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1. Consumer surplus for an individual buyer is equal to: A) the consumer's willingness to pay for the good, minus the marginal cost of producing the good. B) the price of the good, minus the marginal cost of producing the good. C) the consumer's willingness to pay for the good, minus the price of the good. D) the marginal cost of the good, minus the consumer's willingness to pay for the good. Use the following to answer question 2: Table: Consumer Surplus and Phantom Tickets
2. (Table: Consumer Surplus and Phantom Tickets) Using the information in the table, if the price of a ticket to see Phantom of the Opera is $50, then Robert's consumer surplus is: A) $60. B) $50. C) $10. D) $240. 3. If there is a decrease in demand, total surplus: A) will increase. B) will decrease. C) will remain the same. D) may change, but we can't tell how. 4. When there is a bountiful harvest of grapefruit, total consumer surplus in the grapefruit market: A) will increase. B) will decrease. C) will remain the same. D) may change but we can't tell how. 5. Mark and Rasheed are at the bookstore buying new calculators for the semester. Mark is willing to pay $75 and Rasheed is willing to pay $100 for a graphing calculator. The price for a calculator at the bookstore is $65. How much is Mark's individual consumer surplus? A) $10 B) $25 C) $35 D) $75 6. Which of the following is true when a market is in equilibrium and there is no government intervention? A) Total surplus is minimized. B) The deadweight loss is maximized. C) No mutually beneficial trades are missed. D) Some mutually beneficial trades may be missed.
7. When there is a new medical report extolling the health advantages of grapefruit, total producer surplus in the grapefruit market: A) will increase. B) will decrease. C) will remain the same. D) may change but we can't tell how. Use the following to answer question 8: Table: Economics Textbooks
8. (Table: Economics Textbooks) The table shows how much money four consumers would be willing to pay for a new economics textbook. The price of the textbook is $100. How much total consumer surplus would be earned by these consumers? A) $125 B) $500 C) $100 D) $75 Use the following to answer question 9: Figure: Producer Surplus II
9. (Figure: Producer Surplus II) If the price falls from P2 to P1, producer surplus decreases by the area: A) LMK. B) P1K0. C) P2M0. D) P2P1KM.
Use the following to answer question 10: Figure: Producer Surplus III
10. (Figure: Producer Surplus III) If the price of the good is $4 and quantity equals 40, producer surplus will equal: A) $20. B) $40. C) $60. D) $80. Use the following to answer question 11: Table: Producer Surplus The table below shows the willingness to sell The Nutty Nutcracker tickets by five students who have those tickets as part of their student activity fees.
11. (Table: Producer Surplus) If the price of a ticket to see The Nutty Nutcracker is $50, then Dudley's producer surplus is: A) $0. B) $25. C) $60. D) $240.
Use the following to answer question 12: Figure: Consumer Surplus III
12. (Figure: Consumer Surplus III) If the price of the good is $4, consumer surplus will equal: A) $5. B) $10. C) $20. D) $40. 13. Equilibrium in the market for peanut butter is disturbed by an increase in the price of peanuts. Producer surplus in the peanut butter market: A) will increase. B) will decrease. C) will not change. D) may change, but we cannot determine the change without more information. Use the following to answer question 14: Figure: Market Demand
14. (Figure: Market Demand) The amount by which the total benefits to consumers exceed their total expenditure is called ________ and is depicted at quantity E by the area ________. A) producer surplus; BCD B) consumer surplus; OCDE C) consumer surplus; BCD D) net benefit; OBDE Use the following to answer question 15: Figure: Gains from Trade
15. (Figure: Gains from Trade) As demand increases from D1 to D2, total surplus: A) decreases by $10. B) increases by $12.75. C) decreases by $15. D) increases by $27.50. 16. The total producer surplus for a good can be calculated in all except one of the following ways. Which is the exception? A) the sum of the individual producer surpluses for all sellers of the good B) the area below the supply curve for the good up to the quantity of the good sold C) the area above the supply curve and below the price at which the good is being sold D) the sum, for all sellers of the good, of the difference between what each seller receives and the minimum amount he or she is willing to accept for selling the good
Use the following to answer question 17: Figure: Market for Sandwiches
17. (Figure: Market for Sandwiches) Referring again to the market for sandwiches during the lunch hour at a local deli, suppose a price floor is set at $7. At this price, consumer surplus is equal to ________ and producer surplus is equal to ________. A) $64; $40 B) $64; $24 C) $32; $24 D) $32; $40 18. Which of the following is most likely to increase consumer surplus in the market for cotton T-shirts? A) Weather conditions provide for an extremely productive cotton harvest. B) Consumer incomes fall and cotton T-shirts are normal goods. C) The price of polyester T-shirts falls. D) The price of industrial sewing machines used to produce garments increases. 19. If the income elasticity of demand for a good is _______, the good is said to be a(n) _________. A) positive; inferior good B) negative; substitute good C) positive; normal good D) positive; positive good 20. If income decreases and the consumption of a certain good increases, that good is considered a(n): A) substitute good. B) complementary good. C) normal good. D) inferior good. 21. Which of the following is likely to make supply more inelastic? A) The time period under consideration is very short. B) The inputs necessary for production cannot readily be increased. C) The good is necessary for survival (e.g., a life-saving drug). D) The time period under consideration is very short and the inputs necessary for production cannot readily be increased.
