AP Econ Exam I

AP Econ

Multiple ChoiceIdentify the choice that best completes the statement or answers the question.

____ 1. The study of a single firm and how it determines prices would fall under:a. macroeconomics.b. microeconomics.c. economic growth.d. fiscal policy.e. the Federal Reserve.

____ 2. Macroeconomics deals with:a. bits and pieces of the economy.b. the question of how a business unit should operate profitably.c. the working of the entire economyd. how individuals make decisions.e. government regulation of immigration laws.

____ 3. Scarcity in economics means:a. the needs of people are limited.b. the wants of people are limited.c. there must be poor people in rich countries.d. shortages exist in nearly all markets.e. not having sufficient resources to produce all the goods and services we want at zero cost.

____ 4. If resources are “scarce” it means that:a. they cannot provide enough goods or services to satisfy all human material wants and

needs at zero cost.b. they have no opportunity cost.c. they are probably not valued by consumers.d. they have an unlimited supply.e. it is impossible to create a supply of, or demand for, these resources.

____ 5. The problem of scarcity is confronted by:a. industrialized societies.b. pre-industrialized societies.c. societies governed by communist philosophies.d. all societies.e. rural, but not urban, societies.

____ 6. Opportunity cost is:a. about half of the monetary cost of a product.b. the dollar payment for a product.c. the benefit derived from a product.d. the minimum price a consumer would be willing to pay for a product.e. the value of the best alternative forgone in making any choice.

____ 7. When we are forced to make choices we are facing the concept of:a. ceteris paribus.b. free goods.c. scarcity.d. the margin.e. positive and normative analysis.

____ 8. Whenever a choice is made:a. the cost of that choice could be referred to as opportunity cost.b. the cost is easy to measure in dollar terms.c. efficiency is always improved.d. scarcity is not the problem.e. marginal costs are greater than marginal benefits of that choice.

____ 9. We are forced to make choices because of:a. exploitation.b. efficiency.c. scarcity.d. the margin.e. ceteris paribus.

____ 10. Although water is very abundant in most places, it is scarce because:a. it has no alternative uses.b. there is not enough of it to meet all needs at zero cost.c. it is a free good.d. scarce goods in general are not all that costly.e. it is a public good.

____ 11. A resource is anything that:a. can be used in production.b. you pay for.c. is in scarce supply.d. can be consumed.e. requires technology to harvest.

____ 12. The university recently inherited a large mansion from a wealthy alumnus. The university plans to use the mansion for faculty parties and to house distinguished guests. The cost of the mansion to the university is:a. zero, because it was a gift.b. the cost of upkeep (including maintenance, utilities, and so forth).c. the amount the university would receive if it rented or sold the mansion.d. the cost of upkeep (including maintenance, utilities, and so forth) and the amount the

university would receive if it rented or sold the mansion.e. the cost of hosting the faculty parties and housing the distinguished guests.

____ 13. A college student is faced with a difficult decision of how to spend one hour tonight. She could babysit her professor's child at an hourly wage of $7, she could work at the college library at a wage of $6, or she could finish her economics homework assignment. If she chooses to complete her homework assignment, she has incurred an opportunity cost equal to:a. $7.b. $6.c. $13.d. $0.e. $42

____ 14. Which of the following statements is a normative statement?a. The women's labor force participation rate has increased during the past 100 years.b. The federal minimum wage is higher today than it was in 1990.c. Children in the United States are required to go to school until they reach a certain age.d. The best way to encourage growth in the economy is through government spending.e. A higher demand for ethanol will likely cause a higher price of corn.

____ 15. Which of the following would be a positive economic statement?a. Government has grown too large and should be reduced.b. There has been an increase in the rate of inflation.c. Government should be subject to the same rules as all other institutions.d. Women should be paid as much as men for the same work.e. Corporate CEO’s are overcompensated and corrupt.

Scenario 1-1: Marginal Benefits and Marginal CostsIn the graph, MB represents the additional points on an economics exam for each hour of studying economics,and MC represents the loss of points on an accounting test for each hour of studying economics.

____ 16. (Scenario 1-1: Marginal Benefits and Marginal Costs) As shown, more time spent studying economics adds points to economics scores but subtracts points from accounting scores. The marginal benefit of studying economics when the student is at 2 hours is ________ points and the marginal cost is ________ points.a. 40; 0b. 30; 10c. 20; 20d. 10; 30e. 30; 0

____ 17. When a local factory closes, why does it spell bad news for the local restaurants?a. Sales taxes are likely to increase.b. Unemployed factory workers have lower incomes and are less likely to dine out.c. Unemployed factory workers are eligible for government unemployment benefits.d. The opportunity cost of dining out has fallen.e. Prices of raw materials like meat and vegetables are likely to fall.

