C13 Microeconomics Online Exams 1-8 Answers (Ashworth College)

C13 Microeconomics Online Exams 

1-8 Answers (Ashworth College) 

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C13 Microeconomics Online Exams 1-8 Answers (Ashworth College) 

Part 1 of 1 

- 

100.0/ 100.0 Points 

Question 1 of 205.0/ 5.0 Points 

The saying that "There's no such thing as a free lunch" refers to the __________ . 

A. marginal principle 

B. spillover principle 

C. principle of opportunity 

cost 

D. reality principle 


The principle of opportunity cost __________ . 

A. is more relevant for firms than for 

individuals 

B. only refers to monetary payments

C. is only relevant in economics 

D. is applicable to all decision-making 


Angelina, age seven, decides to dress up like Princess Fiona for Halloween. What is the 

opportunity cost of her decision? 

A. the cost of the costume 

B. the fact that she can't dress up like Dora the Explorer, her second 

choice 

C. zero, because seven-year-olds don't have opportunity costs 

D. the cost of the Lady Gaga costume which she did not want 


You have an hour between your economics and math classes. What is the opportunity cost of 

that time if you use it to complete your math homework instead of your economics homework? 

A. the economics homework you could have completed 

B. the math homework you chose to complete 

C. the cost of your calculator and math textbook 

D. zero, because it doesn't cost any money to do your math 

homework 


An unemployed individual decides to spend the day fishing. The opportunity cost of fishing is 

__________ . 

A. the cost of bait and any other monetary expenses 

B. zero, because the person doesn't have a job

C. the cost of bait, any other monetary expenses, and the value of the individual's wages while 

he was working 

D. the cost of bait, any other monetary expenses, and the value of the best alternative use of the 

individual's time 


Because resources are limited, __________ . 

A. only the very wealthy can get everything they want 

B. firms will be forced out of business 

C. the availability of goods will be limited but the availability of services will 

not 

D. people must make choices 


The effort used to coordinate the factors of production is a description of __________ . 

A. physical capital 

B. human capital 

C. labor 

D. 

entrepreneurship 


Economics is best defined as the study of __________ . 

A. financial decision-making 

B. how consumers make purchasing decisions

C. the choices made by people faced with scarcity 

D. inflation, unemployment, and economic 

growth 


Suppose that your tuition to attend college is $24,000 per year and you spend $8,000 per year on 

room and board. If you were working full time, you could earn $30,000 per year. What is your 

opportunity cost of attending college for one year? 

A. 

$32,000 

B. $38,000 

C. $54,000 

D. 

$62,000 

Question 10 of 

5.0/ 5.0 Points 

20 

Suppose that you own a house. What is the opportunity cost of living in the house? 

A. There is no opportunity cost because you own the house. 

B. There is no opportunity cost unless you could set up a business in the house. 

C. The opportunity cost is the rent you could have received from a tenant if you didn't live 

there. 

D. The opportunity cost is the cost of your monthly mortgage payment plus bills. 


5.0/ 5.0 Points 

20 

Tradeoff is __________ .

A. allowing the government and other organizations to choose for 

us 

B. sacrificing one thing for another 

C. deciding who consumes the products produced in an economy 

D. holding other variables fixed 


5.0/ 5.0 Points 

20 

Which of the following is a question answered with normative economic reasoning? 

A. If the college offers free textbooks for students, will more students read their textbooks? 

B. If the college provided less financial aid for out-of-state students, would more in-state 

students benefit? 

C. If the college increased its enrollment requirements, would class size decline? 

D. Should the college increase tuition to fund its athletic programs? 


5.0/ 5.0 Points 

20 

Steven lives in a big city where there is a shortage of parking. He has a parking spot in his 

driveway where he parks his car. Which of the following statements is most correct? 

A. Steven has a lower opportunity cost of owning a car than his neighbor, who must rent a 

parking spot. 

B. The opportunity cost of using the spot is zero, because Steven owns the house. 

C. The opportunity cost of using the parking spot is the price he could charge someone else for 

using the spot. 

D. The opportunity cost depends on how much Steven's mortgage payment is. 


5.0/ 5.0 Points

20 

Resources are all of the following EXCEPT __________ . 

A. unlimited and in abundance 

B. the things we use to produce goods and services 

C. limited in quantity and can be used in different 

ways 

D. scarce and therefore require choices to be made 


5.0/ 5.0 Points 

20 

Spending money on a new car instead of a used car when you are on a fixed budget is an 

example of __________ . 

A. the incursion of an opportunity cost 

B. isolating variables 

C. a bad thing to do because you run out of 

money 

D. living on the edge 


5.0/ 5.0 Points 

20 

You rent a DVD of The Dark Knight Rises. The rental is for seven days and you watch the 

movie on the first day. You tell a friend about the film and your friend asks to come over and 

watch the movie with you before it is due back. What is your opportunity cost if you decide to 

watch the movie a second time instead of going to a football game? 

A. the entire cost of the movie rental, since you have already watched the movie 

B. one half the rental cost, because you have already watched the movie one 

time

C. The answer depends on how much you liked the movie in the first place. 

D. the football game you forego by watching the movie again 


5.0/ 5.0 Points 

20 

Which of the following is an example of a normative question? 

