Need A Tutor?    |   Need Homework Help?                                                                             Help and Support     | Join or Cancel

A farm can produce 1,000 bushels of wheat per year with two workers and 1,300 bushels of wheat per year
with three workers. The marginal product of the third worker is:
A. 100 bushels.
B. 300 bushels.
C. 1,300 bushels.
D. 2,300 bushels.
 
The marginal product of labor is the change in:
A. labor divided by the change in total product.
B. total output divided by the change in the quantity of labor.
C. average output divided by the change in the quantity of labor.
D. total costs divided by the change in the quantity of labor.
 
Average variable cost equals all the following except:
A. variable cost divided by output.
B. (total cost - fixed cost) divided by output.
C. average total cost minus average fixed cost.
D. variable cost times output.
 
The average total cost curve in the short run slopes upward due to:
A. economies of scale.
B. diseconomies of scale.
C. increasing returns.
D. diminishing returns.
 
Austin's total fixed cost is $3,600. Austin employs 20 workers and pays each worker $60. If labor is his only variable cost,
what is Austin's total cost?
A. $3,600
B. $3,660
C. $4,800
D. $400
 
If price is consistently below average variable cost, then in the short
run a perfectly competitive firm should:
A. raise price.
B. sell more output.
C. shut down.
D. lower price to sell more.
 
Oligopoly is a market structure characterized by:
A. independence in decision making.
B. a horizontal demand curve.
C. a small number of interdependent firms.
D. relatively easy entry and exit.
 
A monopoly will have a Herfindahl-Hirschman Index (HHI) equal to about:
A. 1.
B. 100.
C. 1,000.
D. 10,000.
 
A duopoly is an industry that consists of:
A. a single firm.
B. two firms.
C. three or more firms.
D. a large number of small firms.
 
An extreme case of oligopoly in which firms collude to raise joint profits is known as a:
A. duopoly.
B. cartel.
C. dominant producer.
D. price war.
 
In an oligopolistic market structure, collusion between firms usually leads to higher
profits than noncooperative behavior. However, formal, overt collusion doesn't usually
occur in the United States because:
A. it is illegal.
B. there is an incentive for each firm to cheat on a collusive agreement.
C. an oligopolistic firm will typically prefer to improve the profit position of its rivals.
D. it is illegal and because there is an incentive for each firm to cheat on a collusive agreement.
 
Game theory is commonly used to explain behavior in oligopolies, because oligopolies are characterized by:
A. large profits in the long run.
B. either homogeneous or heterogeneous products.
C. interdependence.
D. imperfect competition.
 
An action is a dominant strategy when it is a player's best action:
A. regardless of the actions by other players.
B. given certain profit-maximizing actions of other players.
C. assuming the other players do not correctly anticipate the action.
D. if there is only one other competitor.
 
The kinked demand curve model assumes that:
A. rivals will follow a price increase but not a price decrease.
B. rivals will follow a price decrease but not a price increase.
C. the firm with the kinked demand curve will always behave noncooperatively.
D. the firm with the kinked demand curve will always adopt a tit-for-tat strategy.
 
Tacit collusion in practice is made more difficult to achieve:
A. the larger the number of firms in the industry.
B. the fewer the number of products being sold.
C. the more similar the marginal costs of each firm.
D. if customers have little or no bargaining power.
 
Unwritten or unspoken understandings through which firms collude to restrict competition are called:
A. cartelization.
B. oligopolization.
C. overt collusion.
D. tacit collusion.
 
Price leadership occurs if:
A. smaller firms in an industry silently agree to charge the same price as the largest firm.
B. two or more firms in an industry agree to fix the price at a given level.
C. competition among a large number of small firms generates a stable market price.
D. competition among a large number of small firms generates similar, but slightly different, prices.
 
Antitrust policy refers to government:
A. attempts to prevent the acquisition of monopoly power.
B. attempts to encourage the exercise of monopoly power.
C. encouragement of collusion in the marketplace.
D. attempts to limit private enterprise.
 
Which of the following would make it difficult for oligopolists to collude?
A. There are few firms in the market.
B. There are few buyers in the market.
C. The oligopolists have similar costs of production.
D. Oligopolists usually produce a homogeneous product.
 
