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introduction to microeconomics

5 Steps To A 5 500 AP Microeconomics Questions To Know By Test Day 3rd Edition Anaxos Inc, Brian Reddington - Solutions

Which example illustrates derived demand?(A) A new tomato harvester increases tomato production.(B) Tomato farm workers go on strike and tomato supply falls.(C) Ketchup demand increases, and tomato demand increases as a result.(D) A new pesticide reduces pest damage to the tomato crop.(E)
Which of the following would result in higher demand for soda factory workers?(A) The price of sugar used in soda production increases.(B) Consumers buy more soda.(C) Consumers begin drinking tea instead of drinking soda.(D) Manufacturers shut down soda factories.(E) Energy drinks gain popularity
Marginal product is(A) the total value of all goods produced(B) the value of goods produced by adding one more production input(C) the quantity of goods produced by adding one more production input(D) the total quantity of goods produced(E) also known as scrap or waste
The marginal revenue of a company is three times larger than the company’s marginal cost. If the company’s marginal cost is $5 and the marginal product is $6, what is the value of the marginal revenue product of labor?(A) $15(B) $50(C) $65(D) $75(E) $90
The financial indicators for a company are in the following table. Based on the information, which of the following is the marginal revenue product of labor?(A) $50(B) $56(C) $500(D) $3,200(E) $5,000
If employees were required to attend training courses, how would this affect labor productivity?(A) It would increase.(B) It would decrease.(C) It would remain the same.(D) It would shift the supply curve to the left.(E) It would have no effect on supply.
A table manufacturer uses wood to produce tables.Consumers start demanding more tables. Because of derived demand,(A) the supply of wood will increase(B) the supply of wood will decrease(C) the price of wood will increase(D) the price of wood will decrease(E) none of the above
A waffle truck sells waffles for $2.50 each. With three employees, its revenue is $250. With four employees, its revenue is$375. Marginal product for the fourth employee is(A) 50(B) 150(C) 100(D) 250(E) 200
A golf club factory has five workers. It pays wages of $500 per day and makes 20 golf clubs, which sell for $50 each. With six workers, it would pay wages of $600 per day and make 24 golf clubs.The golf club factory should hire another worker because(A) marginal product is positive(B) marginal
A saw manufacturer has eight workers who can produce 30 saws. With nine workers, it can produce 25 saws. Each saw sells for$10 on the market. Marginal revenue product for the ninth worker is(A) $300(B) $250(C) $50(D) –$50(E) $100
A refrigerator manufacturer has five employees who can produce 10 refrigerators. Each refrigerator sells for $500. With six employees, the firm can produce 12 refrigerators. Marginal revenue product for the sixth employee is(A) $500(B) $5,000(C) $1,000(D) $6,000(E) $2,000
A suit manufacturer has eight employees who can produce 20 suits. The suits sell for $100 each. With nine employees, the firm can produce 24 suits. Marginal revenue product for the ninth employee is(A) $100(B) $400(C) $2,000(D) $2,400(E) $800
A cookie factory uses wheat and sugar to produce cookies.Wheat and sugar are complementary resources. If the MFC of wheat increases,(A) sugar demand will fall(B) sugar demand will rise(C) sugar demand will stay the same(D) the price of cookies will fall(E) the cookie factory will increase production
Consumers demand trucks from a truck manufacturer.Because of derived demand, the truck manufacturer will(A) hire production workers(B) shut down truck manufacturing plants(C) create differentiated trucks(D) offer a discount on last year’s truck model(E) buy radio ads
Consumers demand hamburgers. A restaurant purchases beef to produce hamburgers. Demand for hamburgers is a(n)(A) derived demand(B) direct demand(C) factor of production(D) cost of production(E) indirect demand
Demand for production inputs is a(A) derived demand(B) product of positive externalities(C) product of negative externalities(D) direct demand(E) function of the elasticity of demand
If the MFC of labor decreases,(A) employment increases(B) unemployment increases(C) labor demand decreases(D) labor supply remains unchanged(E) labor demand remains unchanged
