Question 1(Multiple Choice Worth 1 points)

(01.01 MC)

Why might salt be a resource with a high cost in one market and a very low cost in another market?

Trade could affect costs.

Its supply could be scarce in one market and very great in another.

The higher cost market might have a much lower demand for salt than its supply.

The higher cost market might have no demand for salt.

The lower cost market might have more trade-offs for salt harvesting.

Question 2(Multiple Choice Worth 1 points)

(06.05 MC)

Use the graph to answer the question that follows.

In 2020, what percentage of income in this economy did 60 percent of the households earn?

20 percent

30 percent

50 percent

75 percent

80 percent

Question 3(Multiple Choice Worth 1 points)

(02.08 MC)

Assume that the government imposes a price ceiling below the current equilibrium price for a product. Which of the following will happen?

The product's demand will increase.

There will be no impact because the price ceiling is not binding.

There will be surplus of the product.

There will be a shortage of the product.

Suppliers will enter the market.

Question 4(Multiple Choice Worth 1 points)

(02.04 MC)

What is the price elasticity of supply for a good that sees a 25% increase in quantity supplied for a 5% increase in price?

0.2

1

5

20

30

Question 5(Multiple Choice Worth 1 points)

(02.01 MC)

Which of the following would cause the demand curve for milk to shift to the right? Assume it is a normal good.

The number of people who cannot drink milk increases.

A major economic downturn lowers the average household income.

The price of one of its substitutes goes down.

A significant number of people move into the market.

News of a new technology in the milking process makes consumers expect prices to lower soon.

Question 6(Multiple Choice Worth 1 points)

(06.02 MC)

Review the table below, which shows the quantity supplied and quantity demanded for a private good.

Price	Quantity Supplied	Quantity Demanded
$1	3	7
$3	4	6
$5	5	5
$7	6	4

Assume that it becomes impossible to exclude non-payers from consuming this good. What will be the maximum quantity of the good transacted in the market?

3

4

5

6

Indeterminate

Question 7(Multiple Choice Worth 1 points)

(06.02 MC)

Use the graph to answer the question that follows.

What is the deadweight loss that results from this externality?

QE Q*

PC PE

PC PP

(PC PP) x QE

(PC PP) x (QE Q*) x

Question 8(Multiple Choice Worth 1 points)

(04.05 MC)

Which of the following characterizes a cartel?

Price discrimination

Price collusion and output quotas

Productive efficiency but allocative inefficiency

A more competitive oligopoly

Persistent normal profit

Question 9(Multiple Choice Worth 1 points)

(04.01 MC)

If barriers to entry ________ or product differentiation ________, competition in a market will ________.

increase; increases; decrease

increase; increases; increase

increase; decreases; increase

decrease; increases; increase

decrease; decreases; decrease

Question 10(Multiple Choice Worth 1 points)

(01.03 MC)

A production possibility curve would ________ if the availability of an input decreased and would ________ if a lack of technology decreased production efficiency.

shift outward; shift inward

not move; shift outward

not move; not move

shift outward; shift outward

shift inward; shift inward

Question 11(Multiple Choice Worth 1 points)

(04.05 HC)

Company A and Company B are competing oligopolists. Both companies are considering increasing or maintaining their prices. The payoff matrix shows the profits of the companies in millions based on their possible actions.

	Company B
Company A		Increase Price	Maintain Price
Increase Price	$50, $40	$35, $30
Maintain Price	$55, $45	$60, $35

The government announces a $5 million tax on firms that increase prices. After the tax, how much will each firm make if Company A maintains its price and Company B increases its price?

Company A would earn $55 million; Company B would earn $45 million.

Company A would earn $30 million; Company B would earn $30 million.

Company A would earn $50 million; Company B would earn $50 million.

Company A would earn $55 million; Company B would earn $40 million.

Company A would earn $45 million; Company B would earn $35 million.

Question 12(Multiple Choice Worth 1 points)

(02.03 MC)

Own price elasticity of demand measures the

change in quantity demanded over change in price

change in demand over time

percentage change in quantity demanded of the good over percentage change in price of the same good

average change in quantity demanded over time

average percentage change in price over average percentage change in quantity demanded

Question 13(Multiple Choice Worth 1 points)

(05.03 MC)

Use the table to answer the question that follows.

