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1. An economic model is
a. a mechanical machine that replicates the functioning of the economy.
b. a fully detailed, realistic description of the economy.
c. a simplified representation of some aspect of the economy.
d. a computer program that predicts the future of the economy.
2. The circular-flow diagram illustrates that, in markets for the factors of production,
a. households are sellers, and firms are buyers.
b. households are buyers, and firms are sellers.
c. households and firms are both buyers.
d. households and firms are both sellers.
3. A point inside the production possibilities frontier is
a. efficient, but not feasible.
b. feasible, but not efficient.
c. both efficient and feasible.
d. neither efficient nor feasible.
4. An economy produces hot dogs and hamburgers. If a discovery of the remarkable
health benefits of hot dogs were to change consumers’ preferences, it would
a. expand the production possibilities frontier.
b. contract the production possibilities frontier.
c. move the economy along the production possibilities frontier.
d. move the economy inside the production possibilities frontier.
5. All of the following topics fall within the study of microeconomics EXCEPT
a. the impact of cigarette taxes on the smoking behavior of teenagers.
b. the role of Microsoft’s market power in the pricing of software.
c. the effectiveness of antipoverty programs in reducing homelessness.
d. the influence of the government budget deficit on economic growth.
6. Which of the following is a positive, rather than a normative, statement?
a. Law X will reduce national income.
b. Law X is a good piece of legislation.
c. Congress ought to pass law X.
d. The president should veto law X.
1. A change in which of the following will NOT shift the demand curve for hamburgers?
a. the price of hot dogs
b. the price of hamburgers
c. the price of hamburger buns
d. the income of hamburger consumers
2. An increase in ________ will cause a movement along a given demand curve, which is
called a change in ________.
a. supply, demand
b. supply, quantity demanded
c. demand, supply
d. demand, quantity supplied
3. Movie tickets and DVDs are substitutes. If the price of DVDs increases, what happens
in the market for movie tickets?
a. The supply curve shifts to the left.
b. The supply curve shifts to the right.
c. The demand curve shifts to the left.
d. The demand curve shifts to the right.
4. The discovery of a large new reserve of crude oil will shift the ________ curve for
gasoline, leading to a ________ equilibrium price.
a. supply, higher
b. supply, lower
c. demand, higher
d. demand, lower
5. If the economy goes into a recession and incomes fall, what happens in the markets for
inferior goods?
a. Prices and quantities both rise.
b. Prices and quantities both fall.
c. Prices rise, quantities fall.
d. Prices fall, quantities rise.
6. Which of the following might lead to an increase in the equilibrium price of jelly and a
decrease in the equilibrium quantity of jelly sold?
a. an increase in the price of peanut better, a complement to jelly
b. an increase in the price of Marshmallow Fluff, a substitute for jelly
c. an increase in the price of grapes, an input into jelly
d. an increase in consumers’ incomes, as long as jelly is a normal good
1. Emilio buys pizza for $10 and soda for $2. He has income of $100. His budget
constraint will experience a parallel outward shift if which of the following events
occur?
a. The price of pizza falls to $5, the price of soda falls to $1, and his income falls to $50.
b. The price of pizza rises to $20, the price of soda rises to $4, and his income remains the
same.
c. The price of pizza falls to $8, the price of soda falls to $1, and his income rises to $120.
d. The price of pizza rises to $20, the price of soda rises to $4, and his income rises to $400.
2. At any point on an indifference curve, the slope of the curve measures the consumer’s
a. income.
b. willingness to trade one good for the other.
c. perception of the two goods as substitutes or
complements.
d. elasticity of demand.
3. Matthew and Susan are both optimizing consumers in the markets for shirts and hats,
where they pay $100 for a shirt and $50 for hat. Matthew buys 4 shirts and 16 hats,
while Susan buys 6 shirts and 12 hats. From this information, we can infer that
Matthew’s marginal rate of substitution is _____ hats per shirt, while Susan’s is _____.
a. 2, 1
b. 2, 2
c. 4, 1
d. 4, 2
4. Charlie buys only milk and cereal. Milk is a normal good, while cereal is an inferior
good. When the price of milk rises, Charlie buys
a. less of both goods.
b. more milk and less cereal.
c. less milk and more cereal.
d. less milk, but the impact on cereal is ambiguous.
5. If the price of pasta increases and a consumer buys more pasta, we can infer that
a. pasta is a normal good, and the income effect is greater than the substitution effect.
b. pasta is a normal good, and the substitution effect is greater than the income effect.
c. pasta is an inferior good, and the income effect is greater than the substitution effect.
d. pasta is an inferior good, and the substitution effect is greater than the income effect.
6. The labor-supply curve slopes upward if
a. leisure is a normal good.
b. consumption is a normal good.
c. the income effect on leisure is greater than the substitution effect.
d. the substitution effect on leisure is greater than the
1. Raj opens up a lemonade stand for two hours. He spends $10 for ingredients and sells
$60 worth of lemonade. In the same two hours, he could have mowed his neighbor’s
lawn for $40. Raj has an accounting profit of ______ and an economic profit of ______.
a. $50, $10
b. $90, $50
c. $10, $50
d. $50, $90
2. Diminishing marginal product explains why, as a firm’s output increases,
a. the production function and total-cost curve both get steeper.
b. the production function and total-cost curve both get flatter.
c. the production function gets steeper, while the total-cost curve gets flatter.
d. the production function gets flatter, while the total-cost curve gets steeper.
3. A firm is producing 1,000 units at a total cost of $5,000. If it were to increase
production to 1,001 units, its total cost would rise to $5,008. What does this information
tell you about the firm?
a. Marginal cost is $5, and average variable cost is $8.
b. Marginal cost is $8, and average variable cost is $5.
c. Marginal cost is $5, and average total cost is $8.
d. Marginal cost is $8, and average total cost is $5.
4. A firm is producing 20 units with an average total cost of $25 and marginal cost of
$15. If it were to increase production to 21 units, which of the following must occur?
a. Marginal cost would decrease.
b. Marginal cost would increase.
c. Average total cost would decrease.
d. Average total cost would increase.
5. The government imposes a $1,000 per year license fee on all pizza restaurants. Which
cost curves shift as a result?
a. average total cost and marginal cost
b. average total cost and average fixed cost
c. average variable cost and marginal cost
d. average variable cost and average fixed cost
6. If a higher level of production allows workers to specialize in particular tasks, a firm
will likely exhibit ________ of scale and ________ average total cost.
a. economies, falling
b. economies, rising
c. diseconomies, falling
d. diseconomies, rising
Chapter 15 Monopoly
Chapter 15 Monopoly
1d
2b
3d
4a
5c
6c