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5 Steps To A 5 AP Macroeconomics 2014-2015 2015 Edition Eric Dodge - Solutions

A monopolist may be able to maintain long-run positive profit due to(A) deadweight loss.(B) economies of scale in production.(C) a price that is set equal to average total cost.(D) perfectly elastic demand for the product.(E) entry of new firms that keep the price high.
Which of the following is a characteristic of a monopoly market?(A) Firms produce a homogeneous product.(B) Barriers to entry exist.(C) Firms are price-taking profit maximizers.(D)Deadweight loss is eliminated through entry of competing firms in the long run.(E) In the long run the firm earns
If a market for a good is producing a negative externality,(A) at the market output the marginal costs to society exceed the private marginal costs of production.(B) at the market output the marginal benefits to society exceed the private marginal costs of production.(C) at the market output the
Where is the shutdown point for this perfectly competitive firm?(A) Any price below curve 4(B) Any price below 0c(C) Any price below curve 3(D) Any price below curve 2(E) Any quantity less than Q
The curve labeled 4 represents which of the following?(A) Marginal cost(B) Marginal product of labor(C) Average total cost(D)Average fixed cost(E) Average variable cost
The demand for labor falls if(A) labor productivity falls.(B) the price of the good produced by labor rises.(C) the price of a complementary input falls.(D) demand for the good produced by labor rises.(E) a minimum wage is removed from the labor market.
At a quantity of 10, what is the value of $(Y - X)?(A) $100(B) $25(C) $10(D) $35(E) $350
If average variable cost at a quantity of 10 is$25, what is the value of $Y in the figure above?(A) $250(B) $25(C) $35(D) $1,000(E) $350
The market for good X is currently in equilibrium.Which of the following choices would not cause both a decrease in the equilibrium price of good X and a decrease in the equilibrium quantity of good X?(A) A decrease in consumer income and good X is a normal good.(B) An increase in consumer income
The figure above shows the long-run average cost curve of a competitive firm. Which of the following choices best describes Region B in the diagram?(A) Economies of scale(B) Diseconomies of scale(C) Constant returns to scale(D)Diminishing returns to scale(E) Increasing returns to scale
The table above shows how hiring increasing amounts of labor to a fixed amount of capital affects the hourly output of Eli’s lemonade stand. Based on this table of production data, which of the following can be said?(A) Diminishing marginal returns begins with the first worker hired.(B) Marginal
Which of the following is a characteristic of perfect competition?(A) Firms produce a homogeneous product.(B) Barriers to entry exist.(C) Firms are price-setting profit maximizers.(D) The government regulates the price so that deadweight loss is eliminated.(E) Long-run positive profits are
Diminishing marginal returns to short-run production begin when(A) the average product of labor begins to fall.(B) the total product of labor begins to fall.(C) marginal product of labor becomes negative.(D) average variable cost begins to rise.(E) marginal product of labor begins to fall.
A firm employs variable amounts of labor to a fixed amount of capital to produce output. If the daily wage paid to labor increases, how does this affect the firm’s costs?TOTAL TOTAL VARIABLE FIXED TOTAL COST COST COST(A) Decrease No change Decrease(B) Decrease Decrease Decrease(C) Increase
If it is true that bacon and eggs are complementary goods, then(A) the income elasticity of bacon is positive and the income elasticity for eggs is negative.(B) the price elasticity for eggs is greater than the price elasticity for bacon.(C) the cross-price elasticity between bacon and eggs is
The figure above best represents which of the following functions?(A) Total product of labor(B) Total revenue(C) Total cost(D)Total utility(E) Total short-run economic profits
You are told that the Gini coefficient of income inequality has risen from .35 to .85. Which of the following is a likely cause of this change?(A) Market power in the factor and output markets has increased.(B) Labor market discrimination has been eliminated.(C) The distribution of wealth and
Dorothy has daily income of $20, each cup of coffee costs Pc = $1, and each scone costs Ps = $4.The table below provides us with Dorothy’s marginal utility (MU) received in the consumption of each good. As a utility-maximizing consumer, which combination of coffee and scones should Dorothy
The downward-sloping demand curve is partially explained by which of the following?(A) Substitution effects and income effects(B) The law of increasing marginal costs(C) The principle of comparative advantage(D) The law of diminishing marginal returns to production(E) The least-cost principle
If the market is in equilibrium, which of the following areas corresponds to producer surplus?(A) BGD(B) 0AHJ(C) 0DGK(D)0BG(E) 0BGK