____ 18. Too little spending in an economy often leads to:a. a recession.b. inflation.c. full employmentd. efficiency.e. specialization.

____ 19. A simplified representation that is used to study a real situation is called:a. a model.b. normative analysis.c. an assumption.d. a trade-off.e. a hypothesis.

____ 20. Recessions are periods when:a. output rises.b. the aggregate price level rises.c. the unemployment rate is falling.d. output and employment are falling.e. employment and productivity are both rising.

____ 21. In a typical business cycle, the business cycle trough is immediately followed by the:a. business cycle peak.b. recession.c. depression.d. expansion.e. downturn.

____ 22. Inflation is a situation where:a. the average price level falls.b. the national debt rises.c. the average price level becomes negative.d. the real price level falls.e. the average price level increases.

____ 23. If an economy has used up all opportunities to make someone better off (without making someone else worse off) then it has achieved ________.a. equityb. opportunity costc. marginal optimalityd. efficiencye. full employment.

Alternatives A B C D E FConsumer goodsper period

0 1 2 3 4 5

Capital goods per period

30 28 24 18 10 0

Table 3-1: Production Possibilities Schedule I

____ 24. (Table 3-1: Production Possibilities Schedule I) If the economy produces 2 units of consumer goods per period, it also can produce at most ________ units of capital goods per period.a. 30b. 28c. 24d. 18e. 26

____ 25. (Table 3-1: Production Possibilities Schedule I) If the economy produces 10 units of capital goods per period, it also can produce at most ________ units of consumer goods per period.a. 5b. 4c. 3d. 2e. 1

Figure 3-1: Guns and Butter

____ 26. (Figure 3-1: Guns and Butter) Points A, B, E, and F:

a. indicate combinations of guns and butter that society can produce using all of its factors efficiently.

b. show that the opportunity cost of more guns increases, but that of more butter decreases.c. indicate that society wants butter more than it wants guns.d. indicate constant costs for guns and increasing costs for butter.e. indicate that society is experiencing many idle resources.

Production alternatives

V W X Y Z

Capital goods per period

0 1 2 3 4

Consumer goodsper period

20 18 14 8 0

Table 3-2: Production Possibilities Schedule II

____ 27. (Table 3-2: Production Possibilities Schedule II) If the economy is producing at alternative X, the opportunity cost of producing at Y instead of X is ________ units of consumer goods per period.a. 0b. 11c. 8d. 14e. 6

____ 28. (Table 3-2: Production Possibilities Schedule II) If an economy is producing at alternative W, the opportunity cost of producing at X is ________ unit(s) of consumer goods per period.a. 0b. 1c. 4d. 18e. 2

Figure 3-3: Consumer and Capital Goods

____ 29. (Figure 3-3: Consumer and Capital Goods) The movement from Curve 1 to Curve 2 indicates:a. economic growth.

b. change from unemployment to full employment.c. a decrease in the level of technology.d. instability.e. the recovery from a recession.

____ 30. All points inside the production possibility curve represent:a. efficient production points.b. inefficient production points.c. nonfeasible production points.d. economic growth.e. a shortage of economic resources.

Figure 3-5: Tom’s Production Possibilities

____ 31. (Figure 3-5: Tom’s Production Possibilities) In the figure, which point or points would represent (an) efficient combination(s) of wine and wheat that Tom could choose to produce?a. Ab. B and Dc. B and Cd. De. C and D

Figure 3-11: Production Possibilities and Circular-Flow Diagram

____ 32. (Figure 3-11: Production Possibilities and Circular-Flow Diagram) Assume the figures represent the same economy. Suppose that in the circular-flow diagram there is a significant decrease in the amount of labor that is flowing to the firms that produce coconuts. If all other variables remain unchanged, then this adjustment in the economy would be best represented in the production possibilities figure by a move from point A toward:a. point A (no movement would occur).b. point B (an increase in fish production).c. point C (a decrease in coconut production).d. point D (an outward shift of the entire curve..e. point B (an increase in coconut production).

____ 33. (Figure 3-11: Production Possibilities and Circular-Flow Diagram) Assume the accompanying figures represent the same economy. Suppose that in the circular-flow diagram there is a significant increase in the amount of capital that is flowing to the firms that produce fish. Assume that there is a corresponding decrease in the amount of capital that is flowing to the firms that produce coconuts. This adjustment in the economy would be best represented in the production possibilities figure by a move from point A toward:a. point A (no movement would occur).b. point B (an increase in fish production).c. point C (a decrease in coconut production).d. point D (an outward shift of the entire curve..e. point D (an inward shift of the entire curve..

____ 34. Specialization and trade usually lead to:a. lower economic growth.b. the exchange of goods and services in markets.c. lower living standards.d. higher prices.e. less efficiency.

