Liberty University ECON 213 quiz 10 complete solutions correct answers A+ work

Liberty University ECON 213 quiz 10 complete solutions correct answers A+ work

More than 8 different versions

Question 1 Most economists are against monopolies because:

Question 2 Refer to the accompanying table, which represents the costs and production for a monopolist, to answer the questions that follow. As production increases, the price consumers are willing to pay for the good:

Question 3 Lobbying the government to place harsh tariffs on imports is a form of:

Question 4 Refer to the accompanying figure to answer the questions that follow. When this firm is producing at the profit­maximizing price and quantity, its total revenue is:

Question 5 The government oversight and management of monopolies:

Question 6 The equation of a firm’s marginal revenue curve is estimated to be P = 50 – Q (quantity), and the equations of their marginal cost curve is estimated to be P = 10 + 3Q. The profit­maximizing price for this firm is:

Question 7 Barriers to entry:

Question 8 To maximize profits, a monopolist chooses the quantity where:

Question 9 Control of resources is an example of:

Question 10 Refer to the accompanying figure to answer the questions that follow. When the price changes from $50 to $30, the price effect leads to a loss of _________ in revenue.

Question 11 Christopher’s Campground is the only campground located in Abilene, Texas. Christopher’s Campground’s demand curve is:

Question 12 Refer to the accompanying figure to answer the questions that follow. When the price changes from $50 to $30, the output effect leads to an increase of _________ in revenue.

Question 13 When a competitive market becomes controlled by a monopoly, the price _________ and the output _________.

Question 14 Refer to the accompanying figure to answer the questions that follow. If the government forces a firm to produce at the point that generates the greatest welfare for society, that firm would make _________ in profits.

Question 15 Ash is the preferred wood to be used in the production of baseball bats. If a company were to buy the rights to harvesting the ash trees out of all the forests in North America, which of the following barriers of entry has this company created?

Question 16 Refer to the accompanying table, which represents the costs and production for a monopolist, to answer the questions that follow. The profit­maximizing price for this firm is:

Question 17 The marginal revenue lies _________ the demand curve because there is a(n) _________ effect whenever the price is lowered.

Question 18 If a monopolist is producing a quantity where marginal revenue is equal to $16 and the marginal cost is equal to $17, the monopolist should:

Question 19 When marginal revenue intersects marginal cost on a graph:

Question 20 Inefficient output and price, few choices, and rent seeking are all problems associated with:

Question 1 When resources are used to secure monopoly rights through the political process:

Question 2 Refer to the accompanying table, which represents the costs and production for a monopolist, to answer the questions that follow. The profit made by this profit­maximizing firm is:

Question 3 Refer to the accompanying figure to answer the questions that follow. If the government forces a firm to produce at the point that generates the greatest welfare for society, that firm would make _________ in profits.

Question 4 Patents and copyrights can:

Question 5 At low price levels, demand tends to be _________ and the price effect is _________, relative to the output effect.

Question 6 The _________ means that the government can regulate a natural monopoly to minimize deadweight loss without forcing the private firm out of the market.

Question 7 Refer to the accompanying figure to answer the questions that follow. Which of the following is the most efficient price and quantity combination for society?

Question 8 Refer to the accompanying figure to answer the questions that follow. The figure shows which type of market?

Question 9 Refer to the accompanying figure. The revenue received by the profit­maximizing monopolist in this market is represented by:

Question 10 The typical result of monopoly is __________ prices and __________ output than we find in a competitive market.

Question 11 The demand curve for Angel’s Airport Shuttle is downward­sloping. With only this information, it can be concluded that Angel’s Airport Shuttle:

Question 12 Problems raising capital is an example of:

Question 13 When marginal revenue is negative, the:

Question 14 Control of resources, problems raising capital, and economies of scale are all examples of:

Question 15 Refer to the accompanying figure to answer the questions that follow. The consumer surplus associated with this profit­maximizing monopoly is represented by areas:

Question 16 When a monopolist lowers a price from $80 to $70, the quantity that the firm is able to sell increases from 100 to 150. The change in revenue associated with the price effect is equal to:

Question 17 Papa Joe’s Car Dealership is the only dealership in Victorville, California. The owner, Papa Joe: experiences large economies of scale. Because he is the only seller of cars in the town,

Question 18 Willow Park is a small community in Texas with only one gas station. The price of gasoline in Willow Park most likely:

Question 19 Refer to the accompanying figure to answer the questions that follow. The profit­maximizing price and quantity are:

Question 20 Two government­created barriers to entry are:

Question 1 A monopoly:

Question 2 When marginal revenue is negative, the:

Question 3 If a monopolist is producing a quantity where marginal revenue is equal to $125 and the marginal cost is equal to $125, the monopolist should:

Question 4 Refer to the accompanying figure to answer the questions that follow. When the price changes from $50 to $30, the price effect leads to a loss of _________ in revenue.