Total revenue is a firm's:
A. change in revenue resulting from a unit change in output.
B. ratio of revenue to quantity.
C. difference between revenue and cost.
D. total output times the price at which it sells that output.
 
The marginal revenue received by a firm in a perfectly competitive market:
A. is unrelated to the market price.
B. is less than the market price.
C. is greater than the market price.
D. is the change in total revenue divided by the change in output.
 
In the short run, a perfectly competitive firm produces output and breaks even if:
A. the firm produces a quantity at which P < ATC.
B. the firm produces a quantity at which P = ATC.
C. the firm produces a quantity at which P > ATC.
D. the firm produces a quantity at which P = (TR/Q + TC/Q) * Q.
 
A fixed input is one:
A. that exists in nature and there is only so much of it.
B. that can be used for one thing only.
C. that can never produce more or less in any time period.
D. whose quantity cannot be changed in a particular time period.
 
In the long run:
A. all inputs are fixed.
B. inputs are neither variable nor fixed.
C. at least one input is variable and one input is fixed.
D. all inputs are variable.
 
The demand curve for a monopoly is:
A. the sum of the supply curves of all the firms in the monopoly's industry.
B. the industry demand curve.
C. horizontal because no one can enter.
D. perfectly elastic.
 
Because monopoly firms are price-setters:
A. they can only sell more by lowering price.
B. they sell more at higher prices than at lower prices.
C. they take the market-determined price as given and sell all they can at that price.
D. they sell less at lower prices
 
Which of the following is a barrier to entry?
A. control of scarce resources
B. economies of scale
C. government-created barriers such as patents and copyrights
D. control of scarce resources, economies of scale, and government-created barriers
 
In the short run:
A. all inputs are fixed.
B. all inputs are variable.
C. some inputs are fixed and some inputs are variable.
D. all costs are variable.
 
The ________ is the increase in output obtained by hiring an additional worker.
A. average product
B. total product
C. marginal product
D. marginal cost
 
A friend of yours has an interview with an economics consulting firm and has been asked to discuss a microeconomics topic.
Which of the following topics would you recommend that your friend discuss?
the study of how prices are determined in the baseball card industry
 
What does not cause a shift in demand?
a change in the price of the good
 
A physician who hires a plumber to fix a broken toilet is an example of
comparative advantage
 
Alison goes to an all-you-can-eat restaurant. She has eaten three slices of pizza and is considering having another,
but she is quite full from the first three slices. Alison's consideration is an example of
marginal thinking
 
Judy spent eight hours studying for an exam. Normally, she would have spent that time watching TV instead of studying.
She figures she could have gotten a "B" after only studying four hours, but she really wanted an "A."
What is Judy's marginal cost in terms of TV viewing to improve her grade from a "B" to an "A"?
four hours
 
Suppose a student has three hours of time to spend at her apartment before afternoon classes. She has the option of doing laundry,
studying for a test or watching television. If she decides to do laundry, then her opportunity cost is
either watching television or studying for the test, whichever would have been her second choice after doing laundry
 
Suppose that Tegan is good at cooking but not very good at cleaning up the kitchen afterward, and that Sara is good at cleaning
kitchens but not very good at cooking. Which of the following statements is true with regard to Tegan and Sara?
Tegan should cook and Sara should clean up the kitchen.
 
The concept of scarcity in economics refers to
limited resources and unlimited wants
 
The difference between microeconomics and macroeconomics is a difference between
individual economic units and the economy as a whole
 
What is the term for the voluntary exchange of goods and services between two or more parties?
trade-offs
 
What role do funds (money) play in the circular flow model?
They are what households or firms pay for products or resources.
 
You order a $20 sweatshirt online for a Father's Day gift. The shipping charge is $10. You can get free shipping if your order totals $25 or more.
Consequently, you order a $5 bobble head doll, even though neither you nor your father really likes bobble head dolls. This is an example of
incentives
 
Suppose that a politician wants to build more production facilities for solar power and wind power. At the same time, the politician
is unwilling to cut any other programs. If the resources that would be used to produce the solar and wind power facilities are already
being efficiently used in other programs, where is the point the politician is trying to reach located, in relation to the
production possibilities frontier?
it lies outside the frontier
 
Suppose workers attend several skill-building workshops, increasing their labor productivity. How is this represented
by a production possibilities frontier?
The entire PPF shifts out.
 
