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Elite Student Edition 5 Steps To A 5 AP Microeconomics 2024 1st Edition Eric R. Dodge - Solutions
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,
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? PRICE QUANTITY SPENDING (A) Decrease Increase Increase (B) Decrease Decrease Decrease
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 increase
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 on 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 United
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 per-unit
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. Pmkt S Dsocial Dprivate Qmkt Qsoc
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
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) Increase capital and decrease labor so that the marginal product of capital rises and the marginal product of labor falls.(C) Decrease capital
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
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.(B) MC = $d2.(C) TVC = $d2.(D) ATC = $d3.(E) AFC = $d3 – $d2.
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 teachers’ 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.(E) an increase in quantity demanded and a decrease in quantity supplied.
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
If average household income rises and we observe that the demand for pork chops increases, pork chops must be(A) an inferior good.(B) a normal good.(C) a surplus good.(D) a public good.(E) a shortage good.
When the price of pears increases, we expect the following:(A) Quantity demanded of pears rises.(B) Quantity supplied of pears falls.(C) Quantity demanded of pears falls.(D) Demand for pears falls.(E) Supply of pears rises.
Ray and Dorothy can both cook and can both pull weeds in the garden on a Saturday afternoon. For every hour of cooking, Ray can pull 50 weeds and Dorothy can pull 100 weeds. Based on this information, how should they allocate their time?(A) Ray pulls weeds, since he has absolute advantage in
The shape of this PPF tells us that(A) economic resources are perfectly substitutable from production of tea to production of crumpets.(B) citizens prefer that an equal amount of tea and crumpets be produced.(C) the opportunity cost of producing crumpets rises as more crumpets are produced.(D) the
Economic growth is best represented by a movement from(A) A to B.(B) B to C.(C) C to D.(D) D to E.(E) E to A.
A student decides that, having already spent three hours studying for an exam, she should spend one more hour studying for the same exam.Which of the following is most likely true?(A) The marginal benefit of the fourth hour is certainly less than the marginal cost of the fourth hour.(B) The
Economics is best described as(A) the study of how scarce material wants are allocated between unlimited resources.(B) the study of how scarce labor can be replaced by unlimited capital.(C) the study of how decision makers choose the best way to satisfy their unlimited material wants with a scarce
Consumers of gadgets generate spillover benefits to their communities, and the gadget market does not account for these social benefits. Which of the following would be an appropriate government response to improve efficiency in the gadget market?(A) Impose a tax on each gadget produced.(B) Ban the
Suppose we observe a nation’s Gini ratio has fallen from .75 to .45 over 20 years. What might explain this change?(A) The nation’s level of human capital has fallen.(B) The nation has used more regressive taxes.(C) The nation’s markets have become less competitive.(D) The nation has used more
The two characteristics of a private good are(A) excludable and rival.(B) open-access and rival.(C) nonexcludable and nonrival.(D) excludable and nonrival.(E) nonexcludable and rival.
Which of the following tax systems is designed to redistribute income from the wealthy to the poor?(A) A progressive tax system(B) A regressive tax system(C) A proportional tax system(D) An excise tax system(E) A tariff system
A negative production externality in the market for a good exists when(A) the market overallocates resources to the production of this good.(B) spillover benefits are received by society.(C) the marginal social benefit equals the marginal social cost.(D) total welfare is maximized.(E) the marginal
Which of the following is the best example of a public good?(A) A visit to the orthodontist(B) A session at the tanning salon(C) A large pizza(D) A cup of coffee(E) The International Space Station
A firm hires labor and capital in competitive-factor markets. The price of labor is $6, and the price of capital is $12. Currently the marginal product of labor is 24 units, and the marginal product of capital is 36 units. Can the firm adjust the hiring of labor and capital to produce the same
If this firm hires the efficient quantity of labor in this market, employment would be ____ and the wage would be ____.(A) Q1; W3(B) Q1; W1(C) Q2; W2(D) Q1; W2(E) Q2; W1
If this firm is the sole employer in the labor market, how much labor would be employed and what is the wage that would be paid?(A) Q1; W3(B) Q1; W1(C) Q2; W2(D) Q1; W2(E) Q2; W1
Interstate trucking companies hire three factors of production in shipping goods from point A to point B: labor (drivers), capital (trucks and trailers), and diesel fuel. Which of the following would cause the demand for capital to increase?(A) A recession decreases the demand for goods.(B) Wages
If the above firm were a monopsonist, the wage would be _________ and employment would be _________ the competitive outcome.(A) greater than; less than(B) less than; greater than(C) greater than; greater than(D) less than; less than(E) less than; the same as
If a firm is hiring labor in the perfectly competitive labor market, the wage and employment will be(A) $4 and 0.(B) $5 and 10.(C) $6 and 20.(D) $7 and 30.(E) $8 and 40.