If wages rise 40 percent, and 20 percent more production workers enter the market, the price elasticity of labor supply is(A) 0.5(B) –0.5(C) 2(D) –2(E) 0
If firms hire 15 percent fewer production workers when the wage of production workers increases by 45 percent, the price elasticity of labor demand is(A) 0.33(B) –0.33(C) 3(D) –3(E) 0
Trucking company A has trucks available for new drivers.Trucking company B does not have any more trucks for new drivers, although new workers can still help unload boxes, which has a smaller impact on productivity than what a new driver would contribute. In comparison with trucking company B,
A canned soup company uses 10 types of beans to produce minestrone soup and one type of bean to produce chili. The firm’s demand for a single type of bean used in minestrone soup production, compared with its demand for the chili bean, will be(A) more elastic(B) less elastic(C) just as elastic(D)
A restaurant uses wheat tortillas to make tacos. If corn tortillas are available in the market and can be used as a substitute for wheat tortillas, the restaurant’s demand for wheat tortillas will be(A) more elastic(B) less elastic(C) inelastic(D) perfectly inelastic(E) none of the above
A soda manufacturer produces soda using sugar and carbonated water. If soda has a high elasticity of demand, the soda manufacturer’s demand for carbonated water will be(A) more elastic(B) less elastic(C) inelastic(D) perfectly inelastic(E) none of the above
An airplane factory uses machinery and labor to produce airplanes. If the airplane factory buys more efficient machinery, its demand for labor will increase if(A) the price of airplanes falls(B) demand for airplanes falls(C) the price of airplanes increases(D) machinery and labor are complementary
A motorcycle factory uses machinery and labor to produce motorcycles. If the motorcycle factory purchases more efficient machinery, its demand for labor will decrease if(A) machinery and labor are complementary resources(B) machinery and labor are substitute resources(C) the price of motorcycles
A food processing company uses onions to make onion rings. If the price of onions increases and onions and labor are complementary resources, what would happen to the food processing company’s labor demand curve?(A) It will become vertical.(B) It will become horizontal.(C) It will shift to the
If a community college canceled its nursing classes, what will happen to the labor supply curve for nearby hospitals?(A) It will become vertical.(B) It will become horizontal.(C) It will shift to the left.(D) It will shift to the right.(E) It will not change.
A cupcake store has no local competitors. With three workers, it can make 100 cupcakes and sell them for $2 each. If it hires a fourth worker, it can make 200 cupcakes and sell them for $1.50 each. MRP for the fourth worker is(A) $200(B) $150(C) $100(D) $50(E) $0
A taco truck has no local competitors. With four workers, it can make 100 tacos and sell them for $4 each. With five workers, it can make 150 tacos, but the market price will fall to $3 per taco. The taco truck will hire a fifth worker if the MFC of labor is equal to(A) $100(B) $50(C) $150(D)
A lawnmower factory sells lawnmowers for $200. With one worker, it can make three lawnmowers. With two workers, it can make five lawnmowers. With three workers, it can make six lawnmowers. If the MFC for labor decreased from $400 to $200, the lawnmower factory would(A) hire one worker(B) hire two
How would advancements in technology affect a firm’s labor demand curve?(A) It would become horizontal.(B) It would become vertical.(C) It would shift to the right.(D) It would shift to the left.(E) There would be no change.
If more workers moved to towns where automotive plants were located, what will happen to the labor supply curve for auto manufacturers?(A) The labor supply curve will become horizontal.(B) The labor supply curve will become vertical.(C) The labor supply curve will shift to the left.(D) The labor
In this example, demand for wheat and bread can be described, respectively, as(A) derived demand and direct demand(B) direct demand and derived demand(C) both are derived demand(D) both are direct demand(E) unrelated to one another
If demand for bread shifts from D2 to D3, what happens to the market for wheat?(A) Demand for wheat rises.(B) Demand for wheat falls.(C) Demand for wheat stays the same.(D) Quantity demanded falls for wheat.(E) The price of wheat falls.