When a student is explaining to her academic advisor why she needs to take a semester break from school, which of the following would
be an exogenous factor?
a family member's serious illness
 
Where is unemployment, such that employment is below the full-employment level, plotted in relation to a production possibilities frontier?
a point inside the PPF
 
Where would you plot full employment in relation to a production possibilities frontier, if all other resources are being used efficiently?
a point on the PPF
 
Which of the following is an example of a positive economic statement?
The average rainfall in August 2016 was 5 inches nationwide.
 
Which of the following statements is consistent with Jonathan having a comparative advantage in producing apples?
Jonathan's opportunity cost for producing apples is lower than anyone else's.
 
Which of the following would be consistent with taking the short-run approach to decision-making?
buying an expensive new leather jacket instead of saving for retirement
 
The market for breakfast cereal is currently in equilibrium. Suddenly there is a storm that destroys the wheat that farmers
had been growing for the cereal manufacturer. What will happen to the cereal market after the storm?
Supply will decrease.
 
Government officials have hired your consulting firm to increase the demand for public transportation.
They come to you with three of their suggestions.
Suggestion 1. Reduce the price of public transportation.
Suggestion 2. Increase the price of private transportation by increasing tolls.
Suggestion 3. Offer monthly and yearly passes that reduce the price paid per ride of public transportation.
Which suggestion(s) does your firm recommend?
2
 
You're an entrepreneur and had a great idea to sell shoes that have springs installed in them to make walking easier.
However, the development costs were so high that the shoes are priced 15 times higher than shoes without springs.
As a result, many of the shoes have gone unsold.
What possible event could eliminate the disequilibrium in the market for shoes?
There is an increase in income and "spring shoes" are a normal good.
 
You are a producer of tortillas. In the market for tortillas, two events happen simultaneously: there is a decrease in the price of corn
used to make your tortillas, and there are news headlines that promote the link between eating tortillas and reducing heart attacks.
Which of the following is a consequence?
We know the quantity will increase, but we don't know what will happen to the price unless we know the size of the shifts.
 
As the owner of a hotel, you have decided to lower the price for all rooms in the month of October. What should you expect to happen?
As the price is lowered, the quantity of rooms demanded will increase.
 
You advise the owner of a local restaurant to lower the prices of his burgers. Which of the following is a consequence of this price change?
There is an increase in the demand for fries.
 
There are a number of goods that, over time for a variety of reasons, transition from being a normal good to being an inferior good
or from being an inferior good to being a normal good. One example is the flip phone. Prior to about 2010, more income for a
household usually resulted in more flip phones being purchased. However, today flip phones are liable to be purchased by households
that have experienced a reduction in income. How could this happen?
The flip phone becomes an inferior good because the good is now perceived as lower in quality than a smartphone.
 
Which of the following will cause an increase in the supply of yogurt?
an increase in the number of sellers in the market for yogurt
 
You find out that the local Walmart is having a huge sale on Mountain Dew. You rush down with the intent of buying as much Mountain
Dew as you can. In a graph of supply and demand, your action would be shown as
a movement along the demand curve for Mountain Dew.
 
According to the Food and Drug Administration, "...the ultraviolet (UV) radiation from these devices [sunlamps and tanning beds]
poses serious health risks." As a result of reading this, a local mayor decides to introduce legislation that will put a 10% excise tax
on purchases of these tanning products. From an economic point of view, this will
shift the demand curve for tanning leftward.
 
Businesses across the country are starting to install extra insulation in their buildings and warehouses. Households are now deciding to
install more insulation as well. Which of the following outcomes would you predict for the market for oil?
The equilibrium price and quantity of oil will decrease.
 
The following sentence is an example of which kind of statement, and why? "The moon is made of green cheese."
Positive because it can be proven or disproven 
 
Which of the following most accurately describes the fundamental economic problem?
Scarcity because there are more people than Earth can support
 
Which of the following best defines and values opportunity cost?
Opportunity cost is the value of the next best alternative that is given up in making a choice; it can be different for each person.
 