Question 5 The equation of a firm’s marginal revenue curve is estimated to be P = 50 – Q (quantity), and the equations of their marginal cost curve is estimated to be P = 10 + 3Q. The profitmaximizing price for this firm is:

Question 6 Which of the following is a characteristic of a monopoly but not of a competitive market?

Question 7 One way the government can restore competitiveness in a market is through:

Question 8 Refer to the accompanying figure to answer the questions that follow. The profit when a firm is profit­maximizing is:

Question 9 Economies of scale is an example of:

Question 10 Refer to the accompanying figure to answer the questions that follow. If the government forces a firm to produce at the point that generates the greatest welfare for society, that firm would make _________ in profits.

Question 11 Taxi medallions are an example of:

Question 12 One argument against patent and copyright laws is that they:

Question 13 A price­maker:

Question 14 Which of the following is a characteristic of a monopoly but not a characteristic of a competitive market?

Question 15 Refer to the accompanying table, which represents the costs and production for a monopolist, to answer the questions that follow. The profit made by this profit­maximizing firm is:

Question 16 When marginal revenue is positive, the:

Question 17 Both monopolies and competitive firms:

Question 18 Inefficient output and price, few choices, and rent seeking are all problems associated with:

Question 19 Refer to the accompanying figure to answer the questions that follow. Which of the following is the most efficient price and quantity combination for society?

Question 20 The best way to limit competition is to:

Both monopolies and competitive firms

Refer to the accompanying figure to answer the questions that follow.
If this firm is profit-maximizing, society would experience _________ in deadweight loss

At the profit-maximizing output in a monopoly-controlled market, the price a monopolist charges is

Monopolists

When a competitive market becomes controlled by a monopoly, the price _________ and the output _________.

One argument against patent and copyright laws is that they

Rent-seeking occurs when

Monopolies result in a(n) __________ level of output and provide __________ choice to consumers

Ash is the preferred wood to be used in the production of baseball bats. If a company were to buy the rights to harvesting the ash trees out of all the forests in North America, which of the following barriers of entry has this company created

The profit-maximizing rule for a monopolist is

Refer to the accompanying figure to answer the questions that follow.
Consumer surplus associated with a profit-maximizing monopoly is equal to

Refer to the accompanying figure to answer the questions that follow.
The profit-maximizing price and quantity are

If a monopolist is producing a quantity where marginal revenue is equal to $16 and the marginal cost is equal to $17, the monopolist should

Refer to the accompanying figure to answer the questions that follow.
The total revenue when a firm is profit-maximizing is

Refer to the accompanying table, which represents the costs and production for a monopolist, to answer the questions that follow.
The profit made by this profit-maximizing firm is

Refer to the accompanying figure to answer the questions that follow.
When this firm is producing at the profit-maximizing price and quantity, its total revenue is

When marginal revenue is negative, the

When a monopolist lowers a price from $80 to $70, the quantity that the firm is able to sell increases from 100 to 150. The change in revenue associated with the price effect is equal to

Licensing

Refer to the accompanying table, which represents the costs and production for a monopolist, to answer the questions that follow.
The profit-maximizing quantity for this firm is

Question 1

By reducing trade barriers, the government:

Question 2

The price effect refers to how:

Question 3

When resources are used to secure monopoly rights through the political process:

Question 4

Barriers to entry:

Question 5

Reducing trade barriers creates _________ competition, _________ the influence of monopoly, and _________ the efficient use of resources.

Question 6

A big difference between a competitive firm and a monopolist is that a monopolist:

Question 7

The equation of a firm’s marginal revenue curve is estimated to be price = 50 – Q (quantity), and the equations of their marginal cost curve is estimated to be price = 10 + 3Q. The profitmaximizing quantity for this firm is:

Question 8

Patents and copyrights can:

Question 9

Rentseeking:

Question 10

Refer to the accompanying table, which represents the costs and production for a monopolist, to answer the questions that follow.

