QN=1 (1633) (17147) The invisible hand refers to

a. how central planners made economic decisions.

b. how the decisions of households and firms lead to desirable market outcomes.
c. the control that large firms have over the economy.
d. government regulations without which the economy would be less efficient.

QN=2 (1628) (17128) When a society cannot produce all the goods and services people wish to have
it is said that the economy is experiencing
a. scarcity.
b. communism.
c. externalities.
d. market failure.

QN=3 (1623) (17122) Mitch has $100 to spend and wants to buy either a new amplifier for his guitar
or a new mp3 player to listen to music while working out. Both the amplifier and the
mp3 player cost $100, so he can only buy one. This illustrates the basic concept that
a. trade can make everyone better off.
b. people face trade-offs
c. rational people think at the margin.
d. people respond to incentives.

QN=4 (1662) (17158) When economists attempt to simplify the real world and make it easier to
understand they make
a. assumptions.
b. mistakes in judgment.
c. predictions.
d. evaluations.

QN=5 (1655) (17171) In the circular-flow diagram, firms produce

a. (i) goods and services using factors of production.
b. (ii) output using inputs.
c. (iii) factors of production using goods and services.
d. Both (i) and (ii) are correct.

QN=6 (1636) (17150) A demand curve shows the relationship

a. between income and quantity demanded.
b. between price and income.
c. between price and quantity demanded.
d. among income, price, and quantity demanded.

QN=7 (1692) (17215) Two goods are complements when a decrease in the price of one good
a. decreases the quantity demanded of the other good.
b. decreases the demand for the other good.
c. increases the quantity demanded of the other good.
d. increases the demand for the other good.

QN=8 (1693) (17206) Suppose that Carolyn receives a pay increase. We would expect
a. to observe Carolyn moving down and to the right along her given demand curve.
b. Carolyn's demand for inferior goods to decrease.
c. Carolyn will go shopping at a clothing store worse than before.
d. Carolyn's demand for normal goods to decrease.

QN=9 (17207) 3. Refer to Figure 4-4. The graphs show the demand for cigarettes. In Panel (b), the
(1685 leftward arrow is consistent with which of the following events?
)

a. The price of cigarettes increased.

b. A sales tax was placed on cigarettes.
c. The prohibition of cigarette advertisements on television.
d. Tobacco and marijuana are complements and the price of marijuana decreased.

QN=10 (1740) (17259) Which of the following expressions represents a cross-price elasticity of
demand?
a. percentage change in quantity demanded of bread divided by percentage change in
quantity supplied of bread
b. percentage change in quantity demanded of bread divided by percentage change in
price of butter
c. percentage change in price of bread divided by percentage change in quantity
demanded of bread
d. percentage change in quantity demanded of bread divided by percentage change in
income

QN=11 (1723) (17246) Which of the following statements is correct?

a. (i) The demand for flat-screen computer monitors is more elastic than the demand for
monitors in general.
b. (ii) The demand for grandfather clocks is more elastic than the demand for clocks in
general.
c. (iii) The demand for cardboard is more elastic over a long period of time than over a
short period of time.
d. All of (i), (ii), and (iii) are correct.

QN=12 (1715) (17227) The price elasticity of demand for a good measures the willingness of
a. consumers to buy less of the good as price rises.
b. consumers to avoid monopolistic markets in favor of competitive markets.
c. firms to produce more of a good as price rises.
d. firms to cater to the tastes of consumers.

QN=13 (1775) (17292) A tax on the sellers of popcorn

a. increases the size of the popcorn market.
b. decreases the size of the popcorn market.
c. has no effect on the size of the popcorn market.
d. may increase, decrease, or have no effect on the size of the popcorn market.

QN=14 (1768) (17296) Minimum-wage laws dictate the

a. average price employers must pay for labor.
b. highest price employers may pay for labor.
c. lowest price employers may pay for labor.
d. the highest and lowest prices employers may pay for labor.

QN=15 (1745) (17245) The price elasticity of demand measures

a. buyers’ responsiveness to a change in the price of a good.
b. the extent to which demand increases as additional buyers enter the market.
c. how much more of a good consumers will demand when incomes rise.
d. the movement along a supply curve when there is a change in demand.

