Microeconomics Quiz Bank of 100 Questions




1. The three major economic factors of production are natural,


human, and capital. Which of the following groups best


illustrates these factors?


A. farmers, teachers, and investors.


B. rent, wages, and interest.


C. gold, bankers, and corporate stocks.


D. iron ore, bricklayers, and money.


E. water, secretaries, and desks.


2. The Toscano Pizza Company faces a demand for its pizzas which


obeys the “law of demand.” Thus, if the owner lowers the


price she charges per pizza, the number of pizzas sold would:


A. rise as would her total revenues.


B. rise, but her total revenues would fall.


C. rise, while her total revenues could rise, fall, or even


stay the same.


D. fall as would her total revenues.


E. fall, while her total revenues could rise, fall, or even

 stay the same. 

3. Suppose some good was available in unlimited quantities to


everybody. Which of the following would be true?


A. The price of the good would be

equal to zero.


B. The value of the good would be equal to zero.


C. The opportunity cost of using a unit of the good would be

 equal to zero. 

D. Both A and C are true.


E. A, B, and C are all true.


4. Instead of doing yardwork for $1.00 an hour for her neighbor,


Mindy sets up a lemonade stand. In three hours she is able


to sell 100 cups of lemonade at five cents each. If the


ingredients (the lemonade mix, sugar, water, and cups) cost


her a total of $3.00 and she obtained all her capital inputs


(a table, pitcher, spoon, and sign) for free from a company


called “M.O.M.”, then her economic profits were:


A. $5.00.


B. $2.00.


C. $1.00.


D. $0 (that is, she “broke even”).


E. -$1.00 (that is, she suffered economic losses).


5. What provides the best assurance that firms in an industry


will produce efficiently and earn no economic profits in the


long run?


A. Having many firms in the industry.


B. Government regulation of the industry.


C. The existence of large economies to scale.


D. An absence of major barriers to entry in the industry.


E. Economic rivalry among existing firms in the industry.


6. What effect would a decrease in the price of silicon chips


(used to produce computers) and a decrease in the price of


user-friendly software have on the price and production of


personal computers?


Price Production


A. increase increase


B. indeterminable increase


C. decrease indeterminable


D. decrease decrease


E. increase decrease


7. Which of the following could cause supply to decrease in the


short run?


A. A labor union representing the workers who produce this


good is able to negotiate higher wages for its members.


B. More producers enter this industry.


C. The price of a close substitute for this good falls.


D. A large group of consumers decide to boycott this good


due to the political beliefs of some of the producers.


E. A technological breakthrough in the production of this


good lowers the cost of producing



8. Which of the following represents a long-run adjustment?


A. A supermarket hires two additional checkout people.


B. A steel manufacturer cuts back on its purchases of


taconite pellets.


C. A food processor sells the real assets of one of its


branch plants.


D. The demand for tea falls in response to a fall in the


price of coffee.


E. A farmer uses an extra dose of fertilizer on his crop.


9. A newspaper reports, “Coffee growers in Brazil and Columbia


organized to consider world coffee supply levels.” If this


group should decide to act in a concerted effort for the


benefit of the group as a whole, the likely result is:


A. Increased coffee production and



B. Decreased coffee production and increased prices.


C. Increased prices with no change in coffee production.


D. Increased coffee production and decreased prices.


E. Coffee production and prices at competitive levels.


10. Forming and maintaining collusive agreements among firms is


easier given all other things equal when:


A. The number of firms involved is large.


B. The firms involved produce differentiated



C. The demand for the product produced is stable.


D. The firms face different cost situations.


E. There are ample opportunities to make secret price concessions


to selected buyers.


11. Duff Firewood Supply, a competitive private logging firm, is


currently maximizing its profits. Its total costs are $1100


of which $100 are fixed costs (insurance on its equipment).


It is currently producing and selling 20 cords of wood at


the going market price of $60. Suppose, due to its filing


of a claim, its insurance premiums are raised to $300. Then


the firm should in the short run:


A. increase its production of cords.


B. decrease its production of cords.


C. continue producing 20 cords.


D. increase its



E. shut down its operations.


12. Property (or “unearned”)income (that is, profits, interest,


and rents) account for approximately what percent of total


national income?