The profitmaximizing quantity for this firm is:

Question 11

Economists view rentseeking as:

Question 12

If a monopolist is producing a quantity where marginal revenue is equal to $32 and the marginal cost is equal to $30, the monopolist should:

Question 13

Raising capital to compete against an entrenched monopolist:

Question 14

Taxi medallions are an example of:

Question 15

The government oversight and management of monopolies:

Question 16

Beer prices at major league baseball stadiums are usually much higher than prices at a bar or restaurant. This is mainly because:

Question 17

When a town has a single cable provider:

Question 18

Refer to the accompanying figure to answer the questions that follow.

The total cost when a firm is profitmaximizing is:

Question 19

Problems raising capital is an example of:

Question 20

Refer to the accompanying figure to answer the questions that follow.

A profitmaximizing firm without any price regulations would make __________ in profits.

If firms in a competitive market are making positive economic profits, you would expect firms to

A good economist will ignore _________ and focus on _________ when it comes to making the right decisions

The presence of many buyers and sellers is an important characteristic of competitive markets because it allows:

Which of the following lists the three main characteristics of a competitive market?

The marginal cost curve is the short-run supply curve:

Marginal revenue is the change in total:

Firms will break even if the price they charge is:

Firms will always make a positive economic profit if the price they charge is:

Which characteristic of competitive markets is mainly responsible for firms making zero economic profits in the long run?

Two government-created barriers to entry are:

The accompanying payoff matrix depicts the possible outcomes for two players involved in a game of Rock, Paper, Scissors. If a player receives a payoff of 1, the player wins; if the player receives a payoff of –1, the player loses; if both players receive 0 (zero), the players tie. If Stan chooses scissors and Kyle chooses rock, Stan’s payoff is __________ and Kyle’s payoff is __________.

Refer to the accompanying table. If Keisha keeps quiet, Larry will spend __________ years in jail if he confesses and __________ years in jail if he also keeps quiet.

Three natural barriers to entry are:

To maximize profits, a monopolist chooses the quantity where:

Which of the following is a characteristic of a monopoly but not of a competitive market?

At the profit-maximizing output in a monopoly-controlled market, the price a monopolist charges is:

A monopoly:

Because the demand curve for a monopolist is downward sloping:

Question 1

Ash is the preferred wood to be used in the production of baseball bats. If a company were to buy the rights to harvesting the ash trees out of all the forests in North America, which of the following barriers of entry has this company created?

Select one:

a. licensing

b. economies of scale

c. control of resources

d. problems raising capital

e. patents and copyright law

Question 2

Problems raising capital is an example of:

Select one:

a. consumer surplus.

b. a government-created barrier.

c. a natural barrier.

d. communism

e. an externality.

Question 3

Thomas has developed a new social media site that he feels can compete heavily with Facebook. Unfortunately he cannot find someone to lend him enough money to market his product to consumers. Thomas is facing which kind of barrier to entry?

Select one:

a. economies of scale

b. patents and copyright law

c. licensing

d. problems raising capital

e. control of resources

Question 4

Economies of scale exist:

Select one:

a. when long-run average total costs decrease.

b. when long-run average total costs are constant.

c. when governments create barriers to entry.

d. when long-run average total costs increase.

e. only for monopolists.

Question 5

A natural monopoly:

Select one:

a. exists when many sellers experience lower average total costs than potential competitors do.

b. exists when a firm has sole ownership of a natural resource.

c. is needed to make a profit in the long run.

d. is an example of a government-created barrier.

e. exists when a single seller experiences lower average total costs than any potential competitor.

Question 6

Both monopolies and competitive firms:

Select one:

a. are price-makers.

b. make long-run economic profits.

c. are price-takers.

d. face barriers to entry.

e. try to maximize profits.

Question 7

The profit-maximizing rule for a monopolist is:

Select one:

a. average total cost = marginal cost.

b. average total cost = marginal revenue.

c. price = marginal revenue.

d. price = marginal cost.

e. marginal revenue = marginal cost.

Question 8

The demand curve for the product of a firm in a competitive market is _________, and the demand curve for the product of a monopolist is _________.