Demand for raw materials is a(A) direct demand(B) positive externality(C) fixed cost(D) derived demand(E) negative externality
A rancher can buy 10 bags of feed for $8 per bag. Buying 11 bags of feed will cost $9 per bag. MFC for the eleventh bag of feed is(A) $8(B) $9(C) $10(D) $11(E) $19
Country X creates a new job training program for its citizens. Country Y reduces its spending on job training for its citizens.As a result,(A) the MRP for labor will fall in country X and country Y(B) the MRP for labor will rise in country X and fall in country Y(C) the MRP for labor will rise in
The MFC of labor rises in country A and falls in country B.As a result,(A) manufacturers will hire workers in country A and country B(B) manufacturers will lay off workers in country A and country B(C) manufacturers will hire workers in country A and lay off workers in country B(D) manufacturers
A popcorn factory makes popcorn with salt, cooking oil, and corn kernels. Demand for popcorn decreases. As a result,(A) demand for salt decreases(B) demand for cooking oil increases(C) the popcorn factory will hire more workers(D) demand for corn kernels increases(E) the popcorn factory will buy
John is starting his own business after years of working in a factory. In order to maximize his profit, how many workers should he hire?(A) He should hire until the marginal cost equals marginal revenue.(B) He should hire until the marginal product equals marginal factor cost.(C) He should hire
An auto factory produces cars at an average cost of $10,000 per car. It invests in a larger facility and its average cost rises to$12,000, reducing its economic profit by $2,000 per car. The auto factory’s profit decreased because of(A) lower production efficiency(B) new market entrants(C)
A pharmaceutical firm is currently earning an economic profit on a patented drug. The patent will expire soon. To continue earning an economic profit, the pharmaceutical firm should(A) invent a new drug(B) raise the price of its existing drug(C) lower the price of its existing drug(D) stop
A hydropower plant has a natural monopoly on supplying power to a city and a pharmaceutical company has a monopoly on a patented drug. The difference between these monopolies is(A) the hydro plant has a temporary monopoly(B) the pharmaceutical company has a temporary monopoly(C) the pharmaceutical
Two software companies cross-license their patents to each other, giving both firms access to patents held by either company. This is an attempt to create(A) a monopoly(B) an economy of scale(C) a barrier to entry(D) monopolistic competition(E) D and C
A year later, the golf club manufacturer’s average cost is $70 and the equilibrium price point is also $70. This likely happened because(A) other firms saw the opportunity for an economic profit and began manufacturing golf clubs(B) consumers lost interest in playing golf(C) equipment in the golf
A golf club manufacturer has a marginal cost of $50 and marginal revenue of $50 for a golf club. Its average cost for a golf club is $60 and the price at the equilibrium price point is $80. If it sells 100 golf clubs at the equilibrium price point, what is its economic profit?(A) Its economic
Which of the following is a trait of a monopolistic competition?(A) Companies are price takers.(B) Demand is highly elastic to price changes.(C) Companies cannot make excess profit in the short run.(D) There is only one company that operates in the market.(E) There are numerous options for price
How does an oligopoly compare to monopolistic competition?(A) Companies are price takers in both, but only in oligopolies can a change in the price by one company potentially cause a price war.(B) Companies are price setters in both, and in case one of the companies changes the price, a price war
A small town has numerous small restaurants that have almost identical menus. When surveyed about their satisfaction with the culinary options in their town, many of the residents primarily emphasized that they cannot stand so many different ads on their TVs and radios. The restaurants do not work
How are monopolies and oligopolies similar?(A) Companies are price takers in both market structures.(B) Companies have perfectly differentiated products in both market structures.(C) Both are examples of ineffective market structures.(D) Both are characterized by a perfectly inelastic demand
A water company has 100 percent market share in a city. To make the water market most efficient, the government should(A) separate the water company into several firms to end its monopoly(B) eliminate price regulations on water to encourage competition(C) grant the water company a natural
Many clothing stores are competing for customers in a city by offering unique styles. These clothing stores are likely to(A) open for business or shut down infrequently(B) spend much of their revenue on ads(C) consider other clothing stores’ strategic plans before making business decisions(D) be
A tax software firm has 40 percent market share. Its main competitor has 30 percent market share. If the first firm wants to gain market share, it should(A) invest in software patents to create stronger barriers to entry(B) consider how the other tax software company will respond to its business
Many small farms are producing oranges. There is little differentiation among the oranges, and farms enter and exit the orange industry on a regular basis. As a result,(A) the market is not very competitive(B) the orange farms have low pricing power(C) the orange farms have high pricing power(D)