Quantity of Labor	MP of Labor	Quantity of Capital	MP of Capital
1	40	1	50
2	45	2	40
3	35	3	35
4	20	4	15
5	5	5	5

What combination of labor and capital would satisfy the input hiring rule that minimizes the cost of production, if the price of labor is $10 and the price of capital is $20?

1 unit of labor; 3 units of capital

2 units of labor; 1 unit of capital

3 units of labor; 2 units of capital

3 units of labor; 3 units of capital

4 units of labor; 2 units of capital

Question 14(Multiple Choice Worth 1 points)

(06.01 MC)

A market in which private businesses do not pay all of the production costs themselves represents a ________ and will produce ________ than the socially optimal quantity.

negative externality; less

negative externality; more

positive externality; more

positive externality; less

natural monopoly; less

Question 15(Multiple Choice Worth 1 points)

(06.01 MC)

Which of the following describes a situation where the marginal social benefit is equal to the marginal social cost at equilibrium?

Oligopoly

Monopoly

Positive externality

Allocative efficiency

Negative externality

Question 16(Multiple Choice Worth 1 points)

(01.06 MC)

The table below shows the marginal utility that David enjoys based on the number of t-shirts he purchases.

T-shirts Purchased	Marginal Utility
1	8
2	7
3	6
4	5
5	4
6	2

Based on the table above, what is the total utility that David enjoys from purchasing three t-shirts?

6 utils

12 utils

15 utils

18 utils

21 utils

Question 17(Multiple Choice Worth 1 points)

(01.06 MC)

Below is the total benefit Kenneth estimates he would get for jars of chocolate-flavored hazelnut butter.

Jars	Total Benefit (dollars)
1	5
2	9
3	12
4	14
5	15
6	14
7	10

What is Kenneth's optimal quantity consumed if the price of each jar is $4?

1

2

4

5

7

Question 18(Multiple Choice Worth 1 points)

(03.02 MC)

Which of the following scenarios would produce the highest market concentration?

An industry with a very low minimum efficient scale

An industry with many firms operating with efficient scale

An industry with some firms operating with diseconomies of scale

An industry where no firm has achieved maximum efficient scale

An industry with a very high minimum efficient scale

Question 19(Multiple Choice Worth 1 points)

(03.05 MC)

If a firm is producing at the profit-maximizing output level and is earning positive economic profit, which of the following must be true?

Total cost > total revenue; marginal cost > marginal revenue

Average total cost < average revenue; marginal cost > marginal revenue

Average total cost = price; marginal cost < marginal revenue

Average total cost > price; marginal cost = marginal revenue

Average total cost < price; marginal cost = marginal revenue

Question 20(Multiple Choice Worth 1 points)

(01.04 MC)

In the country Gamma, it takes 6 hours to produce 1 automobile and 1 hour to produce a bale of cotton. In the country Delta, it takes 4 hours to produce 1 automobile and 1 hour to produce a bale of cotton. Which country should specialize in automobiles and which should specialize in cotton?

Neither Delta nor Gamma should specialize in automobiles or cotton.

Delta should specialize in automobiles and cotton.

Delta should specialize in automobiles, and Gamma should specialize in cotton.

Gamma should specialize in automobiles and cotton.

Gamma should specialize in automobiles, and Delta should specialize in cotton.

Question 21(Multiple Choice Worth 1 points)

(01.05 LC)

The best alternative foregone for any choice is known as the

associated cost

consumer's marginal utility

resource input cost

explicit cost

opportunity cost

Question 22(Multiple Choice Worth 1 points)

(02.06 MC)

What distinguishes the supply and demand model from the short-run cost curves model?

Supply and demand show the interaction between consumers and producers; short-run cost curves show how product supply curves are determined.

Supply and demand show the flow of outputs between economic actors; short-run cost curves show the flow of inputs between suppliers.

Supply and demand show a product market in the long run; short-run cost curves show the product market for a set time.

Supply and demand show the relationship between inputs and outputs; short-run cost curves show the relationships among various inputs.

Supply and demand show the ideal price in the product market; short-run cost curves show the ideal price in the resource market.

Question 23(Multiple Choice Worth 1 points)

(02.05 MC)

If the price of Good A goes down by 5 percent and the quantity demanded of Good B goes down by 5 percent, which of the following is true?

Both goods have unit elastic supply.

The goods are complements, and the cross-price elasticity is 1.

The goods are substitutes, and the cross-price elasticity is 1.

The goods are complements, and the cross-price elasticity is 1.

The goods are substitutes, and the cross-price elasticity is 25.