If the price were to fall from 0C to 0A, which of the following would be true?(A) Dollars spent on this good would increase if demand for the good were price inelastic.(B) Dollars spent on this good would decrease if demand for the good were price elastic.(C) Dollars spent on this good would
If the current price is 0B, we would expect(A) a surplus in the market to be eliminated by rising prices.(B) a shortage in the market to be eliminated by falling prices.(C) a surplus in the market to be eliminated by falling prices.(D) quantity demanded to be equal to quantity supplied as the
Which of the following is true of the perfectly competitive firm in the short run?(A) The firm earns a normal profit.(B) The firm shuts down if the price falls below average total cost.(C) The firm earns positive economic profit.(D) The firm maximizes profit by producing where the price equals
If the wage paid to all units of labor is $4.50, how many units of labor are hired?(A) 1(B) 2(C) 3(D) 4(E) 5
Which unit of labor has marginal revenue product equal to $1.50?(A) 1st(B) 2nd(C) 3rd(D) 4th(E) 5th
Suppose a price floor is installed in the market for coffee. One result of this policy would be(A) a decrease in the demand for coffee-brewing machines.(B) a persistent shortage of coffee in the market.(C) an increase in consumer surplus due to lower coffee prices.(D) an increase in the demand for
Which of the following is an implicit cost for the owner of a small store in your hometown?(A) The wage that is paid to the assistant manager(B) The cost of purchasing canned goods from a wholesale food distributor(C) The value placed on the owner’s skills in an alternative career(D) The cost of
Good X is exchanged in a competitive market.Which of the following is true if an excise tax is now imposed on the production of good X?(A) If the demand curve is perfectly elastic, the price rises by the amount of the tax.(B) The consumer’s burden of the tax rises as the demand curve is more
The elasticity of supply is typically greater when(A) producers have fewer alternative goods to produce.(B) producers have less time to respond to price changes.(C) producers are operating near the limits of their production.(D) producers have less access to raw materials necessary for
Which of the following is a fundamental aspect of the free market system?(A) A high degree of government involvement.(B) Public ownership of resources.(C) Private property.(D) Central planners set wages and prices.(E) Employers consult government agencies for guidance in hiring workers with
Which of the following goods is likely to have the most elastic demand curve?(A) Demand for white Ford minivans(B) Demand for automobiles(C) Demand for Ford automobiles(D)Demand for American-made automobiles(E) Demand for a Ford minivan
An effective price ceiling in the market for good X likely results in(A) a persistent surplus of good X.(B) a persistent shortage of good X.(C) an increase in the demand for good Y, a substitute for good X.(D) a decrease in the demand for good Z, a complement with good X.(E) a rightward shift in
Which of the following certainly lowers the equilibrium price of a good exchanged in a competitive market?(A) The demand curve shifts to the right.(B) The supply curve shifts to the left.(C) The demand curve shifts to the left, and the supply curve shifts to the right.(D) The demand curve shifts to
A competitive market for coffee, a normal good, is currently in equilibrium. Which of the following would most likely result in an increase in the demand for coffee?(A) Consumer income falls.(B) The price of tea rises.(C) The wage of coffee plantation workers falls.(D)Technology in the harvesting
A rational consumer who is eating Girl Scout cookies stops eating when(A) the total benefit equals the total cost of eating cookies.(B) the marginal benefit equals the marginal cost of the next cookie.(C) the marginal cost of eating cookies is maximized.(D) the marginal benefit of eating cookies is
Which of the following scenarios would increase a nation’s production possibility frontier (PPF)?(A) The nation’s system of higher education slowly declines in quality.(B) The nation invests in research and development of new technology.(C) The nation’s infant mortality rate
The figure above shows the production possibility frontiers (PPFs) for two nations that produce crabs and cakes. If these nations specialize and trade based on the principle of comparative advantage, which of the following trade agreements benefit both nations?(A) Nation A trades three crabs to
Which of the following is likely to have a demand curve that is the least elastic?(A) Demand for the perfectly competitive firm’s output(B) Demand for the oligopoly firm’s output with a homogenous product(C) Demand for the oligopoly firm’s output with a differentiated product(D)Demand for the
The law of increasing costs is useful in describing(A) a demand curve.(B) a marginal benefit curve.(C) a linear production possibility frontier.(D) a concave production possibility frontier.(E) a total fixed costs curve.
Land, labor, capital and entrepreneurial talent are often referred to as(A) production possibilities.(B) goods and services.(C) unlimited human wants.(D) opportunity costs.(E) scarce economic resources.
