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?

Supply and demand

Circular flow

Production possibility curve

Total utility

Production function

Question 45(Multiple Choice Worth 1 points)

(02.08 MC)

Which of the following, ceteris paribus, would lead to an increase in quantity consumed and a decrease in price?

A lump-sum tax

A per-unit tax

A binding price floor

A decrease in income tax

A per-unit subsidy

Question 46(Multiple Choice Worth 1 points)

(01.05 LC)

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

fixed cost

accounting cost

normative cost

positive cost

opportunity cost

Question 47(Multiple Choice Worth 1 points)

(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 offers a $5 million subsidy to maintain current pricing. What is the expected outcome of the new payoff matrix, given the subsidy?The Nash equilibrium changes, and both companies will maintain their prices.

The Nash equilibrium changes, and both companies will increase their prices.

The Nash equilibrium remains the same, and both companies will increase their prices.

Company A will increase its price, while Company B maintains its price.

Company A will maintain its price, while Company B increases its price.

Question 48(Multiple Choice Worth 1 points)

(01.01 MC)

Why might salt be a resource with a high cost in one market and a very low cost in another market?

Trade could affect costs.

Its supply could be scarce in one market and very great in another.

The higher cost market might have a much lower demand for salt than its supply.

The higher cost market might have no demand for salt.

The lower cost market might have more trade-offs for salt harvesting.

Question 49(Multiple Choice Worth 1 points)

(06.02 MC)

One way that externalities can be eliminated is to

increase competition

regulate production or consumption

increase transaction costs

ensure perfect market information

relax enforcement of property rights

Question 50(Multiple Choice Worth 1 points)

(02.02 MC)

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

No change

A shift to the left

A shift to the right

A decrease in price

A decrease in quantity supplied

Question 52(Multiple Choice Worth 1 points)

(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 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

Question 53(Multiple Choice Worth 1 points)

(03.02 MC)

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 monopoly

highly concentrated

fragmented

price discriminating

competitive

Question 54(Multiple Choice Worth 1 points)

(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?

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.

Question 55(Multiple Choice Worth 1 points)

(01.02 LC)

Which of the following is a basic question that must be answered in resource allocation?

How much education should workers have?

What goods and services should be produced?

What is a fair price for a particular good or service?

How much should a good or service cost the consumer?

What sort of technology should be used to produce goods?

Question 56(Multiple Choice Worth 1 points)

(02.01 MC)

According to the law of demand, any change in the own-price will cause a(n)

decrease in demand

increase in demand

increase in the supply

opposing change in quantity demanded when demand is not perfectly inelastic

opposing change in quantity supplied when supply is perfectly elastic

Question 57(Multiple Choice Worth 1 points)

(04.01 MC)

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

increase; increases; decrease

increase; increases; increase

increase; decreases; increase

decrease; increases; increase

decrease; decreases; decrease