In the circular flow model, imports and exports are taken into account. Why?
Imports decrease domestic demand for factors of production, while exports increase domestic demand for factors of production. 
 
Price controls create shortages by setting the price __________ the equilibrium price.
below 
 
An inferior good is one whose:
demand decreases as income increases, ceteris paribus.
 
Negative cross price elasticity of demand between two goods indicates that the two goods are:
compliments.
 
The supply of walnuts in California has increased considerably, and the California Walnut Growers Association convinces the California
government to limit the annual quantity of walnuts produced to 70% of the natural equilibrium quantity. The government does so by
issuing grow permits limiting the quantity that each grower can produce. Which of the following outcomes is most likely to occur in the marketplace?
The price will increase, and the quantity sold will decrease. 
 
Because of the free-rider problem, the final output is less than the efficient level of output. This results in which of the following?
Deadweight loss 
 
Complete the following sentence. Deadweight loss can be described as:
the loss in net benefits resulting from not producing at the efficient level
 
Suppose a neighborhood is located next to a pond that breeds mosquitoes. One of the enterprising residents plans to have the area
sprayed and treated to minimize or eliminate the problem. If he asks all of residents of the neighborhood to contribute funds to have
the area (considered “a public good”) treated, he will most likely run into the problem of:
free riders 
 
What is the marginal cost of adding one more consumer to a public good?
0 
 
Over the past decades there has been a significant increase in income inequality across American households.
What is one of the main reasons for this?
Increasing demand for skilled labor and less demand for unskilled labor. 
 
Shauna has $10 for the purchase of pens and pencils. The cost of each pen is $2, and the cost of a pencil is $1.
We assume that Shauna will purchase the two goods such that the utility maximizing condition is satisfied.
Shauna buys 3 pens and 4 pencils. If the price of a pen falls to $1 each, then the substitution effect would require that Shauna:
buys more pens. 
 
Jane has a weekly budget of $50 to spend on fruit and vegetables. She decides to buy 4 pounds of fruit at a cost of $5/lb.
She spends the rest on 5 pounds of vegetables. What is the price she pays for each pound of vegetable, given her budget constraint?
$6 
 
In the case of an inferior good, the income effect and the substitution effect tend to:
move in the opposite direction. 
 
Which of the following most accurately describes the fundamental economic problem?
Scarcity because there are more people than Earth can support
 
Which of the following best defines and values opportunity cost?
Opportunity cost is the value of the next best alternative that is given up in making a choice; it can be different for each person.
 
Refer to the table below, which shows the marginal cost and the marginal benefit from producing sodas and consuming sodas, respectively.
Economic efficiency occurs at how many cans of soda and why?
Quantity              Marginal Cost                    Marginal Benefit 
1                                   6                                            20
2                                   8                                            15
3                                  10                                           10
4                                  12                                           8
5                                  14                                           5
Select one:
3 cans because marginal cost equals marginal benefit at this point 
 
In the circular flow model, imports and exports are taken into account. Why?
Imports decrease domestic demand for factors of production, while exports increase domestic demand for factors of production.
 
Price controls create shortages by setting the price __________ the equilibrium price.
below 
 
Negative cross price elasticity of demand between two goods indicates that the two goods are:
compliments. 
 
The supply of walnuts in California has increased considerably, and the California Walnut Growers Association convinces
the California government to limit the annual quantity of walnuts produced to 70% of the natural equilibrium quantity.
The government does so by issuing grow permits limiting the quantity that each grower can produce.
Which of the following outcomes is most likely to occur in the marketplace?
The price will increase, and the quantity sold will decrease. 
 
Because of the free-rider problem, the final output is less than the efficient level of output. This results in which of the following?
Deadweight loss
 
In a purely competitive market, a firm finds that at its MR = MC output level, the total variable cost
(TVC) = $550, total fixed cost (TFC) = $250, and total revenue = $700.
What should a firm in this situation do?
continue to produce because it can still cover its total variable costs
 
A monopoly firm produces an output that is __________ than the efficient level resulting in __________ to society.
less; a deadweight loss
 
Which of the following is a characteristic of communism?
The government decides the level of goods and services to produce. 
 