The production of pork on large corporate hog farms generates pollution that seeps into the ground and can pollute the local well-water supply.(A) From society’s perspective, use marginal analysis to explain how the competitive market creates a misallocation of resources in the market for
Eli’s lemonade stand employs only labor and lemons to produce lemonade. The table below shows how total production changes at different combinations of labor and lemons. Lemonade sells in a competitive market at $1 per cup.TOTAL HOURS TOTAL POUNDS PRODUCOF LABOR PRODUCTION OF LEMONS TION 0 00 0
Bob’s Beans is a perfectly competitive soybean producer. The short-run price of soybeans is currently below average total cost, but above Bob’s shutdown point.(A) Using two correctly labeled graphs, show the soybean market side by side with Bob’s Beans. Clearly indicate which graph represents
If the market for this good was in equilibrium at Q2 but the socially optimal output was Q1, the government could best remedy this —— of resources by legislating a —— on —— of the good.(A) underallocation, per unit tax, consumers(B) overallocation, per unit subsidy, consumers(C)
Which of the following is the best example of the free-rider effect?(A) You and a friend take a road trip to Florida in your friend’s car. You pay for the gas.(B) In exchange for tutoring your friend in economics, she helps you with your geometry assignment.(C) You have ordered a big college
The sales tax that you pay at the grocery store is commonly labeled a(A) progressive tax.(B) regressive tax.(C) proportional tax.(D) excise tax.(E) tax bracket.
A perfectly competitive employer hires labor up to the point where(A) Wage = Marginal factor cost.(B) Wage = Marginal product of labor.(C)Wage = Marginal revenue.(D)Wage = Marginal revenue product of labor.(E) Wage = Price of the good produced by the labor.
Which of the following is the best example of a negative externality and the appropriate plan for eliminating it?(A) Air pollution from a factory blows downwind and harms children in a small community.Tax the citizens of the community.(B) Your neighbor plants a fragrant blooming cherry tree in her
More college students are graduating with BA degrees in economics. Given this trend, we would expect the wage of economists, the employment of economists, and the demand for economics textbooks to change in which of the following ways?DEMAND EMPLOYMENT FOR ECONOMIST OF ECONOMICS WAGES ECONOMISTS
In order to hire the least-cost combination of labor and capital, the firm must do which of the following?(A) Find the combination of labor and capital where the marginal product of labor is equal to the marginal product of capital.(B) Find the combination of labor and capital where the ratio of
A minimum wage in the market for fast-food workers is likely to produce(A) an increase in the demand for fast-food workers.(B) a decrease in the supply of fast-food workers.(C) a shortage of fast-food workers.(D) a lower price of fast-food products.(E) a surplus of fast-food workers.
An industry described as an oligopoly would most likely have(A) normal profits in the long run.(B) no opportunities for collusive behavior.(C) significant barriers to entry.(D) price-taking behavior.(E) one firm with no close rivals.
If the wage paid to all units of labor is $20, how many units of labor are employed?(A) 1(B) 2(C) 3(D) 4(E) 5
The marginal revenue product of the fourth unit of labor is equal to(A) $19.(B) $16.(C) $8.(D) $20.(E) $2.
Which of the following is most likely to be true in the long run for a monopoly firm?(A) P = MR = MC = ATC(B) P = MR = MC > ATC(C) P > MR = MC = ATC(D) P = MR > MC = ATC(E) P > ATC > MR = MC
If a monopsony labor market suddenly were transformed into a perfectly competitive labor market, how would the wage and employment change?(A) Both would increase.(B) Both would decrease.(C) The wage would remain constant, but employment would increase.(D) The wage would fall, but employment would
In a competitive labor market for housepainters, which of the following would increase the demand for housepainters?(A) An effective minimum wage imposed on this labor market.(B) An increase in the price of gallons of paint.(C) An increase in the construction of new houses.(D) An increase in the
What is one reason why the government discourages collusion between large firms in the same industry?(A) Collusive output levels tend to increase, driving the price above competitive levels.(B) Consumer surplus falls as the price is driven downward.(C) Collusive output levels tend to decrease,
One of the reasons that the government discourages and regulates monopolies is that(A) producer surplus is lost and consumer surplus is gained.(B) monopoly prices ensure productive efficiency but cost society allocative efficiency.(C) monopoly firms do not engage in significant research and
Monopolistic competition is said to be productively inefficient because(A) the long-run price is above minimum average total cost.(B) long-run profits are positive.(C) firms engage in collusive behavior.(D) there exist no barriers to entry.(E) there exist diseconomies of scale.
If firms are entering an industry that is monopolistically competitive, we would expect(A) the demand for existing firms to shift rightward.(B) the market price of the product to increase.(C) the demand for existing firms to become more inelastic.(D) economic profits to rise for all firms.(E) the
Which is true of monopolistic competition?(A) Firms earn long-run economic profits.(B) P = MR = MC = ATC.(C) Firms spend money to differentiate and advertise their products.(D) In the long run the market is allocatively efficient.(E) Excess capacity is eliminated in the long run.