A. 90% B. 70% C. 50% D. 20% E. 10%


13. Assume labor is the only variable input and that an additional


input of labor increases total output per day from


20 to 28 units. If the product produced sells for $6 per


unit, the additional worker should be hired as long as the


prevailing daily wage rate is less than:


A. $6 C. $48 E. $144


B. $24 D. $120


14. Which type of merger creates the greatest threat of


increased monopoly power?


A. Conglomerate.


B. Horizontal.


C. Vertical.


D. Diagonal.


E. Multi-national.


15. Assuming that the market for a good is in equilibrium, the


initial effect of an increase in demand is:


A. the generation of a surplus of

the good.


B. the generation of a shortage of the good.


C. a shift in the supply of the good.


D. an increase in the price of the good.


E. a decrease in the price of the good.


16. Which of the following would most likely be considered a


free good by an economist?


A. Your high-school education.


B. Network television programs received in your home.


C. Whales.


D. The “prize” in a Cracker-Jack box or in a box of cereal.


E. None of these.


17. Which of the following would be considered a productive


economic resource?


A. IBM stocks. C. Gold bullion. E. AT&T bonds.


B. $100 in cash. D. A savings account.


18. When two or more individuals join together to form a


business where their liability is not limited to the


business’ assets, their business is called a:


A. Corporation.


B. Co-op.


C. Partnership.


D. Merger.


E. Cartel.


19. Which of the following is necessary for perfectly-competitive


markets to exist?


A. Economies of scale in production.


B. Advertising.


C. Barriers to entry for new entrepreneurs.


D. Firms with products which are perfect (identical)


substitutes for each other.


E. A few firms each with a large market share.


20. What might cause the demand for a good to increase?


A. A decrease in consumers’ income (due perhaps to a tax




B. New research indicates there is a strong link between


use of this good and heart disease.


C. The price of a close substitute for this good rises.

 D. A large group of consumers decide to boycott this good due to the political beliefs of some of the producers. 

E. Technological breakthroughs in the production of this


good dramatically lower the cost of producing it.


21. Public goods tend to be underproduced in a pure market





A. They cost more to produce than private



B. They are over-advertisized relative to private goods.


C. Individuals have an incentive to understate their true


demand for them.


D. Suppliers have an incentive to restrict their production


in order to secure higher prices (and profits).


E. Only government can provide these goods.


22. What is the opportunity cost of buying a new car?


A. The value of other goods and services you could have


purchased with the money you spent on the car.


B. The price you paid for the car.


C. The cost of operating and maintaining the car.


D. The difference between the price of the car and the


price of a used car.


E. The difference between what the car costs now and what


a similar car like it will cost a year from now.


23. Which of the following is not characteristic of oligopolies?


A. Large expenditures on advertising and product



B. The existence of significant barriers to entry.


C. “Price-setting” through informal price leadership




D. Considerable concentration of the means of production.


E. Extensive price competition to gain market shares.


24. In the simple circular flow model of a market economy:


A. households earn income in the product (or goods and


services) markets.


B. firms (or businesses) are suppliers in the resource


(or factors of production) markets.


C. households are demanders in all markets and firms are


suppliers in all markets.


D. firms earn their revenues in the product markets.


E. only product markets are considered.


25. Which of the following are capital as defined by economists?


A. stocks and bonds.


B. water and air.


C. gold and silver.


D. computers and wrenches.


E. cabins and boats.


26. Suppose Mindy’s happiness could be measured in units called


“utils.” If one shirt gives her 20 utils of happiness, then


what amount of utils is it possible for two shirts to give


her without violating the usual assumptions economists make


about people’s wants and desires?


A. 15. B. 20. C. 30. D. 40. E. 45.


27. An industry has one firm producing 40% of the industry’s


total output, two firms producing 20% each, and four firms


producing 5% each. The four-firm concentration ratio for


this industry is:


A. 85%. B. 20%. C. 15%. D. 70%. E. 50%.


28. The law of demand essentially says that:


A. the price of a good is the most important determinant of


its demand.


B. as a person’s income rises, so does his/her demand for


C. as the price of a good falls, people tend to buy more of

 the good. 

D. the amount of a good purchased each year depends mainly


on the size of the population.


E. the quantity of a good demanded and its price tend to


move in the same direction.