Suppose an ice cream producer buys a competing ice cream producer. This is an example of(A) vertical integration(B) horizontal integration(C) a monopoly(D) an oligopoly(E) a corporation
In Market A, the market structure is that of a monopoly. In Market B, the market structure is that of a perfectly competitive market.Information about preferences by relevant actors is provided in the following table. Which of the following would MOST likely be the price of the product for each of
Companies A, B, C, and D are the only companies in the electricity supply market. Why do they have an incentive to form a cartel?(A) because this allows them to cooperate in market conditions(B) because this allows them to provide less quality to consumers(C) because this allows them to increase
How are monopolies and oligopolies similar?(A) Both market systems are characterized by high barriers to entry.(B) Both are characterized by markets in which there is no possible substitute.(C) There are no selling costs in either market structure.(D) Both markets are defined by having only one
Which of the following is considered to be a trait of a monopoly?(A) no legal barriers to entry(B) high number of substitute goods(C) downward-sloping demand(D) no deliberate actions or attempts to control the market price(E) high number of competitors
Several manufacturers of luxury cars work together in order to keep the price of these products high. By doing so, the price of the car is far higher had they not worked together. This is an example of(A) marginal social benefit(B) a monopoly(C) a monopsony(D) perfect competition(E) an oligopoly
An auto parts manufacturer decides to produce car doors worth $80,000. It could have produced car windows worth $60,000 instead. Its implicit costs were(A) $20,000(B) $60,000(C) $80,000(D) $0(E) $140,000
Which choice results in the lowest profit for Betty’s and Joey’s?(A) Joey’s buys ads and Betty’s buys ads.(B) Joey’s buys ads and Betty’s does not buy ads.(C) Joey’s does not buy ads and Betty’s does not buy ads.(D) Joey’s does not buy ads and Betty’s buys ads.(E) none of the
Which is the dominant strategy for Joey’s?(A) Don’t buy ads, no matter what happens.(B) Buy ads only if Betty’s buys ads.(C) Don’t buy ads if Betty’s buys ads.(D) Buy ads no matter what happens.(E) none of the above
A group of oil producers have formed a cartel. The cartel is restricting quantity supplied to set a higher price for oil. To maximize its profit, an individual oil producer should(A) raise the price of its oil(B) lower the price of its oil(C) increase quantity supplied for its oil(D) decrease
If Firm A and Firm B are in a prisoner’s dilemma situation, the Nash equilibrium is(A) Firm A defects and Firm B defects(B) Firm A cooperates and Firm B defects(C) Firm A defects and Firm B cooperates(D) Firm A cooperates and Firm B cooperates(E) none of the above
In which type of market would a firm use a payoff matrix to set pricing policy?(A) a monopoly(B) perfect competition(C) monopolistic competition(D) oligopoly(E) natural monopoly
Which outcome would be best for both firms?(A) Firm A raises prices and Firm B raises prices.(B) Firm A lowers prices and Firm B raises prices.(C) Firm A raises prices and Firm B lowers prices.(D) Firm A lowers prices and Firm B lowers prices.(E) none of the above
Using the table, which decision would result in the best outcome for firm A?(A) Firm A lowers prices and Firm B raises prices.(B) Firm B lowers prices and Firm A raises prices.(C) Firms A and B both raise prices.(D) Firms A and B both lower prices.(E) none of the above
A movie studio charges $8 to watch one of its films over the Internet in the United States, and $12 to watch the film from Australia.This is an example of(A) collusion(B) price discrimination(C) economies of scale(D) a cartel(E) game theory The following table illustrates choices available to firm
When a steel manufacturer is buying all of the iron ore produced by many mines, it is likely(A) a price taker(B) a monopsony(C) not insulated from supply and demand fluctuations(D) at a negotiating disadvantage to suppliers(E) engaged in perfect competition
Many small potato farms are growing potatoes. Three large French fry manufacturers are buying all of the potatoes. The potato market is best described as(A) perfect competition(B) an oligopoly(C) an oligopsony(D) a monopsony(E) monopolistic competition
Four cable companies have 90 percent market share. These firms may be(A) price takers(B) in collusion(C) in perfect competition(D) unconcerned with other cable companies’ pricing strategies(E) earning a normal profit in the long run
An auto parts manufacturer has fixed costs of $40,000. It can shut down or produce tires at a loss of $10,000. If it decides to produce tires, its economic profit is(A) –$10,000(B) $40,000(C) $30,000(D) $50,000(E) –$30,000
A group of truck manufacturers are competing in a market.The trucks they manufacture are differentiated products. If this market is an oligopoly and NOT a monopolistic competition,(A) truck manufacturers must consider other firms’ responses when making business decisions(B) the trucks would not
A toy manufacturer adds an employee and average cost decreases. It continues to add more employees. At first, average cost decreases even further, but with even more employees average cost begins to rise. This reflects(A) economies of scale(B) diseconomies of scale(C) constant economies of scale(D)
