QN=1 (17123) Senator Smart, who understands economic principles, is trying to convince

workers in her district that trade with other countries is beneficial. Senator Smart
should argue that trade can be beneficial1111
a. only if it allows us to obtain things that we couldn't make for ourselves.
b. because it allows specialization, which increases total output.
c. to us if we can gain and the others involved in the trade lose.
d. in only a limited number of circumstances because others are typically self-
interested.

QN=2 (17147) The invisible hand refers to1111

a. how central planners made economic decisions.
b. how the decisions of households and firms lead to desirable market outcomes.
c. the control that large firms have over the economy.
d. government regulations without which the economy would be less efficient.

QN=3 (17113) As a result of a successful attempt by government to cut the economic pie into
more equal slices,111
a. it is easier to cut the pie, and therefore the economy can produce a larger pie.
b. those who earn more income pay less in taxes.
c. the pie gets smaller, and there will be less pie overall.
d. government will spend too much time cutting and it causes the economy to lose
the ability to produce enough pie for everyone.

QN=4 (17121) In considering how to allocate its scarce resources among its various members, a
household considers1111
a. (i) each member’s abilities.
b. (ii) each member’s efforts.
c. (iii) each member’s desires.
d. all of (i), (ii), and (iii).

QN=5 (17146) Russell spends an hour studying instead of playing tennis. The opportunity cost
to him of studying is111
a. the improvement in his grades from studying for the hour.
b. the improvement in his grades from studying minus the enjoyment of playing
tennis.
c. the enjoyment and exercise he would have received had he played tennis.
d. zero. Since Russell chose to study rather than to play tennis, the value of
studying must have been greater than the value of playing tennis.

QN=6 (17155) The two basic reasons why economists often appear to give conflicting advice to
policymakers are differences in1
a. opinions and education.
b. opinions and values.
c. scientific judgments and education.
d. scientific judgments and values.

QN=7 (17161) Refer to Figure 2-2. Boxes C and D represent

22

a. households and firms.

b. the goods and services market and the factors of production market.
c. the goods and services market and the financial market.
d. households and government.

QN=8 (17185) Refer to Table 2-2. What is the opportunity cost to Batterland of increasing the
production of pancakes from 150 to 300?
2
a. 75 waffles
b. 150 waffles
c. 250 waffles
d. 325 waffles

QN=9 (17157) Suppose an economy produces two goods, food and machines. This economy
always operates on its production possibilities frontier. Last year, it produced 50
units of food and 30 machines. This year it experienced a technological advance
in its machine-making industry. As a result, this year the society wants to
produce 55 units of food and 30 machines. Which of the following statements is
correct?33
a. Because the technological advance occurred in the machine-making industry, it
will not be possible to increase food production without reducing machine
production below 30.
b. Because the technological advance occurred in the machine-making industry,
increases in output can only occur in the machine industry.
c. In order to increase food production in these circumstances without reducing
machine production, the economy must reduce inefficiencies.
d. The technological advance reduced the amount of resources needed to produce
30 machines, so these resources could be used to produce more food.

QN=10 (17178) Economists build economic models by3

a. generating data.
b. conducting controlled experiments in a lab.
c. making assumptions.
d. reviewing statistical forecasts.

QN=11 (17224) What will happen to the equilibrium price of new textbooks if more students
attend college, paper becomes cheaper, textbook authors accept lower royalties,
and fewer used textbooks are sold?33
a. Price will rise.
b. Price will fall.
c. Price will stay exactly the same.
d. The price change will be ambiguous.

QN=12 (17190) Which of the following would most likely serve as an example of a monopoly?4
a. a bakery in a large city
b. a bank in a large city
c. a local cable television company
d. a small group of corn farmers

QN=13
(17208) 4. Refer to Table 4-7. Suppose Charlie, Maxine, and Quinn are the only
demanders of sandwiches and that the market demand violates the law of demand.
Then, in the table,444

a. x 5.
b. x 5.
c. x 7.
d. x 10.

QN=14 (17193) Which of the following is not held constant in a demand schedule?444
a. Income
b. Tastes
c. Price
d. Expectations

QN=15 (17237) If a good is a luxury, demand for the good would tend to be4
a. inelastic.
b. elastic.
c. unit elastic.
d. horizontal.

