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49.Refer to Figure 10. If the price of an ice cre
am cone is $2, Jason's income is C
A) $75. B) $250. C)300. D) indeterminate
because the price of ice cream sandwiches is
not given. 50.Refer to Figure 10. Jason maxi
mizes utility at Point
A A) A.
B) B.

C) C.
D) D.
51.Refer to Figure 10. The slope of the indiffe
rence curve is the ratio of the
A A)margin
al utility of ice cream cones to the marginal u
tility of ice cream sandwiches. B) marginal
utility of ice cream sandwiches to the margin
al utility of ice cream cones. C) total utility
of ice cream cones to the total utility of ice cr
eam sandwiches. D) total utility of ice crea
m sandwiches to the total utility of ice cream
cones. 52.Refer to Figure 10. At Point A, the s
lope of the indifference curve is
A
A) -0.67.
B) -1.5.
C) -3.0.
D) inde
terminate because the marginal utilities are u
nknown. 53.Refer to Figure 10.If the price of
an ice cream cone is $2, the price of ice crea
m sandwiches is
B A) $2.
B) $3.
C
) $50.
D) $100.
54.Refer to Figure If this shoe manufacturer i
ncreases labor from 15 to 20, the marginal pr
oduct of the 20th worker C
A) is zero, as the total number of shoes prod
uced remains at 50.
B) is 8.5, as capital can be reduced by 8.5 u
nits when the 20th worker is hired. C) cann
ot be determined because output remains co
nstant.
D) cannot be determined because both capi
tal and labor have been increased.
55.Refer to Figure 11. If the price of capital is
$10 and the price of labor is $20, the optimal
product technique is
A

A) A.

B) B.

C) C.

D) D.

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60.Refer to Table 2.Assuming the price of lab
or (L) is $5 per unit and the price of capital (K
) is $10 per unit, what production technique s
hould this firm use to produce 2 units of outp
ut?
B A)Production technique A
B)Production technique B
C) The firm is indifferent between productio
n technique A and production technique B.
D) It is impossible to determine if the firm s
hould select production technique A or B bec
ause total fixed
costs are not given.
61.Refer to Table 2.Assuming the price of lab
or (L) is $5 per unit and the price of capital (K
) is $10 per unit, the total variable cost of pro
ducing one unit of output is
B
A) $16
B) $100
C)$120.
D) $220.
62.Refer to Table 2. Assume that the relevant
time period is the short run. Assuming the pri
ce of labor (L) is $5 per unit and the price of c
apital (K) is $10 per unit, this firm's total cost

of producing one unit of output is

D A)
$100.
B) $120.
C) $220.
D) i
ndeterminate from this information.
63.Refer toTable 2.Assuming the price of labo
r (L) is $5 per unit and the price of capital (K)
is $10 per unit, the marginal cost of producin
g the third unit of output is
B
A)$30.
B) $40.
C)$50.
D) ind
eterminate from this information.
64.Refer to Table 3. If Sherry produces zero e
arrings, her total fixed costs are
C
A)$0.
B) $50.
C)$100.
D) indeterminate from this information. 65.R
efer to Table 3.If Sherry produces one pair of
earrings, her total variable costs are A A)
$50.
B) $100.
C)$150.
D) in
determinate from this information. 66.Refer t
o Table 3.If Sherry produces two pairs of earri
ngs, her marginal cost is A A) $40. B) $
45. C)$72.50.
D) $122.50.
67.Refer to Table 3.If Sherry produces three p
airs of earrings, her total variable costs are
B A) $26.67. B) $140.
C) $175.
D) $
225.
68.Refer to Table 3. If Sherry produces five pa
irs of earrings, her total costs are
C A) $3
20.
B) $360.
C) $370.
D) $400.
69.Refer to Table 3.If Sherry produces four pai
rs of earrings, her average fixed costs are C
A) $4. B) $20.
C) $25.
D) $100.
70.Refer to Table 3.Assume that Sherry's Earr
ings is producing in a perfectly competitive m

arket and the market price for earrings is $60

. To maximize profits Sherry should produce _
_________ pairs of earrings.
C A) Two B)
three
C)four
D) five
71.Refer to Figure 13.For this farmer to maxi
mize profits he should produce __________ bus
hels of wheat. C

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A) 6
B) 9
C) 12
D)16
72.Refer to Figure 13.If this farmer is maximiz
ing profits, his total costs will be D A) $11
. B) $66.
C)$90.
D) $132.
73.Refer to Figure 13.If this farmer is maximiz
ing his profits, his TVC is C A) $24.
B) $
42.
C)$108. D) $255.
74.Refer t
o Figure 13. This farmer's fixed costs are
B
A)$0. B) $24.
C) $45.
D) indetermi
nate unless we know the level of output the fi
rm is producing. 75.Refer to Figure 13.If this f
armer is maximizing profits, his total revenue
will be
C A) $90. B) $135. C)$180. D)
$240.
76.Refer to Figure 13.If this farmer is maximiz