29. “US companies are taking advantage of falling oil prices


resulting from increased world output by switching to oil


for fuel. This is expected to depress coal prices and


output. In terms of conventional demand and supply analysis,


statement is best described as a:


A. shift in the demand curves for both oil and coal.


B. movement along the demand curves for both oil and coal.


C. shift in the demand curve for oil and a movement along


the demand curve for coal.


D. movement along the demand curve for oil and a shift in

 the demand curve for coal. 

E. change in prices, but not a change in demand for either


oil or coal.


30. Which of the following is not usually considered to be a


barrier for new resources to enter into an industry?


A. economies of scale.


B. extensive brand-loyalty on the part of consumers.


C. the existence of patent rights.


D. control of vital inputs (including technological “knowhow”).


E. the existence of fairly standardized products.


31. Externalities are the result of:


A. a misallocation of resources by markets.


B. the existence of monopoly or economic power.


C. undefined or unenforced property rights.


D. illegal or covert market transactions.


E. governmental restraints of trade.


32. From the perspective of efficiency, if the production of


more widgets reduces the quality of the environment, more


widgets should:


A. not be produced.


B. be produced since they would add to the economy’s gross


domestic product.


C. be produced as long as their value exceeds the value of


the lost environmental quality and other resources used.


D. be produced only if the producers of them install


equipment to ensure that the quality of the environment


is not reduced.


E. not be demanded by society.


33. Car manufacturers offering rebates to purchasers is an


example of:


A. sellers responding to a surplus on the market.


B. buyers responding to a surplus on the market.


C. sellers responding to a shortage on the market.


D. buyers responding to a shortage on the market.


E. non-price competition between



34. Which of the following would not help unions meet both their


objectives of higher wages and more employment of members?


A. collective bargaining which leads to a higher than


equilibrium wage.


B. increases in members’ productivity.


C. increases in the demand for the products produced by


union members.


D. decreases in immigration quotas.


E. increased entry requirements into the labor market (such


as competency tests, longer apprenticeships, etc.).


35. Which of the following would likely in the short run lead to


an increase in the price of VCRs?


A. the elimination of all import restraints on VCRs.


B. a technological improvement which lowers the cost of


producing VCR’s.


C. the entry of more VCR producers into the industry.


D. a decrease in the price of purchasing video tapes of


recent movies.


E. a recession.


36. Which of the following statements is false about the


income received from the selling or leasing of property


resources (that is, land, capital, and natural resources)?


A. It accounts for well over half of all income earned in


the United States each year.


B. The majority of it is received by a very small


proportion (less than 2%) of the U.S. population.


C. Individuals in socialistic economies can not generally


earn income from this source.


D. It is referred to as “unearned” income by the Internal


Revenue Service of the U.S.


E. It is viewed as a cost by those using

these resources.


37. A college education usually leads to higher future wages


A. the extra cost of obtaining a college degree limits the


number of people with such a background.


B. people with a college degree tend to be less productive




C. the demand for people with college degrees is low


relative to the supply.


D. the minimum wage that employers can pay workers with a


college degree is set higher by the government.


E. going to college teaches people how to make more money.


38. Interest rates on loans tend to be lower the:


A. shorter the period to maturity.


B. greater the risk of default (non-repayment).


C. the lower the amount of the loan.


D. greater the expected rate of inflation.


E. none of the above.


39. Suppose A is currently a low-wage area and B is a high-wage


area. In the long run (assuming resources are fairly mobile)


one would expect all of the following except:


A. The supply of labor will increase in B.


B. The demand for labor will increase in A.


C. Wages will rise in A.


D. Workers will migrate to B.


E. Employment levels will fall in A.


40. A shortage of good A:


A. indicates that its current price is too high.


B. is a possible result of a government-imposed price




C. could be eliminated by an decrease in the price of A.


D. can only be eliminated by producing more of good A.


E. indicates that government intervention into the market


for good A is required.


41. Which of the following would not decrease the demand for


citrus farm workers?


A. A freeze which destroys much of the citrus crop.


B. Automated citrus picking machines are found to pick


the fruit rapidly and with little damage.


C. New, higher-wage job opportunities open up for


unskilled laborers.


D. The demand for citrus products (oranges, limes, grapefruits,


etc.) decreases.


E. Import restrictions on citrus products are eliminated.


42. If the government taxes electric utilities for the amount


of sulfur they emit when burning coal to produce


electricity, which of the following would not be expected?


