10. 11. 12. Which of the following is not true of an indifference curve? a. b. c. d. C. It must not intersect other indifference curves for the same consumer. It is atter in the parts that are closer to the horizontal axis. Points farther to the left on the curve correspond to the same utility as points farther to the right on the curve. It slopes downward. it shifts upward when the consumer's budget rises. The marginal (physical) product of labor is: a. b. c. d. C. The change in output that results from a one -unit change in the amount of labor used in production. The change in output that results by changing the amount used of every input, by exactly the same percentage. The low productivity that comes from hiring incompetent workers. The change in output that results from a one-unit change in the amount of capital used in production. The wage, unless the firm is a price-taker. The marginal product of labor: 991.017! is positive, because hiring one more unit of labor raises output. is negative, because hiring one more unit of labor reduces output. rises as more labor is hired (if other inputs are held constant). falls as more labor is hired (if other inputs are held constant}. a. and d. The law of diminishing marginal returns says that: a. b. c. d. e. the less capital a fim't is using in production, the smaller the boost in output it will get by adding one more unit of capital. the more capital a firm is using in production, the smaller the boost in output it will get by adding one more unit of capital. A profit-maximizing firm should seek to minimize the output it gets from each factor. a. and c. it's quite usual to work in a company like Dilbert's. The government of Nocognoscia has mandated that book prices be set at $12,000 per book. Assume that, at this price, the quantity of books demanded is 3 million, and the quantity of books supplied is 85 million. For questions 13 through 15, circle the letter beside the best answer. l3. 14. 15. A. B. C. The market clearing price of books is $12,000. The market clearing price of books is less than $12,000. The market clearing price of books is more than $12,000. 1f the government removes the price limit, the quantity of books demanded will rise. A. B. True False The government-imposed price is a price oor, not a price ceiling. A. B. True False 16. 17. 18. 19. 20. 21. 22. The least-cost rule says that: if a firm is minimizing costs, then: a. MPPKJ' PK = MPPU PL b. MPPK = WPL c. P1. = PK {1. MPPKJWPL = PLI'IPK 1f increasing every input by 5 percent raises output by 20 percent, then the production function: a. Exhibits increasing returns to scale. b. Exhibits decreasing returns to scale. c. Exhibits constant returns to scale. d. Exhibits technological improvement. Producer surplus is: a. Represented by the area below the demand curve and above the \"price line,\" and to the left of equilibrium quantity. b. Represented by the area below the "price line\" and above the industry supply curve, and to the left of equilibrium quantity. c. Represented by the area below the "price line\" and above the industry supply curve, and to the right of equilibrium quantity. d. The area that is both above the supply curve and below the demand curve. e. The same as the economic surplus. The law ofdiminisht'ng returns says that adding one additional unit of labor to the production process, without changing the quantity of any other input used, will cause: Total product (output) to fall Total product (output) to rise The marginal product of labor to fall The marginal product of labor to rise b. and d. a. and d. b. and c. a. and c. PUP\"? P-F'P'?' 1n the short-run, a prot-maximizing competitive rm: a. Sets market price equal to marginal cost. b. Sets market price equal to average cost. c. Sets quantity so as to equate marginal cost to marginal revenue. d. Sets quantity so as to equate marginal cost to average cost. e. Sets price equal to marginal utility. Your textbook says that the major disadvantage of partnerships is: a. that partnership income is double taxed, rst as prots, and then as dividend income. b. limited liability. c. unlimited liability d. a., b., and c. Network markets are special because consumers derive benets not only from their own use of a good but also from the number of other consumers who adopt the good. This is known as the adoption externality, and is one reason why many colleges provide universal e-mail for all their students and faculty. Circle one: True False 23. 24. 25. 26. 2?. 28. 29. 30. Depreciation measures the annual cost of a capital input that a company actually owns itself. Circle one: True False It is possible for a supply curve to bend backwards, and examples include workers cutting back their hours in response to a large wage increase, and oil-rich countries curbing their production of oil after the price of oil quadrupled in the early 1970s. Circle one: True False 1f reducing the price of Bay-Ran sunglasses from $50 to $40 would increase the quantity demanded from 5 million per week to 10 million per week, what is the arc elasticity of demand for Bay-Ran sunglasses over that price range? A. SIS B. -l;'3 C. 3 D. SIS E. -3 F. l G. None of the above Based on the information given, demand for Bay-Ran sunglasses is: A. Inelastic B. Elastic G. Unit Elastic D. None of the above In the situation described above, cutting BayRan sunglasses prices from $50 to $40 raises sales revenues? Circle one: True False 1f the elasticity of demand for Greek yogurt is 3, it means: A small rise in the price of Greek yogurt will reduce the sellers' sales revenues. A small cut in the price of Greek yogurt will reduce the sellers' sales revenues. A one-dollar rise in the price of Greek yogurt cuts the quantity demanded by 3 quarts. A $3.00 increase in the price of Greek yogurt cuts the quantity demanded by 1 quart. A one-percent rise in the price of Greek yogurt cuts the quantity demanded by 3 percent. A and E B and E A and D anwpow> According to your textbook, virtually all studies nd that demand for low-wage labor is price- inelastic. Circle one: True False 1f demand for low-wage labor were price-inelastic, then raising the minimum wage would raise the earnings of low-income workers as a group, even if it might also cause some workers to lose their jobs. Circle one: True False