Suppose labor is the only variable input in the production of a certain good. Increasing the number of labor inputs from 5 to 6
increases the output from 50 to 55 units. If the final product sells at $5 per unit, what is the marginal revenue product of this
additional worker in a purely competitive market?
$25 
 
The price elasticity of demand for a resource will be more elastic when:
there are substitutes for the resource. 
 
If the marginal revenue product of a firm’s input is $25 and its marginal cost is $15, then we can say with certainty that the firm:
will find it profitable to hire more workers. 
 
We can expect the cross price elasticity of demand between tea and coffee to be:
positive, indicating coffee and tea are inferior goods.
 
A competitive employer will hire additional labor as long as:
MRP exceeds the wage rate.
 
If a 2% increase in income results in a 1% decline in the demand for a certain good, we can conclude that the coefficient
of income elasticity of demand for that good is:
negative and the good is an inferior good.
 
Suppose a neighborhood is located next to a pond that breeds mosquitoes. One of the enterprising residents plans to have the area
sprayed and treated to minimize or eliminate the problem. If he asks all of residents of the neighborhood to contribute funds to have
the area (considered “a public good”) treated, he will most likely run into the problem of:
free riders 
 
What is the marginal cost of adding one more consumer to a public good?
0 
 
Over the past decades there has been a significant increase in income inequality across American households.
What is one of the main reasons for this?
Increasing demand for skilled labor and less demand for unskilled labor. 
 
Shauna has $10 for the purchase of pens and pencils. The cost of each pen is $2, and the cost of a pencil is $1.
We assume that Shauna will purchase the two goods such that the utility maximizing condition is satisfied.
Shauna buys 3 pens and 4 pencils. If the price of a pen falls to $1 each, then the substitution effect would require that Shauna:
buys more pens. 
 
Jane has a weekly budget of $50 to spend on fruit and vegetables. She decides to buy 4 pounds of fruit at a cost of $5/lb.
She spends the rest on 5 pounds of vegetables. What is the price she pays for each pound of vegetable, given her budget constraint?
 $6 
 
In the case of an inferior good, the income effect and the substitution effect tend to:
move in the opposite direction. 
 
The following table sets out a consumer’s total utility when consuming Good 1 and then shows the consumer’s total utility when consuming Good 2. The prices of Good 1 and Good 2 are given. The consumer has a budget of $20 dollars. How much of each good should this consumer buy to maximize her total utility given her budget constraint? What will her total utility be, given her budget constraint?
 
Good 1                  P1 = $2
Quantity              Total Utility
1                              20
2                              30
3                              38
4                              44
5                              48
 
Good 2                  P2 = $4
Quantity              Total Utility
1                              36
2                              52
3                              64
4                              72
5                              76
Four units of Good 1 and three units of Good 2; total utility is 108. 
 
If you consume pasta every day of the week, its marginal utility is bound to _________ at the end of the week,
ceteris paribus, and this is guided by the law of _________.
decrease; diminishing marginal utility 
 
Given the individual demand functions in the following table, what is the market demand at price P2?
Prices                    A's Demand                        B's Demand                        C's Demand                        D's Demand
P1                           5                                              6                                              8                                              4
P2                           8                                              8                                              10                                           6
P3                           4                                              5                                              6                                              2
32 
 
Suppose a computer manufacturer is producing in the short run when capital is fixed and the only
variable factor of production is labor. The change in the quantity of production with the increase in
labor is shown in the table below. What does this production function represent?
Labor                      Quantity of Computers Produced
0                                              0
1                                              15
2                                              28
3                                              38
4                                              46
5                                              52
Decreasing marginal returns to labor 
 
Suppose you own a profitable tailoring company that hires two workers. The combined production of the two workers is 10 shirts
per day. You decide to double the amount of capital and labor and see that the total number of shirts produced each day has
increased to 22. This implies that your company is exhibiting which of the following?
Increasing returns to scale 
 
When Denise passed her local newsstand today, the proprietor had newspapers on the counter for $2 each.
Denise would happily pay $5. What is her consumer surplus?
$3.00
 
When tariffs are imposed, the price point for consumers will _________.
increase
 
In an indifference curve, the most appealing combination of two products for a given consumer occurs at every point in the curve.
True
 
A typical convex indifference curve demonstrates diminishing marginal rates of substitution.
This means that the further one travels along either axis, the
more of one product must be substituted in place of each unit removed of the other product.
 