A. How will an increase in the inheritance tax affect tax revenues? 

B. What fraction of an income tax cut will be spent on imported goods? 

C. Should Florida implement a state income tax to reduce its deficit? 

D. How will an increase in unemployment benefits affect the unemployment 

rate? 


5.0/ 5.0 Points 

20 

Which of the following is a question answered with positive economic analysis? 

A. Should the college reduce tuition for out-of-state residents? 

B. Should the college charge higher tuition for part-time students? 

C. If the college increased its eligibility requirements for enrollment, will class sizes 

decline? 

D. Should the college eliminate its athletic program to cut its costs? 


5.0/ 5.0 Points 

20 

Normative economics __________ . 

A. is the focus of most modern economic 

reasoning

B. answers the question "What ought to be?" 

C. predicts the consequences of alternative actions 

D. answers the question "What is?" 


5.0/ 5.0 Points 

20 

The principle that the cost of something is equal to what is sacrificed to get it is known as the 

__________ . 

A. marginal principle 

B. principle of opportunity cost 

C. principle of diminishing 

returns 

D. reality principle 

Part 1 of 1 -85.0/ 100.0 Points 


Suppose that in a month the price of oranges increases from $.75 to $1. At the same time, the 

quantity of oranges demanded decreases from 100 to 80. The price elasticity of demand for 

oranges (calculated using the initial value formula) is __________ . 

A. 

0.75 

B. 0.6 

C. 0.25

D. 20 


A good synonym for elasticity would be __________ . 

A. change 

B. demand 

C. 

responsiveness 

D. stickiness 


Suppose that in a month the price of a gallon of milk increases from $2 to $2.50. At the same 

time, the quantity of gallons of milk demanded decreases from 100 to 80. The price elasticity of 

demand for gallons of milk (calculated using the midpoint formula) is approximately 

__________ . 

A. 

0.11 

B. 0.2 

C. 1 

D. 1.2 


Suppose that in a month the price of milk increases from $2 to $3 a gallon. At the same time, the 

quantity of gallons of milk demanded decreases from 200 to 190. The price elasticity of demand 

for milk (calculated using the initial value formula) is __________ . 

A. 

0.1 

B. 0.2

C. 1 

D. 10 


When supply decreases and the supply curve shifts to the left, equilibrium price __________ and 

equilibrium quantity __________ . 

A. increases; increases 

B. increases; decreases 

C. decreases; increases 

D. decreases; 

decreases 


When supply increases and the supply curve shifts to the right, equilibrium price __________ 

and equilibrium quantity __________ . 

A. increases; increases 

B. increases; decreases 

C. decreases; increases 

D. decreases; 

decreases 


A change in the quantity demanded of a product is the result of a change in __________ . 

A. the price of the product 

B. the price of related goods

C. consumer income 

D. the cost of producing the 

product 


A demand curve is defined as the relationship between __________ . 

A. the price of a good and the quantity of that good that consumers are willing to buy 

B. the price of a good and the quantity of that good that producers are willing to sell 

C. the income of consumers and the quantity of a good that consumers are willing to 

buy 

D. the income of consumers and the quantity of a good that producers are willing to sell 


The quantity of TVs sold is 100 at the unit price $200. Suppose the price elasticity of demand for 

TVs by the initial value method is 2.0, and you would like to decrease the unit price for TVs to 

$150. Then the new quantity sold must be __________ . 

A. 

125 

B. 150 

C. 200 

D. 

250 


5.0/ 5.0 Points 

20 

Suppose that in a month the price of tulips increases from $1 to $1.50. At the same time, the 

quantity of tulips demanded decreases from 200 to 190. The price elasticity of demand for tulips 

(calculated using the initial value formula) is __________ .

A. 

0.1 

B. 0.5 

C. 10 

D. 20 


5.0/ 5.0 Points 

20 

The midpoint formula for elasticity of demand solves the problem of __________ . 

A. whether elasticity of demand is really positive or negative 

B. whether to use quantity or price in the numerator 

C. which price or quantity to use as the initial value of the 

variable 

D. whether to use quantity demanded or supplied 


5.0/ 5.0 Points 

20 

Suppose that there are only three consumers of a product. At a price of $6 per unit, the first 

consumer would buy 12 units of the product, the second consumer would buy 8 units, and the 

third consumer would buy 3 units of the product. If you drew a market demand curve for this 

product, the quantity demanded at a price of $6 would be __________ . 

A. 23 

units 

B. 20 units 

C. 12 units 

D. 11 

units


5.0/ 5.0 Points 

20 

The price elasticity of demand reflects the responsiveness of __________ . 

A. firms to changes in demand 

B. demand to a change in price of a substitute 

good 

C. demand to a change in price 

D. quantity demanded to a change in price 


5.0/ 5.0 Points 

20 

Suppose that in a month the price of a dozen of eggs increases from $1.50 to $2. At the same 

time, the quantity of dozens of eggs demanded decreases from 200 to 150. The price elasticity of 

demand for dozens of eggs is __________ . 

A. perfectly 

inelastic 

B. inelastic 

C. unitary elastic 

D. elastic 


5.0/ 5.0 Points 

20 

Suppose that Victoria and her friends are running a fundraiser by selling donuts. They want to 

know what will happen to their revenue if they increase the price of each donut from $0.80 to $1. 

What concept do they need to apply to find out their expected revenue? 