Select one:

a. horizontal; perfectly inelastic

b. downward-sloping; horizontal

c. perfectly inelastic; downward-sloping

d. perfectly elastic; downward-sloping

e. downward-sloping; perfectly elastic

Question 9

If a monopolist is producing a quantity where marginal revenue is equal to $125 and the marginal cost is equal to $125, the monopolist should:

Select one:

a. increase production and lower the price to maximize profits.

b. increase production and increase the price to maximize profits.

c. continue producing at the current price to maximize profits.

d. decrease production and increase the price to maximize profits.

e. decrease production and decrease the price to maximize profits.

Question 10

Which of the following is a characteristic of a monopoly but not of a competitive market?

Select one:

a. price > marginal cost

b. price = marginal cost

c. price < marginal cost

d. A monopoly is a price-taker.

e. A monopoly contains many firms.

Question 11

Refer to the accompanying figure to answer the questions that follow.

If a firm is producing a quantity of 100 and charging a price of $25, it:

Select one:

a. should raise production to 150 units but lower the price to $10 to maximize profits.

b. should keep production at 100 units but lower the price to $13 to maximize profits.

c. should keep production at 100 units and lower the price to $10 to maximize profits.

d. is already maximizing profits and should not change the price or quantity produced.

e. should raise production to 150 units and continue to charge $25 to maximize profits.

Question 12

Beer prices at major league baseball stadiums are usually much higher than prices at a bar or restaurant. This is mainly because:

Select one:

a. baseball team owners have market power and can charge a higher price when they are the only sellers of the beer.

b. demand is much higher at a baseball game than at a bar.

c. it costs the owners of the baseball teams more money to buy the beer from distributors.

d. the owners’ baseball teams are not profit-maximizing.

e. the government forces the owner of baseball teams to charge a high price.

Question 13

Refer to the accompanying figure to answer the questions that follow.

When a competitive market comes under the control of a monopoly, the price changes from:

Select one:

a. A to C.

b. C to A.

c. B to A.

d. D to E.

e. C to B.

Question 14

Refer to the accompanying figure to answer the questions that follow.

Which areas of the graph represent the consumer surplus transferred to the monopolist as a result of the monopolist taking over the market?

Select one:

a. A + B

b. C + D

c. 87

d. B + D + G + E + H

e. A + B + C + D + E

Question 15

Most economists are against monopolies because:

Select one:

a. monopolies offer more choices than are needed.

b. monopolists do not maximize profits.

c. monopolies can never produce the quantity that a perfectly competitive market would produce.

d. monopolies produce too much of product.

e. monopolies do not offer any choice.

Question 16

If cable companies were in a highly competitive market, you would expect:

Select one:

a. customers to be unhappy about their cable package options.

b. deadweight loss in the market.

c. cable companies to force you to choose between buying a little more cable than you really need or going without cable altogether.

d. a company to be willing to sell specific channels as well as packaged options.

e. cable companies to make profits in the long run.

Question 17

Rent-seeking occurs when:

Select one:

a. resources are used to deregulate a market through the political process.

b. resources are used to maximize profits.

c. two firms try to enter the same market.

d. resources are used to secure monopoly rights through the political process.

e. landlords attempt to raise the rent on tenants.

Question 18

When the government passes antitrust laws in an industry, we see:

Select one:

a. lower prices, higher output, and fewer choices.

b. higher prices, higher output, and more choices.

c. higher prices, lower output, and more choices.

d. lower prices, higher output, and more choices.

e. higher prices, lower output, and fewer choices.

Question 19

Refer to the accompanying figure to answer the questions that follow.

The figure shows which type of market?

Select one:

a. a monopolistically competitive market incurring an economic loss

b. a monopolistically competitive market in the long run

c. a competitive market in the long run

d. a natural monopoly

e. a competitive market in the short run

Question 20

One way the government could regulate a natural monopoly at the marginal cost level would be to:

Select one:

a. allow the natural monopoly to produce at the profit-maximizing point.

b. give the monopoly a patent.

c. subsidize the monopoly.

d. place a tariff on the monopoly.

e. tax the monopoly.

1. Opportunity cost is the ______________ alternative forfeited when a choice is made.

a.         least-valued

b.        highest-valued

c.         most recently considered

d.        most convenient

e.         first

2. You decide whether to eat one more slice of pizza based on how hungry you feel. This statement best represents this economic concept:

 A) resources are scarce.

