A production possibility curve would ________ if the availability of an input decreased and would ________ if a lack of technology decreased production efficiency. (1 point)

shift outward; shift inward

not move; shift outward

not move; not move

shift outward; shift outward

shift inward; shift inward

5.

(01.04 MC)

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. (1 point)

an absolute advantage

superior human capital

a comparative advantage

achieved allocative efficiency

achieved productive efficiency

6.

(01.04 MC)

Michelle can produce 20 dozen cookies and 5 cakes in one day. Robert can produce 5 dozen cookies and 5 cakes in one day. Who should specialize in cakes and who should specialize in cookies? (1 point)

Robert should specialize in cake and cookies.

Neither Michelle nor Robert should specialize.

Michelle should specialize in cakes and cookies.

Michelle should specialize in cakes and Robert in cookies.

Robert should specialize in cakes and Michelle in cookies.

7.

(01.05 LC)

Every choice requires a sacrificed or foregone best alternative. Economists call this the (1 point)

fixed cost

accounting cost

normative cost

positive cost

opportunity cost

8.

(01.05 MC)

The president of a small business is provided with the following options to improve his company by a consulting firm. Based on the data provided, which option should he choose?

Cost (thousands of dollars)Benefit (thousands of dollars)Option A1050Option B50100Option C120150Option D515Option E125200(1 point)

Option A

Option B

Option C

Option D

Option E

9.

(01.06 MC)

The table below shows the total utility that Sarah enjoys based on the quantity of pizza slices she consumes.

Pizza Slices ConsumedTotal Utility(utils)142739411512

Based on the table above, which slice of pizza gives Sarah the highest marginal utility? (1 point)

Slice 1

Slice 2

Slice 3

Slice 4

Slice 5

10.

(01.06 MC)

Below is the total benefit Kenneth estimates he would get for jars of chocolate-flavored hazelnut butter.

JarsTotal Benefit (dollars)1529312414515614710

What is Kenneth's marginal benefit for his 6th jar of chocolate flavored hazelnut butter? (1 point)

1

0

1

4

14

11.

(02.01 MC)

Economic theory teaches that a consumer's quantity demanded may not change in response to a lower price when (1 point)

consumers are not always rational

not all consumers seek to maximize their utility per dollar

their demand may be perfectly inelastic

they do not consider the lower price an incentive to consume

their demand may be perfectly elastic

12.

(02.01 MC)

Which of the following would cause the demand curve for milk to shift to the right? Assume it is a normal good. (1 point)

The number of people who cannot drink milk increases.

A major economic downturn lowers the average household income.

The price of one of its substitutes goes down.

A significant number of people move into the market.

News of a new technology in the milking process makes consumers expect prices to lower soon.

13.

(02.02 MC)

If a firm with a supply schedule with positive units at every price leaves a market, ceteris paribus, what will happen to the market supply? (1 point)

It will shift right by that firm's output quantity at every price.

It will shift left or decrease by that firm's output quantity at every price.

It will not change.

It will become more elastic.

Insufficient data to determine.

14.

(02.02 MC)

What would be the effect of a decrease in government taxes on a good's supply curve, ceteris paribus? (1 point)

No change

A shift to the left

A shift to the right

A decrease in price

A decrease in quantity supplied

15.

(02.03 MC)

If an increase in a product's price increases the total revenue businesses collect, what must be true? (1 point)

Exchange is in the elastic part of the demand curve for its product.

Exchange is in the inelastic part of the demand curve for its product.

The firm is charging too much.

The market is not perfectly competitive.

The product's elasticity coefficient must be greater than one for this range.

16.

(02.03 MC)

Use the graph to answer the question that follows. (1 point)

What is the price elasticity of demand when price increases from $2 to $4?

0.2

0.5

2

3

5

17.

(02.04 MC)

What is the price elasticity of supply for a good that sees a 1% increase in quantity supplied for a 5% increase in price? (1 point)

0.2

1

4

5

6

18.

(02.05 MC)

The income elasticity of demand for a good is 4 and average consumer income goes down by 10%. The good's quantity demanded (1 point)

is indeterminant

must have increased by 40% and it is a normal good

must have increased by 40% and it is an inferior good

must have decreased by 2.5% and the good is inferior

must have decreased by 0.4% and it is a normal good

19.

(02.06 HC)

Use the graph to answer the question that follows. (1 point)

If the price is set at P3, what area represents the total economic surplus?