22. If two goods are complements, their cross-price elasticity of demand should be: A) less than 0. B) equal to 0. C) positive, yet almost equal to 0. D) greater than 0. 23. The long-run price elasticity of supply of crude oil is ________ the short-run price elasticity of supply of crude oil. A) less than B) greater than C) equal to D) not comparable to 24. Which of the following would be most likely to have a vertical supply curve? A) salt B) oil C) insulin D) paintings by Van Gogh 25. Suppose the price elasticity of demand for cheeseburgers equals 0.37. This means the demand for cheeseburgers is: A) price elastic. B) price inelastic. C) price unit-elastic. D) perfectly price inelastic. 26. If an increase in the price of a good leads to an increase in total revenue, then: A) the supply curve must be price inelastic. B) the demand curve must be price inelastic. C) the supply curve is price elastic. D) the demand curve must be price elastic. Use the following to answer question 27: Figure: Demand Curve
27. (Figure: Demand Curve) Using the midpoint method, you can calculate that the price elasticity of demand between $1 and $2 is approximately: A) 0.16. B) 0.56. C) 0.18. D) 5.67. Use the following to answer question 28: Figure: Market for Lattes
28. (Figure: Market for Lattes) In the market for lattes shown in the figure, what is the price elasticity of supply between prices of $2 and $2.50 per cup, using the midpoint formula? A) 1 B) 1.29 C) 1.51 D) 2.12 29. If the price of chocolate-covered peanuts increases and the demand for strawberry-flavored soft drinks decreases, this indicates that these two goods are: A) unrelated goods. B) complementary goods. C) inferior goods. D) substitute goods.
Use the following to answer question 30: Figure: Market for Lattes
30. (Figure: Market for Lattes) If, in the market for lattes shown in the figure, the government assesses a tax of $0.75 on each latte, the price the consumer pays for a latte after the tax will: A) increase from $2 to $2.75. B) increase from $2 to $2.50. C) increase from $2 to $2.25. D) change, but we cannot determine by how much. 31. Suppose the cross-price elasticity of demand for butter and margarine is equal to 0.96 while the cross-price elasticity for water and lemon is –0.13. This means that butter and margarine are ________ while water and lemons are ________. A) complements; substitutes B) substitutes; complements C) inelastic goods; elastic goods D) elastic goods; complements Use the following to answer question 32: Table: Johnson's Income and Expenditures
32. (Table: Johnson's Income and Expenditures) Johnson's income elasticity of demand for movies is: A) infinite. B) 1. C) 0. D) –1.
Use the following to answer question 33: Figure: Demand for Shirts
33. (Figure: Demand for Shirts) Using the midpoint method, the absolute value of the price elasticity of demand for the segment EF is: A) greater than 1. B) less than the price elasticity of demand for segment FG. C) less than the price elasticity of demand for segment DE. D) greater than the price elasticity of demand for segment AB. 34. If the purpose of a tax is to decrease the amount of a harmful activity, such as underage drinking, the government should impose it when the supply is ________ and the demand is ________. A) elastic; elastic B) inelastic; inelastic C) elastic; inelastic D) inelastic; elastic 35. There is no total revenue test for price elasticity of supply because: A) price and quantity supplied are inversely related. B) price and quantity supplied are usually positively related. C) total revenue will not usually change in the direction of a supply price change. D) price and quantity supplied are never positively related.