A. The amount of electricity produced declines.


B. Less sulfur emissions.


C. The price of electricity rises.


D. Utilities begin using more low-sulfur coal.


E. Sulfur-related pollution would be eliminated.


43. Natural monopolies:


A. are prevented from forming by antitrust laws.


B. occur when one firm can produce all the output for a


market at a lower cost than several competing firms




C. are created when the government issues patent rights.


D. are unlikely when extensive economies to scale exist


in the production process.


E. would include entire river basins and air sheds.


44. If there is a permanent increase in the demand for the


product of a perfectly-competitive industry, which of the


following is not true?


A. Individual firms will increase their output in the short




B. Industry output will expand via the entry of new firms


in the long run.


C. Firms in the industry will earn economic profits in the


short run.


D. Price will rise more in the long run than in the short


E. Each firm in the industry will earn no economic profits

 in the long run. 

45. Firms finance their investment in new capital in all the


following ways except:


A. through retained earnings or profits.


B. by borrowing from banks or other financial institutions.


C. by issuing stock.


D. with government grants.


E. by levying business taxes.


46. Factors that directly effect the market demand for goods


and services do not include:


A. income.


B. prices of related goods and services.


C. the cost of productive resources.


D. the number of buyers.


E. tastes and preferences.


47. A firm has total capital of $500 million. The opportunity


cost of capital is 12 percent per year. The firm earns an


economic profit of $15 million this year. Its total rate


of return on capital is thus:


A. -9 percent. D. +9 percent.


B. -3 percent. E. +15 percent.


C. +3 percent.


48. Which of the following types of mergers leads directly to


higher “four-firm concentration ratios”?


A. horizontal. C. conglomerate. E. freeway.


B. vertical. D. international.


49. Producer sovereignty (as opposed to consumer sovereignty):


A. refers to producers responding to the demands of consumers.


B. is best exemplified by the product development efforts


of businesses in response to changing consumer tastes.


C. is supported by mass media advertising.


D. is a fundamental principle of capitalistic economies.


E. All of the above are true.


50. Suppose there are two kinds of drill bits which may be used


to drill through solid rock–one made of a special steel


alloy, the other of diamonds. The hardness of the diamonds


allows the diamond drill to cut through 10,000 feet of rock


before it must be replaced. The steel bit must be replaced


every 2000 feet. The price of each diamond bit is $2000,


while each steel bit sells for $300. Which of the following


is false?


A. The diamond bit is technologically more efficient (i.e.,


it is capable of doing five times the work of a steel




B. The steel bit is economically more efficient (i.e., five


steel bits could drill through 10,000 feet of rock


cheaper than one diamond bit could).


C. Drilling firms would choose to use the steel bits.


D. The per foot cost of using the diamond bit is $5.


E. None of the above statements is false.


51. Resources are said to be efficiently allocated when:


A. the amount of output produced by an economy is




B. the rate of economic growth is maximized.


C. the total value generated from available resources is


D. the number of jobs in the economy is maximized.


E. businesses produce their outputs in the least-costly


manner available.


52. Businesses will alter their packaging and production methods


to reduce solid waste flows:


A. whenever they discover a way it can be done.


B. only if the government forces them to.


C. whenever it reduces their costs.


D. whenever the resulting change in their revenues exceeds


the cost of the change.


E. at any cost.


53. In general, how does the government exercise property rights


with respect to environmental resources (air, wildlife,


waterways, etc.)?


A. it charges businesses and individuals for their use of

 these resources. 

B. it forbids any use of these resources.


C. it establishes laws and regulations businesses and


individuals must obey when using these resources.


D. it doesn’t exercise them at all–everyone is free to use


these resources as they please.


E. it sells these rights to businesses which in turn manage


these resources in the most profitable manner they can.


54. Higher wages for some occupations is likely a result of:


A. easy entry into the field.


B. low demand for the services provided.


C. high productivity.


D. either A or C.


E. A, B, or C.


55. Which of the following requires scarce economic resources?


A. preserving endangered species. D. recycling.


B. providing education.

E. all of the above.


C. producing consumer goods.


56. The unequal distribution of income in the U.S. is primarily


the result of differences in:


A. ability.


B. race.


C. opportunity.


D. productivity.


E. resource ownership.


57. If the price of cattle feed increases, the result will


probably be:


A. an increase in the supply of cattle and lower cattle


B. a decrease in the supply of cattle and higher cattle


C. an increase in the demand for cattle and higher cattle


D. a decrease in the demand for cattle and lower cattle


E. a decrease in both the demand and supply of cattle and


lower cattle prices.