If this firm was operating in a perfectly competitive market, and the price was equal to 0g, economic profit would be equal to which of the following areas?(A) abcd(B) cdgh(C) cdef(D) eghf(E) abgh
The curve labeled 1 represents which of the following?(A) Marginal cost(B) Marginal product of labor(C) Average total cost(D)Average variable cost(E) Average fixed cost
The area 0abQ is equal to(A) total cost.(B) total variable cost.(C) total fixed cost.(D) marginal cost.(E) average product of labor.
When the marginal product of labor is equal to the average product of labor,(A) marginal product of labor is at its maximum.(B) marginal cost of production is at its minimum.(C) marginal cost is equal to minimum average variable cost.(D) average total cost is at its minimum.(E) total product of
If these firms do not collude, the outcome will be(A) both firms maintain the status quo.(B) both firms enter the market.(C) Firm X enters the market and Firm Y maintains the status quo.(D) Firm Y enters the market and Firm X maintains the status quo.(E) both firms alternate between entering the
Deadweight loss is equal to which of the following areas?(A) abcd(B) cdfg(C) 0abQ1(D)Q1Q2gh(E) bdgh Two competing firms are deciding whether to enter a new market or maintain the status quo. Use the following profit matrix to respond to question 37.FIRM X Enter Market Status Quo X: $3 X: $1 Enter
If this firm were a profit-maximizing monopolist, the price and output would be which of the following?(A) 0a and Q1(B) 0c and Q1(C) 0e and Q1(D) 0e and Q2(E) 0f and Q1
Which of the following is true of monopoly markets?(A) Deadweight loss exists in the short run, but not in the long run.(B) A homogenous product allows for long-run entry of competing firms.(C) Collusion between close rivals creates pricing above marginal cost.(D)Barriers to entry allow for the
Declining populations of tuna in the Atlantic Ocean have likely had which of the following impacts on the wages of tuna fishermen, the employment of tuna fishermen, and real estate prices in New England fishing towns?FISHERMAN EMPLOYMENT REAL ESTATE WAGES OF FISHERMEN PRICES(A) Decrease Increase
For the perfectly competitive firm, the profitmaximizing decision to shut down is made when the price(A) falls below minimum average total cost.(B) is greater than minimum average variable cost, but lower than minimum average total cost.(C) falls below minimum average variable cost.(D) is equal to
Which of the following might explain how a price decrease might cause a decrease in quantity demanded and an upward-sloping demand curve?(A) The good is inferior and the income effect is stronger than the substitution effect.(B) The good is normal and the income effect is stronger than the
Jason cleans swimming pools in a perfectly competitive local market. A profit maximizer, he can charge $10 per pool to clean 9 pools per day, incurring total variable costs of $80 and total fixed costs of $20. Which of the following is true?(A) Jason should shut down in the short run, with economic
If a market is organized by a cartel, we can expect(A) normal profits for all cartel firms.(B) an incentive for cartel firms to cheat on the cartel agreement.(C) profit maximization by individual firms in the cartel.(D) allocative efficiency.(E) perfectly competitive prices.
If the market price is above the perfectly competitive firm’s average total cost curve, we expect that in the long run,(A) the industry contracts as firms exit the market.(B) the industry expands as firms exit the market.(C) the industry contracts as firms enter the market.(D) the industry
Which of the following is true in the long run in perfect competition?(A) P = MR = MC = ATC(B) P = MR = MC > ATC(C) P > MR = MC = ATC(D) P = MR > MC = ATC(E) P > MR = MC > ATC
The demand curve for a perfectly competitive firm’s product is(A) downward sloping and equal to the market demand curve.(B) perfectly elastic.(C) perfectly inelastic.(D) “kinked” at the going market price.(E) the same as the firm’s marginal cost curve.
If total product of labor is rising at an increasing rate,(A) marginal product of labor is rising.(B) marginal product of labor is at its minimum.(C) marginal product of labor is at its maximum.(D) marginal cost is rising.(E) average product of labor is at its minimum.
Which of the following is an example of a longrun adjustment for the owners of a small café?(A) The owners switch from whole wheat to sourdough bread.(B) The owners hire several part-time workers to cover the dinner shifts.(C) The owners work overtime on a busy weekend.(D) The owners install more
You are told that the cross-price elasticity between goods X and Y is +2.0. This means that(A) goods X and Y are normal goods.(B) goods X and Y are inferior goods.(C) goods X and Y are complementary goods.(D) goods X and Y are substitute goods.(E) good X is twice as elastic as good Y.