A. price elasticity of supply 

B. price elasticity of demand

C. cross elasticity of demand 

D. income elasticity of 

demand 


5.0/ 5.0 Points 

20 

If a competitive market operates perfectly, it relies on __________ . 

A. the number of people buying goods 

B. the laws of supply and demand 

C. how many products can be produced for sale 

D. how much people are willing to pay for the 

products 


5.0/ 5.0 Points 

20 

In considering the relationships between price and quantity demanded, ceteris paribus directs the 

economist to assume that __________ . 

A. price increases affect quantity 

B. quantity increases affect prices 

C. neither price nor quantity affect 

demand 

D. all other variables remain unchanged 


5.0/ 5.0 Points 

20 

The quantity demanded of a product increases as __________ .

A. consumer income rises 

B. the prices of other products 

fall 

C. the price of the product rises 

D. the price of the product falls 


0.0/ 5.0 Points 

20 

The price elasticity of demand is calculated by __________ . 

A. the change in price divided by the change in quantity demanded 

B. the change in quantity demanded divided by the change in price 

C. the percentage change in price divided by the percentage change in quantity demanded 

D. the percentage change in quantity demanded divided by the percentage change in 

price 


5.0/ 5.0 Points 

20 

The ratio of the percentage change in quantity demanded to the percentage change in price is 

known as the __________ . 

A. demand-side shift factor 

B. income elasticity of 

demand 

C. price elasticity of demand 

D. cross elasticity of demand

Part 1 of 1 -85.0/ 100.0 Points 


Assume that linen pants are a normal good and consumer income rises. If the supply of linen 

pants remains constant, producer surplus __________ . 

A. will decrease 

B. will increase 

C. will remain constant 

D. may increase or decrease depending on the amount of the price 

increase 


If the market price of salmon is $8.99 per pound but the government will not allow salmon 

farmers to charge more than $4.99 per pound, which of the following will happen? 

A. The supply curve for salmon will shift to the left. 

B. There will be an excess demand for salmon. 

C. There will be an excess supply of salmon. 

D. The market will be in equilibrium at a price of 

$4.99. 


Mary has an old house built in 1950 that she would be willing to sell for $100,000. If someone 

offers to buy her house for $110,000, Mary's producer surplus would be equal to __________ . 

A. $5,000 

B. $10,000

C. $55,000 

D. 

$100,000 


If the government sets a maximum price for gasoline above the equilibrium price, __________ . 

A. quantity demanded of gasoline will be equal to quantity supplied of 

gasoline 

B. there will be excess demand for gasoline 

C. there will be excess supply of gasoline 

D. demand for gasoline will be less than supply of gasoline 


Assume that Crystal's demand for handbags remains constant, but the price of handbags 

increases. Crystal's consumer surplus __________ . 

A. decreases 

B. increases 

C. remains constant 


decrease 


A ban on imported avocados would result in __________ . 

A. an increase in total surplus because domestic production will increase 

B. no change in total surplus because the reduction in consumer surplus will offset the increase 

in producer surplus

C. a reduction in total surplus because a deadweight loss is created 

D. It is impossible to say what will happen to total surplus. 


Assume that there is rent control in Chicago. Which of the following is true? 

A. All consumers in the rental market will benefit because the rent will be lower. 

B. The total surplus will fall because there will be a shortage of apartments. 

C. The total surplus will rise because consumer surplus will increase. 

D. Consumer surplus will increase and as a result all consumers in the rental market will 

benefit. 


Jody's bakery makes cakes and would be willing to sell each cake for $12.50. If Jody's bakery 

sells 10 cakes for $13 each, the total producer surplus for Jody's bakery would be equal to 

__________ . 

A. $5.00 

B. $12.50 

C. $125.00 

D. 

$130.00 


Consumer surplus can be defined as the __________ . 

A. value a consumer receives from a good minus the price paid for that 

good

B. maximum amount the consumer would pay for a good 

C. actual amount paid for a good minus the benefit of using that good 

D. marginal utility of a good divided by its price 


5.0/ 5.0 Points 

20 

Laura makes hand-made jewelry and she would be willing to sell pairs of earrings for $50. If 

Laura sells each pair of earrings for $65, her producer surplus per pair of earrings sold would be 

equal to __________ . 

A. 

$115 

B. $65 

C. $15 

D. $50 


5.0/ 5.0 Points 

20 

If the equilibrium price of gasoline is $2.75 per gallon and the government will not allow oil 

companies to charge more than $2.00 per gallon, which of the following will happen? 

A. Demand must eventually decrease so that the market will come into equilibrium at a price of 

$2.00. 

B. Supply must eventually increase so that the market will come into equilibrium at a price of 

$2.00. 

C. Total surplus in the market will be lower than it would be if the price was $2.75 per gallon. 

D. The market will be in equilibrium at a price of $2.00. 


5.0/ 5.0 Points 

20 

Assume that the supply of smartphones remains constant, but the price of smartphones increases. 

Producer surplus __________ .

A. will decrease 

B. will increase 

C. will remain constant 


increase 


5.0/ 5.0 Points 

20 

The difference between the maximum amount a person is willing to pay for a good and its 

current market price is known as __________ . 

A. the paradox of 

value 

B. profits 

C. revealed preferences 

D. consumer surplus 


0.0/ 5.0 Points 

20 

At the market equilibrium, resources are allocated efficiently because __________ . 