58. Which of the following is false about a market shortage?


A. the quantity desired by buyers exceeds the quantity


offered for sale by the sellers.


B. they are a likely result if the government establishes


price floors.


C. they are eliminated in free markets through a rising


D. it is an indication that the price in the market is


below its equilibrium level.


E. if price is not free to move, then the supply curve will


determine the amount of the good actually exchanged.


59. Which of the following is least likely to be a variable




A. the cost of raw materials.


B. the wages of production workers.


C. insurance premiums.


D. shipping expenses.


E. energy costs.


60. If one of a firm’s fixed costs rises,


A. its profit-maximizing output level will increase.


B. its profit-maximizing output level will decrease.


C. its profit-maximizing output level will not change.


D. its profits will remain the same after it adjusts


its output level (either up or down).


E. it would likely increase its price.


61. Firms which have no ability to effect the price of their


output are called “price-takers.” All other firms are


“price-setters.” Which of the following is true for both


these types of firms?


A. They face downward-sloping demand curves for their


B. To maximize their profits they produce up to the point


where the additional revenue earned on the last unit


produced just equals the additional cost of producing


C. They produce products which are identical to those


produced by other firms in their industry.


D. They must reduce their price to sell more.

 E. All of the above are true. 

62. Stefanie’s Waterbeds faces the demand shown below for its


beds. Each bed costs $300 to produce (no matter how many


are made). What price should Stefanie charge to maximize


her profits?


Price (per bed) Quantity Demanded (per day)


$1000 1


900 2


800 3


700 4


600 5


A. $1000 B. $900 C. $800 D. $700 E. $600


63. Wage differentials in labor markets (between markets


requiring similar skills) play essentially the same role


as __________ in the goods and services markets.


A. economic profits.


B. normal profits.


C. total revenues.


D. total costs.


E. barriers to entry.


64. Which of the following would not likely be considered


productive economic resources?


A. gold and silver.


B. stocks and bonds.


C. Tiger Woods and Hillary Clinton.


D. hammers and computers.


E. whales and rain forests.


65. Suppose the price of a good with a normally-shaped demand


curve increases, what happens to each of the following:


Total Total Value Consumer


Expenditures Received Surplus


A. falls rises rises


B. rises falls rises


C. rises falls falls


D. indeterminable falls falls


E. indeterminable rises falls


66. Which of the following best represents a conservative’s


overall view of markets?


A. They work best with little or no government




B. They have problems that require government intervention


to correct.


C. They are often equitable (“fair”), but not usually very




D. They are so inefficient and unfair that they should be


replaced with another allocating mechanism.


E. They are too unstable due to supply and demand shifts.


67. If the costs of using environmental resources (such as the


atmosphere, rain forests, and whales) were fully paid by the


users of these resources:


A. these resources would be used less.


B. the prices of most goods would be lower.


C. a negative externality would still exist.


D. A, B, and C are all true.


E. A, B, and C are all false.


68. If the average product of labor when three workers build a


house is 150 square feet (per day) and the marginal product


of a fourth worker is 75 square feet, then the total product


with four workers is:


A. 225 square feet.


B. 525 square feet.


C. 675 square feet.


D. 300 square feet.


E. 50 square feet.


69. If a good has a price of zero, it may be concluded that:


A. it has no value to society.


B. it is available in unlimited quantities.


C. it is not scarce relative to the demand for it.


D. none of the above.

 E. A, B, and C are all true. 

70. Given the following market data, answer the question below.


Quantity Quantity


Price Demanded Supplied


$ 1 50 10


2 40 20


3 30 30


4 25 40


5 20 50


6 15 60


A tax of $3 per unit is to be imposed on the sellers. What


will be the total tax revenues received by the government?