Use the following to answer question 36: Figure: Demand for Notebook Computers
36. (Figure: Demand for Notebook Computers) The change in the firm's total revenue resulting from a change in price from P to T suggests that demand is: A) nonelastic. B) price-elastic. C) price-inelastic. D) price unit-elastic. Use the following to answer question 37: Table: Market for Fried Twinkies
37. (Table: Market for Fried Twinkies) The government decides to tax fried Twinkies at a rate of $0.30 per Twinkie and collect that tax from the producers. Using the table, the consumers will pay ________ per Twinkie and buy ________ Twinkies after the tax. A) $1.20; 8,000 B) $1.30; 7,000 C) $1.40; 6,000 D) $1.50; 5,000
38. A factor of production whose quantity cannot be changed during a particular period is a(n): A) marginal factor of production. B) fixed factor of production. C) incremental factor of production. D) variable factor of production. 39. Which of the following cost concepts is correctly defined? A) ΔTC
B) C) D)
ATC = VC + FC ATC = AVC + AFC TC = AVC + AFC
40. A curve that shows the quantities of output that can be obtained from different quantities of a variable input, assuming other inputs are fixed, is called the ________ curve. A) total input B) marginal input C) total product D) average total quantity 41. The change in total output resulting from a one-unit increase in the quantity of an input used, holding the quantities of all other inputs constant, is: A) average cost. B) average product. C) marginal cost. D) marginal product. 42. The long run is a planning period: A) over which a firm can consider all inputs as variable. B) that is at least 5 years in length. C) that must be over 6 months in length. D) that must be between 6 months and 5 years. 43. The ________ curve continually declines as more output is produced in the short run. A) marginal cost B) average variable cost C) average fixed cost D) average total cost 44. Which of the following curves is not affected by the existence of diminishing returns? A) the average fixed cost curve B) the average variable cost curve C) the average total cost curve D) the marginal cost curve 45. When marginal cost is above average variable cost, average variable cost must be: A) at its minimum. B) at its maximum. C) falling. D) rising.
Use the following to answer question 46: Figure: Short-Run Costs
46. (Figure: Short-Run Costs) B is the ________ cost curve. A) average total B) average variable C) marginal D) total 47. You run a business producing picture frames. This month your total cost of production is $10,000, your variable cost of production is $6,000, and you produce 3,000 picture frames. It follows that: A) average variable cost is $2. B) average total cost is $3. C) average total cost is $1. D) average fixed cost is $1.
Use the following to answer question 48: Figure and Table: Variable, Fixed, and Total Costs
48. (Figure and Table: Variable, Fixed, and Total Costs) In the figure, the marginal cost of increasing production from 19 to 36 bushels of wheat is: A) $23.53. B) $11.76. C) $22.22. D) $11.11. Use the following to answer question 49: Figure: Change in Total Product
49. (Figure: Change in Total Product) The figure shows a production function changing from TP1 to TP2. Which of the following choices is a likely cause of this shift? A) Workers in the firm are less productive on average. B) The firm employed more of a variable input in the short run. C) The firm has suffered a decrease in available technology. D) The firm employed more capital in the long run. Use the following to answer question 50: Figure: Cost Curves
50. (Figure: Cost Curves) If a firm currently was producing at point C on the ATC2 in the figure but anticipates increasing output to 225 units in the long run, the firm will build a ________ plant and experience ________. A) smaller; economies of scale B) smaller; diseconomies of scale C) larger; economies of scale D) larger; diseconomies of scale 51. When a firm experiences diminishing marginal returns: A) its output is falling. B) marginal product is falling, yet it is still positive. C) total product is going down, as marginal product is falling. D) marginal product is negative. Use the following to answer question 52: Figure: Short-Run Costs II
52. (Figure: Short-Run Costs II) At six units of output, marginal cost is approximately: A) $100. B) $120. C) $250. D) $200. 53. Kaile Cakes is currently producing 10 cakes per day. The marginal cost of the tenth cake is $24, and average total cost of 10 cakes is $6. The average total cost of 9 cakes is: A) $4. B) $5. C) $6. D) $8.
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