QN=1 (17127) Prices direct economic activity in a market economy by11

a. influencing the actions of buyers and sellers.

b. reducing scarcity of the goods and services produced.
c. eliminating the need for government intervention.
d. allocating goods and services produced in the most equitable way.

QN=2 (17120) Productivity is defined as the11

a. amount of goods and services produced from each unit of labor input.
b. number of workers required to produce a given amount of goods and services.
c. amount of labor that can be saved by replacing workers with machines.
d. actual amount of effort workers put into an hour of working time.

QN=3 (17131) Moira decides to spend two hours taking a nap rather than attending her classes.
Her opportunity cost of napping is1
a. the value of the knowledge she would have received had she attended class.
b. the $30 she could have earned if she had worked at her job for those two hours.
c. the value of her nap less the value of attending class.
d. nothing, since she would valued sleep more than attendance at class.

QN=4 (17144) In an economy in which decisions are guided by prices and individual self-
interest, there is1111
a. the potential to achieve efficiency in production.
b. a strong need for government intervention in the market.
c. less efficiency than would be observed in a centrally-planned economy.
d. more need for a strong legal system to control individual greed than would be
needed in a centrally-planned economy.

QN=5 (17165) When economists make normative statements, they are1

a. speaking as scientists.
b. speaking as policy advisers.
c. making claims about how the world is.
d. revealing that they are very liberal in their views of how the world works.

QN=6 (17170) The slope of a fairly flat upward-sloping line will be a1111
a. small positive number.
b. large positive number.
c. small negative number.
d. large negative number.

QN=7 (17154) Positive statements are1

a. prescriptive.
b. claims about how the world should be.
c. claims about how the world is.
d. made by economists speaking as policy advisers.

QN=8 (17156) When two variables have a positive correlation,2

a. (i) when the x-variable increases, the y-variable decreases.
b. (ii) when the x-variable decreases, the y-variable increases.
c. (iii) when the x-variable increases, the y-variable increases.
d. More than one of (i), (ii), and (iii) is correct.

QN=9 (17167) Refer to Figure 2-7. In order to reach point C, the economy would have to
2222

a. (i) acquire more resources or experience a technological advance.

b. (ii) begin using its available resources more efficiently than it is currently using
them.
c. (iii) shift resources away from the production of ribeye steaks and toward
production of books.
d. None of (i), (ii), and (iii) are correct; the economy will never be able to reach
point C.

QN=10 (17158) When economists attempt to simplify the real world and make it easier to
understand they make222
a. assumptions.
b. mistakes in judgment.
c. predictions.
d. evaluations.

QN=11 (17179) In the circular-flow diagram, which of the following items flows from
households to firms through the markets for the factors of production?3333
a. goods and services
b. land, labor, and capital
c. dollars spent on goods and services
d. wages, rent, and profit

QN=12 (17214) Two goods are substitutes when a decrease in the price of one good33
a. decreases the demand for the other good.
b. decreases the quantity demanded of the other good.
c. increases the demand for the other good.
d. increases the quantity demanded of the other good.

QN=13 (17219) Which of the following is not held constant in a demand schedule?333
a. income
b. tastes
c. price
d. expectations

QN=14 (17186) In a market economy, supply and demand determine3333

a. both the quantity of each good produced and the price at which it is sold.
b. the quantity of each good produced, but not the price at which it is sold.
c. the price at which each good is sold, but not the quantity of each good produced.
d. neither the quantity of each good produced nor the price at which it is sold.

QN=15 (17252) For a particular good, a 12 percent increase in price causes a 3 percent decrease
in quantity demanded. Which of the following statements is most likely
applicable to this good?333
a. There are many substitutes for this good.
b. The good is a necessity.
c. The market for the good is narrowly defined.
d. The relevant time horizon is long.

QN=16 (17250) Which of the following statements is correct?333

a. (i) The demand for natural gas is more elastic over a short period of time than
over a long period of time.
b. (ii) The demand for smoke alarms is more elastic than the demand for Persian
rugs.
c. (iii) The demand for bourbon whiskey is more elastic than the demand for
alcoholic beverages in general.
d. All of (i), (ii), and (iii) are correct.