A. the marginal cost of producing another unit is equal to zero 

B. the price buyers pay accurately reflects the marginal cost of the resources used to produce the 

good 

C. the price buyers pay is greater than sellers' willingness to sell 

D. all of the above 

Question 15 of

If the government imposes a maximum price for milk that is above the equilibrium price 

__________ . 

A. this maximum price for milk will have no economic impact 

B. quantity demanded of milk will be less than quantity 

supplied 

C. demand for milk will be greater than supply 

D. the available milk supply will have to be rationed 


5.0/ 5.0 Points 

20 

Suppose that you are willing to pay $25 for a new shirt and the market price is $35. In this case 

__________ . 

A. you will not buy the good 

B. you will buy the good and receive a consumer surplus of $5 

C. you will buy the good and receive a consumer surplus of –$10 

D. you will buy the good and receive a consumer surplus of – 

$35 


5.0/ 5.0 Points 

20 

If the government sets a minimum price above the equilibrium price for soybeans, which of the 

following statements will be correct? 

A. There will be an efficient level of output 

produced. 

B. There will be excess supply. 

C. There will be excess demand.



5.0/ 5.0 Points 

20 

The conclusion that the level of output is efficient at the market equilibrium rests on all of the 

following assumptions EXCEPT that __________ . 

A. buyers and sellers are well-informed 

B. there are no external costs or benefits 

C. the government regulates price and 

output 

D. the market is perfectly competitive 


5.0/ 5.0 Points 

20 

Recall the application on rent control and mismatches. Under rent control, the government sets a 

maximum price for housing, decreasing the quantity supplied and the total value of the market. 

Rent control and other maximum prices cause __________ and possibly __________ . 

A. inefficiency; 

mismatches 

B. efficiency: mismatches 

C. mismatches: equilibrium 

D. none of the above 


5.0/ 5.0 Points 

20 

Suppose you receive a consumer surplus of $50. The $50 represents __________ . 

A. a monetary payment from the store

B. a monetary payment from the government 

C. a reduction in the original price of the good 

D. the fact that you paid $50 less than you were willing to pay for the 

good 

Part 1 of 2 - Lesson 4 

Questions 

47.5/ 50.0 Points 


Reductions in pollution from a specific starting level of existing pollution is called __________ . 

A. abatement 

B. the EPA 

C. command and 

control 

D. usage tax 


When the government taxes a firm that generates an external cost, the profit maximizing firm 

will produce __________ . 

A. more units of output than before the tax was imposed 

B. the same number of units of output as before the tax was imposed 

C. fewer units of output than before the tax was imposed 

D. either more or fewer units of output than before the tax was 

imposed 


The idea behind the pollution tax equal to the external cost per unit of pollution is to 

__________ .

A. increase the social benefit to be above the marginal 

cost 

B. internalize the externality 

C. allow the firm to evade external costs 

D. drive polluting firms out of developed countries 


Which of the following would be typically classified as a public good? 

A. postal delivery 

B. national defense 

C. toll roads 

D. college 

education 


Sirens located around a town to warn citizens of the approach of a tornado are an example of 

__________ . 

A. an external cost 

B. a private good 

C. a common 

resource 

D. a public good 


Once a firm is forced to consider an external cost, the price of its product will __________ .

A. increase and output will decrease 

B. increase and output will increase 

C. decrease and output will 

decrease 

D. decrease and output will increase 


If a producer is imposing an external cost on society, the best response would be to 

__________ . 

A. lower the producer's taxes to offset 

pollution 

B. increase the production 

C. internalize the externality 

D. subsidize the producer 


The biggest problem with using a tax as a way to solve an externality problem is that 

__________ . 

A. the tax sometimes increases the external cost 

B. damages must be estimated in financial terms to determine the correct level of the 

tax 

C. the firm will pass the entire tax onto the consumer 

D. the commerce clause forbids such taxes 

Question 9 of 402.5/ 2.5 Points

Goods that are nonrival in consumption and that have benefits that are nonexcludable are 

__________ . 

A. private goods 

B. neighbor effects 

C. public goods 

D. none of the 

above 


2.5/ 2.5 Points 

40 

Chris buys pizza for his football party and he gets to decide who will have a slice of his pizza. 

This means his pizza is __________ . 

A. nonrival and 

nonexcludable 


C. a public good 

D. rival, but nonexcludable 


2.5/ 2.5 Points 

40 

By imposing tolls on people who drive during the busiest times, a government would be 

attempting to __________ . 

A. internalize an externality 

B. institute a progressive tax 

C. externalize an internality

D. encourage driving to generate 

revenue 


0.0/ 2.5 Points 

40 

Public goods are __________ . 

A. rival in consumption and their benefits are excludable 

B. nonrival in consumption and their benefits are excludable 

C. nonrival in consumption and their benefits are 

nonexcludable 

D. rival in consumption and their benefits are nonexcludable 


2.5/ 2.5 Points 

40 

Jamal and Lauren live in the countryside 30 minutes from a city in Virginia. They moved there 

because they wanted to enjoy the fresh air. After a year of living in their house, the 200 acres 

that surround their neighborhood were zoned for an industrial property. A paper mill was built 

on the land and now emits strong gases that can be smelled from miles away. The paper mill's 

emission of gases is an example of a(n. __________ . 

