For consumers, chocolate chip cookies and doughnuts are substitutes. So, an increase in the price of chocolate chip cookies will lead to a rightward shift in the demand curve for doughnuts.
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In the above figure, the average variable cost curve is curve
A) A.
B) B.
C) C.
D) D.
Ques. 2
In the long-run, if firms in a perfectly competitive market are incurring persistent economic losses, some firms will
A) exit and the price will fall.
B) exit and the price will rise.
C) enter and the price might either rise or fall.
D) exit and the price might either rise or fall.
Ques. 3
Why does it make sense for economies to specialize according to comparative advantage and trade?
What will be an ideal response?
Ques. 4
Unions support minimum wage laws because an increase in the minimum wage
A) increases the supply of union labor.
B) decreases the supply of union labor.
C) increases the demand for union labor.
D) decreases the demand for union labor.
Ques. 5
In the figure above, what is Gap's excess capacity?
A) 32 jackets per day
B) zero
C) 4 jackets per day
D) 132 jackets per day
Ques. 6
If the percentage change in quantity demanded is greater than the percentage change in price, can you determine if the demand is elastic, unit elastic, or inelastic? Explain your answer.
What will be an ideal response?
Ques. 7
John's utility of wealth curve is shown in the above figure. He currently has wealth of 20,000. If there is a 10 percent chance that he could lose all his wealth, what is his expected wealth?
A) 0
B) 2,000
C) 17,000
D) 18,000
Ques. 8
Using the market shares in the table above, if Widgotech buys Widgette the HHI will
A) stay the same.
B) rise by 1 point.
C) rise by 10 points.
D) rise by 18 points.
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In the figure above, the poorest 40 percent of households receive ________ of total income.
A) 20 percent
B) 10 percent
C) 30 percent
D) 15 percent
Ques. 2
Tom and Jerry are the only members of society. The table above shows their marginal benefits from defense satellites, a public good. What is the marginal benefit to society from the fourth satellite?
A) 36
B) 20
C) 18
D) 4
Ques. 3
Indifference curves are drawn on a diagram with the
A) price of a good on the vertical axis and its quantity on the horizontal axis.
B) price of one good on the vertical axis and the price of another good on the horizontal axis.
C) quantity of a good on the vertical axis and its price on the horizontal axis.
D) quantity of one good on the vertical axis and the quantity of another good on the horizontal axis.
Ques. 4
Which of the following is NOT an assumption of marginal utility theory?
A) People derive utility from their consumption.
B) More consumption yields more total utility.
C) Marginal utility diminishes with more consumption.
D) Utility can be measured and the units of utility are precisely defined.
Ques. 5
Which of the following arguments support the proposition that society should accept at least some income inequality?
A) Income redistribution will require taxation, causing inefficiently low levels of labor supply and saving, thus decreasing the size of the economic pie.
B) Administrative costs associated with income redistribution imply that low-income people receive less than 1 for each dollar taken from high-income people.
C) Income redistribution programs divert skilled labor and capital to tax compliance activities and away from production of goods and services that people value.
D) All of the above answers are correct because all support the proposition that society should accept some income inequality.
Ques. 6
In the figure above, Gap maximizes its profit if it charges ________ per jacket.
A) 100
B) 95
C) 75
D) 120
Ques. 7
A perfectly competitive firm will have an economic profit of zero if, at its profit-maximizing output, its marginal revenue equals its
A) average total cost.
B) marginal cost.
C) average variable cost.
D) average fixed cost.
Ques. 8
The cost of risk is the amount by which expected wealth must increase to give the same ________ as a no-risk situation.
A) marginal wealth
B) marginal utility
C) expected utility
D) expected wealth
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Joe consumes pizza and movies. Pizza and movies are substitutes. According to marginal utility theory, if the price of a pizza rises then
A) the demand curve for pizza shifts leftward.
B) the demand curve for pizza shifts leftward and the demand curve for movies shifts rightward.
C) there is an upward movement along the demand curve for pizza.
D) there is an upward movement along the demand curve for pizza and the demand curve for movies shifts rightward.
