1. Daisy incurs $7,200 per month in fixed costs operating her floral shop.She pays her employees $9.

00 per hour and has three assistants each working 120 hours per month.Her other variable costs are $800 per month.What are Daisys total variable costs and total costs each month? a. Total variable costs are $800; total costs are $8,000. b. Total variable costs are $800; total costs are $11,240. c. Total variable costs are $3,240; total costs are $11,240. d. Total variable costs are $4,040; total costs are $11,240. 2. If housekeeping services are a normal good, then an increase in income will a. increase the supply of housekeeping services. b. decrease the supply of housekeeping services. c. increase the demand for housekeeping services. d. decrease the demand for housekeeping services. 3. Why do minimum wage laws in Italy and Spain result in a greater prevalence of workers being hired in unreported jobs off the books than do minimum wage laws in the U.S.? a. Because workers in these countries prefer short-term employment contracts. b. Because the minimum wages in these countries are so low that workers typically feel they have to accept more than one job. c. Because the minimum wages in these countries are so far above the equilibrium wage that they have generated significant unemployment. d. Because governments in these countries have designed labor market policies with the goal of making the official unemployment rate appear as low as possible. 4. If the price elasticity of demand for an annual magazine subscription is 1.6 in the range between $26 and $30, what happens in the market for this subscription when the price rises over this range? a. There will be an increase in the total revenue the magazine collects on its subscriptions. b. There will be a decrease in the total revenue the magazine collects on its subscriptions.

c. Magazines will become a normal good. d. Magazines will become an inferior good. 5. What determines the price elasticity of supply? a. The number of substitutes consumers can find for the good b. The amount of an excise tax imposed on a good c. The ease with which suppliers can expand production of the good d. The difference between the equilibrium price of a good and the price established by a price floor 6. What situation would make the demand for new cars relatively more price elastic? a. Auto manufacturers have a difficult time hiring skilled workers. b. Auto manufacturers find it easy to hire skilled workers. c. Car buyers are prosperous, and they are seeking luxury cars. d. There is a plentiful supply of used cars. 7. A firm will choose to shut down in the short run when a. price is above the minimum point of AVC but below the minimum point of ATC. b. price is below the minimum point of AVC. c. marginal cost begins to increase. d. total revenue is not sufficient to cover total cost. 8. If an airline wants to practice price discrimination so as to enhance its profit levels, it will a. charge higher fares to those with a more elastic demand. b. charge higher fares to those with a less elastic demand. c. determine a fare for each passenger according to the costs of serving them. d. charge everyone the same fare.

9. For the members of OPEC, it is in their combined interests to a. restrict yearly output and keep prices high. b. maximize yearly petroleum output. c. engage in product differentiation. d. reach a noncooperative equilibrium. 10. Federal Express and UPS are two firms that compete in providing overnight delivery services. How is the market for UPS affected by an increase in the rates charged by Federal Express? a. UPS will increase the supply of its services. b. UPS will decrease the supply of its services. c. The demand for UPS services will decrease. d. The demand for UPS services will increase.