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Elite Student Edition 5 Steps To A 5 AP Microeconomics 2020 1st Edition Eric R. Dodge - Solutions

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 wellwater supply.(A) From society’s perspective, use marginal analysis to explain how the competitive market creates a misallocation of resources in the market for pork.(B)
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(A) In competitive input markets, each hour of labor costs $6 to employ and
The soybean market is a constant cost industry and 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
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?
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
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
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?
For the perfectly competitive firm, the profit- maximizing 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
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 long-run 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) demand for good X is twice as elastic as demand for
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 are made in the technology used to produce paper.(D) Household income falls.(E)
You are told that the income elasticity for skateboards is +1.5. This means that(A) a 10-percent increase in income produces a 15-percent increase in consumption of skateboards. Skateboards are a normal luxury good.(B) a 10-percent increase in income produces a 15-percent increase in consumption of
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?
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
If she has already spent all of her lunch money, how should Melanie change her consumption decision to maximize utility?(A) She should make no changes; she is consuming the utility maximizing combination of apples and oranges.(B) She should increase her apple consumption and decrease her orange
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
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
A typical characteristic of capitalist market economies is(A) government ownership of land and capital.(B) extensive price controls.(C) centralized government decision making to determine production limits.(D) an absence of scarcity.(E) private ownership of economic resources.
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
Suppose the market for roses is currently in equilibrium. If the supply of roses falls, while at the same time the demand for roses rises, what can you say about the price and quantity of roses in the market?(A) Price and quantity both rise.(B) Price rises, but the change in quantity is
Nancy has the choice to spend one hour studying for an exam, mowing the lawn for one hour at a wage of $6, or babysitting her niece for one hour at a wage of $8. If we know that Nancy has chosen to study for the exam, which of the following is true?(A) The benefit received from studying is greater
At the birthday party of your best friend, you see Skylar help himself to a second piece of cake. For this individual, it must be the case that(A) the marginal benefit of the second piece of cake is less than the marginal cost.(B) the total benefit received from eating cake is falling.(C) the ratio
You learn that one nation has a Gini ratio of .25 and another nation has a Gini ratio of .85. Based on this you might conclude(A) the nation with the higher Gini ratio has a more equal distribution of wealth and income.(B) the nation with the higher Gini ratio has a more unequal distribution of
Jason earns $1,000 a week and pays a total of $200 in taxes. Jennifer earns $2,000 a week and pays a total of $300 in taxes. We can conclude from this information that their income is taxed with a(n)(A) progressive tax(B) proportional tax(C) regressive tax(D) tax bracket(E) egalitarian tax
Production of energy (i.e., electricity, natural gas, heating oil) creates a negative externality in the form of air pollution blown to communities downwind from the source of the pollution. Of the choices below, which is the most appropriate policy to remedy this negative externality?(A) a
Which of the following is the best example of a public good?(A) A lighthouse on a rocky coastline(B) Tickets to the Super Bowl(C) A granola bar(D) A cup of coffee(E) A magazine subscription
Which of the following scenarios best describes a negative externality?(A) A roommate has an extensive music library, and you share the same taste in music.(B) Your neighbor has a swimming pool, and you have an open invitation to come on over for a pool party.(C) Your neighbor has a swimming pool,
In the figure below, X represents(A) spillover benefits.(B) a potential producer subsidy to eliminate an externality(C) a potential consumer subsidy to eliminate an externality.(D) both A and C.(E) A, B, and C.
If a firm hires labor in a monopsony labor market, the wage and employment are(A) $3 and 0.(B) $8 and 3.(C) $5 and 2.(D) $6 and 3.(E) $7 and 4.
If a firm is hiring labor in the perfectly competitive labor market, the wage and employment are(A) $3 and 0.(B) $4 and 1.(C) $5 and 2.(D) $6 and 3.(E) $7 and 4.
A competitive labor market is currently in equilibrium. Which of the following most likely increases the market wage?(A) More students graduate with the necessary skills for this labor market.(B) Demand for the good produced by this labor is stronger.(C) The price of a complementary resource
The price of labor is $2, and the price of capital is $1. The marginal product of labor is 200, and the marginal product of capital is 50. What should the firm do?(A) Increase capital and decrease labor so that the marginal product of capital falls and the marginal product of labor rises.(B)
Your aunt runs a small firm from her home making apple pies. She hires some friends to help her. Which of the following situations would most likely increase her demand for labor?(A) The price of apple peelers/corers rises.(B) Your aunt’s friends gossip all day, slowing their dough-making
Deadweight loss occurs in(A) monopolistic competition as P > MC.(B) monopoly markets because P > MC.(C) oligopoly markets because P > MC.(D) All of the above.(E) None of the above.