QN=16 (17240) Suppose there is a 6 percent increase in the price of good X and a resulting 6
 percent decrease in the quantity of X demanded. Price elasticity of demand for X
is55
a. 0.
b. 1.
c. 6.
d. 36.

QN=17 (17264) Scenario 5-2

The supply of aged cheddar cheese is inelastic, and the supply of bread is elastic.
Both goods are considered to be normal goods by a majority of consumers.
Suppose that a large income tax increase decreases the demand for both goods
by 10%.

Refer to Scenario 5-2. The change in equilibrium price will be55

a. greater in the aged cheddar cheese market than in the bread market.
b. greater in the bread market than in the aged cheddar cheese market.
c. the same in the aged cheddar cheese and bread markets.
d. may be greater in either the aged cheddar cheese market or the bread market.

QN=18 (17266) Under rent control, bribery is a mechanism to555

a. bring the total price of an apartment (including the bribe) closer to the
equilibrium price.
b. allocate housing to the poorest individuals in the market.
c. force the total price of an apartment (including the bribe) to be less than the
market price.
d. allocate housing to the most deserving tenants.

QN=19 (17274) Rent-control laws dictate555

a. the exact rent that landlords must charge tenants.
b. a maximum rent that landlords may charge tenants.
c. a minimum rent that landlords may charge tenants.
d. a minimum rent and a maximum rent that landlords may charge tenants.

QN=20 (17294) A surplus results when55

a. a nonbinding price floor is imposed on a market.
b. a nonbinding price floor is removed from a market.
c. a binding price floor is imposed on a market.
d. a binding price floor is removed from a market.

QN=21 (17314)
Refer to Table 7-9. Both the demand curve and the supply curve are straight
lines. If the price is $8 but only 4 units are bought and sold, producer surplus
will be5
a. $24.
b. $28.
c. $32.
d. $40.

QN=22 (17332) Inefficiency can be caused in a market by the presence of666

a. (i) market power.
b. (ii) externalities.
c. (iii) imperfectly competitive markets.
d. All of (i), (ii), and (iii) are correct.

QN=23 (17319) Which of the following statements is not correct?666

a. A seller would be eager to sell her product at a price higher than her cost.
b. A seller would refuse to sell her product at a price lower than her cost.
c. A seller would be indifferent about selling her product at a price equal to her
cost.
d. Since sellers cannot set the price for their product, they must be willing to sell
their product at any price.

QN=24 (17354) A paper plant produces water pollution during the production process. If the
government forces the plant to internalize the negative externality, then the66
a. supply curve for paper would shift to the right.
b. supply curve for paper would shift to the left.
c. demand curve for paper would shift to the right.
d. demand curve for paper would shift to the left.

QN=25 (17367) The term market failure refers to666

a. a market that fails to allocate resources efficiently.
b. an unsuccessful advertising campaign which reduces demand.
c. ruthless competition among firms.
d. a firm that is forced out of business because of losses.
QN=26 (17360) The height of the demand curve shows7777
a. how much each buyer in the market is willing to pay.
b. the willingness to pay of the marginal buyer.
c. the maximum price all buyers will pay for a product.
d. the lowest price buyers will pay for a product.

QN=27 (17409) An overcrowded beach is an example of777

a. a positive externality.
b. a Tragedy of the Commons.
c. an environmentally inefficient allocation of resources.
d. an economically unfair allocation of resources.

QN=28 (17421) The value and cost of goods are easiest to determine when the goods are7
a. private goods.
b. public goods.
c. common resources.
d. natural monopolies.

QN=29 (17394) Because public goods are7777

a. excludable, people have an incentive to be free riders.
b. excludable, people do not have an incentive to be free riders.
c. not excludable, people have an incentive to be free riders.
d. not excludable, people do not have an incentive to be free riders.

QN=30 (17449) At Bert's Bootery, the total cost of producing twenty pairs of boots is $400. The
marginal cost of producing the twenty-first pair of boots is $83. We can
conclude that the7777
a. average variable cost of 21 pairs of boots is $23.
b. average total cost of 21 pairs of boots is $23.
c. average total cost of 21 pairs of boots is $15.09.
d. marginal cost of the 20th pair of boots is $20.