Question 24(Multiple Choice Worth 1 points)

(02.09 MC)

How would the creation of an import quota affect the market for a good?

Imported supply increases

Domestic supply decreases

Market price increases

Consumer surplus increases

Producer surplus decreases

Question 25(Multiple Choice Worth 1 points)

(05.03 MC)

A firm will continue to hire workers so long as ________ is less than ________.

total product; total cost

marginal product; marginal cost

marginal revenue; marginal cost

average revenue product; average factor cost

marginal factor cost; marginal revenue product

Question 26(Multiple Choice Worth 1 points)

(02.07 MC)

Use the graph to answer the question that follows.

This market will be efficient, maximizing economic surplus with no deadweight loss, when the price is

above P2

below P2

equal to P2

equal to P1

below P1

Question 27(Multiple Choice Worth 1 points)

(06.02 MC)

One way that externalities can be eliminated is to

increase competition

regulate production or consumption

increase transaction costs

ensure perfect market information

relax enforcement of property rights

Question 28(Multiple Choice Worth 1 points)

(01.02 LC)

Resource allocation is determined by which of the following?

What are the most advantageous terms of trade?

When does marginal cost equal marginal benefit?

Which economy enjoys a lower opportunity cost for this good?

What is essential knowledge to pass on to the next generation?

What goods and services should be produced?

Question 29(Multiple Choice Worth 1 points)

(03.06 HC)

In the short run, a price-taking firm decides to produce zero units of output. Which of the following must have been the case?

The market price was less than the firm's average variable cost.

The firm was earning normal profits in the short run but projected economic losses in the long run.

The firm's average total cost was higher than its average revenue.

The market price was between the firm's average variable cost and average total cost.

The market price was equal to the firm's average total cost.

Question 30(Multiple Choice Worth 1 points)

(02.02 MC)

A producer of widgets decides to stop producing widgets. Ceteris paribus, if this producer of widgets had a typical supply curve before their exit from the widget-making industry, what must happen to the market supply curve?

It will not change.

It will become more elastic.

There is insufficient data to determine.

It will shift right at every price with more output supplied.

It will shift left at every price with less output supplied.

Question 31(Multiple Choice Worth 1 points)

(02.01 MC)

If a good's price is lowered, it may have the effect of providing a higher utility per dollar for many consumers than another good, increasing the quantity demanded. Economists call this

diminishing marginal utility

the substitution effect

the income effect

diminishing marginal returns

rational choice theory

Question 32(Multiple Choice Worth 1 points)

(04.04MC)

Which of the following explains the price a monopolistically competitive firm charges when it is earning zero economic profits?

The price is equal to average total cost at the quantity where marginal revenue equals marginal cost.

The price is equal to average total cost at a quantity where marginal revenue is less than marginal cost.

The price is greater than average total cost at the quantity where marginal revenue equals marginal cost.

It is equal to average total cost at a quantity where marginal revenue is greater than marginal cost.

The price is greater than average total cost at a quantity where marginal revenue is less than marginal cost.

Question 33(Multiple Choice Worth 1 points)

(03.02 MC)

Use the graph to answer the question that follows.

The shift indicated on the graph could be explained by

a decrease in fixed costs

an increase in fixed costs

increased productivity

decreased productivity

a demand increase

Question 34(Multiple Choice Worth 1 points)

(06.01 MC)

Use the graph to answer the question that follows.

Which of the following can cause the relationship shown between MSC and MPC?

A decrease in financial instability from unlawful investing

Increased healthcare costs due to factory runoff in a city

An increase in investment to support educational funding

A decrease in air pollution caused by a nuclear energy plant

An increase in research and development funding of a product

Question 35(Multiple Choice Worth 1 points)

(02.02 MC)

What would be the effect on the market supply curve from the government imposing a per unit tax on the production of the good?

No change

A shift to the left

A shift to the right

An increase in price

An increase in the quantity supplied

Question 36(Multiple Choice Worth 1 points)

(03.04 MC)

A firm has a total revenue of $90,000. Its total explicit costs are $50,000, and its total implicit costs are $40,000. What economic profit is the firm earning?

$50,000

$40,000

$10,000

Indeterminate

Normal

Question 37(Multiple Choice Worth 1 points)

(02.03 MC)

Use the graph to answer the question that follows.

What is the price elasticity of demand when price increases from $2 to $4?

0.2

0.5

2

3

5

Question 38(Multiple Choice Worth 1 points)

(01.03 LC)

Which of the following conclusions may be drawn from the PPC above?