A. public good 

B. good that imposes an external cost 

C. good that provides an external 

benefit 

D. efficient good 


2.5/ 2.5 Points 

40 

If the government taxes a firm that is generating an external cost, the price of the firm's product 

will __________ . 

A. increase and output will decrease

B. increase and output will increase 

C. decrease and output will 

decrease 

D. decrease and output will increase 


2.5/ 2.5 Points 

40 

An external cost of production is __________ . 

A. a cost incurred by someone other than the 

producer 

B. the production cost borne by a producer 

C. the result of the sum of private and social cost 

D. another word for a tax 


2.5/ 2.5 Points 

40 

Private goods are __________ . 

A. rival in consumption and their benefits are excludable 

B. nonrival in consumption and their benefits are excludable 

C. nonrival in consumption and their benefits are 

nonexcludable 

D. rival in consumption and their benefits are nonexcludable 


2.5/ 2.5 Points 

40 

Taxes on a firm's external costs __________ .

A. are designed to encourage more production 

B. are meant to force some firms out of business 

C. are simply meant to force decision makers to consider the full costs of their actions 

D. are designed primarily as a way to raise money so that the government can compensate the 

victims of the spillover 


2.5/ 2.5 Points 

40 

A harbor lighthouse that guides approaching ships is an example of __________ . 

A. a public good 


C. a monopoly 

D. a good that is 

rival 


2.5/ 2.5 Points 

40 

Which of the following would be an example of an external benefit? 

A. More people start to ride the bus and as a result air pollution is reduced. 

B. Firms are able to reduce their costs of production by using a more efficient technology. 

C. The government requires polluting firms to pay a special tax. 

D. A firm has just gotten permission to open a landfill on property that is adjacent to your 

home. 


2.5/ 2.5 Points 

40 

Which of the following would be classified as an external cost?

A. As more firms began hiring computer programmers, the salaries of computer programmers 

increased and therefore the firm's cost of production increased. 

B. You eat too much pizza and end up with a stomach ache. 

C. You are not able to study at night because there is so much noise coming from the dorm 

room next to yours. 

D. When you purchase a prescription drug you are not made fully aware of all the possible side 

effects that may result from taking the drug. 


Questions 

42.5/ 50.0 Points 


2.5/ 2.5 Points 

40 

If marginal product is negative, then __________ . 

A. total product will decrease if more of the input is hired 

B. total product is equal to zero 

C. marginal product will increase if more of the input is 

hired 

D. average product will increase if more of the input is hired 


2.5/ 2.5 Points 

40 

Which of the following statements about fixed costs is correct? 

A. Fixed costs are not opportunity costs. 

B. Fixed costs must be paid even if the firm's output is 

zero.

C. Fixed costs are always the largest portion of total costs. 



2.5/ 2.5 Points 

40 

Maxine has a fixed income per month to spend on goods and services, so in allocating her 

limited income over a set of goods, she should purchase the goods that __________ . 

A. have the highest utility regardless of 

price 

B. have the highest marginal utility 

C. provide the most utility per dollar spent 

D. have equal marginal utilities 


0.0/ 2.5 Points 

40 

The satisfaction experienced from consuming a good or service is referred to as __________ . 

A. utility 

B. marginal utility 

C. the law of diminishing marginal 

utility 



2.5/ 2.5 Points 

40 

Utility can be thought of as the same as __________ . 

A. opportunity cost

B. satisfaction 

C. choice 


above 


2.5/ 2.5 Points 

40 

According to the law of diminishing marginal utility __________ . 

A. as the consumption of a particular good increases, marginal utility increases 

B. as the consumption of a particular good increases, marginal utility 

decreases 

C. total utility is negative 

D. Both B and C are correct. 


2.5/ 2.5 Points 

40 

As more of any one good is consumed in a given period, its __________ . 

A. total utility decreases, then remains 

constant 

B. marginal utility decreases 

C. total utility decreases, then increases 

D. marginal utility increases 


2.5/ 2.5 Points 

40 

The budget line shows __________ .

A. the different combinations of two goods that a consumer can buy 

B. the quantity of a single good that a consumer is willing to buy at different 

prices 

C. the maximized utility from a good 



2.5/ 2.5 Points 

40 

The principle of opportunity cost is __________ . 

A. what someone sacrifices to get something 

B. the satisfaction of obtaining the best next alternative 

C. the choice someone has to make between two different 

goods 

D. the cost of paying for something someone needs 


2.5/ 2.5 Points 

40 

A firm's objective is to maximize its economic profit, which is __________ . 

A. total revenue minus economic 

cost 

B. total profit minus total cost 

C. economic cost minus profit 

D. economic cost minus total 

revenue 


2.5/ 2.5 Points 

40 

You are the owner and only employee of a company that repairs computers. Last year, you

earned total revenues of $75,000. Your costs for equipment, rent, and supplies were $10,000. To 

start this business you quit a job at another computer software firm that paid $40,000 a year. 

During the year, your economic costs were __________ . 

A. 

$10,000 

B. $40,000 

C. $50,000 

D. 

$75,000 


2.5/ 2.5 Points 

40 

Marginal utility is the __________ . 