A budget set can change with price and income changes. If prices fall, then new ________ of goods attainable
combinations
 
A manufacturing process that releases dangerous elements into the surrounding area without compensation is a negative externality.
True
 
Concern over alligators from a nearby swamp getting into their warehouse has prompted a local business to install
alligator-proof fences along the edge of the swamp abutting their community. What is this an example of?
Positive externality
 
Imposing fees and taxes on industries in order to move more of the cost of production onto the
producer _______  _______ production toward a more socially optimal level of output
should; move
 
Government regulation intended to limit the impacts of negative externalities will make products cheaper for end consumers.
False
 
What is an example of government policies intended to increase the impacts of positive externalities?
Tax incentives (rebates) for education
 
Enforcing property rights will have a side effect of ___________ use of banks
increased
 
A toll road is an example of something that is nonexcludable.
False
 
Which of the following is a public good rather than a private good?
Public schools
 
Governments subsidize some public goods because these projects provide a public good that would be too expensive
for private companies to provide given free-riding behavior.
True
 
Which of the following is a public good?
Street lighting
 
National defense is a public good and suffers from the free-rider problem. Therefore, it is best ____________ by the government
subsidized
 
Perfect competition displays which of the following characteristics?
Homogeneous products
 
In a perfectly competitive industry,
sellers and buyers both have perfect pricing information.
 
In a perfectly competitive industry, all producers are
price takers.
 
For a perfectly competitive firm, the marginal revenue is
equal to the equilibrium price.
 
All firms in a perfectly competitive industry differentiate their products.
False
 
To maximize profit, a perfectly competitive firm should adjust production until marginal cost
is equal to marginal revenue.
 
For a perfectly competitive firm, if the firm is breaking even, then
P = AC = MC = MR.
 
If the demand curve is perfectly horizontal, the firm is
a price taker.
 
In the short run, if the marginal cost is equal to the average variable cost, the firm
is breaking even.
 
If P < AVC, then the firm
should shut down.
 
If a company is not covering its total costs, it should
continue producing at current level, but only if it is covering its variable costs.
 
If the long-run supply curve is perfectly elastic, the firm is part of a
constant cost industry.
 
In a decreasing cost industry, expansion of output will cause
a fall in average costs.
 
The quantity demanded for an item is the amount of that good or service consumers are willing and able to buy at a
specific price during a specific time period, with which of the following important qualifications?
"everything else held constant."
 
Price, time period, ability of consumers to buy, and willingness of consumers to buy all affect _____.
quantity demanded
 
Shift factors for the supply curve include changes in price of productive resources. These include all of the following, except _____.
time
 
A market-clearing price only occurs in a market in equilibrium.
true
 
If a shortage exists in the market, the invisible hand will manipulate prices to maintain equilibrium by _____
increasing prices and thereby raising future quantity supplied.
 
The primary functions of price in a free market are to inform and direct consumers and firms.
false
 
Price ceilings can cause a shortage if they are set _____
below the market-clearing price
 
A market clearing condition occurs when price floors are set _____.
at or below the equilibrium price
 
 Unintended market conditions, including black markets and shortages, can occur through the
price restraint of a price ceiling set above the market-clearing price.
false
 
If the price elasticity of demand for a product is zero regardless of pricing changes, the product is said to be ______.
perfectly inelastic
 
 Price elasticity of demand generally increases when a product's price is a smaller percentage of available spending power.
true
 
If income has changed by +40% and demand has changed by -30%, then the overall income elasticity of demand is ______.
-0.75
 
A new compact car is released, and the income elasticity of demand is found to be equal to -0.2. In this case, the good is _____.
an inferior good
 
 A product with low income elasticity will be affected less by falling wages than a product with high income elasticity.
true
 
Assume that peanut butter quantity demanded falls 8% and jelly prices fall 4%. In this case, the cross elasticity of
demand between peanut butter and jelly is what?
2.0
 
Assume that jam and jelly have a cross elasticity of 0.8. This means that these goods are _____.
substitutes
 
For two complementary products A and B, demand for complementary product B has an inverse relationship
to price changes in complementary product A.
true
 
Price elasticity of supply is different from price elasticity of demand because _____
higher prices will yield higher total revenues regardless of supply elasticity.
 