____ 35. An economy is said to have a comparative advantage if it:a. can produce more of all goods than another economy.b. can produce less of all goods than another economy.c. has the highest opportunity cost for producing a particular good.d. has the lowest opportunity cost for producing a particular good.e. has more economic resources than another country.

Figure 4-1: Bicycles and Radishes I

____ 36. (Figure 4-1: Bicycles and Radishes I) The figure shows production possibility curve for two countries that produce only radishes and bicycles. The axes of both graphs are measured in equivalent units. Country A is now operating at point M, and Country B is now operating at point N. The opportunity cost of producing an additional ton of radishes would be:a. greater in Country A than in Country B.b. greater in Country B than in Country A.c. the same in both countries.d. greater at point M than at point N.e. zero for either country if the country was operating on the production possibility curve.

____ 37. (Figure 4-1: Bicycles and Radishes I) The figure shows production possibility curve for two countries that produce only radishes and bicycles. The axes of both graphs are measured in equivalent units. Country A is now operating at point M, and Country B is now operating at point N. Suppose Country A discovered a new technology that greatly increased its ability to produce bicycles. This would:a. lower the opportunity cost of producing radishes in Country A.b. decrease the opportunity cost of producing radishes in Country B.c. have no effect on the opportunity cost of producing radishes in Country A.d. increase the opportunity cost of producing radishes in Country B.e. increase the opportunity cost of producing radishes in Country A.

Coffee SalmonBrazil 40 20

Alaska 10 10Table 4-1: Coffee and Salmon Production Possibilities

____ 38. (Table 4-1: Coffee and Salmon Production Possibilities) The table shows the maximum amounts of coffee and salmon that Brazil and Alaska can produce if they just produce one good. The opportunity cost of producing 1 unit of coffee for Brazil is:a. 2 salmon.b. 1/4 salmon.c. 1 salmon.d. 1/2 salmon.e. 20 salmon

____ 39. (Table 4-1: Coffee and Salmon Production Possibilities) The table shows the maximum amounts of coffee and salmon that Brazil and Alaska can produce if they just produce one good. The opportunity cost of producing 1 unit of salmon for Alaska is:a. 2 coffees.b. 1/4 coffee.c. 10 coffee.d. 1/2 coffee.e. 1 coffee.

Coffee SalmonBrazil 40 20Alaska 20 20

Table 4-2: Coffee and Salmon Production Possibilities II

____ 40. (Table 4-2 Coffee and Salmon Production Possibilities II) This table shows the maximum amounts of coffee and salmon that Brazil and Alaska can produce if they just produce one good. Brazil has:a. an absolute advantage in producing coffee only.b. an absolute advantage in producing salmon only.c. an absolute advantage in producing both coffee and salmon.d. an absolute advantage in producing neither coffee nor salmon.e. a comparative advantage in producing both coffee and salmon.

____ 41. (Table 4-2 Coffee and Salmon Production Possibilities II) This table shows the maximum amounts of coffee and salmon that Brazil and Alaska can produce if they just produce one good. Alaska has:a. an absolute advantage in producing coffee only.b. an absolute advantage in producing salmon only.c. a comparative advantage in producing both coffee and salmon.d. an absolute advantage in producing neither coffee nor salmon.e. a comparative advantage in producing coffee, but not salmon

____ 42. If Brazil gives up 3 automobiles for each ton of coffee it produces, while Peru gives up 7 automobiles for eachton of coffee it produces, then:a. Brazil has a comparative advantage in automobile production and should specialize in

coffee.b. Brazil has a comparative advantage in coffee production and should specialize in the

production of automobiles.c. Brazil has a comparative advantage in coffee production and should specialize in coffee

production.d. Brazil has a comparative advantage in automobile production and should specialize in

automobile production.e. Brazil has a comparative advantage in neither automobiles nor coffee and cannot gain from

trade.

Sweden and Finland produce only two goods, herring and cell phones, and this table shows the maximum amount that each nation can produce of the two goods.

Sweden FinlandHerring 100,000 50,000Cell phones 10,000 10,000

Table 4-3: Comparative Advantage I

____ 43. (Table 4-3: Comparative Advantage I) Sweden has an absolute advantage in producing:a. cell phones only.b. a combination of cell phones and herring.c. both cell phones and herring.d. neither cell phones nor herring.e. herring only.

____ 44. (Table 4-3: Comparative Advantage I) Finland has an absolute advantage in producing:a. cell phones only.b. herring only.c. both cell phones and herring.d. neither cell phones nor herring.e. a combination of cell phones and herring.

____ 45. (Table 4-3: Comparative Advantage I) Sweden has a comparative advantage in producing:a. cell phones only.b. herring only.c. both cell phones and herring.d. neither cell phones nor herring.e. a combination of cell phones and herring.