A. total amount of satisfaction gained by the consumption of a good or service 

B. additional satisfaction gained by the consumption or use of one more unit of 

something 

C. price of a good relative to the prices of other goods and services 

D. comparison of utility between two different people 


2.5/ 2.5 Points 

40 

Sarah has a savings account with a $1,000 balance that earns 3% APY. She decides to withdraw 

the entire balance to buy a laptop computer. What will be her opportunity cost in buying the 

laptop? 

A. the cost of the laptop 

B. the foregone interest

C. the foregone interest and the cost of the laptop 

D. the cost of the laptop minus the foregone 

interest 


0.0/ 2.5 Points 

40 

Juan is consuming three sandwiches and six sodas. If a sandwich costs twice as much as a soda, 

then __________ . 

A. Juan should buy more sodas 

B. Juan should buy more sandwiches 

C. Juan is maximizing his utility if he derives twice as much utility from the last soda as from 

the last sandwich 

D. Juan is maximizing his utility if he derives twice as much utility from the last sandwich as 

from the last soda 


2.5/ 2.5 Points 

40 

Mario has a company that produces plastic freezer bags. His company objective is to maximize 

__________ . 

A. his company's revenues 

B. his company's total out-of-pocket costs 

C. his company's opportunity costs of each factor of production 

D. his company's economic profits, the difference between total revenue and total 

cost 


0.0/ 2.5 Points 

40 

Dan is an entrepreneur who invests in commercial and residential real estate. He has a savings 

account with $100,000 that earns 1% APY. Dan wants to buy a house that will give him a 

monthly cash inflow of $200. What will be the opportunity cost of investing in the house?

A. 

$1,000 

B. $1,200 

C. $800 

D. $200 


2.5/ 2.5 Points 

40 

Consumers should allocate their scarce income so that __________ . 

A. the marginal utility for all goods consumed is zero 

B. the marginal utility for all goods consumed is equal 

C. the marginal utility divided by price is equal for all goods consumed 

D. the marginal utility divided by price is maximized for all goods 

consumed 


2.5/ 2.5 Points 

40 

From 1998 to 2010, the cost of electricity produced with nuclear power has __________ and the 

cost of electricity produced with solar power has __________ . 

A. increased; increased 

B. increased; decreased 

C. decreased; increased 

D. decreased; 

decreased 


40 

2.5/ 2.5 Points

The equimarginal rule __________ . 

A. equates the marginal utility per dollar spent on each good purchased 

B. states that in order to maximize utility the consumer should buy more of those goods with a 

high marginal utility 

C. states that in order to maximize utility the consumer should buy more of those goods that cost 

less 



2.5/ 2.5 Points 

40 

Suppose that MU x / P x < MU y / P y . This implies that __________ . 

A. spending a dollar less on Y and spending a dollar more on X increases 

utility 

B. spending a dollar less on X and spending a dollar more on Y increases utility 

C. X is more expensive than Y 

D. Y is more expensive than X 


Questions 

40.0/ 50.0 Points 


When a second firm enters a monopolist's market, the initial demand curve facing the monopolist 

will __________ . 

A. shift to the left

B. shift to the right 

C. remain the same 


above 


When a second firm enters a monopolist's market, the monopolist's marginal revenue curve will 

__________ . 

A. shift to the left as its initial demand curve shifts to the left 

B. shift to the right as its initial demand curve shifts to the 

right 

C. remain the same 



When there are just a few firms in an industry, the industry structure is most likely to be 

__________ . 

A. a perfectly competitive 

industry 

B. an oligopoly market 

C. a monopoly market 

D. a natural monopoly market 


When a few firms sell similar products in a market, the market structure is most likely to be 

__________ .

A. a perfectly competitive market 

B. a monopoly 

C. a monopolistically competitive 

market 

D. an oligopoly 


What is the characteristic of a perfectly competitive firm that causes it to be a price taker? 

A. many buyers and 

sellers 

B. homogeneous product 

C. free entry and exit 

D. A and B are correct. 


Price discrimination always benefits __________ . 

A. the firm and may benefit or harm the 

consumer 

B. the consumer and may benefit or harm the firm 

C. consumers and firms 

D. consumers only 


When a second firm enters a monopolist's market __________ . 

A. market price will rise

B. the quantity produced by the first firm will 

increase 

C. the first firm's profits will decrease 

D. All of the above will occur. 


Market power is the power to __________ . 

A. control prices 

B. gain another firm's customers 

C. reduce price below cost to deter 

entry 

D. control output 


Which of the following would NOT be considered price discrimination? 

A. charging more money for long-distance calls during business hours than on 

weekends 

B. giving students a discount on ski lift tickets 

C. charging higher rates for oil delivery to people who live farther from your business 

D. charging less money to wash a large luxury car than a small economy car 


2.5/ 2.5 Points 

40 

You notice that the price of butter rises and then falls. The best explanation for this is that 

__________ .

A. demand for butter increased causing price to rise, which attracted other firms to enter the 

market causing supply to increase, which caused the price to go back down 

B. demand for butter decreased causing price to rise, which attracted other firms to enter the 

market causing supply to increase, which caused the price to go back down 

C. demand for butter increased causing price to rise, which induced other firms to exit the 

market causing supply to decrease, which caused the price to go back down 

D. demand for butter increased causing price to rise, which attracted other firms to enter the 

market causing supply to decrease, which caused the price to go back down 


2.5/ 2.5 Points 

40 

Which of the following is NOT a characteristic of a perfectly competitive market? 