If mango prices rise by 10% and 8% more mangoes are supplied, the price elasticity of supply is about _____.
0.8
 
 Price elasticity of supply will not change over time.
false
 
Jana's Jelly Jars cost $5.00 each, and Jana has standing orders for 2,000 jars per month.
What is the total revenue generated each month?
$10,000.00
 
Assume Jana has lost some market share due to competition ,and she's having trouble covering her costs.
Also assume that donuts are a good with elastic demand in your market. Jana has asked you if she should raise
or lower prices to increase total revenues. Jana should _____.
lower prices
 
 Raising prices on price-inelastic products will increase total revenues.
true
 
What do economists assume about consumer behavior?
Consumers have imperfect information about the goods they are consuming.
 
In economics, the level of satisfaction obtained from consuming a good or service is its _____.
utility
 
 The marginal utility provided from eating a second ice cream cone is generally less than the total
utility derived from eating ice cream cones.
true
 
Denise gets 50 utils from consuming three cups of coffee. The first cup of coffee provides 25 utils and the third
cup provides 10 utils. What is the marginal utility of the second cup of coffee?
15 utils
 
"Value in exchange" versus "value in use" were Adam Smith's means of distinguishing between _____.
price and utility
 
 Each additional unit of good consumed will have greater utility than the prior unit.
false
 
Jacques has $15 left to spend, and is deciding between a $9 burger (provides 5 utils of satisfaction for Jacques),
a $7.50 order of cheesy fries (provides 2 utils), a $6 bucket of popcorn (provides 4 utils), and a $3 cookie (provides 1 util).
What will he buy?
A burger and popcorn
 
Denise finds that she gets too sore to function well if her workout lasts more than 80 minutes.
She gets the following utils per workout for her first four 20-minute routines: 12, 8, 5, 2.
A reasonable number of utils to assign to her fifth 20-minute routine would be _____.
-3
 
 For items that aren't free, consumer surplus is less than the value of a good or service to the consumer.
true
 
When Denise passed her local newsstand today, the proprietor had newspapers on the counter for $2 each.
Denise would happily pay $5. What is her consumer surplus.
$3.00
 
When tariffs are imposed, the price points for consumers will _____.
increase
 
In an indifference curve, the most appealing combination of two products for a given consumer occurs at every point in the curve.
true
 
A typical convex indifference curve demonstrates diminishing marginal rates of substitution.
This means that the further one travels along either axis, the ______
more of one product must be substituted in place of each unit removed of the other product.
 
A budget set can change with price and income changes. If prices fall, then _______.
more combinations of goods are attainable
 
A manufacturing process that releases dangerous elements into the surrounding area without compensation is a negative externality.
true
 
Concern over alligators from a nearby swamp getting into their warehouse has prompted a local business to install
alligator-proof fences along the edge of the swamp abutting their community. What is this an example of?
positive externality
 
Imposing fees and taxes on industries in order to move more of the cost of production onto the producer should _____.
move production toward a more socially optimal level of output
 
Government regulation intended to limit the impacts of negative externalities will make products cheaper for end consumers.
false
 
What is an example of government policies intended to increase the impacts of positive externalities?
tax incentives (rebates) for education
 
Enforcing property rights will have a side effect of ______.
increased use of banks
 
A toll road is an example of something that is nonexcludable.
false
 
Which of the following is a public good rather than a private good?
public schools
 
A public good is ____.
generally provided by government
 
 Governments subsidize some public goods because these projects provide a public good that
would be too expensive for private companies to provide given free-riding behavior.
true
 
Which of the following is a public good?
street lighting
 
National defense is a public good and suffers from the free-rider problem. Therefore, it is best _____.
subsidized by the government