QN=17 (17241) The flatter the demand curve through a given point, the3
a. greater the price elasticity of demand at that point.
b. smaller the price elasticity of demand at that point.
c. closer the price elasticity of demand will be to the slope of the curve.
d. greater the absolute value of the change in total revenue when there is a
movement from that point upward and to the left along the demand curve.

QN=18 (17275) A shortage results when4

a. a nonbinding price ceiling is imposed on a market.
b. a nonbinding price ceiling is removed from a market.
c. a binding price ceiling is imposed on a market.
d. a binding price ceiling is removed from a market.

QN=19 (17276) Suppose the government has imposed a price ceiling on televisions. Which of
the following events could transform the price ceiling from one that is not
binding into one that is binding?44
a. Firms expect the price of televisions to fall in the future.
b. The number of firms selling televisions decreases.
c. Consumers' income decreases, and televisions are a normal good.
d. The number of consumers buying televisions decreases.

QN=20 (17267) Suppose the government has imposed a price floor on cellular phones. Which of
the following events could transform the price floor from one that is binding to
one that is not binding?4444
a. Cellular phones become less popular.
b. Traditional land line phones become more expensive.
c. The components used to produce cellular phones become less expensive.
d. Firms expect the price of cellular phones to fall in the future.

QN=21 (17344) Refer to Figure 7-5. What happens to the consumer surplus if the price rises
from $100 to $150?
44
a. The new consumer surplus is half of the original consumer surplus.
b. The new consumer surplus is 25 percent of the original consumer surplus.
c. The new consumer surplus is double the original consumer surplus.
d. The new consumer surplus is triple the original consumer surplus.

QN=22 (17334) When a buyer’s willingness to pay for a good is equal to the price of the good,
the5
a. buyer’s consumer surplus for that good is maximized.
b. buyer will buy as much of the good as the buyer’s budget allows.
c. price of the good exceeds the value that the buyer places on the good.
d. buyer is indifferent between buying the good and not buying it.

QN=23 (17316) Refer to Figure 7-1. If the supply curve is S, the demand curve is D, and the
equilibrium price is $100, what is the producer surplus?
555
a. $625
b. $1,250
c. $2,500
d. $5,000

QN=24 (17368) If a sawmill creates too much noise for local residents,6666
a. noise restrictions will force residents to move out of the area.
b. a sense of social responsibility will cause owners of the mill to reduce noise
levels.
c. the government can raise economic well-being through noise-control
regulations.
d. the government should avoid intervening because the market will allocate
resources efficiently.

QN=25 (17372) When a market is characterized by an externality, the government6666

a. can correct the market failure only in the case of positive externalities.
b. can correct the market failure only in the case of negative externalities.
c. can correct the market failure in the case of both positive and negative
externalities by inducing market participants to internalize the externality.
d. cannot correct for externalities due to the existence of patents.

QN=26 (17389) Mary and Cathy are roommates. Mary assigns a $30 value to smoking cigarettes.
Cathy values smoke-free air at $15. Which of the following scenarios is a
successful example of the Coase theorem?6666
a. Cathy offers Mary $20 not to smoke. Mary accepts and does not smoke.
b. Mary pays Cathy $16 so that Mary can smoke.
c. Mary pays Cathy $14 so that Mary can smoke.
d. Cathy offers Mary $15 not to smoke. Mary accepts and does not smoke.

QN=27 (17391) A view of a spectacular sunset along a private beach is an example of a7

a. private good.
b. public good.
c. nonrival but excludable good.
d. rival but nonexcludable good.

QN=28 (17411) People have little incentive to produce a public good because777
a. the social benefit is less than the private benefit.
b. the social benefit is less than the social cost.
c. there is a free-rider problem.
d. there is a Tragedy of the Commons.

QN=29 (17404) When the absence of property rights causes a market failure, the government can
potentially solve the problem777
a. (i) by clearly defining property rights.
b. (ii) through regulation.
c. (iii) by supplying the good itself.
d. All of (i), (ii), and (iii) are correct.

QN=30 (17440) Industrial organization is the study of how7

a. labor unions organize workers in industries.
b. profitable firms are in organized industries.
c. industries organize for political advantage.
d. firms' decisions regarding prices and quantities depend on the market conditions
they face.

