Scenario 13-8 Figure 7-4 Wanda owns a lemonade stand. She produces lemonade using five inputs: water, sugar, lemons, paper cups, and labor. Her costs per glass are as follows: $0.01 for water, $0.02 for sugar, $0.03 for lemons, $0.02 for cups, and $0.10 for the Price opportunity cost of her labor. She can sell 300 glasses for $0.50 each. F 34. Refer to Scenario 13-8. What are Wanda's explicit costs per glass? a. $0.18 D P1 - - - - - - - b. $0.10 C C. $0.08 P2 6 - -- d. $0.02 Demand 01 02 Quantity Table 13-8 Quantity Fixed Variable of Output Cost Cost 38. Refer to Figure 7-4. Which area represents consumer surplus at a price of P1? $20 SO a. BDF $20 $10 $20 $40 b. AFG $20 $80 c. ABDG $20 $130 d. ABC $20 $200 $20 $300 35. Refer to Table 13-8. What is the average fixed cost of producing 5 units of output? a. $4 Figure 10-1 b. $. c. $40 Price Supply (Private + Public Costs) d. $44 $1.90 Supply 1.80 (Private Costs) Scenario 13-19 1.70 Doreen's Dairy produces and sells Swiss cheese. Last year, it produced 7,000 pounds and sold each pound for $6. In 1.60 - producing the 7,000 pounds, the dairy incurred variable costs of $28,000 and a total cost of $40,000. 1.50 36. Refer to Scenario 13-19. Suppose the owner of the business had an offer to work for another firm for $25,000. The firm's economic profit for the year was 1.35 - a. -$26,000. b. -$23,000. c. $2,000. 35 38 42 58 d. $14,000. Quantity 39. Refer to Figure 10-1. This graph represents the tobacco industry. The industry creates olist maxin a. positive externalities. a. producing an output level where marginal revenue equals marginal cost. b. negative externalities. b. charging a price that is greater than marginal revenue. c. no externalities. . earning a profit of (P - MC) x Q. d. no equilibrium in the market. d. Both a and b are correct.10. Normative statements are not a. descriptive. b. prescriptive. Table 3-23 . claims about how the world should be. Assume that the farmer and the rancher can switch between producing pork and producing tomatoes at a constant rate. d. made by economists speaking as policy advisers. Labor Hours Needed to Make 1 Pound of Pounds Produced in 24 Hours Tomatoes 11. An increase in the price of blueberries would lead to a(n) Pork Pork Tomatoes a. increased supply of blueberries. Farmer 3 4 18 Rancher 4 14 16 16 b. a movement up and to the right along the supply curve for blueberries. c. a movement down and to the left along the supply curve for blueberries. d. Both a and b are correct. 14. Refer to Table 3-23. Assume that the farmer and the rancher each has 24 labor hours available. If each person spends all his time producing the good in which he has a comparative advantage, then total production is 12. If the government were to intervene and set the price of a dozen eggs above the market price, then we would expect, a. 4 pounds of pork and 6 pounds of tomatoes. relative to the market outcome, b. 6 pounds of pork and 8 pounds of tomatoes. a. an increase in the number of eggs people want to buy and an increase in the number of eggs farmers want to c. 4 pounds of pork and 8 pounds of tomatoes. sell. d. 6 pounds of pork and 6 pounds of tomatoes. b. an increase in the number of eggs people want to buy and a decrease in the number of eggs farmers want to sell. c. a decrease in the number of eggs people want to buy and an increase in the number of eggs farmers want to sell 15. Suppose the number of buyers in a market decreases and a technological advancement occurs, also. What would we d. a decrease in the number of eggs people want to buy and a decrease in the number of eggs farmers want to expect to happen in the market? sell. a. Equilibrium price would decrease, but the impact on equilibrium quantity would be ambiguous. b. Equilibrium quantity would increase, but the impact on equilibrium price would be ambiguous. Figure 2-9 c. Equilibrium quantity would decrease, but the impact on equilibrium price would be ambiguous. d. None of the above is correct. Panel (a) Panel (b) cups of coffee Icups of coffee Figure 4-7 Twice Da Db quantity donuts donuts 16. Refer to Figure 4-7. The movement from Da to Do could be caused by 13. Refer to Figure 2-9, Panel (a). Production is a. a decrease in price. a. possible at points J, K, L, and M, but efficient only at points J, L, and M. b. a decrease in income, assuming the good is inferior. b. possible at points J, K, L, and M, but efficient only at point K. c. buyers expecting the price of