ing profits, his profit will be

C A) -$24. B)
$45. C)48. D) $72.
77.Refer to Figure 13.If this farmer is maximiz
ing profit, his operating profit (or loss) is C
A) -$24. B) $48. C)$72. D) $156
78.Refer to Figure 13.This farmer would earn
a zero operating profit if price was A A) $
7. B) $9. C) $10. D) $11.
79.Refer to Figure 13.This farmer would earn
a zero economic profit if price was
C A)
$7. B) $9. C) $10. D) $11.
80.Refer to Figure 13.This farmer's shutdown
point is at a price of
C A) $0. B) $4.
C) $7.
D) $10.
81.Refer to Figure 14.This firm's shutdown poi
nt corresponds to Point
B A)A.
B)B.
C) C.
D)D.
82.Refer to Figure14.This firm's short-run sup
ply curve is the firm's
C A)AVC curve to t
he right of Point B.
B) marginal cost curv
e above Point A. C)marginal cost curve abo
ve Point B.
D) marginal cost curve above
Point D.
83.Refer to Figure 14.This firm will earn an op
erating profit, but incur an economic loss if pr
ice is
C
A) between $0 and $4. B) betw
een $4 and $7. C) between $7 and $13. D)
above $13.
84.Refer to Figure 14.This firm will earn a zer
o economic profit if price is
D
A) $0. B
) $4. C) $7. D) $13 85.True/False
1Input prices fall as entry occurs in an incre

asing-cost industry.
FALSE
2 Entry of new firms in an increasing-cost in
dustry leads to an upward shift of the LRAC c
urve.
TRUE 3 Information on MC of prod
uction is all that is necessary to obtain the in
dustry supply curve, because
P = MC is t
he profit-maximization condition for all firms.
FALSE
4 The long run industry supply curve is mad
e up of the zero-profit equilibrium levels of ou
tput as
the industry expands due to entry.
TRUE
5 When price is sufficient to cover average
variable costs, firms suffering short-run losse
s will
continue to operate rather than shut
down.
TRUE
6 At all prices below the shutdown point, op
timal short-run output is zero.
TRUE
7 The horizontal sum of marginal cost curve
s (above AVC) of all the firms in an industry is
the short-run
industry supply curve.
TRUE
8 The marginal cost curve of a firm above A
VC is also its short-run supply curve.
TRUE

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89.Refer to Figure 16.If labor supply is given
by S0 and the firm is using K1 units of capital
, this firm should hire __________ units of labor
to maximize profit.
A A) I0
B) I1
C) I2
D) I3
90.Refer to Figure 16.The market wage is initi
ally W0 and the firm is initially at Point A. Lab
or supply decreases from S0 to S1, if the firm
does not change the amount of capital it emp
loys, the firm will move to Point __ to maximiz
e profits.
A
A) B
B) C
C) E
D) F
93.An increase in technology will cause a mar
ginal revenue product of labor curve to
C
A) be unaffected because the productivity of l
abor has not changed.
B) shift to the left.
C) shift to the rig
ht
D) become more inelastic.
94.A firms marginal cost curve in a perfectly
competitive product market is the same as its
______ curve. Similarly, a firms marginal reve
nue product curve in a perfectly competitive l
abor market is the same as its ________ curve.
A)demand; supply
B)supply; demand
C)demand; demand
D)supply; supply
B
95.A firm is currently hiring capital and labor
so that MPL/PL < MPK/PK, if the firm wishes t
o maximize profits it should hire
D

A)less labor and less capital.

B) mo
re capital and more labor.
C) more la
bor and less capital.
D) less labor and
more capital. 96.The equilibrium condition P
= MC holds
C
A) only if all markets are imperfectly compe
titive. B) as long as all firms maximize profi
ts.
C) only if all markets are perfectly comp
etitive.
D) only for goods produced by the
public sector. 97._______is an example of a p
ublic good.
B
A) An automobile
B) National defense
C) A restaurant
D) A hospital
98.Your next-door neighbor has a beautiful ro
se garden. But you are allergic to roses and c
annot use your yard because of the rose polle
n that drifts into your yard. In this case, the r
ose garden is an example of a B A) public
good.
B) good that impose
s an external cost.
C) good that provides a
n external benefit. D) Pareto good.
99.Which of the following is an example of an
external benefit?
A
A) More people start to ride the bus becaus
e they become more public-spirited and, as a
result, air pollution
is reduced.
B) Firms are able to reduce their costs of pr
oduction by using a more efficient technology
.
C) The federal government spends a milli
on dollars on improving national parks.
D) A firm has just gotten permission to ope
n a landfill on property that is adjacent to you
r home.

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100.Refer to Figure 17. The profit-maximizing
level of output for this monopolist is _______u
nits of output.
B
A) 20
B) 22
C
) 24
D) 26
101.Refer to Figure 17.The profit-maximizing
price for this firm is
D A) $5.
B) $7.
C) $9.
D) $11
102. Refer to Figure 17. If this firm is producin
g the profit-maximizing quantity and selling it
at the profit-maximizing price, the firm's profi
t will be
C A) $80.
B) $84.
C)
$88.
D) $132.
103.Refer to Figure 18. The Silver Exchange h
as a monopoly over the sale of solid silver wa
lking sticks. The Silver Exchange has hired y
ou as an economic consultant. You should ad
vise this monopolist to
A
A) shut down i
n the short run and exit the industry in the lo
ng run.
B) produce in the short run and ex
pand capacity in the long run.
C) produce i
n the short run but exit the industry in the lon

g run.
D) shut down in the short run but e
xpand capacity in the long run.
104.Refer to Figure 18. The profit-maximizing
level of output for the Memory Company is __
________ high school yearbooks.
B
A) 0
B) 200
C) 300
D) 3
50
105.Refer to Figure 18. The profit-maximizing
price for the Memory Company's high school
yearbook is
C
A) $0.
B) $9.
C
) $16.
D) $20.
106.Refer to Figure 18. The profit-maximizing
level of profit for the Memory Company is
C
A)-$1,800.
B)-$1,200.
C) -$800.
D)
$0.
107.Refer to Figure 18. The Memory Compan
y's operating profit is
D
A)-$800.
B
) -$1,000.
C) $800.
D) $1,000.