QN=16 (1756) (17266) Under rent control, bribery is a mechanism to

a. bring the total price of an apartment (including the bribe) closer to the equilibrium
price.
b. allocate housing to the poorest individuals in the market.
c. force the total price of an apartment (including the bribe) to be less than the market
price.
d. allocate housing to the most deserving tenants.

QN=17 (1748) (17242) When the price of a good is $5, the quantity demanded is 120 units per month;
when the price is $7, the quantity demanded is 100 units per month. Using the
midpoint method, the price elasticity of demand is about
a. 0.55.
b. 1.83.
c. 2.
d. 0.45

QN=18 (1766) (17295) The imposition of a binding price floor on a market causes quantity demanded
to be
a. (i) greater than quantity supplied.
b. (ii) less than quantity supplied.
c. (iii) equal to quantity supplied.
d. Both (i) and (ii) are possible.

QN=19 (1772) (17277) The goal of rent control is to

a. facilitate controlled economic experiments in urban areas.
b. help landlords by assuring them a low vacancy rate for their apartments.
c. help the poor by assuring them an adequate supply of apartments.
d. help the poor by making housing more affordable.

QN=20 (1810) (17311) Consumer surplus is the

a. amount of a good consumers get without paying anything.
b. amount a consumer pays minus the amount the consumer is willing to pay.
c. amount a consumer is willing to pay minus the amount the consumer actually pays.
d. value of a good to a consumer.

QN=21 (1794) (17345) Producer surplus measures the

a. benefits to sellers of participating in a market.
b. costs to sellers of participating in a market.
c. price that buyers are willing to pay for sellers’ output of a good or service.
d. benefit to sellers of producing a greater quantity of a good or service than buyers
demand.

QN=22 (1792) (17291) A $2.00 tax levied on the sellers of mailboxes will shift the supply curve
a. upward by exactly $2.00.
b. upward by less than $2.00.
c. downward by exactly $2.00.
d. downward by less than $2.00.

QN=23 (1800) (17340) Consumer surplus is equal to the

a. Value to buyers - Amount paid by buyers.
b. Amount paid by buyers - Costs of sellers.
c. Value to buyers - Costs of sellers.
d. Value to buyers - Willingness to pay of buyers.

QN=24 (1785) (17288) Which of the following is correct?

a. A tax burden falls more heavily on the side of the market that is more elastic.
b. A tax burden falls more heavily on the side of the market that is less elastic.
c. A tax burden falls more heavily on the side of the market that is closer to unit elastic.
d. A tax burden is distributed independently of the relative elasticities of supply and
demand.

QN=25 (1811) (17324) Market efficiency occurs when

a. total surplus is maximized.
b. producer surplus is maximized.
c. all resources are being used.
d. consumer surplus equals producer surplus.

QN=26 (1837) (17388) The Coase theorem states that

a. taxes are an efficient way for governments to remedy negative externalities.
b. subsidies are an efficient way for governments to remedy positive externalities.
c. industrial policies encourage technology spillovers.
d. in the absence of transaction costs, private parties can solve the problem of
externalities on their own.

QN=2 (17373) Refer to Figure 10-5. Which of the following statements is correct?
7
(1842)
a. The marginal benefit of the positive externality is measured by P3 - P1.
b. The marginal cost of the negative externality is measured by P3 - P2.
c. The marginal cost of the negative externality is measured by P3 - P1.
d. The marginal cost of the negative externality is measured by P3 - P0.

QN=28 (1874) (17387) Suppose that electricity producers create a negative externality equal to $6
per unit. Further suppose that the government imposes a $8 per-unit tax on the
producers. What is the relationship between the after-tax equilibrium quantity and the
socially optimal quantity of electricity to be produced?
a. They are equal.
b. The after-tax equilibrium quantity is greater than the socially optimal quantity.
c. The after-tax equilibrium quantity is less than the socially optimal quantity.
d. There is not enough information to answer the question.

QN=29 (1853) (17382) The difference between social cost and private cost is a measure of the
a. loss in profit to the seller as the result of a negative externality.
b. cost of an externality.
c. cost reduction when the negative externality is eliminated.
d. cost incurred by the government when it intervenes in the market.