the good to fall in the near future. c. possible at points J, L, M, and N, but efficient only at points J, L, and M. d. an increase in the price of a complement. d. possible at points J, L, M, and N, but efficient only at point N.Table 14-5 Table 13-3 The table represents a demand curve faced by a firm in a competitive market. Number of Output Fixed Variable Total Quantity Total Revenue Workers Cost Cost Cost 12 $132 10 $50 $0 $50 13 $143 90 $50 $20 $70 14 $154 17 $50 $40 $90 15 $165 230 $50 $60 $1 10 16 $176 24 $5 $8 $130 40. Refer to Table 14-5. For this firm, the average revenue when 14 units are produced and sold is 45. Refer to Table 13-3. The marginal product of the fourth worker is a. 10 units. b. $11. b. 60 units. c. $13. c. 230 units. d. $15. d. 240 units. 41. A profit-maximizing firm will shut down in the short run when a. price is less than average variable cost. Table 14-17 b. price is less than average total cost. The table below shows the price and cost information for a firm that operates in a perfectly competitive market. c. average revenue is greater than marginal cost. Price Quantity Total Cost d. average revenue is greater than average fixed cost. $8 $6 $8 $10 $8 2 $15 $8 $21 Scenario 13-16 $8 4 $2 Barney builds custom wooden birdhouses. He can make 150 birdhouses per month and sell them for $50 each. His $8 average total cost is $30 per birdhouse. $36 $8 $45 42. Refer to Scenario 13-16. Barney's monthly total revenue is a. $12,000. 46. Refer to Table 14-17. The marginal cost of the fourth unit is b. $7,500. a. $28. c. $4,500. b. $32. d. $1,500. c. $5. d. $7. 43. When demand is inelastic, an increase in price will cause . an increase in total revenue 47. The smaller the price elasticity of demand, the b. a decrease in total revenue. a. more likely the product is a luxury. c. no change in total revenue but an increase in quantity demanded. b. smaller the responsiveness of quantity demanded to a change in price. d. no change in total revenue but a decrease in quantity demanded. c. more substitutes the product has. d. greater the responsiveness of quantity demanded to a change in price. 44. Diseconomies of scale occur when 48. If education produces positive externalities, we would expect . average fixed costs are falling a. the government to tax education b. average fixed costs are constant. b. the government to subsidize education. c. long-run average total costs rise as output increases. c. people to realize the benefits, which would increase the demand for education. d. long-run average total costs fall as output increases. d. colleges to relax admission requirements.22. Ramona decides to spend two hours taking a nap rather than attending her classes. Her opportunity cost of napping is a. the value of the knowledge she would have received had she attended clam. b. the $24 she could have earned if she had Worked at her job for those two hours. 0. the value of her nap minus the value of attending class. d. nothing, since she valued sleep more than attendance at class. 17. What will happen in the gasoline market now if buyers expect higher gasoline prices in the near future? a The demand for gasoline will increase. b. The demand for gasoline will decrease. c. The demand for gasoline will be unaffected. d The supply of gasoline will increase, 23. Fundamentally, economics deals with a. scarcity. Table 3-36 h money 0. poverty routes Needed d banking 24. Suppose Country A has a high average wage level and a high level of output per person, while Country B has a low 18. Refer to Table 3-36. Antigua has an absolute advantage in the production of average wage level and a low level of output per person. Which country can benet from trade? a. towels and Barbuda has an absolute advantage in the production of umbrellas. a. Only Country A can benet. b. umbrellas and Barbuda has an absolute advantage in the production of towelsl h. Only Country B can benet. cl both goods and Barbuda has an absolute advantage in the production of neither good 0. Both Country A and Country B can benet. d. neither good and Barbuda has an absolute advantage in the production of both goodsl d. Neither Country A nor Country B can benet 19. A movement along the demand curve might be caused by a change in 25' The imposition of a binding price ceiling on a market causes 3* income a. quantity demanded to be greater than quantity supplied. b. the prices of substitutes or complements. b. (\"mm-.3, demanded to be less than quantity supplied. - expectations about \"we prices. 