A. $30. C. $60. E. $135.


B. $40. D. $90.


71. Suppose hot dogs and colas yield Clark the same amount of


satisfaction (that is, he likes 2 hot dogs exactly the same


as he likes 2 colas, etc.), but that the price of hot dogs


is twice that of colas. Given that he has a limited amount


of income, to maximize his satisfaction he should:


A. buy the same amount of hot dogs and colas.


B. buy more colas than hot dogs.


C. buy more hot dogs than colas.


D. buy only colas.


E. buy only hot dogs.


72. If the price of a fixed factor of production rises by 20%,


what effect would this have on the marginal costs of a firm


using this factor?


A. marginal costs would fall.


B. marginal costs would rise by 20%.


C. marginal costs would rise but by less than 20%.


D. marginal costs would rise by more than 20%.


E. none.


73. What is the defining feature of a competitive market?


A. no buyer or seller is able to unilaterally influence the


market price.


B. there are many buyers and sellers.


C. sellers actively engage in advertising and product


D. new firms find it difficult to compete against existing

 sellers. E. all of the above. 

74. Corporate profits (as measured by return on equity) over the


past thirty years have been in which of the following




A. 0 – 5% D. 20 – 30%


B. 5 – 10% E. 30 – 40%


C. 10 – 15%


75. A decrease in the price of a productive resource will result


in each of the following except:


A. a reduction in the average cost of producing products


which require this resource.


B. an increase in the supply of products which require this


resource to produce.


C. an increase in the demand for products which require


this resource to produce.


D. an increase the the quantity of this resource which is




E. a reduction in the demand for resources that are


substitutes for this resource.


76. Which of the following is not an example of price




A. A theater charging children less than adults to see the


latest Disney movie.


B. A college charging higher tuition for out-of-state




C. A utility charging less for electricity used during


off-peak hours when its costs are lower.


D. A doctor charging patients for her services according


to their income.


E. An airline charging different fares for seats in the


same section of the same flight.


77. Which of the following would most likely result in the


market price of a good falling?


A. Rising demand with falling supply.


B. Rising demand with rising supply.


C. Rising demand with unchanging supply.


D. Falling demand with falling supply.


E. Falling demand with rising supply.


78. Suppose you were trying to illustrate the concept of


diminishing marginal productivity. What would be reasonable


values for the amount of capital and the amount of output


produced when 3 units of labor are used given the table




Units of Units of Units of


Capital Labor Output Produced


2 1 10


2 2 20


? 3 ?


Units of Capital Units of Output Produced


A. 2 30


B. 1 30


C. 2 15


D. 2 25


E. 1 25


79. Which of the following would a labor union interested in


maintaining high wages not likely support?


A. A more restrictive immigration policy.


B. Tough enforcement of child-labor laws.


C. Early retirement programs.


D. A successful advertising campaign about the product


produced by its members.


E. None of the above (i.e., it would support all of these).


80. In which of the following cases would a free market for good


X produce too much of X from the perspective of economic (or


allocative) efficiency?


A. Good X has public good characteristics.


B. Good X is produced by imperfectly-competitive firms.


C. Producing good X generates unaccounted for social costs.


D. Consuming good X generates unaccounted for social




E. None of the above.


81. Labor costs account for 80% of a local restaurant’s total


variable costs. Other costs (including the food itself)


account for the remaining portion. Suppose wages rise by


10% while the other costs rise by 5%. How much would this


restaurant’s total variable costs rise (assuming no changes


in the input mix)?


A. 15%


B. 12%


C. 6%


D. 8%


E. 9%


82. A firm has fixed costs of $1000. It’s per unit variable


costs are $6 and it can sell its output for $10 each. How


much must it sell in order to break-even?


A. 100 units. D. 250 units.


B. 167 units. E. 400 units.


C. 200 units.


83. Which of the following is the best example of a good or


service which generates spillover costs to society?


A. imported steel. D. cars.


B. pizza. E. education.


C. flu shots.


84. Which of the following would decrease the equilibrium


quantity of good Y exchanged in its market, but would not


change the demand for good Y?


A. an increase in the number of sellers of good Y.


B. an increase in the cost of producing good Y.


C. an increase in the price of a complementary good.


D. a decrease in buyers’ incomes.


E. a decrease in the price of an input used to make good Y.


85. Which of the following best illustrates products which are


produced by a homogeneous oligopoly?