QN=31 (17462) Refer to Figure 13-2. As the number of workers increases,

7
a. (i) marginal product decreases.
b. (ii) total output decreases.
c. (iii) marginal product increases but at a decreasing rate.
d. Both (i) and (ii) are correct.

QN=32 (17453) The long-run average total cost curve is always8

a. flatter than the short-run average total cost curve, but not necessarily horizontal.
b. horizontal.
c. falling as output increases.
d. rising as output increases.

QN=33 (17483) Profit maximizing firms in competitive industries with free entry and exit face a
price equal to the lowest possible8888
a. marginal cost of production.
b. fixed cost of production.
c. total cost of production.
d. Average total cost of production.

QN=34 (17478) 4. Refer to Figure 14-2. This is a competitive market. If the market price is
$10, what is the firm’s total cost?
8888
a. $15
b. $30
c. $35
d. $50

QN=35 (17506) Refer to Table 14-7. If the firm is currently producing 14 units, what would you
advise the owners?
999

a. decrease quantity to 13 units

b. increase quantity to 17 units
c. continue to operate at 14 units
d. increase quantity to 16 units

QN=36 (17547) A monopoly chooses to supply the market with a quantity of a product that is
determined by the intersection of the99
a. marginal cost and demand curves.
b. average total cost and demand curves.
c. marginal revenue and average total cost curves.
d. marginal revenue and marginal cost curves.

QN=37 (17528) Suppose when a monopolist produces 75 units its average revenue is $10 per
unit, its marginal revenue is $5 per unit, its marginal cost is $6 per unit, and its
average total cost is $5 per unit. What can we conclude about this monopolist?
1010
a. The monopolist is currently maximizing profits, and its total profits are $375.
b. The monopolist is currently maximizing profits, and its total profits are $300.
c. The monopolist is not currently maximizing profits; it should produce more
units and charge a lower price to maximize profits.
d. The monopolist is not currently maximizing profits; it should produce fewer
units and charge a higher price to maximize profits.

QN=38 (17529) A monopoly market is characterized by101010

a. many buyers and sellers
b. “natural” products.
c. barriers to entry.
d. a Nash equilibrium.

QN=39 (17562) One way in which monopolistic competition differs from oligopoly is
that10101010
a. there are no barriers to entry in oligopolies.
b. in oligopoly markets there are only a few sellers.
c. all firms in an oligopoly eventually earn zero economic profits.
d. strategic interactions between firms are rare in oligopolies.

QN=40 (17577) A market is comprised of many firms as opposed to just one firm or a few
firms1010
a. only when it is perfectly competitive.
b. only when it is perfectly competitive or oligopolistic.
c. only when it is perfectly competitive or monopolistically competitive.
d. when it is perfectly competitive, monopolistically competitive, or oligopolistic.

QN=41 (17593) Which of the following statements is correct?101010

a. Monopolistic competition is similar to monopoly because both market structures
are characterized by patents.
b. Monopolistic competition is similar to perfect competition because both market
structures are characterized by each seller being small compared to the market.
c. Monopolistic competition is similar to oligopoly because both market structures
are characterized by free entry.
d. Monopolistic competition is similar to perfect competition because both market
structures are characterized by excess capacity.
QN=42 (17618) A profit-maximizing firm in a monopolistically competitive market is
characterized by which of the following?111111
a. Average revenue exceeds marginal revenue.
b. Marginal revenue exceeds average revenue.
c. Average revenue is equal to marginal revenue.
d. Revenue is always maximized along with profit.

QN=43 (17622) After initial success, the OPEC cartel saw the price of oil and the revenues of its
members decline due, in part, to11111111
a. the low elasticity of demand for oil in the short run.
b. the large number of buyers from each member nation.
c. surging demand for oil in the early 1980s.
d. OPEC members failing to produce their agreed-upon production levels.

QN=44 (17603) The players in a two-person game are choosing between Strategy X and Strategy
Y. If the second player chooses Strategy X, the first player's best outcome is to
select X. If the second player chooses Strategy Y, the first player's best outcome
is to select X. For the first player, Strategy X is called a11
a. dominant strategy.
b. collusive strategy.
c. repeated-trial strategy.
d. cartel strategy.