0. quantity demanded to be equal to quantity supplied. '1' \"1 price f the 300d 0' service that is being demanded. d. the price of the good to be greater than its equilibrium price. 20. When drawing a demand curve, a. demand is measured along the vertical axis and price is measured along the horizontal axis. 26. [f the price of gasoline rises, when is the price elasticity ofdemand likely to be the highest? b. quantity demanded is measured along the vertical axis, and price is measured along the horizontal axis. a. immediately after the price increases a. price is measured along the vertical axis, and demand is measured along the horizontal axis b one month alter the price increase d. price is measured along the vertical axis, and quantity demanded is measured along the horizontal axis. 0. three months after the price increase d. one year aer the price increase 21. Currently you purchase ten frozen pizza per month. You will gladuate from college in December, and you will start a new job in January. You have no plans to purchase frozen pizzas in January. For you, ozen pizzas are a(n) *1 Substitute 3004 27. For a commotion company that builds houses, which of the following costs would be a fixed cost? b. normal good a. the $50,000 per year salary paid to a construction foreman cl inferior good. b. the $30,000 per year salary paid to the company's bookkeeper dl complementary good. c. the $l0,fl[l[l per year premium paid to an insurance company d. All of the above are correct. Figure 14-6 Suppose a firm operating in a competitive market has the following cost curves: Price Figure 14-7 MC Price ATC AVC 175 -. ... MC ATC AVC 125 100 02 Q3 04 Quantity 80 28. Refer to Figure 14-6. Firms will be encouraged to enter this market for all prices that exceed a. P1. b. P2. c. P3. 270 322 515 Quantity d. None of the above is correct. 31. Refer to Figure 14-7. The firm will shut down in the short run if the price of the good is 29. When marginal cost is less than average total cost, a. $75. a. marginal cost must be falling. b. $85. b. average variable cost must be falling. C. $95. c. average total cost is falling. d. All of the above are correct. d. average total cost is rising. Figure 10-1 Price Supply 32. When Monique drives to work every morning, she drives on a congested highway. What Monique does not realize is (Private + Public Costs) that when she enters the highway each morning she increases the travel time of all other drivers on the highway. In this case, the external cost of Monique's highway trip $1.90 Supply (Private Costs) a. increases the social cost above the private cost. 1.80 b. lowers the social cost below the private cost. 1.70 - c. increases the social value above the private benefit. 1.60 - d. decreases the social value below the private benefit. 1.50 1.35 33. Consider a firm that operates in a perfectly competitive market. The firm is producing at its profit maximizing output level. If this is true, then a. average revenue is maximized. 35 38 42 58 Quantity b. the firm must be earning a positive economic profit. 30. Refer to Figure 10-1. This graph represents the tobacco industry. Without any government intervention, the c. marginal revenue is greater than the market price. equilibrium price and quantity are d. price must be equal to marginal cost. a. $1.90 and 38 units, respectively. b. $1.80 and 35 units, respectively. c. $1.60 and 42 units, respectively. d. $1.35 and 58 units, respectively.4. Kelly and David are both capable of repairing cats and cooking meals. Which of the following scenarios is not possible? 3. Kelly has a comparative advanmge in repairing cars and David has a comparative advantage in cooldng meals. I). Kelly has an absolute advantage in repairing cars and David has an absolute advantage in cooking meals. c. Kelly has a comparative advantage in repairing cars and in cooking meals. d. David has an absolute advantage in repairing cars and in cooking meals. Figure 2-5 360 m m m m 15a 12a to 00 an on so in us m m m m an :30 Ill-In 5. Refer to Figure 26. If this economy devotes all of its resources to the production of blankets, then it will produce a. 0 blankets and 360 pillows. b. 200 blankets and 240 pillows. c. 320 blankets and 120 pillows. d. 360 blankets and 0 pillows. Table 3-27 Assume that Huang and Min can switch between producing pamsols and producing porcelain plates at a constant rate. Labor Hours Needed to