If these firms do not collude, the outcome will be that(A) both firms maintain the status quo.(B) both firms advertise.(C) Firm X advertises and Firm Y maintains the status quo.(D) Firm Y advertises and Firm X maintains the status quo.(E) Firm X advertises and Firm Y alternates between the status
Which of these situations is not an example of price discrimination?(A) Brent works nights, so he chooses to buy bread at 7 a.m. rather than at 7 p.m.(B) Bob and Nancy each receive a “$1 off” coupon in the mail, but Bob redeems it while Nancy does not.(C) Katie buys 12 Cokes for $3, and Josh
If the perfectly competitive price is currently above minimum ATC, we can expect which of the following events in the long run?(A) Price rises as firms enter the industry.(B) Market equilibrium quantity rises as firms exit the industry.(C) Nothing. The industry is currently in long-run
Which characteristic is likely a part of a monopoly market but not of monopolistic competition?(A) Differentiated products(B) Patents and copyrights(C) Possibility of profit in the short run(D) Deadweight loss exists(E) None of the above
For a competitive firm, what is the most important thing to consider in deciding whether to shut down in the short run?(A) Compare AVC to MR.(B) Compare TR to TC.(C) Do not produce if the TFC is not covered by revenue.(D) Produce the highest quantity demanded regardless of price.(E) Compare P to
At the q3 level of output,(A) AFC = $d2– $d1
The curves labeled W, X, Y, Z refer to which respective cost functions?(A) MC, AVC, ATC, and AFC.(B) MC, TC, TVC, and AFC.(C) MC, ATC, AVC, and AFC.(D) MC, ATC, AVC, and TFC.(E) ATC, AVC, AFC, and MC.
If the per-unit price of labor, a variable resource, increases, it causes which of the following?(A) An upward shift in AFC.(B) An upward shift in MPL.(C) A downward shift in ATC.(D) An upward shift in MC.(E) A downward shift in AFC.
Which of the following cost and production relationships is inaccurately stated?(A) AFC = AVC − ATC(B) MC = ΔTVC/ΔQ(C) TVC = TC − TFC(D) APL= TPL/L(E) MC = w/MPL
The Law of Diminishing Marginal Returns is responsible for(A) AVC that first rises, but eventually falls, as output increases.(B) AFC that first rises, but eventually falls, as output increases.(C) MP that first falls, but eventually rises, as output increases.(D) MC that first falls, but
Which of the following is most likely an example of production inputs that can be adjusted in the long run, but not in the short run?(A) Amount of wood used to make a desk.(B) Number of pickles put on a sandwich.(C) The size of a McDonald’s kitchen.(D) Number of teacher’s assistants in local
The competitive market equilibrium is at point C. If a per-unit excise tax is imposed on the production of this good, the revenue collected by the government is(A) the area BDE.(B) the area BADH.(C) the area GDH.(D) the area DAC.(E) the area GDAB.
The competitive market equilibrium is at point C. If a per-unit excise tax is imposed on the production of this good, the deadweight loss is(A) the area BDE.(B) the area BADH.(C) the area GDH.(D) the area DAC.(E) the area GDAB.
A consequence of a price floor is(A) a persistent shortage of the good.(B) an increase in total welfare.(C) a persistent surplus of the good.(D) elimination of deadweight loss.
Mrs. Johnson should(A) do nothing; she is consuming her utility-maximizing combination of chips and dip.(B) increase her consumption of chips until the marginal utility of chip consumption equals 30.(C) decrease her consumption of chips until the marginal utility of chip consumption equals 30.(D)
Mrs. Johnson spends her entire daily budget on potato chips, at a price of $1 each, and onion dip at a price of $2 each. At her current consumption bundle, the marginal utility of chips is 12 and the marginal utility of dip is
To raise total revenue, owners should(A) decrease price as demand is elastic.(B) decrease price as demand is inelastic.(C) increase price as demand is elastic.(D) increase price as demand is inelastic.(E) do nothing; they are already maximizing total revenue.
A small business estimates price elasticity of demand for the product to be
If the price of corn rises 5 percent and the quantity demanded for corn falls 1 percent, then(A) Ed= 5 and demand is price elastic.(B) Ed= 1/5 and demand is price elastic.(C) Ed= 5 and demand is price inelastic.(D) Ed= 1/5 and demand is price inelastic.(E) Ed= 5 and corn is a luxury good.
The competitive market provides the best outcome for society because(A) consumer surplus is minimized, while producer surplus is maximized.(B) the total welfare is maximized.(C) producer surplus is minimized, while consumer surplus is maximized.(D) the difference between consumer and producer
The apple market is in equilibrium. Suppose we observe that apple growers are using more pesticides to increase apple production. At the same time, we hear that the price of pears, a substitute for apples, is rising. Which of the following is a reasonable prediction for the new price and quantity
The market for denim jeans is in equilibrium, and the price of polyester pants, a substitute good, rises. In the jean market(A) supply falls, increasing the price and decreasing the quantity.(B) supply falls, increasing the price and increasing the quantity.(C) demand falls, increasing the price
Suppose that aluminum is a key production input in the production of bicycles. If the price of aluminum falls, and all other variables are held constant, we expect(A) the demand for aluminum to rise.(B) the supply of bicycles to rise.(C) the supply of bicycles to fall.(D) the demand for bicycles to

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