A. steel and oil.


B. soft drinks and cars.


C. wheat and corn.


D. haircuts and video rentals.


E. local telephone service and cable TV.


86. A good with standard-looking supply and demand curves has an


equilibrium price of $10. If the government imposes a tax


of $2 on each unit sold, what will it cost consumers to buy


this good once equilibrium has been re-established?


A. More than $12.


B. $12.


C. More than $10, but less than $12.


D. $10.


E. Less than $10.


87. At any disequilibrium price, the quantity that is actually


exchanged is determined by:


A. the quantity demanded.


B. the quantity supplied.


C. the lesser of quantity demanded and quantity supplied.


D. the greater of quantity demanded and quantity supplied.


E. the greater of quantity demanded and quantity supplied


minus the smaller of the two.


88. A rise in the price of milk used in producing chocolate bars


will cause the equilibrium price of chocolate bars to ______


and the equilibrium quantity sold to ______.


A. rise; rise


B. rise; fall


C. fall; rise


D. fall; fall


E. rise; stay the same


89. Economic power and barriers to entry in an industry will


usually result in:


A. economic profits for businesses in the long run.


B. output levels greater than those which are socially


desirable (i.e. economically efficient).


C. artificially low prices.


D. fairly competitive conditions for the industry.


E. All of the above.


90. The demand for a brand of soda is Q = 10 – 2P where Q is


the number of bottles (in thousands) and P is price (in


dollars). At what price are total revenues maximized?


A. $5.00 C. $2.50 E. $0.50


B. $3.00 D. $1.00


91. If the market price of a good is greater than the per unit


cost of producing it in a competitive market,


A. businesses are likely suffering economic losses.


B. in the long run the price will likely rise.


C. the supply in the market will likely increase over time.


D. the per unit cost is likely to rise.


E. the market is likely in long-run equilibrium.


92. While the local McDonald’s restaurant which sells hamburgers


is likely competing in a ________ market, the McDonald’s


corporation which sells fast-food franchises competes in a


market which is probably best described as ________.


A. perfectly-competitive; monopolistically-competitive


B. monopolistically-competitive; oligopolistic


C. oligopolistic; monopolistic


D. perfectly-competitive; oligopolistic


E. monopolistically-competitive; monopolistic


93. A firm can produce 50 units of output using any of the five


combinations of labor and capital inputs shown below. If


the prices of labor, capital, and its output are $5, $4, and


$1 respectively, which combination would it likely use?


Labor Capital


A. 1 5


B. 2 3


C. 3 2


D. 4 1


E. 5 0


94. If Q = KL where Q is output, K is the amount of capital


used, and L is the number of workers used, how would you


describe the returns to scale of producing Q?


A. average.


B. marginal.


C. constant.


D. decreasing


E. increasing.


95. Workers in the United States enjoy a high standard of living


A. unions keep overall wages in the U.S. high.


B. we have protected industries from foreign competition.


C. Congress has established a high minimum wage.


D. workers in the U.S. are highly productive.


E. the lack of capital resources in the U.S. has increased


the demand for workers.


96. A price floor below the equilibrium price causes:


A. shortages. D. excess supply.


B. surpluses. E. None of the above.


C. excess demand.


97. Which of the following would most likely lead to a increase


in airline fares?


A. an decrease in the price of oil


B. the entry of new airline companies


C. increases in consumer wealth due to rising stock prices


D. improved technology in reservations and baggage handling


E. an increase in airline fatalities


98. Which of the following costs always rise as output is




A. Average fixed costs.


B. Total fixed costs.


C. Average total costs.


D. Marginal costs.


E. Total variable costs.


99. If economies of scale exist, then if a firm doubles its


output in the long run, it will:


A. double its total costs.


B. lower its total costs.


C. less than double its total costs.


D. increase its average costs, but they will less than




E. double its average costs.


100. How would 10 units of a resource be allocated between the


markets below if market conditions were ideal and resource


owners pursue their own self-interest?

 Quantity Quantity 

Market 1: Price Demanded Market 2: Price Demanded


$ 8 3 $ 6 1


7 4 5 2


6 5 4 3


5 6 3 4


4 7 2 5


3 8 1 6


A. 5 to each market


B. 6 to Market 1 and 4 to Market 2


C. 4 to Market 1 and 6 to Market 2


D. 7 to Market 1 and 3 to Market 2


E. 3 to Market 1 and 7 to Market 2


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