Make 1 Quantity Producedm 36 Hours Parasol Plate Parasol Plate Huang 2 6 l8 6 Min 2 l4 18 9 6 Refer to Table 3-27. Huang has an absolute advantage in the production of a. parasols and a comparative advantage in the production of parasols, b. parasols and a comparative advantage in the production of plates. c. neither good and a comparative advantage in the production of parasols. d. neither good and a comparative advantage in the production of plates. Figure 2-14 1W m Ion No m \"In so an W 20 2) 40 60 BB 100 I)? \"01.60 180 \"I\" Consider the production possibilities curve for a country that can produce sweaters, apples (in bushels), or a combination of the two 7, Refer to Figure 2-14. If this society mom from point U to point V, a. it gives up 40 bushels of apples to get 80 sweaters, b. it gives up 14-0 bushels of apples to get 80 sweaters. c. it gives up 80 sweaters to gel. 140 bushels of apples. d it gives up 80 sweaters to get 40 bushels ofapples. Tabletll 8, Refer to Table 4-11. The equilibrium price and quantity, respective ly, are a. $2 and 50 units. b. 86 and 30 units. 0. $6 and 60 units. d Sl2 and 30 units. 9. Which of the following would cause price to decrease? a. a decrease in supply b. an increase in demand c. a surplus of the good d. a shortage of the good Indicate the answer choice that best completes the statement or answers the question. 1. The opportunity cost of obtaining more of one good is shown on the production possibilities frontier is the a. amount of the other good that must be given up. b. market price of the additional amount produced. c. amount of resources that must be devoted to its production. CI. number of dollars that must be spent to produce it. Figure 4:11 Q Q' rmn'o 2. Refer to Figure 4-11. The movement from point A to point B on the graph is called a. a decrease in supply. b. an increase in supply. c. an increase in the quantity supplied. d. a decrease in the quantity supplied. 3. Assume Leo buys coffee beans in a competitive market. It follows that a. Leo has a limited number of sellers from which to buy coffee beans. b. Leo will negotiate with sellers whenever he buys coffee beans. c. Leo can inuence the price of coffee beans if he buys a large quantity of them. d. None of the above is correct. Table 13-11 Figure 13-5 Measures of Cost for Very Brady Poster Factory Fixed Cost Quantity Variable Total of Posters Costs Costs Costs $10 $3 $13 $6 $16 $10 $25 $21 $10 49. Refer to Table 13-11. What is the variable cost of producing 5 posters? a. $13 10 11 12 Quantity b. $14 c. $15 52. Refer to Figure 13-5. Curve A is always declining because d. It can't be determined from the information given. a. of diminishing marginal product. b. we are dividing fixed costs by higher and higher levels of output. c. marginal product first increases, then decreases d. marginal product first decreases, then increases. 50. If a consumer places a value of $15 on a particular good and if the price of the good is $17, then the 53. The minimum wage is an example of a . consumer has consumer surplus of $2 if he or she buys the good. a. price ceiling b. consumer does not purchase the good. b. price floor. c. market is not a competitive market. c. wage subsidy. d. price of the good will fall due to market forces. d. tax. 54. Farmer Mcdonald sells wheat to a broker in Kansas City, Missouri. Because the market for wheat is generally considered to be competitive, Mr. McDonald maximizes his profit by choosing 51. In some parts of the United States, sugar beets are grown and harvested. The process of producing usable sugar from the beets generates foul-smelling smoke. A government policy that limits the emission of smoke by sugar-beet-processing a. to produce the quantity at which average variable cost is minimized. firms is an example of b. to produce the quantity at which average fixed cost is minimized. a. a market-based policy. c. the quantity at which market price is equal to Mr. Mcdonald's marginal cost of production. b. a command-and- d. the quantity at which market price exceeds Mr. Mcdonald's marginal cost of production by the greatest c. tradable pollution permits. amount d. transaction costs. Table 5-1 Good Price Elasticity of Demand 1.9 R 0.8 55. Refer to Table 5-1. Which of the following is consistent with the elasticities given in Table 5-1? a. A is laundry detergent and B is Tide. b. A is Diet Pepsi and B is soda. c. A is food and B is a yacht. d. A is toilet paper and B is candles