____ 46. (Table 4-3: Comparative Advantage I) Finland has a comparative advantage in producing:a. cell phones only.b. herring only.c. both cell phones and herring.d. neither cell phones nor herring.e. a combination of cell phones and herring.

Figure 4-3: Production Possibility Curve for Jackson and Tahoe

____ 47. (Figure 4-3: Production Possibility Curve for Jackson and Tahoe) The figure shows the production possibility curves for two countries, Jackson and Tahoe. Without trade, Jackson produces and consumes 30 units of cattle and 80 units of wheat, while Tahoe produces and consumes 80 units of cattle and 60 units of wheat. Based on this information:a. Jackson has a comparative advantage in the production of cattle.b. Tahoe has a comparative advantage in the production of wheat.c. Jackson has an absolute advantage in the production of cattle.d. Tahoe has an absolute advantage in the production of wheat.e. Jackson has a comparative advantage in the production of wheat.

____ 48. (Figure 4-3: Production Possibility Curve for Jackson and Tahoe) The figure shows the production possibility curves for two countries, Jackson and Tahoe. Without trade, Jackson produces and consumes 30 units of cattle and 80 units of wheat, while Tahoe produces and consumes 80 units of cattle and 60 units of wheat. With complete specialization according to comparative advantage, the two nations' production of wheat will:a. remain constant.b. increase by 120 units.c. increase by 60 units.d. decrease by 60 units.e. increase by 200 units.

____ 49. The law of demand states that, other things equal:a. as the price increases, the quantity demanded will increase.b. as the price decreases, the demand curve will shift to the right.c. as the price increases, the demand will decrease.d. as the price increases, the quantity demanded will decrease.e. as the price decreases, the demand curve will shift to the left.

____ 50. Which of the following factors cause a movement along the demand curve?a. change in the prices of related goodsb. change in the price of the goodc. change in the populationd. both a change in the price of the good and a change in the populatione. change in the popularity of the good

____ 51. If goods A and Z are complements, an increase in the price of good Z will:a. increase the demand for good A.b. increase the quantity of good Z demanded and decrease the demand for good A.c. decrease the demand for good Z.d. decrease the demand for good A and decrease the demand for good Z.e. decrease the demand for good A.

____ 52. Suppose you manage a corner grocery store. If peanut butter is an inferior good, what do you suppose would happen to the price and quantity of peanut butter as incomes fall during an economic recession?a. The price would increase and the quantity would decrease.b. The price and quantity would both increase.c. The price and quantity would both decrease.d. The price would decrease and the quantity would increase.e. The price would decrease with no change in the quantity.

____ 53. A newspaper story recently reported that the price of new cars has decreased, and the quantityof new cars sold has dropped. The price and quantity changes were probably caused by:a. a decrease in buyers' incomes and new cars are normal goods.b. an increase in buyers' incomes and new cars are normal goods.c. an increase in production costs.d. a decrease in production costs.e. the price of gasoline has decreased

Figure 5-1: Demand for Coconuts

____ 54. (Figure 5-1: Demand for Coconuts) If a coconut is a normal good and the price of coconuts increases, then the movement that would take place in the model could be:a. A to B.b. B to E.c. C to A.d. E to B.e. B to A.

____ 55. (Figure 5-1: Demand for Coconuts) If fish is a substitute good for coconuts and the price of fish increases, then the movement that would take place in the model could be:a. A to C.b. B to A.c. C to A.d. B to E.e. A to B.

____ 56. (Figure 5-1: Demand for Coconuts) If coconuts are considered a normal good and the overall income level of consumers is falling, then the movement that would take place in the model could be:a. A to C.b. B to A.c. C to A.d. E to B.e. A to B.

____ 57. (Figure 5-1: Demand for Coconuts) If there is an overall increase in taste and preference forcoconuts, then the movement that would take place in the model could be:a. A to C.b. B to A.c. C to A.d. B to E.e. A to B.

____ 58. (Figure 5-1: Demand for Coconuts) If coconuts are considered a normal good and there is an expectation onthe part of consumers that the prices of coconuts will rise significantly in the near future, then the movement that would take place in the model could be:a. C to A.b. A to B.c. B to E.d. E to B.e. B to A.

____ 59. When the price of gas goes up and the demand for tires goes down, this means tires and gas are:a. substitutes.b. complements.c. both expensive.d. both inexpensive.e. inferior goods.

____ 60. After graduation from college, you will receive a substantial increase in your income from a new job. If you decide that you will purchase more T-bone steak and less hamburger, then for you hamburger would be considered a(n):a. normal good.b. substitute good.c. complementary good.d. inferior good.e. luxury good.