A. a small number of firms in a market 

B. selling a standardized product 

C. no barriers to entry 

D. an individual firm having no control over 

price 


0.0/ 2.5 Points 

40 

When a second firm enters a monopolist's market __________ . 

A. the former monopolist's average cost decreases as its output level 

decreases 

B. the demand curve the former monopolist faces shifts to the left 

C. the market price rises as the average cost increases 



2.5/ 2.5 Points

40 

A market served by only one firm is called a(n. __________ . 

A. perfectly competitive market 

B. monopoly 

C. oligopoly 

D. Any of the above could be 

correct. 


2.5/ 2.5 Points 

40 

Compare two markets. In one market, the HHI is 500, in the other market the HHI is 1,500. 

What must be true of these two markets? 

A. The firms in the market in which the HHI is 1,500 have greater market power than do the 

firms in the market in which the HHI is 500. 

B. There are more firms in the market in which the HHI is 1,500 than in the market in which the 

HHI is 500. 

C. The firms in the market in which the HHI is 1,500 have less market power than do the firms 

in the market in which the HHI is 500. 

D. The market in which the HHI is 500 is, by definition, an oligopoly but the market in which 

the HHI is 1,500 is not an oligopoly. 


2.5/ 2.5 Points 

40 

Oligopoly differs from monopoly and perfect competition in that __________ . 

A. firms consider other firms’ actions when choosing price and 

quantity 

B. there are a few firms in the industry

C. firms act strategically 



2.5/ 2.5 Points 

40 

In which of the following market structures do you find many sellers? 

A. monopoly 

B. perfect competition 

C. monopolistic competition 

D. monopolistic competition and perfect 

competition 


2.5/ 2.5 Points 

40 

Which of the following is a characteristic of a perfectly competitive market? 

A. a large number of firms in a 

market 


C. no barriers to entry 



2.5/ 2.5 Points 

40 

Which of the following is NOT a characteristic of a monopoly? 

A. There is only one seller.

B. A monopolist is a price-taker. 

C. There are barriers to entry. 

D. A monopolist's sales revenue is constrained by the market 

demand. 


2.5/ 2.5 Points 

40 

Which of the following is NOT a characteristic of a perfectly competitive market? 

A. a large number of firms in a market 


C. substantial barriers to entry 

D. an individual firm having no control over 

price 


2.5/ 2.5 Points 

40 

Long-run equilibrium for a perfectly competitive industry occurs when __________ . 

A. P = MC = ATC 

B. P = MC = 

AVC 

C. P = MC = AFC 

D. P > MC = ATC 


Questions 

42.5/ 50.0 Points 


2.5/ 2.5 Points 

40 

The marginal revenue product of labor is the __________ .

A. change in labor necessary to produce an additional unit of output 

B. cost of additional labor necessary to produce an additional unit of 

output 

C. change in output resulting from adding an additional unit of labor 

D. change in revenue resulting from adding an additional unit of labor 


2.5/ 2.5 Points 

40 

Poverty rates among the elderly are __________ . 

A. much lower than poverty rates among children 

B. higher than the poverty rates among children 

C. approximately the same as the poverty rates among 

children 

D. rising more rapidly than the poverty rates among children 


0.0/ 2.5 Points 

40 

Without the government's redistribution programs, the income share of the lowest quintile would 

__________ and the income share of the highest quintile would __________ . 

A. decrease; remain the 

same 

B. decrease; increase 

C. remain the same; increase 

D. increase; decrease 


2.5/ 2.5 Points

40 

Compared to the typical high-school graduate, the typical college graduate has greater human 

capital and thus more options for both low-skill and high-skill jobs. This is called __________ . 

A. the signaling effect of a college education 

B. the learning effect of a college education 

C. the discriminatory effect of a college 

education 



2.5/ 2.5 Points 

40 

In order to practice price discrimination, a firm must be in a market such that the consumers in 

its market __________. 

A. have identical tastes 

B. have identical elasticity of demand 

C. have different elasticity of demand 

D. have the same demand for its 

product 


0.0/ 2.5 Points 

40 

Government taxes and transfers __________ . 

A. increase the wealth of the poorest Americans and reduce the wealth of the richest 

Americans 

B. reduce the wealth of all Americans 

C. increase the wealth of all Americans

D. reduce the wealth of the poorest Americans and increase the wealth of the richest 

Americans 


2.5/ 2.5 Points 

40 

The poverty rate in the United States is highest for __________ . 

A. married couples 

B. childless households 

C. female headed 

households 

D. single people 


2.5/ 2.5 Points 

40 

Which of the following is a main factor that explains the differences in the incomes of U.S. 

households? 

A. inheritances 

B. luck and 

misfortune 

C. discrimination 



2.5/ 2.5 Points 

40 

Suppose that we compare shares of income earned by different U.S. groups by dividing all 

households into five groups. Which of the following statements about the income distribution in 

the United States is correct? 

A. Shares of income remain roughly constant as we move from the lowest quintile to the highest

quintile. 

B. Shares of income decrease as we move from the lowest quintile to the highest quintile. 

C. Shares of income increase as we move from the lowest quintile to the highest quintile. 



2.5/ 2.5 Points 

40 

The marginal product of labor is the __________ . 