Ques. 2
The figure above shows a perfectly competitive firm. The figure shows a firm
A) in the short run.
B) in the long run.
C) at its shutdown point.
D) Both answers A and C are correct.
Ques. 3
Buying insurance is similar to
A) selling risk.
B) irrationally avoiding life's risks.
C) being a free rider.
D) buying risk.
Ques. 4
The United States uses tax funds to build and repair the interstate highway system and to provide health care services via Medicare. Suppose Medicare services are on the horizontal axis and highway miles are on the vertical axis of a PPF.
If the government decides to reduce funding to Medicare, this change would be shown as A) a shift out of the PPF.
B) the PPF becoming flatter.
C) a movement down along the PPF.
D) a movement up along the PPF.
Ques. 5
An important determinant of the price elasticity of supply is the extent to which
A) the commodity is a luxury or a necessity.
B) the demand for it is both price and income elastic.
C) the product has many complements or substitutes.
D) production requires the use of particularly scarce or specialized resources.
Ques. 6
Which of the following is a CORRECT statement about markets for prohibited goods?
A) Penalizing sellers of an illegal good decreases supply and penalizing buyers decreases demand.
B) Penalizing either buyers or sellers of an illegal good decreases the quantity bought.
C) Taxing a good at a sufficiently high rate can achieve the same consumption level as prohibition.
D) All of the above are correct statements.
Ques. 7
The above table gives some cost data for Peter's Pickles. Peter's fixed cost is 20. The marginal cost of increasing output from 3 to 4 barrels of pickles is
A) 25.
B) 75.
C) 20.
D) 50.
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A good has a perfectly inelastic supply and a downward sloping demand curve. Imposing a sales tax of 1 per unit on the sellers of the good
A) raises the price paid by demanders by more than 1.00.
B) raises the price paid by demanders by 1.00.
C) raises the price paid by demanders by less than 1.00.
D) does not change the price paid by demanders.
Ques. 2
The figure above shows Ronald's budget line. He has a weekly income of 20, which he spends on hotdogs and hamburgers. Now Ronald's income decreases to 10 per week and the price of a hotdog doubles.
Ronald's budget line becomes ________ and ________. A) flatter; shifts rightward
B) flatter; does not shift
C) steeper; shifts rightward
D) steeper; shifts leftward
Ques. 3
The figure above shows a monopoly firm's demand curve. The monopoly's total revenue is zero at point
A) x.
B) r.
C) t.
D) u.
Ques. 4
The figure above shows the market for coffee. If one firm owns all the coffee outlets and sells 10 million pounds of coffee a month
A) the market is efficient because the marginal social benefit from coffee exceeds its marginal social cost.
B) the market is efficient because the total social benefit from coffee exceed the total social cost.
C) there is a deadweight loss because the marginal social benefit from the last pound of coffee exceeds its marginal social cost.
D) there is a deadweight loss because the marginal social cost of the last pound of coffee exceeds its marginal social benefit.
Ques. 5
During the last decade, the price of shoes rose substantially yet people bought more pairs of new shoes each year. This experience suggests that the
A) supply curve of shoes shifted leftward.
B) demand curve for shoes shifted leftward.
C) supply curve of shoes shifted rightward.
D) demand curve for shoes shifted rightward.
Ques. 6
Which of the following CORRECTLY describes the above figure?
A) There is no relationship between x and y.
B) There is a positive relationship between x and y.
C) There is a negative relationship between x and y.
D) None of the above answers are correct.
Ques. 7
The payoff matrix of economic profits above displays the possible outcomes for Bob and Jane who are involved in game of whether or not to advertise. After each player chooses his or her best strategy and sees the result
A) only Bob would like to change his decision.
B) neither player would be willing to change his or her decision unless the other player also changes his or her decision.
C) if Jane does not change her decision, Bob would like to change his.
D) if Bob does not change his decision, Jane would like to change hers.
Ques. 8
Firms in monopolistic competition can achieve product differentiation by
A) expanding plant size.
B) exploiting economies of scale in production.
C) advertising special characteristics.
D) setting the price equal to average revenue.
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A company will shut down in the short run if it cannot cover its __________ and will exit the industry in the long run if it cannot cover its __________.