____ 61. The ________ apples will decrease due to higher apple prices.a. demand forb. tastes and preferences forc. supply ford. equilibrium fore. quantity demanded of

____ 62. The demand curve for running shoes has shifted to the right. What could have caused it?a. a decrease in the price of running shoesb. an increase in the price of running shoesc. an increase in the supply of running shoesd. an increase in the income of buyers of running shoes if running shoes are normal goods.e. a medical report that concludes that running causes arthritis in the joints.

____ 63. When the price of gas goes down and the demand for tires goes up, this means tires and gas are:a. substitutes.b. complements.c. both expensive.d. both inexpensive.e. both inferior goods.

____ 64. A market is composed of three individuals, Nicholas, Benjamin, and Alexander. Their individual demand schedules are given below and are as follows:

Nicholas Benjamin AlexanderPrice Quantity

DemandedPrice Quantity

DemandedPrice Quantity

Demanded1 10 1 15 1 122 9 2 11 2 103 8 3 9 3 8

Based on this information, which of the following market demand schedules accurately portrays this market?a. Price Quantity Demanded

1 272 353 30

b. Price Quantity Demanded1 202 53 25

c. Price Quantity Demanded1 372 302 25

d. Price Quantity Demanded1 252 303 10

e. Price Quantity Demanded1 352 253 25

____ 65. According to economists, equilibrium exists when:a. output is distributed equitably.b. scarcity is eliminated.c. an individual would be better off taking a different action.d. income is distributed equally.e. no individual has an incentive to change his or her behavior.

____ 66. A negative relationship between the quantity demanded and price is called the law of ________.a. demandb. marginalityc. efficiencyd. supply

e. increasing marginal cost.

____ 67. When the price of lamps increases, the:a. supply increases.b. quantity supplied increases.c. supply decreases.d. quantity supplied decreases.e. quantity demanded increases.

Figure 6-1: Supply of Coconuts

____ 68. (Figure 6-1: Supply of Coconuts) If the price of coconuts decreases, then the movement that would take place in the model could be:a. A to C.b. B to A.c. C to A.d. E to B.e. A to B.

____ 69. (Figure 6-1: Supply of Coconuts) If the prices of inputs (e.g., labor, fertilizer, and fuel) used to produce and transport coconuts are increasing, then the movement in the model could be:a. A to B.b. B to A.c. C to A.d. E to B.e. B to C

____ 70. (Figure 6-1: Supply of Coconuts) If the prices of inputs (e.g., labor, fertilizer, and fuel) used to produce and transport coconuts are decreasing, then the movement in the model could be:a. A to B.b. B to A.c. C to A.d. E to B.e. B to E

Number of Cups of Lemonade Supplied (per day)Price of lemonade (per cup)

Eric Molly Eli

$0.50 0 5 100.75 10 15 251.00 25 25 401.25 40 35 551.50 60 45 70

Table 6-1: Supply of Lemonade

____ 71. (Table 6-1: Supply of Lemonade) When the price of lemonade is $1 per cup, the quantity of lemonade supplied by Eli will be:a. 40 cups.b. 90 cups.c. 10 cups.d. 25 cups.e. 50 cups.

____ 72. (Table 6-1: Supply of Lemonade) If the price of lemonade is $1 per cup, total quantity of lemonade suppliedwill be:a. 50 cups.b. 80 cups.c. 25 cups.d. 90 cups.e. 40 cups

____ 73. Which of the following is most likely to shift the supply of milk to the right?a. a tax on each gallon of milk producedb. an increase in household income and milk is a normal goodc. removal of milk subsidies that had previously been given to dairy farmersd. the bankruptcy of many small dairy farmse. a decrease in the price of feed given to dairy cows

Figure 6-2: DVD Market

____ 74. (Figure 6-2: DVD Market) The figure shows the weekend rental market for DVDs in Collegetown. The equilibrium price for DVD rentals is ________ and the equilibrium quantity is ________.a. $5; 50b. $3; 30c. $9; 90d. $6; 40e. $7; 30

____ 75. (Figure 6-2: DVD Market) At a rental price of $3, there will bea. equilibrium in the rental market for DVDs.b. an increase in demand.c. an excess supply of 40 DVD rentals.d. an excess demand of 40 DVD rentals.e. an excess demand of 10 DVD rentals.

____ 76. (Figure 6-2: DVD Market) At a rental price of $6, there will be:a. equilibrium in the rental market for DVDs.b. a decrease in demand.c. an excess supply of 20 DVD rentals.d. an excess demand of 20 DVD rentals.e. an excess supply of 40 DVD rentals.

____ 77. Suppose the equilibrium price of Good Y is $5 and the equilibrium quantity is 150 units. If the current price ofGood Y is $12:a. the quantity demanded will be greater than 150 units.b. the quantity supplied will be less than 150 units.c. there will be an excess demand for Good Y.d. there will be an excess supply of Good Y.e. the price will eventually rise to equilibrium.

