Rent controls create distortions in the housing market by:

a. Increasing rents received by landlords.

b. Raising property values.

c. Encouraging landlords to overspend for maintenance.

d. Discouraging new housing construction.

e. Increasing the supply of housing in the long run.

22. Price elasticity of demand refers to the ratio of the:

a. Percentage change in price of a good in response to a percentage change in quantity demanded.

b. Percentage change in price of a good to a percentage increase in income.

c. Percentage change in the quantity demanded of a good to a percentage change in its price.

d. None of the above.

23. If the demand curve over a certain range is "price elastic," this implies that the:

a. Percentage change in the quantity demanded exceeds one.

b. Percentage change in the quantity demanded exceeds the percentage change in product price.

c. Percentage change in price exceeds the percentage change in quantity demanded.

d. Price is non-reactive.

e. Product has no good substitute.

24. A measure of sensitivity or responsiveness to changes in price is called:

a. elasticity.

b. technology.

c. supply and demand.

d. social pressure.

e. kickback.

25. If the units of variable input in a production process are 1, 2, 3, 4, and 5, and the corresponding total outputs are 30, 34, 37, 39, and 40, respectively. The marginal product of the fourth unit is:

a. 2

b. 1

c. 37

d. 39

26. A farm is able to produce 9,000 pints of strawberries per season on 10 acres. It adds one more acre and is able to produce 12,000 pints per season. The marginal product of land for this farm is:

a. 900 pints per acre per year.

b. 1,000 pints per acre per year.

c. 3,000 pints per acre per year.

d. 12,000 pints per acre per year.

27. Which of the following is considered to be a fixed cost of operating an automobile?

a. Gasoline

b. Tires

c. Oil change

d. Maintenance

e. Registration fees

28. Marginal cost is defined as the increase in total cost resulting from an increase in:

a. One unit of output.

b. Output of 100 units.

c. A firm's plant size.

d. One unit of labor.

29. A perfectly competitive firm maximizes profits or minimizes losses in the short- run by producing at the output level at which:

a. marginal revenue equals marginal cost.

b. total revenue equals total cost.

c. total revenue is at a maximum.

d. none of the above.

30. A firm operating in a perfectly competitive market is a price taker because:

a. No firm has a significant market share.

b. No firm's product is perceived as different.

c. Setting a price higher than the going price results in zero sales.

d. All of the above.

31. Marginal revenue is the change in:

a. Total profit brought about by selling one more unit of output.

b. Price brought about by selling one more unit of output.

c. Total revenue brought about by selling one more unit of output.

d. Output brought about by a $1 change in product price.

e. Average revenue brought about by selling one more unit of output.

32. A perfectly competitive firm sells its output for $100 per unit and marginal cost is $100 per unit. To maximize short-run profit, the firm should:

a. Increase output

b. Decrease output

c. Maintain its current output

d. Shut down

33. Under monopoly, a firm:

a. Is a price taker.

b. Maximizes profit by setting marginal cost equal to marginal revenue.

c. Will shut down in the short-run if price falls short of average total cost.

d. Always earns a pure economic profit.

34. The profit-maximizing output level for a monopolist is where the:

a. Price is maximized.

b. Output sold is maximized.

c. ATC curve is minimized.

d. Maximum efficiency is achieved.

e. MR = MC.

35. Which of the following is always associated with monopolistic competition?

a. Identical products

b. Economic profits in the short run.

c. Demand curves become more inelastic as new entry occurs.

d. Product differentiation.

36. Firms in a monopolistically competitive market structure maximize their profit by producing an output where:

a. price equals average total cost.

b. marginal cost equals average total cost.

c. marginal cost equals price.

d. marginal revenue equals marginal cost.

37. A characteristic of an oligopoly is:

a. Mutual interdependence in pricing decisions.

b. Independent pricing decisions.

c. Lack of control over prices.

d. None of the above.

38. Tucker Corporation sells its whatsits for $5.00. Tucker's industrial engineers have informed management that hiring one additional worker will increase output by five units per hour. Tucker should hire the additional worker only if the wage rate is:

a. $5.00 or less per hour

b. $1.00 or more per hour

c. $25.00 or less per hour

d. None of the above.

39. Marginal revenue product is defined as the extra:

a. Output a firm would receive after hiring one more unit of resource.

b. Cost of hiring one more unit of resource.

c. Revenue earned by selling one more unit of product.

d. Revenue earned by hiring one more unit of resource.

e. Output received by spending one more dollar on resources.

40. Factors that influence the price of compact discs are a concern of:

a. Macroeconomics

b. Microeconomics

c. Both macroeconomics and microeconomics

d. Neither macroeconomics or microeconomics

41. Which of the following states the definition of supply for a good?

a. More of a good is supplied at a lower price.

b. There is a positive relationship between the price and the quantity that buyers purchase.

c. There is a positive relationship between the price and the quantity offered for sale by suppliers.

d. There is a negative relationship between the price and the quantity offered for sale by suppliers.

42. A price floor is:

a. The lowest price a producer will accept.

b. The lowest price a consumer will pay.

c. A minimum price set by the government above equilibrium price.

d. A maximum price set by the government above equilibrium price.

e. Usually set equal to equilibrium price.

43. A market consequence of the establishment of a price floor program is that price will be:

a. Too low, and an excess supply will result.

b. Too low, and a shortage will result.

c. Too high, and an excess supply will result.

d. Too high, and a shortage will result.

e. Below the market equilibrium price.

44. Consider the market for bicycles. If a dealer cuts prices by 10 percent and sells 20 percent more bikes, then demand for bicycles is:

a. Inelastic, and total revenue will increase.

b. Elastic, and total revenue will increase.

c. Inelastic, and total revenue will decrease.

d. Elastic, and total revenue will decrease.

e. Unit elastic, and total revenue will remain the same.

45. By producing at the point where MR = MC, the firm:

a. Is guaranteed a profit.

b. Will earn a profit of zero.

c. Will lose money.

d. Will maximize profit.

46. Suppose product price is fixed at $24; MR = MC at Q = 200; AFC = $6; AVC = $16. What do you advise this firm to do?

a. Increase output.

b. Decrease output.

c. Shut down operations.

d. Stay at the current output; the firm is earning a profit of $400.

e. Stay at the current output; the firm is losing $200.

47. An oligopoly is a market structure in which:

a. one firm has 100 percent of a market.

b. there are many small firms.

c. there are many firms with no control over price.

d. there are few firms selling either a homogeneous or differentiated product.

48. If the supply of a good decreases, which of the following will generally occur in a market setting?

a. The price of the good will decrease.

b. Demand will decrease.

c. The quantity demanded will increase.

d. The quantity demanded will decrease.