QN=45 (17676) Suppose that technological progress increases the productivity of teachers.
Which of the following accurately describes the labor market for teachers after
the technological change?111111
a. Wages will rise and quantity of teachers employed will fall.
b. Wages will rise and the quantity of teachers employed will rise.
c. Wages will fall and the quantity of teachers employed will fall.
d. Wages will fall and the quantity of teachers employed will rise.

QN=46 (17677) Consider the labor market for heath care workers. Because of the aging
population in the United States, the output price for health care services has
increased. Holding all else equal, what effect does this have on the labor market
for health care employees?1111
a. The equilibrium wage increases and the equilibrium quantity of labor increases.
b. The equilibrium wage increases and the equilibrium quantity of labor decreases.
c. The equilibrium wage decreases and the equilibrium quantity of labor increases.
d. The equilibrium wage decreases and the equilibrium quantity of labor decreases.

QN=47 (17665) If Emma's individual labor supply curve is upward sloping, then Emma responds
to an increase in11
a. (i) the wage by working more hours per week.
b. (ii) the opportunity cost of leisure by working fewer hours per week.
c. (iii) the opportunity cost of leisure by taking more hours of leisure per week.
d. Both (i) and (ii) are correct.

QN=48 (17688) A budget constraint illustrates the12

a. prices that a consumer chooses to pay for products he consumes.
b. purchases made by consumers.
c. consumption bundles that a consumer can afford.
d. consumption bundles that give a consumer equal satisfaction.

QN=49 (17716) When a consumer experiences a price decrease for an inferior good, it is possible
that the income effect is12
a. (i) less than the substitution effect, and the demand curve will be downward
sloping.
b. (ii) greater than the substitution effect, and the demand curve will be upward
sloping.
c. (iii) less than the substitution effect, and the demand curve will be upward
sloping.
d. both (i) and (ii) are correct.

QN=50 (17711) Suppose a consumer has an income of $800 per month and that she spends her
entire income each month on beer and sausage. The price of a pint of beer is $5,
and the price of a sausage is $4. Which of the following combinations of beers
and bratwursts represents a point that would lie directly on the consumer’s
budget constraint?12
a. 160 beers and 200 sausages
b. 40 beers and 50 sausages
c. 80 beers and 100 sausages
d. 80 beers and 0 sausages
[id=17123, Mark=1]1. B
[id=17147, Mark=1]2. B
[id=17113, Mark=1]3. C
[id=17121, Mark=1]4. D
[id=17146, Mark=1]5. C
[id=17155, Mark=1]6. D
[id=17161, Mark=1]7. B
[id=17185, Mark=1]8. A
[id=17157, Mark=1]9. D
[id=17178, Mark=1]10. C
[id=17224, Mark=1]11. D
[id=17190, Mark=1]12. C
[id=17208, Mark=1]13. C
[id=17193, Mark=1]14. C
[id=17237, Mark=1]15. B
[id=17240, Mark=1]16. B
[id=17264, Mark=1]17. A
[id=17266, Mark=1]18. A
[id=17274, Mark=1]19. B
[id=17294, Mark=1]20. C
[id=17314, Mark=1]21. A
[id=17332, Mark=1]22. D
[id=17319, Mark=1]23. D
[id=17354, Mark=1]24. B
[id=17367, Mark=1]25. A
[id=17360, Mark=1]26. B
[id=17409, Mark=1]27. B
[id=17421, Mark=1]28. A
[id=17394, Mark=1]29. C
[id=17449, Mark=1]30. B
[id=17462, Mark=1]31. A
[id=17453, Mark=1]32. A
[id=17483, Mark=1]33. D
[id=17478, Mark=1]34. C
[id=17506, Mark=1]35. D
[id=17547, Mark=1]36. D
[id=17528, Mark=1]37. D
[id=17529, Mark=1]38. C
[id=17562, Mark=1]39. B
[id=17577, Mark=1]40. C
[id=17593, Mark=1]41. C
[id=17618, Mark=1]42. A
[id=17622, Mark=1]43. D
[id=17603, Mark=1]44. A
[id=17676, Mark=1]45. B
[id=17677, Mark=1]46. A
[id=17665, Mark=1]47. A
[id=17688, Mark=1]48. C
[id=17716, Mark=1]49. D
[id=17711, Mark=1]50. C