____ 78. Excess supply occurs when:a. the quantity demanded equals the quantity supplied.b. the quantity demanded exceeds the quantity supplied.c. the price is below the equilibrium price.d. the quantity demanded exceeds the quantity supplied and when the price is below the

equilibrium price.e. the price is above the equilibrium price.

____ 79. High-fructose corn syrup, which is derived from corn, is an important ingredient in the production of many soft drinks. If the price of corn increases, one would expect:a. the supply curve for soft drinks to shift left.b. the quantity supplied of soft drinks to increase.c. the demand for soft drinks to increase.d. the supply curve for soft drinks to shift right.e. the demand and supply curves will both shift to the left.

Price Quantity Demanded Quantity Supplied0 50 05 40 1510 30 3015 20 4520 10 60

Table 6-4: Competitive Market for Good Z

____ 80. (Table 6-4: Competitive Market for Good Z) If the current price of Good Z is $15, there will be:a. excess demand of 25 units.b. excess supply of 25 units.c. a shortage of 20 units.d. a surplus of 45 units.e. no excess demand or excess supply.

____ 81. (Table 6-4: Competitive Market for Good Z) A surplus of the good will occur at a price of ________.a. $0b. $5c. $10d. $2.50e. $15

____ 82. (Table 6-4: Competitive Market for Good Z) The equilibrium price and quantity in this market are, respectively:a. $5 and 40 units.b. $20 and 60 units.c. $10 and 30 units.d. $15 and 20 units.e. $10 and 60 units.

____ 83. Which of the following will result in an increased price of milk?a. a shift to the right of the supply curve for milkb. a shift to the right of the demand curve for milkc. an increase in the number of milk suppliersd. a decrease in the number of milk buyerse. an increase in the production technology of milk suppliers.

____ 84. Assume that corn is an input in the production of beef but not in the production of pork. Further, beef and pork are substitutes. A decrease in the price of corn will:a. increase the supply of beef and increase the demand for pork.b. decrease the supply of beef and increase the demand for pork.c. decrease the supply of beef and decrease the demand for pork.d. increase the supply of beef and decrease the demand for pork.e. decrease the supply of beef and have no impact on the demand for pork.

Figure 7-1: Demand and Supply of Gasoline

____ 85. (Figure 7-1: Demand and Supply of Gasoline) Given the equilibrium after a change in supply from S1 to S2:a. at the old price of $2.50, there will be pressure for the price to fall.b. the new price will be $2.00.c. the new quantity will be 600 gallons.d. the price will remain constant.e. the new quantity will be 100 gallons.

____ 86. (Figure 7-1: Demand and Supply of Gasoline) When the supply curve shifted from S1 to S2, the new intersection of supply and demand has a price of ________ and quantity of 400. This could have resulted from________.a. $1.50; an increase in consumers' income if gasoline is a normal goodb. $1.50; an increase in refining technologyc. $2.00; an increase in the number of buyersd. $2.00; an increase in consumers' incomee. $1.50; an increase in the price of crude oil

____ 87. (Figure 7-1: Demand and Supply of Gasoline) What might cause the supply curve to shift from S2 back to the initial supply curve S1?a. The Organization of Petroleum Exporting Countries (OPEC. restricts the production of

crude oil.b. The government decreases the per-gallon tax on gasoline production.c. Americans want to buy more gasoline.d. Technology in the refinement of gasoline greatly improves.e. The price of crude oil decreases.

____ 88. Which of the following always results in an increase in price and quantity?a. an increase in supply and a decrease in demandb. an increase in demand and supplyc. an increase in supply with no change in demandd. a decrease in demand and supplye. an increase in demand with no change in supply

Figure 7-2: Demand and Supply of Wheat

____ 89. (Figure 7-2: Demand and Supply of Wheat) If there were an increase in demand of 2,000 bushels at each price, the equilibrium price and quantity would be ________ and ________ units, respectively.a. $5; 5,000b. $6; 7,000c. $7; 7,000d. $8; 8,000e. $6; 8,000

____ 90. An ambiguous change in price and a decrease in quantity are most likely caused by:a. no shift in supply and a shift to the left in demand.b. a shift to the left in supply and a shift to the left in demand.c. a shift to the right in supply and a shift to the left in demand.d. a shift to the left in supply and a shift to the right in demand.e. a shift to the right in supply and a shift to the right in demand.

____ 91. A decrease in demand and a decrease in supply will lead to a(n) ________ in equilibrium quantity and a(n) ________ in equilibrium price.a. decrease; uncertain changeb. uncertain change; increasec. uncertain change; decreased. increase; uncertain changee. decrease; decrease

____ 92. The government imposes a price ceiling below the equilibrium price. The price ceiling will cause:a. quantity demanded to decrease.b. quantity supplied to increase.c. a shortage of the good.d. an increase in the quality of the good.e. price to return to market equilibrium.