Consumers value Good B twice as much as Good A.

Good B is more expensive for consumers than Good A.

Producers in this economy should specialize in Good B.

There is an increasing opportunity cost for producing more of either good.

Every unit of Good A costs 1 unit of Good B to produce.

Question 39(Multiple Choice Worth 1 points)

(01.05 MC)

Ruby is an accountant. She is considering leaving her 9-to-5 job so she can have more time for leisure and to bond with her family. She currently earns $139,000 per year. She plans to start her accounting firm and render accounting services to small enterprises. She also intends to learn fashion design and make dresses. The table below shows all of the economic benefits and associated costs for her plans.

Accounting Firm	Fashion Design
Annual rent & salary cost	$61,200	Cost of learning fashion	$10,000
Annual earnings	$200,000	Monthly earnings from sale of dresses	$900

Consider total costs and benefits, calculate the net benefits, and advise Ruby whether to quit her job, using knowledge of cost-benefit analysis.

Ruby should quit her job because the net benefit is $200,900.

Ruby should keep her job because the net benefit is $200.

Ruby should keep her job because the net benefit is $9,300.

Ruby should quit her job because the net benefit is $139,600.

Ruby should quit her job because the net benefit is $600.

Question 40(Multiple Choice Worth 1 points)

(02.08 MC)

Which of the following would increase the short-run supply for a business, regardless of market structure?

An income tax on consumers

A transfer payment

A lump-sum production subsidy

A per-unit production subsidy

An excise tax

Question 41(Multiple Choice Worth 1 points)

(04.03 MC)

A monopolist engages in perfect price discrimination. What will happen to the consumer surplus?

It significantly increases as it absorbs the producer surplus.

It disappears and becomes deadweight loss.

It decreases based on the elasticity of demand.

It is unchanged.

It is entirely converted to producer surplus.

Question 42(Multiple Choice Worth 1 points)

(06.01 MC)

In long-run equilibrium, the marginal social cost exceeds the marginal private cost, but the marginal social benefit is equal to the marginal private benefit. This describes which of the following markets?

Oligopoly with no externalities

Monopoly with perfect information

Perfect competition with a positive externality

Perfect competition with a negative externality

Perfect competition with asymmetric information

Question 43(Multiple Choice Worth 1 points)

(02.06 HC)

Use the graph to answer the question that follows.

When prices are set away from the market equilibrium there is a loss in total economic surplus. If the market was initially in equilibrium and then the price was set at P1, what is the loss in total economic surplus or the deadweight loss?

A

B + E

E + F

E + F + H + J

B + C + D + E + F

Question 44(Multiple Choice Worth 1 points)

(03.03 MC)

Use the graph to answer the question.

Where on the graph would firms be experiencing diseconomies of scale?

Between A and B

Point B

Between B and C

Between C and D

Beyond D

Question 45(Multiple Choice Worth 1 points)

(06.04 MC)

What is the most likely goal of a government that enacts a per-unit subsidy?

To increase market competition

To correct for a positive externality

To correct for a negative externality

To encourage production of private goods

To increase profit and encourage production

Question 46(Multiple Choice Worth 1 points)

(05.02 MC)

If consumer tastes and preferences cause the equilibrium price of a product to decrease steadily over time, ceteris paribus, what will happen to the market wage for the labor to produce that product?

It will increase.

It will decrease.

It will not be affected.

It will decrease and then increase back to its original equilibrium.

Insufficient information to determine.

Question 47(Multiple Choice Worth 1 points)

(03.07 MC)

Ryan owns a beet farm. If his farm is perfectly competitive, what profits and losses can he expect to make in the short and in the long run?

Ryan may earn economic profits or losses in the short run and in the long run.

Ryan may earn economic profits or losses in the short run but not in the long run.

Ryan may earn zero economic profit in the short run and profits in the long run.

Ryan may earn zero economic profit in the short run and losses in the long run.

Ryan may earn economic profits or losses in the long run but not in the short run.

Question 48(Multiple Choice Worth 1 points)

(06.05 MC)

Which of the following policies will most likely help a government to achieve a goal of reducing the wealth gap between those with great wealth and those with no wealth?