Fill in the blank(s) with correct word
Ques. 2
Suppose that macaroni and cheese is an inferior good and the price of macaroni and cheese rises. Explain the income and substitution effects of this price change.
What will be an ideal response?
Ques. 3
Define the short-run industry supply curve. Explain the two factors that can cause the short-run industry supply curve to shift to the right.
What will be an ideal response?
Ques. 4
Monopolists can make an economic profit in the long-run because of barriers to entry.
Indicate whether the statement is true or false
Ques. 5
Comment on the following statement: When firms are earning positive profits, the industry supply curve will shift to the right.
What will be an ideal response?
Ques. 6
A profit maximizing single-price monopolist sets price equal to marginal cost.
Indicate whether the statement is true or false
Ques. 7
When the price of raisins falls, the quantity of raisins demanded rises. Explain this change in terms of income and substitution effects.
What will be an ideal response?
Ques. 8
The monopolist always maximizes its profits by producing the amount of output that sets the marginal revenue equal to zero.
Indicate whether the statement is true or false
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Buckovitch Corporation is a manufacturer that uses job-order costing. The company has supplied the following data for the just completed year:
| Raw materials purchased on account | $ 482,000 |
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| Raw materials (all direct) requisitioned for use in production | $ 478,000 |
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| Direct labor cost | $ 576,000 |
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| Manufacturing overhead: | |
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| Indirect labor cost | $ 136,000 |
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| Other manufacturing overhead costs incurred | $ 414,000 |
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| Cost of goods manufactured | $1,565,000 |
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| Cost of goods sold (unadjusted) | $1,513,000 |
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Required:
a. What is the journal entry to record raw materials used in production?
b. What is the journal entry to record the direct and indirect labor costs incurred during the year?
c. What is the journal entry to record the transfer of completed goods from Work in Process to Finished Goods?
d. What is the journal entry to record the unadjusted cost of goods sold?
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The Production Function in the Long and Short Run
The table shows the quantity of workers and short-run production for Huong's Waffles.
| Quantity of Workers | Quantity of Waffles
per Week | | 0 | 0 | | 1 | 24 | | 2 | 36 | | 3 | 45 | | 4 | 50 | | 5 | 49 |
The waffle maker costs $510 and each worker costs $550 per week. What is the marginal product of labor for fourth worker? What is the average product of labor for the fourth worker?
▸ 50, 1.25
▸ 5, 12.5
▸ 5, 1.25
▸ 50, 12.5
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Relationship between Utility and Consumption
The table shows Kaito's utility from consuming protein shakes and beef jerky.
| Number of Protein Shakes | Total Utility from Protein Shakes | Number of Slices of Beef Jerky | Total Utility from Beef Jerky | | 0 | 0 | 0 | 0 | | 1 | 21 | 1 | 49 | | 2 | 32 | 2 | 71 | | 3 | 38 | 3 | 81 | | 4 | 39 | 4 | 94 | | 5 | 35 | 5 | 100 | | 6 | 28 | 6 | 101 |
If Kaito has an unlimited budget to spend on protein shakes and beef jerky, how many protein shakes and beef jerky will he consume? Assume that Kaito cannot consume more than 6 protein shakes and 6 slices of beef jerky.
▸ 4 protein shakes and 6 slices of beef jerky
▸ 4 protein shakes and 4 slices of beef jerky
▸ 1 protein shake and 4 slices of beef jerky
▸ 6 protein shakes and 6 slices of beef jerky
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The graph shows the market for labor.
Assume that P1=$3.00, P2=$4.50, P3=$6.00, P4=$12.50, P5=$18.50, Q1=90, Q2=160, and Q3=285. At a minimum wage of $12.50, what amount of consumer surplus is transferred to producers? What is the deadweight loss? At this minimum wage, there is a ________ (shortage/surplus) of workers equal to ________. Please round your answer to two decimal places.
▸ $585.00, $280.00, shortage, 195
▸ $585.00, $280.00, surplus, 195
▸ $812.50, $500.00, surplus, 125
▸ $812.50, $500.00, shortage, 125
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