 B) the real cost of something is what you must give up to get it.

 C) “How much” is a decision at the margin.

 D) there are gains from trade.

3. Positive economics:

 A) describes opinions and perspectives on how the world should work.

 B) is based on opinion polls.

 C) describes how the world does work

 D) is the same as normative economics.

4. Economists use models to explain real-life situations because:

 A) such models tend to be exactly what is occurring in each situation.

 B) assumptions found in such models tend to make the problem more difficult.

 C) simplifications and assumptions often yield answers that can help to explain the more difficult real-life situations

 D) they do not; real-life situations are not relevant to the building of models.

5. Bob can hire someone to paint his house for $2,000, or he can do it himself at no out-of-pocket cost.  It will take him 5 days.  Bob earns $500 a day when he works outside the home.  Which option has the greater economic cost?

a.       hiring a painter

b.       painting the house himself

c.        they are the same cost

d.       not enough information to decide—one needs to know the marginal cost

6. When one producer has a comparative advantage in production,

a.         she can produce more output than someone else using the same quantity of resources.

b.        she can produce a good at a lower opportunity cost than someone else.

c.         she will not benefit from trade with other producers.

d.        she is unable to reach her production possibilities frontier (PPF).

e.         she will only trade with others who have the same comparative advantage.

7. The slope of a production possibilities frontier

a.  has no economic relevance or meaning.

b.  is always constant.

c.  is always varying.  

d.  measures the opportunity cost of producing one more unit of a good

8. Increases in resources or improvements in technology will tend to cause a society's production possibility frontier to:

 A) shift inward to the left.

 B) shift outward to the right

 C) remain unchanged.

 D) become vertical.

9. Which point(s) in the PPF above are unattainable?

a)       Point A because it is outside the production possibilities frontier

b)       All the points because the production of each has an opportunity cost.

c)       None of the points because they all are feasible.

d)       Points B, C, and D because they are on the production possibilities frontier.

e)       Point E because it is inside the production possibilities frontier.

10. Michael and Angelo are both artists who can create sculptures or paint paintings each day. The following table describes their maximum outputs per day. Does either person have an absolute advantage?

Sculptures

Paintings

Michael

10

5

Angelo

6

2

a.       Yes, Michael has an absolute advantage in both sculptures and paintings

b.       Yes, Angelo has an absolute advantage in both sculptures and paintings.

c.        Yes, Michael has an absolute advantage in paintings, and Angelo has an absolute advantage in sculptures.

d.       Yes, Michael has an absolute advantage in sculptures, and Angelo has an absolute advantage in paintings.

e.        No, neither has an absolute advantage.

11. Michael and Angelo are both artists who can create sculptures or paintings each day. The following table describes their maximum outputs per day. What is Angelo’s opportunity cost of a sculpture?

Sculptures

Paintings

Michael

10

5

Angelo

6

2

1. 1/2 painting
2. 1/3 painting
3. 3 paintings
4. 1/3 sculpture
5. 6/10 sculpture

12. The accompanying figure depicts the production possibilities frontiers (PPFs) for two people who can allocate the same amount of time between making pizzas and making stromboli. If Jim and Pam were to specialize and trade, at what exchange rate would they find some quantity of trade to be mutually beneficial?

a.       3 pizzas for 1 stromboli

b.       1 pizza for 1 stromboli

c.        10 pizzas for 2 stromboli

d.       1 pizza for 1/2 stromboli

e.        1 pizza for 1/4 of a stromboli

Figure: Production Possibility Frontier Curve for Tealand

13. (Figure: Production Possibility Frontier for Tealand) In the figure, Tealand is producing at point C on its production possibility frontier. What is the opportunity cost in Tealand of increasing the production of tea from 20 million cups to 30 million cups?

 A. 10 million cups of tea

 B. 5 million scones

 C. 10 million scones

 D. The answer is impossible to determine from the information given.

14. Consider the production possibilities frontier below.  Which line(s) represents a change in technology for producing good A?

a.         1

b.        2

c.         both

d.        neither

15. Consider the production possibilities frontier below. Which line(s) represents a change in the economy’s resources?

a.       1

b.       2

c.        both

d.       neither

16. Use the accompanying diagram to answer the question.

An increase in the number of buyers would cause the demand curve to:

a. shift from D to D2.

b. remain at D.

c. shift from D to D1.

d. shift from D1 to D.

e. shift from D1 to D2.

