1.How do the production function model and the supply and demand model differ?

a.The production function shows market relationships over time; supply and demand illustrate the relationship between inputs and outputs.

b.The production function shows the relationship between inputs and outputs; supply and demand illustrate market relationships over time.

c.The production function shows the flow of outputs between economic actors; supply and demand illustrate the various efficiency points in both the short and long run.

d.The production function shows the various efficiency points in both the short and long run; supply and demand illustrate the flow of outputs between economic actors.

e.The production function shows a market in the short run; supply and demand illustrate a market in the long run.

2.Businesses in which market structure(s) would be affected if a per-unit excise tax were imposed?

a.Perfect competition

b.Monopolistic competition

c.Oligopoly

d.Monopoly

e. all of the above

3.If barriers to entry ________ or product differentiation ________, competition in a market will ________.

a.increase; increases; decrease

b.increase; increases; increase

c.increase; decreases; increase

d.decrease; increases; increase

e.decrease; decreases; decrease

4.Every choice requires a sacrificed or foregone best alternative. Economists call this the

a.fixed cost

b.accounting cost

c.normative cost

d.positive cost

e.opportunity cost

5.At one unit of production, fixed costs are $50 and variable costs are $20. Assume that the variable costs increase at a constant rate. At 5 units of production, variable costs are ________, while fixed costs are ________ in the short run.

a.$20; $50

b.$20; $70

c.$80; $200

d.$100; $50

e.$100; $250

6.What will happen to the market supply curve of gadgets if a new gadget producer enters the market?

a.It will not change.

b.It will become more elastic.

c.There is insufficient data to determine.

d.It will shift right at every price with more output supplied.

e.It will shift left at every price with less output supplied.

7.What is the intended effect of a country imposing an import tariff on a good?

a.Decreasing domestic production

b.Increasing foreign trade

c.Increasing domestic production

d.Improving the quality of foreign trade

e.Decreasing prices for transport

8.If a country, individual, or business can produce one unit of output using the fewest resources relative to all other producers of the same output, then it must have ________ in that good.

a.an absolute advantage

b.superior human capital

c.a comparative advantage

d.achieved allocative efficiency

e.achieved productive efficiency

9.A price-taking firm evaluates its production costs and revenue and decides it will operate in the short run and can stay in the market in the long run without conditions changing. Which of the following must describe the firm's short-run production?

a.Average variable cost > Price < Average total cost

b.Average variable cost = Price = Average total cost

c.Average variable cost < Price < Average total cost

d.Price Average total cost

e.Price > Average total cost

10.What would be the effect on the market supply curve from the government imposing a per unit tax on the production of the good?

a.No change

b.A shift to the left

c.A shift to the right

d.An increase in price

e.An increase in the quantity supplied

11.Which of the following describes a situation where the marginal social benefit is equal to the marginal social cost at equilibrium?

a.Oligopoly

b.Monopoly

c.Positive externality

d.Allocative efficiency

e.Negative externality

12.In the country Gamma, it takes 6 hours to produce 1 automobile and 1 hour to produce a bale of cotton. Gamma and the country of Delta currently have an agreement to trade 1 car for 5 bales of cotton. Assuming the trade agreement is mutually beneficial, which of the following production rates must be true for Delta?

a.Delta's production rate is the same as Gamma's

b.One car in 2.5 hours and one bale of cotton in 10 hours

c.One car in 4 hours and one bale of cotton in 1 hour

d.One car in 10 hours and one bale of cotton in 1 hour

e.One car in 15 hours and one bale of cotton in 1 hour

13.In the cell phone market, what demand curve shift would occur if the price of cellular service decreased?

a.The demand for cell phones would shift to the left.

b.The demand for cell phones would shift to the right.

c.The demand for cell phones and the quantity demanded would remain constant.

d.The quantity demanded of cell phones would increase, but the demand curve would not shift.

e.The quantity demanded of cell phones would decrease, but the demand curve would not shift.

14.What is true of a firm's production if it operates in a perfectly competitive market with short-run economic profits?

a.Marginal revenue = demand = marginal cost > average total cost

b.Marginal revenue = marginal cost = average fixed cost

c.Average total cost = price = average variable cost

d.Marginal cost < Marginal revenue

e.Price = marginal cost = average total cost

15.Company X produces good Y. The entire market's demand for Y is 100,000 units, and Company X has achieved minimum efficient scale at 50,000 units. This market is most likely

a.a monopoly

b.highly concentrated

c.fragmented

d.price discriminating

e.competitive

16.Which of the following would be considered a factor of production?

a.Fresh popcorn

b.A family portrait

c.Raw steel

d.A fountain drink

e.A parent playing with her child

17.A production possibility curve would ________ if the availability of an input decreased and would ________ if a lack of technology decreased production efficiency.

a.shift outward; shift inward

b.not move; shift outward

c.not move; not move

d.shift outward; shift outward

e.shift inward; shift inward

18.Resource allocation is determined by which of the following?

a.What are the most advantageous terms of trade?

b.When does marginal cost equal marginal benefit?

c.Which economy enjoys a lower opportunity cost for this good?

d.What is essential knowledge to pass on to the next generation?

e.What goods and services should be produced?

19.Farm2U produces its product in a perfectly competitive market that is producing where MR = MC and price is higher than average variable costs. Farm2U is earning economic losses. What should the Farm2U do?

a.Increase output to reduce economic losses

b.Shut down immediately

c.Reduce output below minimum efficient scale

d.Decrease price to increase revenue

e.Leave the market in the long run

20.A firm is earning negative economic profit of $5,000. If its total revenue is $7,000 and its implicit costs are $3,000, what must its explicit costs be?

a.$8,000

b.$9,000

c.$10,000

d.$12,000

e.Indeterminate

21.If the price of Good A goes down by 5 percent and the quantity demanded of Good B goes down by 5 percent, which of the following is true?

a.Both goods have unit elastic supply.

b.The goods are complements, and the cross-price elasticity is 1.

c.The goods are substitutes, and the cross-price elasticity is 1.

d.The goods are complements, and the cross-price elasticity is 1.

e.The goods are substitutes, and the cross-price elasticity is 25.