Question: If the marginal product of labor is less than the average product of labor then the average product of labor will be…
Answer Choices:
Rising
Falling
Constant
Maximized
Answer: Falling
Question: The profit-maximizing firm equates the marginal benefit of labor to the marginal ________.
Answer Choices:
units of labor
cost of labor
profit
production
Answer: cost of labor
Question: After working for IBM, Ann quits her job in order to open her own consulting business. At the time she left IBM, Ann was earning $50,000 per year. In order to start her business, she withdrew $20,000 from a low-risk account that was earning 5% interest annually. After a year of operations, Ann has the following information regarding costs and revenues:
Revenue = $50,000
Advertising expenses = $7,500
Rent = $12,000
Answer Choices:
Costs of materials = $2,500
How much is Ann’s accounting profit?
Note: Do not include a $ sign in your answer, just numbers.
Answer: 28,000
Question: Last year Janet was earning $55,000 per year as a chef at Sam’s restaurant. Earlier this year, Janet quit her job at Sam’s and opened her own restaurant (Janet’s Café). Sam has made her an offer of $65,000 per year if she will come back, but she is enjoying having her own restaurant and is earning a positive accounting profit.
True or false: Janet’s economic costs are larger than her accounting costs.
Answer Choices:
True
False
Answer: True
Question: All of the following are examples of a government’s economic allocation function EXCEPT ________.
Answer Choices:
building public highways
subsidizing wheat farmers
taxing alcohol and tobacco
providing criminal penalties
Answer: providing criminal penalties
Question: Which of the following is the best description of “consumer surplus”?
Answer Choices:
Consumer surplus is total net gains to a buyer.
Consumer surplus is the maximum amount a consumer would be willing to pay.
Consumer surplus occurs when there are more buyers than sellers in a market.
Consumer surplus is the same as accounting profit.
Answer: Consumer surplus is total net gains to a buyer.
Question: If most businesses in an industry are currently earning negative economic profit, we can expect that some businesses will exit that industry.
Answer Choices:
True
False
Answer: True
Question: Price controls such as price floors and price ceilings tend to make markets less efficient.
Answer Choices:
True
False
Answer: True
Question: Which of the following is NOT an example of hurdle method price discrimination?
Answer Choices:
Having lower prices for weekday and matinee movies relative to prime time and weekend movies.
Receiving 55 cents off your box of Cheerios for bringing in a coupon.
Gasoline prices rise in the summer as fuel consumption increases.
Having different prices for airline consumers based on whether or not they stay over a Saturday night.
Answer: Gasoline prices rise in the summer as fuel consumption increases.
Question: In 2018 Dave’s salary was $50,000. In 2019 his salary was 2% higher, $51,000. If inflation between 2018 and 2019 was 3%, which of the following is true?
Answer Choices:
Dave’s nominal and real income increased from 2018 to 2019.
Dave’s nominal and real income decreased from 2018 to 2019.
Dave’s nominal income increased but his real income decreased from 2018 to 2019.
Dave’s real income increased but his nominal income decreased from 2018 to 2019.
Answer: Dave’s nominal income increased but his real income decreased from 2018 to 2019.
Question: Relative to the outcome of a perfectly competitive market, a monopoly will result in a lower equilibrium quantity and higher equilibrium price.
Answer Choices:
True
False
Answer: True
Question: All other things equal, a market where firms have less market power will be more efficient than markets where firms have a lot of market power. In other words, markets where firms have more market power will be less efficient.
Answer Choices:
True
False
Answer: True
Question: What does an economist suggest that efficient allocation of resources by the market means?
Answer Choices:
Every individual who wants a product gets it.
Producers determine what to produce, and consumers buy it.
The products desired by a society are produced.
Answer: The products desired by a society are produced.
Question: Which of the following is the best description of the moral hazard problem associated with fully compensating the victims of a negative externality?
Answer Choices:
All government regulation is fundamentally inefficient.
The victims may spend the money on goods and services that others consider morally unacceptable.
The most efficient way to distribute tax revenues is spending on new technology to offset the externality.
Compensation of the victim may create the incentive for inefficient levels of avoidance activity by the victim.
Answer: Compensation of the victim may create the incentive for inefficient levels of avoidance activity by the victim.
Question: Based on the graph shown here, how much is producer surplus at the socially optimal price and quantity? That is, how much is producer surplus, assuming a policy has been put in place to internalize the negative externality?
Answer Choices:
$75
50 units
$175
$250
$15
Answer: $175