QN=31 (17464) If a firm produces nothing, which of the following costs will be zero?77
a. total cost
b. fixed cost
c. opportunity cost
d. variable cost

QN=32 (17433) Refer to Table 13-2. The marginal product of the second worker is
7777
a. 90 units.
b. 85 units.
c. 80 units.
d. 20 units.

QN=33 (17484) When a firm has little ability to influence market prices it is said to be in what
kind of a market?8888
a. a competitive market
b. a strategic market
c. a thin market
d. a power market

QN=34 (17485) Use the information for a competitive firm in the table below to answer the
following questions.

Refer to Table 14-5. If the firm finds that its marginal cost is $11, it should8
a. (i) increase production to maximize profit.
b. (ii) increase the price of the product to maximize profit.
c. (iii) advertise to attract additional buyers to maximize profit.
d. None of (i), (ii), and (iii) are correct.

QN=35 (17490) For a certain firm, the 100th unit of output that the firm produces has a marginal
revenue of $10 and a marginal cost of $11. It follows that the999
a. production of the 100th unit of output increases the firm's profit by $1.
b. production of the 100th unit of output increases the firm's average total cost by
$1.
c. firm's profit-maximizing level of output is less than 100 units.
d. production of the 110th unit of output must increase the firm’s profit by less
than $1.

QN=36 (17541) A monopoly chooses to supply the market with a quantity of a product that is
determined by the intersection of the99
a. marginal cost and demand curves.
b. average total cost and demand curves.
c. marginal revenue and average total cost curves.
d. marginal revenue and marginal cost curves.

QN=37 (17532) If a monopolist has zero marginal costs, it will produce9999

a. the output at which total revenue is maximized.
b. in the range in which marginal revenue is still increasing.
c. at the point at which marginal revenue is at a maximum.
d. in the range in which marginal revenue is negative.

QN=38 (17519) One difference between a perfectly competitive firm and a monopoly is that a
perfectly competitive firm produces where99
a. marginal cost equals price, while a monopolist produces where price exceeds
marginal cost.
b. marginal cost equals price, while a monopolist produces where marginal cost
exceeds price.
c. price exceeds marginal cost, while a monopolist produces where marginal cost
equals price.
d. marginal cost exceeds price, while a monopolist produces where marginal cost
equals price.

QN=39 (17563) A profit-maximizing firm in a monopolistically competitive market is

characterized by which of the following?999
a. (i) average revenue exceeds marginal revenue
b. (ii) marginal revenue equals marginal cost
c. (iii) price exceeds marginal cost
d. All of (i), (ii), and (iii) are correct.
QN=40 (17596) Refer to Figure 16-4. Which of the graphs depicts a short-run equilibrium that
will encourage the exit of some firms from a monopolistically competitive
industry?
101010

a. panel (a)
b. panel (b)
c. panel (c)
d. panel (d)

QN=41 (17594) Because monopolistically competitive firms produce differentiated products,

each firm101010
a. faces a demand curve that is horizontal.
b. faces a demand curve that is vertical.
c. has no control over product price.
d. has some control over product price.

QN=42 (17624) In which of the following games is it clearly the case that the cooperative
outcome of the game is good for the two players and good for society?101010
a. Two guilty criminals have been captured by the police, and each prisoner
 decides whether to confess or to remain silent.
b. Two airlines dominate air travel between City A and City B, and each airline
decides whether to charge a “high” airfare or a “low” airfare.
c. Two duopoly firms account for all of the production in a market, and each firm
decides whether to produce a “high” amount of output or a “low” amount of
output.
d. Two oil companies own adjacent oil fields over a common pool of oil, and each
company decides whether to drill one well or two wells.

QN=43 (17602) The prisoners' dilemma is an important game to study because11111111

a. most games present zero-sum alternatives.
b. it identifies the fundamental difficulty in maintaining cooperative agreements.
c. strategic decisions faced by the prisoners are identical to those faced by firms
engaged in competitive agreements.
d. all interactions among firms are represented by this game.

QN=44 (17625) The simplest type of oligopoly is111111

a. monopoly.
b. duopoly.
c. monopolistic competition.
d. oligopolistic competition.