A + B + C + D

A + B + C

A + B + C + F + G

D

E

20.

(03.04 MC)

The law of diminishing marginal utility pushes consumers' willing purchase-price down for every additional unit of consumption. The law of diminishing marginal returns pushes marginal costs up for firms and increases the price they must charge to make normal profits. These two phenomena are illustrated most clearly by which model? (1 point)

Supply and demand

Circular flow

Production possibility curve

Total utility

Production function

21.

(02.07 MC)

Use the graph to answer the question that follows. (1 point)

A shortage will exist in this market whenever price is

above P3

below P2

above P2

equal to P3

indeterminate

22.

(02.08 MC)

Businesses in which market structure(s) would be affected if a per-unit excise tax were imposed? (1 point)

Perfect competition

Monopolistic competition

Oligopoly

Monopoly

All of the above

23.

(02.08 MC)

Assume that the government imposes a price ceiling below the current equilibrium price for a product. Which of the following will happen? (1 point)

The product's demand will increase.

There will be no impact because the price ceiling is not binding.

There will be surplus of the product.

There will be a shortage of the product.

Suppliers will enter the market.

24.

(02.09 MC)

What is the intended effect of a country imposing an import tariff on a good? (1 point)

Decreasing domestic production

Increasing foreign trade

Increasing domestic production

Improving the quality of foreign trade

Decreasing prices for transport

25.

(03.01 MC)

A business hires workers to help harvest blueberries. The following table shows the marginal productivity of each worker in number of bushels of blueberries.

Number of WorkersMarginal Product172103124115966

Which number of workers produces a total product of 49 bushels of blueberries? (1 point)

2

3

4

5

6

26.

(03.02 MC)

In the short run, a firm's total cost is $150 if it does not produce any units of output. Its variable cost is $5 per unit. If the firm produces 5 units, variable costs are ________, while total costs are ________. (1 point)

$5; $50

$5; $70

$10

$25; $175

$25; $775

27.

(03.02 MC)

Use the graph to answer the question that follows. (1 point)

Which of the following explains the shift indicated on the graph?

Variable costs decreased

Variable costs increased

Fixed costs decreased

Total costs increased

Indeterminate

28.

(03.02 MC)

The entire market for a good is 1,000 units, and the minimum efficient scale is 5 units. Which of the following terms accurately describes this market? (1 point)

Inefficient

Concentrated

Fragmented

Monopolized

Diseconomy

29.

(03.03 MC)

Use the graph to answer the question. (1 point)

Where on the graph would firms be experiencing diseconomies of scale?

Between A and B

Point B

Between B and C

Between C and D

Beyond D

30.

(03.04 MC)

A firm's total revenue is $50,000. Its explicit costs are $40,000. Its accounting profit is $10,000, while its economic profit is $5,000. What are its implicit costs? (1 point)

$0

$5,000

$10,000

$40,000

$90,000

31.

(03.05 MC)

If a firm is producing at the profit-maximizing output level and is earning positive economic profit, which of the following must be true? (1 point)

Total cost > total revenue; marginal cost > marginal revenue

Average total cost < average revenue; marginal cost > marginal revenue

Average total cost = price; marginal cost < marginal revenue

Average total cost > price; marginal cost = marginal revenue

Average total cost < price; marginal cost = marginal revenue

32.

(03.06 HC)

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? (1 point)

Average variable cost > Price < Average total cost

Average variable cost = Price = Average total cost

Average variable cost < Price < Average total cost

Price Average total cost

Price > Average total cost

33.

(03.06 MC)

A firm in a perfectly competitive market produces and sells hand sanitizer. The following information is available for the company:

Current output5000 unitsCurrent market price$5Total cost$27,000Marginal cost$5Total variable cost$20,000

What is the best action for this firm? (1 point)

Operating in the short run, as well as in the long run

Operating in the short run and exiting in the long run

Shut down in the short run and exit in the long run

Shut down in the short run and produce in the long run

Reduce output in the short run and increase output in the long run

34.

(03.07 MC)

Which of the following statements is true of a perfectly competitive market in the long run? (1 point)

No firms can enter or exit.

All firms earn normal profits, and there is both productive and allocative efficiency.

Individual firms produce where average variable cost equals marginal cost and marginal revenue.

It is allocatively efficient but may or may not be productively efficient.

Consumer surplus will always equal producer surplus.

35.