Figure 8-3: Market for Hybrid Cars

____ 93. (Figure 8-3: Market for Hybrid Cars) If there is a binding price ceiling in the market for hybrid cars, the price would be equal to ________, consumers would demand ________, and producers would supply ________.a. P1; Q1; Q3

b. P2; Q2; Q2

c. P1; Q3; Q1

d. P3; Q3; Q1

e. P3; Q3; Q2

P Qp Qs$1.20 9.0 12.01.10 9.5 11.01.00 10.0 10.00.90 10.5 9.00.80 11.0 8.0

Table 8-3: Market for ButterNote: P = Price per lb in $;Qp = Quantity demanded in millions of lbs;Qs = Quantity supplied in millions of lbs.

____ 94. (Table 8-3: Market for Butter) If the government imposes a price ceiling of $0.90 per pound of butter, the quantity of butter actually purchased will be:a. 10.5 million pounds.b. 9.0 million pounds.c. 1.5 million pounds.d. 10.0 million pounds.e. 19.5 million pounds.

P Qp Qs$1.20 9.0 12.01.10 9.5 11.01.00 10.0 10.00.90 10.5 9.00.80 11.0 8.0

Table 8-5: Market for ButterNote: P = Price per lb in $;Qp = Quantity demanded in millions of lbs;Qs = Quantity supplied in millions of lbs.

____ 95. (Table 8-5: Market for Butter) If the government imposes a price floor of $0.90 per pound of butter, the quantity of butter actually purchased will be:a. 10.5 million pounds.b. 9.0 million pounds.c. 1.5 million pounds.d. 8.0 million pounds.e. 10.0 million pounds.

____ 96. Suppose the government sets a price floor of $2.85 per bushel on corn when the current price is $2.55. This price floor will:a. cause a surplus of corn.b. cause a shortage of corn.c. have no effect on the price of corn.d. shift the supply of corn to the right.e. shift the demand for corn to the left.

____ 97. Wendy sells ice-making machines. She can sell 6 per week at a price of $2,000. If she charges $2,100, she will only sell 5 per week. The marginal benefit of selling the 6th ice-making machine is:a. $2,000.b. $2,100.c. $12,000.d. $22,500.e. $1,500.

____ 98. Pauli's Pizza offers the following prices: one slice for $2, two slices for $3.50, three slices for $4.50, four slices for $5.00. Sal orders two slices. From this we know that Sal's marginal benefit from the second slice must be at least ________ while the marginal benefit from the third slice must be less than ________.a. $3.50; $4.50b. $3.50; $1.00c. $1.50; $1.00d. $1.50; $4.50e. $5.50; $10.50

____ 99. William installs custom sound systems in cars. If he installs seven systems per day, his total costs are $300. If he installs eight systems per day, his total costs are $400. William will install only eight sound systems per day if the eighth customer is willing to pay at least:a. $300.b. $400.c. $100.d. $50.e. $700

____ 100. Pauli's Pizza offers the following prices: one slice for $2, two slices for $3.50, three slices for $4.50, four slices for $5.00. The marginal cost to the customer of the third slice is:a. $4.50.b. $10.c. $1.d. $2.e. $12.

Sigmund tutors five students for the introductory psychology class. The students differ in their willingness to pay for a one-hour session. The second column of the table shows their willingness to pay. Sigmund has estimated his costs of providing tutoring hours(he has no sunk costs) and these costs appear in the last column.

StudentStudents'

Willingness to PayHours ofTutoring

Sigmund'sCost

Peter $25 1 $5Quincy 15 2 10Rosemary 5 3 15Sally 20 4 20Tomas 10 5 25

Table 53-2: Tutoring

____ 101. (Table 53-2: Tutoring) Sigmund's optimal number of tutoring hours is:a. 5.b. 4.c. 3.d. 2.e. 1.

____ 102. (Table 53-2: Tutoring) At the optimal hours of tutoring, Sigmund's total net gain is:a. $60.b. $50.c. $30.d. $15.e. $5.

____ 103. If the marginal benefit received from a good is equal to the marginal cost of production, then:a. society's well-being cannot be improved by changing production.b. society's well-being can be improved if production decreases.c. society's well-being can be improved if production increases.d. the market is producing too much of the good.e. the market is producing too little of the good.