Figure: Demand and Supply of Gasoline

17. (Figure: Demand and Supply of Gasoline) Look at the figure Demand and Supply of Gasoline. The initial equilibrium price and quantity (at intersection of S1 and D) of gasoline are:

 A.$2.00 and 450 gallons.

 B. $1.50 and 400 gallons.

 C. $2.00 and 200 gallons.

 D. $2.50 and 300 gallons

18. (Figure: Demand and Supply of Gasoline) Look at the figure Demand and Supply of Gasoline. Given the initial equilibrium of S1 and D, any price lower than ________ will create pressure for the price to ________.

 A. $2.00; fall

 B. $2.50; rise

 C. $3.00; rise

 D. $2.50; fall

19. (Figure: Demand and Supply of Gasoline) Look at the figure Demand and Supply of Gasoline. A factor that may have changed supply from S1 to S2 is:

 A. better technology in the production of gasoline

 B. increased demand.

 C. lower labor productivity in gasoline production.

 D. increased prices of substitutes for gasoline.

20.       “In 2008, air travel decreased substantially despite significant reductions in ticket prices.” If this information is correct, it indicates that the law of demand did not apply to air travel in 2008.

 A. True

 B. False

21. A supply curve is:

a.       downward sloping because suppliers prefer lower costs

b.       upward sloping because suppliers prefer lower costs

c.        upward sloping because suppliers will offer for sale more at a higher price

d.       downward sloping because suppliers will offer more for sale at a higher price

22. The demand curve shift shown in the figure above was caused by a(n):

a.         increase in the input cost of the good.

b.        increase in the price of a substitute of the good.

c.         decrease in the number of firms selling the good.

d.        decrease in the number of buyers in the market for the good.

e.         expectation that the future price of this good will be higher than it currently is.

23. According to the diagram above, if the price is at $10, there is a:

a. shortage of 15 units.

b. surplus of 15 units

c. shortage of 30 units.

d. surplus of 30 units.

e. surplus of 22 units.

24. When both supply and demand shift to the left,

a. the equilibrium price will always rise.

b. the equilibrium price will always fall.

c. the equilibrium quantity will always fall.

d. the equilibrium quantity will always rise.

e. the equilibrium quantity is indeterminate.

25. According to the figure below, at the price of $5:

a. the equilibrium quantity is 500.

b. the quantity demanded is 500.

c. the demand is 500.

d. there is a surplus.

e. there is a shortage.

26. When the price increases by 30% and the quantity demanded drops by 30%, the price elasticity of demand is:

a.         perfectly inelastic.

b.        inelastic.

c.         unitary elastic.

d.        elastic.

e.         perfectly inelastic.

27. What good is most likely to have an income elasticity of demand equal to 0.3?

a.         medication

b.        take-out dinner

c.         used clothing

d.        laptop

e.         a download on iTunes

28. Demand for Coca-Cola is _____ price elastic than cola products in general.

a.       More

b.       less

c.        equally

29. Peanut butter and jelly are complements. If a tax is imposed on peanut butter, how will that affect the market for jelly?

a. Demand for jelly will increase along with the price.

b. Demand for jelly will decrease along with the price

c. The supply of jelly will increase and the price will decrease.

d. Both the supply and demand for jelly will increase along with the price.

e. The supply of jelly will decrease and the price will increase.

30. Pepsi and Coke are considered substitute goods. Because of this, one would predict that, holding all else constant, if the price of Pepsi increases,

a. we would see the demand curve for Coke shift to the right.

b. we would see the demand curve for Coke shift to the left.

c. we would see no change in the demand for Coke.

d. we would see the demand curve for Pepsi shift to the right.

e. we would see the demand curve for Pepsi shift to the left.

31. Technological advances have resulted in lower prices for digital cameras.  What is the impact of this on the market for traditional (non-digital) cameras?

a.  The demand curve for traditional cameras shifts to the right.

b.  The supply curve for traditional cameras shifts to the right.

c.  The demand curve for traditional cameras shifts to the left.

d.  The supply curve for traditional cameras shifts to the left.