QN=45 (17642) When economists refer to a firm's capital, they are likely to be using the term to
describe the11
a. markets for final goods and services.
b. stock of equipment and buildings used in production.
c. amount of bank financing used by the firm.
d. amount of financing provided by the equity markets.

QN=46 (17652) Which of the following best describes the economy's stock of equipment and
structures?1111
a. capital
b. aggregate demand
c. long-term inventory
d. aggregate stock

QN=47 (17671) 5. Refer to Table 18-3. This table describes the number of baseballs a
manufacturer can produce per day with different quantities of labor. Each
baseball sells for $5 in a competitive market. For which level of employment is
the marginal product of labor greatest?
1111
a. 1 worker
b. 2 workers
c. 3 workers
d. 4 workers

QN=48 (17694) When the price of pizza falls, the substitution effect, for normal goods Pepsi and
pizza, causes a1212
a. shift to a lower indifference curve so the consumer buys more Pepsi.
b. shift to a higher indifference curve so the consumer buys more Pepsi.
c. movement along the indifference curve so the consumer buys more Pepsi.
d. movement along the indifference curve so the consumer buys less Pepsi.

QN=49 (17715) Bundle L contains 10 units of good X and 20 units of good Y. Bundle M
contains 8 units of good X and 21 units of good Y. The consumer is indifferent
between bundle L and bundle M. Assume that the consumer’s preferences
satisfy the four properties of indifference curves. Which of the following
correctly expresses the marginal rate of substitution of good X for good Y
between these two points?1212
a. The consumer will give up 1 unit of good X to gain 2 units of good Y.
b. The consumer will give up 2 units of good X to gain 1 unit of good Y.
c. The price of good X is twice as large as the price of good Y.
d. The price of good X is half as large as the price of good Y.

QN=50 (17684) Diana and Sarah each like jewelry and music by the Rolling Stones. If we were
to graph an indifference curve with jewelry on the horizontal axis and cd’s by
the Rolling Stones on the vertical axis, then12
a. Diana and Sarah would have identical indifference curves.
b. Diana’s indifference curve would be higher than Sarah’s indifference curve.
c. Sarah’s indifference curve would be higher than Diana’s indifference curve.
d. Because we do not know the intensity of each woman’s preferences, we do not
have enough information to compare their indifference curves.
[id=17127, Mark=1]1. A
[id=17120, Mark=1]2. A
[id=17131, Mark=1]3. A
[id=17144, Mark=1]4. A
[id=17165, Mark=1]5. B
[id=17170, Mark=1]6. A
[id=17154, Mark=1]7. C
[id=17156, Mark=1]8. C
[id=17167, Mark=1]9. A
[id=17158, Mark=1]10. A
[id=17179, Mark=1]11. B
[id=17214, Mark=1]12. A
[id=17219, Mark=1]13. C
[id=17186, Mark=1]14. A
[id=17252, Mark=1]15. B
[id=17250, Mark=1]16. C
[id=17241, Mark=1]17. A
[id=17275, Mark=1]18. C
[id=17276, Mark=1]19. B
[id=17267, Mark=1]20. B
[id=17344, Mark=1]21. B
[id=17334, Mark=1]22. D
[id=17316, Mark=1]23. C
[id=17368, Mark=1]24. C
[id=17372, Mark=1]25. C
[id=17389, Mark=1]26. B
[id=17391, Mark=1]27. C
[id=17411, Mark=1]28. C
[id=17404, Mark=1]29. D
[id=17440, Mark=1]30. D
[id=17464, Mark=1]31. D
[id=17433, Mark=1]32. C
[id=17484, Mark=1]33. A
[id=17485, Mark=1]34. D
[id=17490, Mark=1]35. C
[id=17541, Mark=1]36. D
[id=17532, Mark=1]37. A
[id=17519, Mark=1]38. A
[id=17563, Mark=1]39. D
[id=17596, Mark=1]40. B
[id=17594, Mark=1]41. D
[id=17624, Mark=1]42. D
[id=17602, Mark=1]43. B
[id=17625, Mark=1]44. B
[id=17642, Mark=1]45. B
[id=17652, Mark=1]46. A
[id=17671, Mark=1]47. B
[id=17694, Mark=1]48. D
[id=17715, Mark=1]49. B
[id=17684, Mark=1]50. D