QN=30 (1856) (17377) Suppose that a steel factory emits a certain amount of air pollution, which
constitutes a negative externality. If the market does not internalize the externality,
a. the supply curve would adequately reflect the marginal social cost of production.
b. consumers will be required to pay a higher price for steel than they would have if the
externality were internalized.
c. the market equilibrium quantity will not be the socially optimal quantity.
d. producers will produce less steel than they otherwise would if the externality were
internalized.

QN=31 (1890) (17424) The Tragedy of the Commons occurs because

a. a common resource is rival in consumption.
b. a common resource is underutilized.
c. crimes are committed in public places.
d. common resources are subject to exclusionary rules.

QN=32 (1913) (17391) A view of a spectacular sunset along a private beach is an example of a
a. private good.
b. public good.
c. nonrival but excludable good.
d. rival but nonexcludable good.

QN=33 (1900) (17406) Most goods in the economy are

a. natural monopolies.
b. common resources.
c. public goods.
d. private goods.

QN=34 (1932) (17458) A difference between explicit and implicit costs is that
a. explicit costs are greater than implicit costs.
b. explicit costs do not require a direct monetary outlay by the firm, whereas implicit
costs do.
c. implicit costs do not require a direct monetary outlay by the firm, whereas explicit
costs do.
d. implicit costs are greater than explicit costs.

QN=35 (1945) (17434) Suppose that for a particular firm the only variable input into the production
process is labor and that output equals zero when no workers are hired. In addition,
suppose that when the firm hires 2 workers, the total cost of production is $100.
When the firm hires 3 workers, the total cost of production is $120. In addition,
assume that the variable cost per unit of labor is the same regardless of the number of
units of labor that are hired. What is the firm's fixed cost?
a. $40
b. $60
c. $80
d. $100
QN=36 (1946) (17444) Which of the following costs would be regarded as an implicit cost?
a. the cost of accounting services
b. the opportunity cost of financial capital that has been invested in the business
c. the cost of compliance with government regulation
d. all costs that involve outlays of money by the firm

QN=37 (1955) (17430) The firm's efficient scale is the quantity of output that minimizes
a. average total cost.
b. average fixed cost.
c. average variable cost.
d. marginal cost.

QN=38 (1962) (17514) Refer to Figure 14-1. Which of the four prices corresponds to a perfectly
competitive firm earning zero economic profits in the short run?

a. P1
b. P2
c. P3
d. P4

QN=39 (17491) In the figure below, panel (a) depicts the linear marginal cost of a firm in a competitive
(1970) market, and panel (b) depicts the linear market supply curve for a market with a fixed number
of identical firms.

Refer to Figure 14-8. If at a market price of $1.75, 52,500 units of output are supplied to this
market, how many identical firms are participating in this market?

a. 75
b. 100
c. 250
d. 300

QN=40 (1999) (17518) A competitive market is in long-run equilibrium. If demand increases, we can
be certain that price will
a. rise in the short run. Some firms will enter the industry. Price will then rise to reach the
new long-run equilibrium.
b. rise in the short run. Some firms will enter the industry. Price will then fall to reach the
new long-run equilibrium.
c. fall in the short run. All, some, or no firms will shut down, and some of them will exit
the industry. Price will then rise to reach the new long-run equilibrium.
d. not rise in the short run because firms will enter to maintain the price.

QN=41 (2004) (17490) For a certain firm, the 100th unit of output that the firm produces has a
marginal revenue of $10 and a marginal cost of $11. It follows that the
a. production of the 100th unit of output increases the firm's profit by $1.
b. production of the 100th unit of output increases the firm's average total cost by $1.
c. firm's profit-maximizing level of output is less than 100 units.
d. production of the 110th unit of output must increase the firm’s profit by less than $1.

QN=42 (1987) (17510) Which of the following statements is correct?

a. For all firms, marginal revenue equals the price of the good.
b. Only for competitive firms does average revenue equal the price of the good.
c. Marginal revenue can be calculated as total revenue divided by the quantity sold.
d. Only for competitive firms does average revenue equal marginal revenue.

