A chief reason firms give employees bonuses based on the firm's profit is to cope with
A) the tax laws.
B) the law of diminishing returns.
C) the principal-agent problem.
D) unions.
Ques. 2In the above figure, of the quantities listed below, for which is the total deadweight loss the largest?
A) 0 units
B) 10 units
C) 20 units
D) 30 units
Ques. 3A perfectly competitive firm will shut down rather than produce if its
A) price is less than average variable cost.
B) price is less than total variable cost.
C) total revenue is less than total cost.
D) price is less than marginal cost.
Ques. 4The elasticity of demand for chocolate chip cookies is 0.6 and the elasticity of supply for these cookies is 1.9. If a tax is imposed on purchases of chocolate chip cookies, then the
A) consumers would pay more of the tax.
B) producers would pay more of the tax.
C) tax would be equally shared by the consumers and the producers.
D) consumers would pay the entire tax because their demand is less elastic than the producers' supply.
Ques. 5The marginal product of labor is the
A) change in total product produced by hiring an additional unit of labor.
B) total revenue divided by units of labor.
C) extra revenue gained by selling one more unit of output produced by hiring additional units of labor.
D) extra revenue gained by employing one more unit of labor.
Ques. 6Suppose inter-city bus travel is a substitute for transportation by train. Which of the following could then be TRUE?
A) The cross elasticity between bus and train travel could equal 0.65.
B) The cross elasticity between bus and train travel could equal 1.0.
C) The cross elasticity between bus and train travel could equal 1.25.
D) All of the above could be true.
Ques. 7When Frankie spends all his money in such a way that the marginal utility per dollar is the same for all final purchases of products he consumes, Frankie has maximized
A) his marginal utility.
B) his total utility.
C) the number of products he consumes.
D) his total expenditure on all products.
Ques. 8In the above figure, a negative relationship between price and quantity is shown in
A) Figure A.
B) Figure B.
C) both Figure A and Figure B.
D) neither Figure A nor Figure B.
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