When a firm is earning a normal profit from the production of a good, it is true that(A) total revenues from production are equal to explicit costs.(B) explicit costs are equal to implicit costs.(C) total revenues from production are equal to implicit costs.(D) total revenues from production are
If Matt’s total utility from consuming bratwurst increased at a constant rate, no matter how many bratwurst Matt consumed, what would Matt’s demand curve for bratwurst look like?(A) Vertical(B) Horizontal(C) Downward sloping(D)Upward sloping(E) First upward, but eventually downward sloping
The market for Cincinnati Reds baseball tickets is currently in equilibrium. Which of the following events would most likely increase the consumer surplus received by Reds fans?(A) The Reds offer discounted parking for all home games.(B) The Reds increase hot dog prices to reflect a higher cost of
Monopoly deadweight loss is the result of(A) setting the price above marginal cost.(B) setting the price above average total cost.(C) monopoly output being greater than the competitive output.(D) long-run normal profits.(E) marginal revenue equaling marginal cost.
Suppose the county government sends each parent a coupon that can be used to subsidize the cost of sending each child to daycare. What would you expect to occur in the market for daycare services?(A) The demand for daycare falls, lowering the market price.(B) The demand for daycare rises,
Using the diagram above, which of the following might have caused the outward movement of the production possibility frontier?(A) A decrease in the availability of fertile farmland(B) A plague of destructive grasshoppers(C) An increase in the productivity of the labor force(D) A severe and
Which of the following causes the supply curve of paper to shift to the left?(A) Paper producers expect lower paper prices in the months ahead.(B) The price of pencils, a complement to paper, increases.(C) Improvements in the technology used to produce paper.(D)Household income falls.(E)
You are told that the income elasticity for DVDs is + 1.5. This means that(A) a 10 percent increase in income produces a 15 percent increase in consumption of DVDs. DVDs are a normal luxury good.(B) a 10 percent increase in income produces a 15 percent increase in consumption of DVDs. DVDs are an
Which of the following is true of a price floor?(A) The price floor shifts the demand curve to the left.(B) An effective floor creates a shortage of the good.(C) The price floor shifts the supply curve of the good to the right.(D)To be an effective floor, it must be set above the equilibrium
Suppose the price elasticity of demand for cigarettes is less than one. When an excise tax is imposed on cigarette production, it changes the price, quantity, and consumer spending in which of the following ways?PRICE QUANTITY SPENDING(A) Decrease Increase Increase(B) Decrease Decrease Decrease(C)
Which of the following would best complete a short definition of economics? “Economics is the study of . . .”(A) how unlimited resources are allocated between scarce wants.(B) how money is circulated through the economy.(C) how corporations maximize the share price of their stock.(D) how
When the production or consumption of a good creates a positive externality, it is deemed a market failure because at the market quantity(A) the marginal social benefit exceeds the marginal social cost.(B) the marginal social cost exceeds the marginal social benefit.(C) society produces too much of
Every day Melanie spends her lunch money consuming apples, at $1 each, and oranges, at $2 each. At her current level of consumption, Melanie’s marginal utility of apples is 12 and her marginal utility of oranges is 18. If she has already spent all of her lunch money, how should Melanie change her
If the price were to rise from 0B to 0C,(A) dollars spent on this good would increase if demand for the good were price elastic.(B) dollars spent on this good would decrease if demand for the good were price inelastic.(C) dollars spent on this good would increase if demand for the good were price
If the market is initially in equilibrium, which of the following would create a new equilibrium at point H?(A) A decrease in consumer income if this good is normal.(B) An increase in the price of a substitute for this good.(C) A decrease in the cost of a production input for this good.(D) An
Assuming no government involvement in this market, if the current price were at the level of 0A, we would expect(A) a surplus in the market to be eliminated by rising prices.(B) a shortage in the market to be eliminated by falling prices.(C) a surplus in the market to be eliminated by falling
Which of the following statements are true of a capitalist market economy?I. Economic resources are publicly owned.II. Freedom of enterprise is critical.III. The price system allocates resources in the most efficient way.(A) I only(B) II only(C) III only(D) I and II only(E) II and III only
Which of the following is the best example of a public good?(A) Private violin lessons(B) The volunteer fire department in your community(C) A $1 ticket for admission to a museum(D) A bag of potato chips(E) A history textbook
The United States is trading salmon to Peru in exchange for anchovies. If these nations are trading based upon relative opportunity costs, what must be the case?(A) The United States has comparative advantage in anchovy production, and Peru has comparative advantage in salmon production.(B) The

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