1.An imperfectly competitive firm is one that

Multiple Choice

• charges any price it wants.
• has at least some influence over the market price.
• faces a perfectly inelastic demand curve.

2. John is trying to decide how to divide his time between his job as a stocker in the local grocery store, which pays $7 per hour for as many hours as he chooses to work, and cleaning windows for the businesses downtown. He makes $2 for every window he cleans. John is indifferent between the two tasks, and the number of windows he can clean depends on how many hours he spends cleaning in a day, as shown in the accompanying table.

Time cleaning windows (hours/day)	Total number of windows cleaned
0	0
1	7
2	11
3	14
4	16
5	17

How many hours a day should John spend cleaning windows?

3.

If a 10 percent decrease in the price of a good leads to a 20 percent increase in the quantity demanded, then what is the price elasticity of demand?

4.

For a given seller, the accompanying figure shows the relationship between the number of units produced and the opportunity cost of producing an additional unit of output. If the market price of this good is $6, how many units would this seller produce?

The graph plots number of units versus dollars per unit. An upward curve starts from the bottom left of the first quadrant at (50, 1) and curves upward and to the right and ends at the top right of the first quadrant at (360, 16) passing through the following coordinates - (150, 2), (250, 4), (300, 6) and (350, 14).

5.

Shelter for homeless people is an example of

Multiple Choice

• something they can live without.
• something hard to find.
• a want.
• a need.

6.

The demand for a good is inelastic with respect to price if the price elasticity of demand is

Multiple Choice

• equal to one.
• less than one.
• equal to negative one.
• greater than one.

7.

If the price of cheese falls by 1 percent and the quantity demanded rises by 1 percent, then the price elasticity of demand for cheese is equal to

8.

If a firm spends $240 to produce 40 units of output and spends $540 to produce 80 units, then between 40 and 80 units of output, the marginal cost of production is:

9.

Denise sells lemonade in front of her house in the summer. Several other kids in Denise's neighborhood also run lemonade stands in the summer. Suppose that the first week of summer, Denise charged 25 cents for an 8-ounce cup of lemonade, her next-door neighbor Jason charged 50 cents for an 8-ounce cup of lemonade, and Gina across the street charged 15 cents for an 8-ounce cup of lemonade. Assuming the market for lemonade is perfectly competitive, what is most likely to happen?

Multiple Choice

• Everyone will start to charge 50 cents to maximize revenue.
• A price war will break out, and all of the kids will lower their prices.
• Each kid will keep his or her price at the original amount.
• Eventually prices will equalize across all three lemonade stands.

10.

If the price elasticity of demand for cigarettes is 0.55, and the price of cigarettes increases by 10 percent, then the quantity of cigarettes demanded will fall by

11.

When Lorenzo eats 1 slice of pizza for lunch, his total utility is 75, and when he eats 2 slices of pizza for lunch, his total utility is 110. Assuming that Lorenzo's marginal utility from eating pizza is always positive, we can infer that his total utility from eating 3 slices of pizza at lunch is

Multiple Choice

• greater than 75 and less than 110.
• greater than 110 and less than 150.
• greater than 110 and less than 145.
• greater than 110 and less than 185.

12.

Laura's total utility from consuming 5, 6, and 7 bonbons is 25, 34, and 40, respectively. Her marginal utility from the 7th bonbon is _____.

13. As the price of computers falls, the quantity of computers demanded increases. This is an application of

Multiple Choice

• needs versus wants.
• the law of demand.
• the law of supply.
• the production possibilities curve.

14.

During Thanksgiving you participated in a pumpkin pie-eating contest. You really enjoyed the first two pies, the third one was okay, but as soon as you ate the fourth one you became ill and lost the contest. Your total utility ______ with the first three pies you ate.

Multiple Choice

• first increased than decreased
• stayed the same
• increased
• decreased

15.

If the price of textbooks increases by one percent and the quantity demanded falls by one percent, then demand for textbooks is

Multiple Choice

• zero.
• inelastic.
• elastic.
• unit elastic