Increasing the interest rate on bank loans

Switching from a regressive tax system to a progressive tax system

Lowering taxes on income from interest earned on investments

Increasing the nation's per capita income

Encouraging actions that yield increased returns to entrepreneurs

Question 49(Multiple Choice Worth 1 points)

(04.02 MC)

The defining trait of a natural monopoly is

diseconomies of scale at the profit-maximizing quantity

a patent preventing competitors from entering the market

a low minimum efficient scale on the product's long-run average total cost curve

persistent economies of scale across the full market demand

allocative and productive inefficiency at the profit-maximizing quantity

Question 50(Multiple Choice Worth 1 points)

(04.02 MC)

Use the graph to answer the question that follows.

What area would represent the consumer surplus if this firm maximizes its profit?

There would be no consumer surplus because of the monopolist's market power

The area between average revenue and marginal revenue all the way to the price axis

The area between the marginal cost curve and the marginal revenue curve

The area above P1 up to the average revenue curve

The area between P3 up to the marginal revenue curve

Question 51(Multiple Choice Worth 1 points)

(05.01 MC)

Use the graph to answer the question that follows.

Based on the chart above, if the product sells at a price of $0.50 per unit, what is the marginal revenue product of the second unit of labor?

$10

$15

$30

$50

Indeterminate

Question 52(Multiple Choice Worth 1 points)

(03.01 MC)

A business hires workers to help harvest blueberries. The following table shows the marginal productivity of each worker in number of bushels of blueberries.

Number of Workers	Marginal Product
1	7
2	10
3	12
4	11
5	9
6	6

Which number of workers produces a total product of 49 bushels of blueberries?

2

3

4

5

6

Question 53(Multiple Choice Worth 1 points)

(03.02 MC)

In the short run, a firm's total cost is $150 if it does not produce any units of output. Its variable cost is $5 per unit. If the firm produces 5 units, variable costs are ________, while total costs are ________.

$5; $50

$5; $70

$10

$25; $175

$25; $775

Question 54(Multiple Choice Worth 1 points)

(05.04 MC)

Which of the following is correct about a monopsonistic market?

Resources are efficiently allocated.

There is one supplier and many buyers.

The monopsony has the same quantity transacted as in a perfectly competitive market.

The supply curve is horizontal and is equal to the average cost of labor.

Purchase of an additional item increases the price of the item and of the existing items being purchased.

Question 55(Multiple Choice Worth 1 points)

(06.03 MC)

Private businesses and consumers know that a resource will be spoiled if the whole society does not limit everyone's use of it. However, individuals are privately incentivized to increase their own use of it before it is spoiled and no longer available. This describes

a common pool good used efficiently

the primary reason some goods are publicly provided

the tragedy of the commons

a good that is made artificially scarce

one cause of a natural monopoly

Question 56(Multiple Choice Worth 1 points)

(03.07 MC)

What is true of a firm's production if it operates in a perfectly competitive market with short-run economic profits?

Marginal revenue = demand = marginal cost > average total cost

Marginal revenue = marginal cost = average fixed cost

Average total cost = price = average variable cost

Marginal cost < Marginal revenue

Price = marginal cost = average total cost

Question 57(Multiple Choice Worth 1 points)

(03.07 MC)

Use the graph to answer the question below. The quantity is measured in thousands of units.

Assume the graph represents a perfectly competitive firm. What will this firm do in the short run and in the long run?

It will operate in the short run but will leave the market in the long run.

It will shut down in the short run and leave the market in the long run.

It will operate in the short run and stay in the market in the long run.

It will shut down in the short run and stay in the market in the long run.

Insufficient data to determine

Question 58(Multiple Choice Worth 1 points)

(06.04 MC)

Use the graph to answer the question that follows.

How much will consumers pay after the tax?

$2.00

$3.00

$3.50

$4.00

$5.00

Question 59(Multiple Choice Worth 1 points)

(01.04 MC)

Business A must have ________ in cogs if it can produce them for a lower opportunity cost than any other producer of cogs.

an absolute advantage

a comparative advantage

a decreasing trade-off value

relatively low-quality factors of production

relatively poor manufacturing technology

Question 60(Multiple Choice Worth 1 points)

(03.06 MC)

The following information is available for a company that operates in a perfectly competitive market.

Current output	5000 units
Current market price	$5
Total cost	$25,000
Marginal cost	$4
Total variable cost	$20,000

What is the best action for this firm?

Increase output in the short run and stay in the market the long run

Increase output in the short run and decrease output in the long run

Shut down in the short run and exit in the long run

Shut down in the short run and produce in the long run

Reduce output in the short run and increase output in the long run