QN=43 (2045) (17538) If one were to compare a competitive market to a monopoly that engages in
perfect price discrimination, one could say that
a. in both cases, total social welfare is the same.
b. total social welfare is maximized in the competitive market, but not in the perfectly
discriminating monopoly.
c. in both cases, some potentially mutually beneficial trades do not occur.
d. consumer surplus is the same in both cases.

QN=44 (2034) (17553) When a monopolist is able to sell its product at different prices, it is engaging
in
a. distribution pricing.
b. quality-adjusted pricing.
c. price differentiation.
d. price discrimination.

QN=45 (2030) (17550) A monopolist will choose to increase output when

a. market price increases.
b. at all levels of output, marginal cost increases.
c. at the present level of output, marginal revenue exceeds marginal cost.
d. the demand curve shifts to the left.

QN=46 (2061) (17581) When quality cannot be easily judged in advance, what provides consumers
with information about the quality of a product?
a. a brand name
b. a tie-in
c. the quantity available for sale
d. the amount of deadweight loss

QN=47 (2198) (17697) A consumer's preferences provide a

a. ranking of the set of bundles that happen to fall on indifference curves.
b. relative ranking of bundles that provide more of all goods.
c. framework for evaluating market equilibriums.
d. complete ranking of all possible consumption bundles.

QN=48 (2099) (17623) The practice of selling a product to retailers and requiring the retailers to
charge a specific price for the product is called
a. fixed retail pricing.
b. resale price maintenance.
c. cost plus pricing.
d. unfair trade.

QN=49 (2178) (17689) Which of the following could explain the change in the budget line from A to
B?

a. (i) a simultaneous decrease in the price of X and the price of Y

b. (ii) an increase in income
c. (iii) an increase in income and a decrease in the price of Y
d. Both (i) and (ii) are correct.

QN=50 (2184) (17707) The slope of the budget constraint is determined by the
a. relative price of the goods measured on the axes.
b. relative price of the goods measured on the axes and the consumer’s income.
c. endowment of productive resources.
d. preferences of the consumer.
[id=1633, Mark=1]1. B

[id=1628, Mark=1]2. A

[id=1623, Mark=1]3. B

[id=1662, Mark=1]4. A

[id=1655, Mark=1]5. D

[id=1636, Mark=1]6. C

[id=1692, Mark=1]7. D

[id=1693, Mark=1]8. B

[id=1685, Mark=1]9. C

[id=1740, Mark=1]10. B

[id=1723, Mark=1]11. D

[id=1715, Mark=1]12. A

[id=1775, Mark=1]13. B

[id=1768, Mark=1]14. C

[id=1745, Mark=1]15. A

[id=1756, Mark=1]16. A

[id=1748, Mark=1]17. A

[id=1766, Mark=1]18. B

[id=1772, Mark=1]19. D

[id=1810, Mark=1]20. C

[id=1794, Mark=1]21. A

[id=1792, Mark=1]22. A

[id=1800, Mark=1]23. A

[id=1785, Mark=1]24. B

[id=1811, Mark=1]25. A

[id=1837, Mark=1]26. D

[id=1842, Mark=1]27. C

[id=1874, Mark=1]28. C

[id=1853, Mark=1]29. B
[id=1856, Mark=1]30. C

[id=1890, Mark=1]31. A

[id=1913, Mark=1]32. C

[id=1900, Mark=1]33. D

[id=1932, Mark=1]34. C

[id=1945, Mark=1]35. B

[id=1946, Mark=1]36. B

[id=1955, Mark=1]37. A

[id=1962, Mark=1]38. B

[id=1970, Mark=1]39. D

[id=1999, Mark=1]40. B

[id=2004, Mark=1]41. C

[id=1987, Mark=1]42. D

[id=2045, Mark=1]43. A

[id=2034, Mark=1]44. D

[id=2030, Mark=1]45. C

[id=2061, Mark=1]46. A

[id=2198, Mark=1]47. D

[id=2099, Mark=1]48. B

[id=2178, Mark=1]49. D

[id=2184, Mark=1]50. A