A price increase in product B resulted in a price increase for product C. Product C is most likely a(n)(A) inferior good(B) complementary good(C) normal good(D) substitute good(E) factor of production
An auto manufacturer needs to reduce costs in the short run.It can make any of these decisions EXCEPT(A) lay off 10 percent of the auto workers(B) shut down 5 percent of its plants(C) order smaller quantities of metal and rubber(D) shut down a production line(E) refinance corporate bonds
Many farms are selling peanuts. The peanuts are not differentiated and the peanut farms are not earning an economic profit.Demand for a peanut farm is likely(A) elastic(B) perfectly elastic(C) inelastic(D) perfectly inelastic(E) downward sloping
An agricultural community has four banana farms, five plum farms, six grape farms, and seven apple farms. Demand is likely the MOST price elastic for which fruit?(A) apples(B) bananas(C) plums(D) grapes(E) not enough information
Several oil companies form an industry organization that sets the price of a barrel of oil. This is NOT(A) a monopoly(B) a cartel(C) collusion(D) an oligopoly(E) market power
A few laptop manufacturers are competing in a market. The laptops have slightly different styles and similar prices. The laptop manufacturers earn economic profits in the long run. The market is a(n)(A) oligopoly(B) monopoly(C) perfect competition(D) monopolistic competition(E) none of the above
If the soda price and quantity shifted from point A to point B, this would indicate(A) demand for soda increased(B) economies of scale(C) other soda manufacturers entered the market(D) decreased price competition(E) diseconomies of scale
Which areas on the chart reflect the deadweight loss caused by the monopoly?(A) the triangle bounded by points A, B, and (200, $2)(B) the triangle bounded by points A, B, and (200, $2) AND the triangle bounded by point B, ($2, 200), and the point where MR = MC(C) the rectangle containing point A
What is the soda manufacturer’s economic profit if it has a monopoly?(A) $800(B) $1,000(C) $400(D) $600(E) $0
Economies of scale refers to(A) an increase in ATC as quantity increases(B) a decrease in ATC as quantity increases(C) a decrease in ATC as quantity decreases(D) a firm maximizing profit through dominance of the market(E) sensitivity to the determinants of supply and demand and price level Refer to
When the government grants a patent to a firm, the market for the patented product becomes a(n)(A) monopoly(B) oligopoly(C) cartel(D) monopolistic competition(E) pure competition
Firms engaged in a monopolistically competitive market have some market power because(A) the firms have few competitors(B) the firms have differentiated products(C) the government restricts the use of patents for the firms through antitrust legislation(D) advertising allows the firms to set any
Since the monopolist has many barriers to entry and no competition, he or she has price-setting ability. This is also known as(A) purchasing power(B) profit maximization(C) market power(D) efficiency(E) none of the above
If P = ATC, then(A) economic profit is zero(B) accounting profit is zero(C) normal profit is unattainable(D) firms are operating inefficiently(E) all of the above
For the firm in this graph, marginal revenue is(A) constantly decreasing(B) constantly increasing(C) the same at every output level(D) increasing rapidly, then decreasing, then negative(E) increasing at a constant rate, then decreasing
Jet Inc. is a car-making company that operates in a market that has a very inelastic demand curve. Barriers to entering the market are high, and the price is higher than the marginal cost in the long run.Which of the following is this most likely an example of ?(A) monopolistic competition(B)
All of the following are characteristic of an oligopoly EXCEPT(A) price taking(B) collusive behavior(C) barriers to entry(D) cheating on other firm members to produce more(E) a few large firms
If price equals marginal revenue, which equals marginal cost, which equals average total cost, all in the long run, which type of market structure would this be?(A) monopolistic competition(B) monopoly(C) natural monopoly(D) oligopoly(E) perfect competition
Monopoly deadweight loss is caused by(A) P > MC(B) P = MC(C) MC = MB(D) MC > MB(E) none of the above
If a cartel comes into existence, the most likely outcome would be that(A) economic profits will be balanced among all cartel members(B) each cartel member would attempt to cheat by producing more(C) there is allocative efficiency(D) prices will be established through the market forces of supply
Implicit costs are(A) direct, purchased, out-of-pocket costs(B) costs that change with the level of output(C) indirect costs or opportunity costs(D) total variable costs divided by output(E) none of the above
Price leadership fits best with which type of market structure?(A) monopoly(B) natural monopoly(C) perfect competition(D) oligopoly(E) monopolistic competition
Game theory fits best with which market structure?(A) monopolistic competition(B) perfect competition(C) monopoly(D) oligopoly(E) natural monopoly
In the long run, monopolistically competitive firms break even because of(A) government regulations(B) price ceilings(C) no entry or exit barriers(D) exit of firms from the market(E) non-price competition
The graph represents a short-run monopolistic equilibrium.The shaded area represents(A) surplus(B) shortage(C) profit(D) price ceiling(E) price floor

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