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1
Because you can only obtain more of one good by giving up some of another good, the shape of
a production possibility curve is _______________.
downward-sloping
perfectly vertical
perfectly horizontal
upward-sloping
2. Refer to the table shown. The average product when eight workers are employed is -Number of workers Total Output
14
2 10
3 18
4 28
5 35
6 41
7 45
8 48
9 50
10 49
6Refer to the graph shown. If this monopolistically competitive firm maximizes profit, it will
charge $45 per dress.
charge $85 per dress.
charge $78 per dress.
shut down because it cannot cover its opportunity costs
7 The price of a ticket to a rock concert is set at $35. All the tickets for the concert sell out 1 hour
after they go on sale and there are still 1,000 fans who want to buy tickets. It follows that
the quantity of tickets demanded is equal to the quantity supplied at the $35 price.
the equilibrium price of tickets to the concert is more than $35.
the equilibrium price of tickets to the concert is $35.
8 Which of the following statements is true?
Many different production processes can be economically efficient, but only the method that
involves the lowest possible cost is technically efficient.
Many different production processes can be technically efficient, but only the method that
involves the lowest possible cost is economically efficient.
9 State what type of business combination is occurring in the following scenario: Samsung and
Sony become partners in a flat screen manufacturing company.
Joint venture
Conglomerate
Vertical merger
Horizontal merger
10 Suppose a firm finds that an additional dollar spent on labor increases output more than does
an additional dollar spent on machines. Under these conditions, the firm
should substitute machines for labor if it wants to increase economic efficiency
is economically efficient
is technically efficient
should substitute labor for machines if it wants to increase economic efficiency
11 Economists and laypeople see the pros and cons of international trade in different ways.
Which of the following is one of those ways?
Laypeople enjoy the benefits of trade in terms of lower consumer prices.
Laypeople tend to think of foreign trade only in terms of manufactured goods.
Laypeople believe in the law of one price and economists do not.
12 The morel is a prized mushroom that is often abundant in the Western United States in years
after forest fires. Suppose two companies are buying morels from workers willing to find them.
One company offers to pay workers $5.00 per pound, and the other company will pay workers
price to decline from $1.25 to $1.00 a dozen and a shortage of 2,000 dozen eggs per week.
price to rise from $1.00 to $1.25 a dozen and a surplus of 2,000 dozen eggs per week.
price to rise from $1.00 to $1.25 a dozen and equilibrium quantity to be 3,000 dozen eggs per
week.
price to remain at $1.00 a dozen and a shortage of 2,000 dozen eggs per week
25 Germany restricts the use of nonrefillable bottles and cans. The European Union argues that
the rules aren't just protecting the environment; they also are protecting German beverage makers
from competition. The EU sees Germany's environmentalism as _____________________.
a quota
a tariff
a regulatory trade restriction
an embargo
26 Oligopoly is probably the best market for technological change because
funds for research and development are available in an oligopoly due to innovation, which
motivates the need for research and development.
the typical oligopoly lacks the funds for research and development and therefore will use basic
research from universities.
27 George Davis and Michael Wohlgenant estimate that for every 1 percent increase in the price
of Christmas trees, quantity demanded falls by 0.6 percent. The demand for Christmas trees is -perfectly inelastic
inelastic
elastic
unit elastic
28 State what type of business combination is occurring in the following scenario: A tobacco
producer buys a carbonated beverage plant.
Joint venture
Conglomerate
Vertical merger
Horizontal merger
29 Suppose the minimum possible price of constructing homes is $50 per square foot. As a result
of a sharp drop in the demand for home construction, the equilibrium price of home construction
falls to $40 per square foot. Assuming the home construction industry is perfectly competitive
and there are no specialized inputs, firms will
exit the industry, and the price will rise above $40 in the long run.
exit the industry, and the price will fall below $40 in the long run.
30 Refer to the table shown. At what level of employment is the marginal product of labor
seven?
7
5
2
4