(03.07 MC)

Use the graph to answer the question below. The quantity is measured in thousands of units. (1 point)

At the current market price of P, will this firm produce output in the short run?

The firm will produce goods in the short run because the price is below the average total cost.

The firm will produce goods in the short run because the price is above the average variable cost.

The firm will not produce goods in the short run because the price is above the average variable cost.

The firm will not produce goods in the short run because the price is below the average total cost.

The firm will not produce goods in the short run because the price is between the average variable cost and average total cost.

36.

(03.07 MC)

Company Alpha produces its product in a perfectly competitive market that is in long-run equilibrium. What will happen if it lowers its price while increasing its output? (1 point)

It will increase revenue but increase costs by the same amount.

It will incur economic losses.

It will take business from its competitors, increasing its revenue and profit.

It will begin to develop market power, making its market imperfectly competitive.

Its producer surplus will increase but consumer surplus will decrease by a greater amount.

37.

(04.01 MC)

If barriers to entry ________ or product differentiation ________, competition in a market will ________. (1 point)

increase; increases; decrease

increase; increases; increase

increase; decreases; increase

decrease; increases; increase

decrease; decreases; decrease

38.

(04.02 MC)

A firm produces an allocatively and productively inefficient output at its profit-maximizing quantity. Which of the following statements could explain this scenario? (1 point)

It has market power and a barrier to entry into its market.

It has no market power and no barriers to entry into its market.

It is operating with diseconomies of scale.

It has symmetric information between all consumers and producers in its market.

It sells a product that is indistinguishable from its competitors.

39.

(04.02 MC)

Use the graph below. (1 point)

What does the area formed by points G, M, and the intersection of MC and AR represent?

The firm's total revenue at the profit-maximizing quantity

The firm's profit at the profit-maximizing quantity

The firm's total cost at the profit-maximizing quantity

The deadweight loss in the market because of the monopoly

The firm's missed revenue if it charges less than the profit-maximizing price

40.

(04.03 MC)

A monopolist engages in perfect price discrimination. What will happen to the consumer surplus? (1 point)

It significantly increases as it absorbs the producer surplus.

It disappears and becomes deadweight loss.

It decreases based on the elasticity of demand.

It is unchanged.

It is entirely converted to producer surplus.

41.

(04.04MC)

At 120 units of output, a monopolistically competitive firm's demand is $12, marginal revenue is $8, its marginal cost is $8, and its average total cost is $12. Based on this, which of the following is true? (1 point)

The firm will produce more than 120 units of output.

The firm will produce fewer than 120 units of output.

The firm is earning normal profit at its profit-maximizing quantity.

The firm will earn $960 in profit.

The firm will earn $480 in profit.

42.

(04.05 MC)

In the context of oligopoly, which of the following describes a situation in which no firm can improve its outcome by independently changing its course of action? (1 point)

Price collusion

Prisoner's dilemma

Nash equilibrium

Dominant strategy

Game theory

43.

(04.05 HC)

Company A and Company B are competing oligopolists. Both companies are considering increasing or maintaining their prices. The payoff matrix shows the profits of the companies in millions based on their possible actions.

Company BCompany AIncrease PriceMaintain PriceIncrease Price$50, $40$35, $30Maintain Price$55, $45$60, $35

The government announces a $5 million tax on firms that increase prices. After the tax, how much will each firm make if Company A maintains its price and Company B increases its price? (1 point)

Company A would earn $55 million; Company B would earn $45 million.

Company A would earn $30 million; Company B would earn $30 million.

Company A would earn $50 million; Company B would earn $50 million.

Company A would earn $55 million; Company B would earn $40 million.

Company A would earn $45 million; Company B would earn $35 million.

44.

(05.01 MC)

Use the graph to answer the question that follows. (1 point)

Based on the chart above, if the product sells at a price of $10 per unit, what is the marginal revenue product of the seventh unit of labor?

0

$6.50

About $5

About $25

Indeterminate

45.

(05.02 MC)

Assume that all cell phone company workers are less productive because of a decline in human capital. How does this affect the demand for labor in the telecommunications industry? (1 point)

The market labor demand curve shifts to the left.

The quantity demanded of labor shifts to the left.

The market labor demand curve shifts to the right.

The slope of the market labor demand curve increases.

The slope of the market labor demand curve decreases.

46.

(05.03 MC)

If the wage in a perfectly competitive labor market is $20 and the firm can sell all the output it wants at $4 per unit, then the marginal product of the last worker employed must be (1 point)

5 units

16 units

24 units

80 units

indeterminate

47.