Which of the following statements is true about the demand for labor?(A) It rises if the price of a substitute resource falls and the output effect is greater than the substitution effect.(B) It falls if the price of the output produced rises.(C) It falls if the price of a complementary resource
Which of the following is most likely to decrease the demand for kindergarten teachers?(A) An increase in funding for education (B) Increased immigration of foreign citizens and their families (C) A decrease in the average number of children per household (D) Subsidies given to college students who
Two oligopolists must simultaneously decide on a pricing strategy, either set a high price (Ph) or a low price (Pl). Once the price is set, it cannot be changed. If the firms can successfully collude, the outcome of the game will be:(A) both firms set a low price.(B) both Firm Y and Firm Z
Two oligopolists must simultaneously decide on a pricing strategy, either set a high price (Ph) or a low price (Pl). Once the price is set, it cannot be changed. If the firms do not collude, the outcome of the game will be(A) both firms set a low price.(B) Firm Y sets a high price and Firm Z
If the government wishes to regulate a natural monopoly so that it produces an allocatively efficient level of output, it would be at an output(A) where price is equal to average total cost.(B) where marginal revenue equals marginal cost.(C) where normal profits are made.(D) where price is equal to
Monopolistic competition is often characterized by(A) strong barriers to entry.(B) a long-run price that exceeds average total cost.(C) a price that exceeds average variable cost, causing excess capacity.(D) a homogenous product.(E) many resources devoted to advertising.
The market structures of perfect competition and monopolistic competition share which of the following characteristics?(A) Ease of entry and exit in the long run(B) Homogenous products(C) Perfectly elastic demand for the firm’s product(D) Long-run positive profits(E) Product differentiation
Which of the following is necessarily a characteristic of oligopoly?(A) Free entry into and exit from the market(B) A few large producers(C) One producer of a good with no close substitutes(D) A homogenous product(E) No opportunities for collusion between firms
If this monopolist were regulated to produce a break-even level of output, output will be set at ____ and price will be set at ____.(A) Q2; P1(B) Q1; P1(C) Q1; P2(D) Q3; P3(E) Q2; P2
At the monopoly outcome, consumer surplus is equal to the following area:(A) (P2 − P1) × Q1(B) 1/2 × (P3 − P1) × Q2(C) 1/2 × (P2 − P1) × (Q2 − Q1)(D) 1/2 × P3 × Q3(E) 1/2 × (P3 − P2) × Q1
When the monopolist maximizes profit, output will be set at ____ and price will be set at ____.(A) Q2; P1(B) Q1; P1(C) Q1; P2(D) Q3; P3(E) Q2; P2
Assuming positive profits are possible, when a monopolist sets output to maximize profit, we know that(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.
When a monopolist has maximized profit,(A) price is set equal to marginal cost, creating zero economic profit.(B) output is set where price is equal to average total cost.(C) price is set above marginal cost, creating allocative inefficiency.(D) any short-run profit will be eliminated through the
Perfectly competitive markets are said to be allocatively efficient because output is where(A) P = ATC.(B) P = MC.(C) P = AVC.(D) economic profit is zero.(E) P= MR.
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