32. A recent news story reported that ice cream producers will increase the supply of ice cream during the summer. Summer is traditionally a time of increased demand for ice cream. How would an economist expect the price and quantity of ice cream to change from the spring to the summer given knowledge of these two changes in the market for ice cream?

A.        An increase in the price and quantity.

B.        An increase in the price and an unpredictable change in the quantity.

C.        An unknown change in both the price and quantity.

D.        An unknown change in the price and an increase in the quantity.

33. Suppose the demand curve for a product is vertical and the supply curve is upward sloping. If a unit tax is imposed in the market for this product,

A) sellers bear the entire burden of the tax.

B) buyers bear the entire burden of the tax.

C) the tax burden will be shared equally between buyers and sellers.

D) buyers share the burden of the tax with government.

34. If demand is more elastic than supply then:

A) sellers bear more of the burden of the tax.

B) buyers bear more of the burden of the tax.

C) the tax burden will be shared equally between buyers and sellers.

D) buyers share the burden of the tax with government.

35. In 1990 the U.S. government imposed a special sales tax on yachts with a price of at least $100,000. The tax was repealed in 1993 since it generated far less revenue than expected and led to significant job losses in the yacht building industry. The sales tax was unsuccessful because:

a)        the supply and the demand for yachts were relatively elastic.

b)        the supply and the demand for yachts were relatively inelastic.

c)         the tax rate was too low.

d)        yachts are a necessity.

36. Each point on a ________ curve shows the willingness of consumers to purchase a product at different prices.

A) demand

B) supply

C) production possibilities

D) marginal cost

Use this information for questions 36.1-36.3. Alfred has a willingness to pay for one car of $35,000.  The second car offers him a marginal benefit of $25,000.  A third car is worth $10,000, and his willingness to pay for a fourth is 0.  The market price for the car is $24,999.

36.1 Alfred’s willingness to pay for the marginal car is falling.  This pattern is called

a. opportunity cost

b. diminishing marginal utility

c. price effect

d. consumer surplus

36.2. At the market price, Alfred would buy ___ cars.

a. 0

b. 1

c. 2

d. 3

e. 4

36.3 At this market price, his consumer surplus is

a. 35,000

b. 24,999

c. 1

d. 10,002

Figure 4-6 above shows the demand and supply curves for the almond market.  The government believes that the equilibrium price is too low and tries to help almond growers by setting a price floor at Pf.

37.  Refer to Figure 4-6. What area represents consumer surplus prior to the imposition of the price floor?

A) A + B + E

B) A + B + C

C) A + B + C + D + E

D) E + F

38. Refer to Figure 4-6. What area represents consumer surplus after the imposition of the price floor?

A) A + B + E

B) A + B

C) A + B + E + F

D) A

39. The costs of a market activity paid for by an individual NOT engaged in the market activity are:

a.         external costs.

b.        internal costs.

c.         free-rider costs.

d.        social costs.

e.         common costs.

40. The total costs of a market activity paid for by individuals in the market as well as individuals not engaged in the market activity are:

a.         external costs.

b.        internal costs.

c.         free-rider costs.

d.        social costs.

e.         common costs.

41. A firm’s willingness to supply their product in the short run is represented on a graph by:

a.         the market supply curve.

b.        the entire marginal cost (MC) curve.

c.         the marginal revenue (MR) curve.

d.        the part of the marginal cost (MC) curve above minimum average total cost (ATC).

e.         the part of the marginal cost (MC) curve above minimum average variable cost (AVC).

42. Rachel quit her job as a chef making $30,000 per year to start her own restaurant in New York City. The first year, Rachel's restaurant earned $120,000 in revenue. Rachel pays $50,000 per year in wages to the waitresses and hostess, $20,000 per year to buy food and other supplies.  She paid $10,000 for rent and utilities, instead of earning 10% on that money in a bank CD. What is Rachel's economic profit for the year?

A) $0

B) $9,000

C) $40,000

D) $80,000

43. What directly drives the entry and exit of firms?

a. Revenues

b. Costs

c. Profits and losses

d. Marginal product of labor

44.       The law of diminishing returns states that

a) dividing the tasks to be performed through division of labor will increase the marginal product of labor.

b) the long-run average cost of production falls as output increases.

c)  adding more of a variable input to the same amount of a fixed input will eventually cause the marginal product of the variab