____ 104. The costs associated with variable inputs are ________ costs and the costs associated with ________ inputs are ________costs.a. constant; fixed; fixedb. fixed; fixed; variablec. variable; fixed; variabled. fixed; fixed; fixede. variable; fixed; fixed

____ 105. Which of the following cost concepts is correctly defined?a.

b. ATC = VC + FCc. ATC = AVC + AFCd. TC = AVC + AFCe. TC = AVC + MC

Quantityof Output

Variable CostVC

Total CostTC

0 0 501 50 1002 70 1203 100 1504 140 1905 2406 250 3007 320 370

Table 55-1: Cost Data

____ 106. (Table 55-1: Cost Data) The table shows some cost data for a firm currently operating in the short run. What is the value of the total fixed cost for this firm?a. $40b. $50c. $100d. $70e. It is impossible to determine without more information.

____ 107. (Table 55-1: Cost Data) The table shows some cost data for a firm currently operating in the short run. What is the value of the total variable cost for this firm when the firm is producing five units of output?a. $50b. $240c. $60d. $190e. It is impossible to determine without more information.

____ 108. If Jakob knows the marginal cost of the first sports jersey is $21, the marginal cost of the second sports jersey is $40, and the marginal cost of the third jersey is $17, what is the total variable cost of producing three jerseys?a. $26b. $78c. $17d. $61e. $88

Q = output, FC = fixed cost, VC = variable cost, TC = total cost, MC = marginal cost

Q FC VC TC MC1 20 10 302 20 18 38

133 20 31

174 20 68

Table 55-2: Output and Costs

____ 109. (Table 55-2: Output and Costs) Using the information in the table, when quantity increases from one to two, marginal cost equals:a. 13.b. 10.c. 18.d. 17.e. 8.

____ 110. (Table 55-2: Output and Costs) Using the information in the table, when quantity equals four, total variable cost equals:a. 48.b. 38.c. 58.d. 28.e. 68

____ 111. (Table 55-2: Output and Costs) Using the information in the table, when quantity equals three, average total cost equals:a. 13.b. 10.c. 8.d. 17.e. 20

____ 112. Rebecca knows that Becca Furniture's marginal cost curve is above the average total cost curve. This means Becca Furniture's average total cost curve:a. must be rising.b. must be horizontal.c. must be falling.d. is at its minimum point.e. is at its maximum point.

____ 113. The long run refers to the period of time for which:a. a fixed input exists.b. all inputs are variable.c. marginal costs are decreasing.d. diminishing returns causes marginal cost to increasee. marginal product is increasing.

Figure 55-1: Average Total Cost Curve

____ 114. (Figure 55-1: Average Total Cost Curve) In the figure, the total cost of producing three pairs of boots is approximately:a. $24.b. $72.c. $75.d. $216.e. $125.

____ 115. (Figure 55-1: Average Total Cost Curve) In the figure, the total cost of producing five pairs of boots is approximately:a. $408.b. $82.c. $108.d. $17.e. $275.

____ 116. (Figure 55-1: Average Total Cost Curve) In the figure, the total cost of producing 10 pairs of boots is approximately:a. $13.b. $54.c. $131.d. $1,308.e. $1,150.

____ 117. If a firm produces 10 units of output and incurs $30 in average variable cost and $5 in average fixed cost, average total cost is:a. $30.b. $35.c. $50.d. $300.e. $350.

Figure 55-3: Short-Run Costs II

____ 118. (Figure 55-3: Short-Run Costs II) Curve 1 is the ________ cost curve.a. average totalb. average variablec. marginald. totale. total fixed

____ 119. (Figure 55-3: Short-Run Costs II) Curve 2 is the ________ cost curve.a. average totalb. average variablec. marginald. totale. total variable

____ 120. (Figure 55-3: Short-Run Costs II) Curve 3 is the ________ cost curve.a. average totalb. totalc. marginald. average variablee. total variable

____ 121. (Figure 55-3: Short-Run Costs II) Curve 1 crosses the average variable cost curve at:a. 3 units of output.b. approximately 5.3 units of output.c. the minimum value of Curve 2.d. the level of output at which diminishing marginal returns begin.e. the level of output that corresponds to zero average fixed cost.

____ 122. (Figure 55-3: Short-Run Costs II) Curve 1 crosses the average total cost curve at:a. the minimum value of Curve 2.b. approximately 4.3 units of output.c. approximately 2.8 units of output.d. Point A.e. the level of output that corresponds to the point of diminishing marginal returns.

____ 123. (Figure 55-3: Short-Run Costs II) At six units of output, average total cost is approximately:a. $100.b. $120.c. $170.d. $250.e. $85.

____ 124. (Figure 55-3: Short-Run Costs II) At six units of output, average variable cost is approximately:a. $100.b. $120.c. $200.d. $250.e. $300.

____ 125. At 20 units of output, a firm finds that its average variable cost is $5 per unit and its average total cost is $8 per unit. Therefore, its:a. marginal cost is less than $3 per unit.b. marginal cost is $3 per unit.c. average fixed cost is $3 per unit.d. total fixed cost is $300.e. total cost is $80.