrease the quantity demanded and decrease total revenue

B. increasing the price you charge for your good will decrease the quantity demanded but increase total revenue

C. increasing the price you charge for your good will increase the quantity demanded for your good but decrease total revenue

D. Increasing the price you charge for your good will increase the quantity demanded and increase total revenue

increasing the price you charge for your good will decrease the quantity demanded but increase total revenue

An unexpected winter storm in Charlotte, NC increases the quantity of rock salt sold by 10% and increases its retail price by 18%. Which of the following is the most reasonable conclusion?

A. Supply of rock salt is shifted left along an elastic demand curve

B. Supply of rock salt is shifted left along an inelastic demand curve

C. Demand shifted up along an inelastic demand curve

D. Demand shifted up along an elastic demand curve

Demand shifted up along an inelastic demand curve

The (inverse) supply and (inverse) demand equations for UDTEE Banana slice are given by MC=2.0+0.25Qs and MB=8.0-.5Qd respectively, where price is dollars per slicer and quantity is in thousand of slicers. The equilibrium market price and quantity are:

A. Equilibrium P=$4.50, Equilibrium Q= 10 thousand slicer

B. Equilibrium P=$4.00, Equilibrium Q= 8 thousand slicer

C. Equilibrium P=$1.00, Equilibrium Q= 15 thousand slicer

D. Equilibrium P=$5.00, Equilibrium Q= 6 thousand slicer

Equilibrium P=$4.00, Equilibrium Q= 8 thousand slicer

Which story below best describes Figure 1?

A. In the market for bananas, anew fungus kills 35% of the south american crop

B. In the market for ivory, former NBA star Yao Ming urges Chinese consumers to stop purchasing elephant tusks and rhino horns

C. in the market for rap music, new of Lil Boosies release from LA prison sparks and increase interest in his music

D. In the market for maple syrup, improvements in the tree tapping techniques make maple sap easier to extract

In the market for maple syrup, improvements in the tree tapping techniques make maple sap easier to extract

In the price elasticity of supply was the same for the soloing goods, sellers would be most able to pass along buyers a portion of a cost increase on which of the following items?

A. Salt, with a price elasticity of demand of -0.1

B. Fresh green peas, with price elasticity of demand of -2.8

C. Movies, with a price elasticity of demand of -0.9

D. Gasoline with a price elasticity of -0.2

Salt, with a price elasticity of demand of -0.1

Which of the following is most likely to shift the demand for Old Navy shirts to the left?

A. the price of polo brand shirts increases

B. the price of cotton increases

C. the average wage of workers decreases

D. Rolling Stone suggest that cool people wear old navy shirts

the average wage of workers decreases

There are two consumers who make up the market for exotic goldfish. One person's (inverse) demand curve is P=5-1Qd, where Qd is the person's quantity demanded. The second person's (inverse) demand curve is P=8-2Qd. If the market price for exotic goldfish is $2, what is the market quantity of exotic goldfish?

A. 11 exotic goldfish

B. 9 exotic goldfish

C. 6 exotic goldfish

D. 3 exotic goldfish

6 exotic goldfish

Effective rent controls:

A. are examples of price floors

B. create greater amount go higher quality housing to be made available to renters

C. create an excess quantity supplied of renter-occupied housing

D. cause the quantity demand to exceed the quantity supplied of rental occupied housing

cause the quantity demand to exceed the quantity supplied of rental occupied housing

The more broadly a good is defined:

A. the fewer substitutes it has therefore the demand for that good is more elastic

B. the fewer substitutes it has therefore the demand for that good is less elastic

C. the more substitutes it has therefore the demand for that good is less elastic

D. the more substitutes it has therefore the demand for that good is more elastic

the fewer substitutes it has therefore the demand for that good is less elastic

It has been estimated that the price elasticity of demand for attend Atlanta Braves baseball games is -0.6. If price were the only factor to change, one might conclude that a decrease in attendance of 12% was caused by:

A. an decrease in ticket prices of 2%

B. an increase in ticket prices of 2%

C. an decrease in ticket prices of 20%

D. an increase in ticket prices of 20%

an increase in ticket prices of 20%

Chuck is deciding how to spend his inheritance. If he buys a BMW it will give him 90,000 utils of satisfaction and will cost him $45,000. If, instead he buts a Porsche he will get 120,000 utils of satisfaction and it will cost him $75,000. If Chuck is rational, his better choice is:

A. buying the Porsche because his total cost will be greater

B. buying the BMW because his total pleasure will be greater

C. buying the BMW because his pleasure per dollar is will be greater

D. buying the Porsche because his pleasure per dollar is will be greater

buying the BMW because his pleasure per dollar is will be greater

The downward sloping portion of the long-run average cost curve is a result of:

A. economies if scale

B. Economies of scope

C. the absence of fixed inputs

D. decreasing marginal productivity

economies if scale

The young Thomas Edison make 20 light bulbs a week in his dorm room. The parts for each light bulb cost $2.00. He sells each light bulb fir $5.00. General Electric offers Thomas an executive job that pay $50.00 a week. Thomas's weekly economic profit from making light bulbs is equal to:

A. $60.00

B. $0.00

C. $10.00

D. $3.00

$10.00

Marginal cost is calculated by:

A. dividing total cost by output

B. dividing the change in fixed cost by the change in quantity

C. dividing the change in variable cost by the change in quantity

D. dividing the cost of one more unit of output by the level of output

dividing the change in variable cost by the change in quantity

Which of the following is necessary for a level of output to be produced in an economically efficient way?

A. the least number of inputs possible should be used

B. the marginal cost of each input must be at its minimum level

C. the marginal product of each input must be at its maximum level

D. The ratio of marginal product to input price must be the same for all inputs

The ratio of marginal product to input price must be the same for all inputs

Diminishing marginal utility is consistent with the law of demand because:

A. people generally want more of things they like at the margin

B. people buy less of some item when their income rises at the margin

C. when people have more of something they tend to value it less at the margin

D. output decreases as additional units of variable inputs are utilized at the margin

when people have more of something they tend to value it less at the margin

Refer to the Table 1 below. What is the marginal utility of the third fried peanut butter and banana sandwich?

A. 81 utils

B. 0 utils

C. 15 utils

D. 9 utils

9 utils

Refer to the Table 2 below. If labor (the variable input) costs $17.50 per hour, what is the marginal cost of the 85th unit of output?

A. $1.00

B $2.00

C. $ 0.50

D. $1.50

$0.50

In the short run,

A. the number of input choices available to a firm has no relationship to the number available to the firm in the long run

B. a firm has fewer input choices than in the long-run

C. a firm has the same number of input options as in the long-run

D. a more has more input options than in the long run

a firm has fewer input choices than in the long-run

A person currently consuming a bundle of goods (x and y) such that she has no money left over and MUx/Px < MUy/Py. To maximize her utility with the money she has available she should:

A. consume less of both good y and x

B. consume more of both good y and x

C. consume more of good x and less of good y

D. consume more of good y and less of good x

consume more of good y and less of good x