(05.03 MC)

Use the table to answer the question that follows.

Quantity of LaborMP of LaborQuantity of CapitalMP of Capital1401502452403353354204155555

What combination of labor and capital would satisfy the input hiring rule that minimizes the cost of production, if the price of labor is $10 and the price of capital is $20? (1 point)

1 unit of labor; 3 units of capital

2 units of labor; 1 unit of capital

3 units of labor; 2 units of capital

3 units of labor; 3 units of capital

4 units of labor; 2 units of capital

48.

(05.04 MC)

Which of the following is correct about a monopsonistic factor market? (1 point)

Resources are efficiently allocated.

There is one seller and many buyers.

The monopsony has the same quantity transacted as in a perfectly competitive input market.

The demand curve is downward sloping and above the marginal cost curve.

The marginal benefit to suppliers will be less than the marginal cost to the buyer.

49.

(06.01 MC)

Which of the following describes a situation where the marginal social benefit is greater than the marginal private benefit at equilibrium? (1 point)

Oligopoly

Monopoly

Positive externality

Allocative efficiency

Negative externality

50.

(06.01 MC)

A market in which private businesses do not pay all of the production costs themselves represents a ________ and will produce ________ than the socially optimal quantity. (1 point)

negative externality; less

negative externality; more

positive externality; more

positive externality; less

natural monopoly; less

51.

(06.01 MC)

Use the graph to answer the question that follows. (1 point)

Which of the following can cause the relationship shown between MSC and MPC?

A decrease in financial instability from unlawful investing

An increase in investment to support educational funding

A decrease in fish population caused by overfishing a lake

A decrease in air pollution caused by a nuclear energy plant

An increase in research and development funding of a product

52.

(06.01 MC)

In long-run equilibrium, the marginal social cost exceeds the marginal private cost, but the marginal social benefit is equal to the marginal private benefit. This describes which of the following markets? (1 point)

Oligopoly with no externalities

Monopoly with perfect information

Perfect competition with a positive externality

Perfect competition with a negative externality

Perfect competition with asymmetric information

53.

(06.02 MC)

A market has a cost or benefit not internalized, unclear property rights, and high transaction costs. This describes (1 point)

monopolistic competition

a natural monopoly

an externality

an oligopoly

a monopsony

54.

(06.02 MC)

Review the table below, which shows the quantity supplied and quantity demanded for a private good.

PriceQuantity SuppliedQuantity Demanded$137$346$555$764

Assume the market shown is perfectly competitive and has social costs that exceed private costs. If these social costs were reflected in the market, how many goods would be exchanged? (1 point)

Fewer than 5 units

5 units

6 units

More than 6 units

Indeterminate

55.

(06.02 MC)

Use the graph to answer the question that follows. (1 point)

Without government intervention, this market will charge a price

lower than optimal by P^c

higher than optimal by P^c

lower than optimal by P^c P^e

higher than optimal by P^c P^e

lower than optimal by P^c P^p

56.

(06.03 MC)

Private businesses and consumers know that a resource will be spoiled if the whole society does not limit everyone's use of it. However, individuals are privately incentivized to increase their own use of it before it is spoiled and no longer available. This describes (1 point)

a common pool good used efficiently

the primary reason some goods are publicly provided

the tragedy of the commons

a good that is made artificially scarce

one cause of a natural monopoly

57.

(06.04 MC)

What is the most likely goal of a government that enacts a per-unit subsidy? (1 point)

To increase market competition

To correct for a positive externality

To correct for a negative externality

To encourage production of private goods

To increase profit and encourage production

58.

(06.04 MC)

Use the graph to answer the question that follows. (1 point)

What is the seller's price after the tax?

$2.00

$3.00

$3.50

$4.00

$5.00

59.

(06.05 MC)

Use the graph to answer the question that follows. (1 point)

In 2010, what percentage of households in this economy earned 20 percent of the income?

10 percent

20 percent

40 percent

60 percent

80 percent

60.

(06.05 MC)

Which of the following policies will most likely help a government to achieve a goal of reducing the wealth gap between those with great wealth and those with no wealth? (1 point)

Increasing the interest rate on bank loans

Increasing taxes on income from interest earned on investments

Increasing the nation's per capita income

Encouraging actions that yield increased returns to entrepreneurs

Switching from a progressive tax system to a regressive tax system