A. change in labor necessary to produce an additional unit of output 

B. cost of additional labor necessary to produce an additional unit of 

output 

C. change in output resulting from adding an additional unit of labor 

D. change in revenue resulting from adding an additional unit of labor 


2.5/ 2.5 Points 

40 

The change in the quantity of labor demanded resulting from a change in the quantity produced 

of the product is known as the __________ effect. 

A. inputsubstitution 

B. price elasticity 

C. output 

D. derived demand 


2.5/ 2.5 Points 

40 

Which of the following is the most important reason for growing inequality in the income 

distribution in the United States?

A. an increase in demand for highly educated workers 

B. inheritances 

C. discrimination 

D. a steady increase in tuition and fees for a college 

education 


2.5/ 2.5 Points 

40 

The poverty rate in the United States is lowest for __________ . 

A. whites 

B. blacks 

C. 

Hispanics 

D. Asians 


2.5/ 2.5 Points 

40 

The price of an hour of leisure time is __________ . 

A. the income that could have been earned in that hour 

B. zero 

C. the minimum wage rate 

D. determined by the value of the activity the person engages in during that hour of 

leisure 


2.5/ 2.5 Points

40 

One reason that professional baseball players earn higher incomes than college professors is that 

__________ . 

A. the training costs to enter the baseball profession are 

low 

B. there no barriers to entry in the baseball profession 

C. few people have the skill to play professional baseball 

D. being a college professor requires less education 


2.5/ 2.5 Points 

40 

Other things being equal, as diminishing marginal returns begin to occur, the marginal revenue 

product of labor __________ . 

A. decreases as more workers are used 

B. increases as more workers are used 

C. remains unchanged as more workers are 

used 



0.0/ 2.5 Points 

40 

The relationship between the wage and the quantity of labor that a given worker is willing to 

provide is called __________ . 

A. individual labor 

demand 

B. market labor demand

C. individual labor supply 

D. market labor supply 


2.5/ 2.5 Points 

40 

Suppose that differences in skills explain part of the difference in wages by race. Wage 

differences arising from skill differences __________ . 

A. may result from past discrimination in access to 

education 

B. are not attributable to present or past discrimination 

C. will disappear when labor markets are in equilibrium 

D. are always classified as racial discrimination 


2.5/ 2.5 Points 

40 

The change in the quantity of labor demanded resulting from a change in the relative cost of 

labor is known as the __________ effect. 

A. inputsubstitution 

B. price elasticity 

C. output 

D. derived demand 


2.5/ 2.5 Points 

40 

Medical doctors earn higher incomes than people who have a Ph.D. in economics. This is partly 

because __________ . 

A. medical doctors are more likely to face malpractice lawsuits

B. the costs of receiving necessary medical education are higher 

C. a relatively small number of students are admitted to medical 

schools 


Part 1 of 1 -90.0/ 100.0 Points 


A possible reason to impose a protectionist policy such as a tariff is to __________ . 

A. increase the welfare of domestic consumers 

B. slow domestic production 

C. aid other nations in developing their own 

industries 

D. protect domestic workers from foreign competition 


Which of the following situations will arise in the domestic market following the removal of an import quota? 

A. imports increase, domestic production increases, prices increase 

B. imports increase, domestic production decreases, prices decrease 

C. imports decrease, domestic production increases, prices decrease 

D. imports decrease, domestic production decreases, prices 

increase 


If Italy can produce grapes at a lower opportunity cost than any other nation, Italy is said to have a(n. 

__________ in the production of grapes.

A. autarky 

B. absolute advantage 

C. comparative 

disadvantage 

D. comparative advantage 


Which of the following statements is true? 

A. Free trade will benefit all workers in a nation equally. 

B. As a result of specialization some workers will be displaced and harmed in the short run by 

free trade. 

C. Free trade leads to lower wages for all workers in both nations. 

D. Specialization will result in a decline in an industry, and none of those workers will be able 

to find other jobs. 


A possible reason a nation might impose a protectionist policy such as a tariff is to __________ . 

A. help domestic firms establish a world monopoly in a particular market 

B. increase the level of imports 

C. encourage specialization in the good in which the nation has a comparative 

advantage 

D. increase the welfare of domestic consumers 


Suppose the nation of Arcadia produces only two goods, teapots and surfboards. If Arcadia produces only 

teapots, it can make 80 per day. If Arcadia produces only surfboards, it can make 30 per day. What is the 

opportunity cost of 1 teapot in Arcadia?

A. 3/8 of a 

surfboard 

B. 8/3 surfboards 

C. 30 surfboards 

D. 80 surfboards 


According to the infant industry argument for trade protectionism, __________ . 

A. trade barriers must be used to protect domestic workers 

B. new industries need to be shielded from competition in the early stages of learning by 

doing 

C. tariffs imposed to aid new industries should never be removed 

D. new industries are capable of competing with established rivals 


The relative amounts of the goods that will be exchanged for each other in trade refers to the nations' 

__________ . 

A. absolute advantages 

B. terms of trade 

C. production 

possibilities 

D. autarky status 


Import bans, import quotas, voluntary export restraints, and tariffs on goods all __________ .

A. increase imports and raise prices for consumers 

B. reduce imports and prices for consumers 

C. reduce imports and raise prices for consumers 

D. increase imports and reduce prices for 

consumers 


20 

0.0/ 5.0 Points 

Suppose Belgium produces only two goods, chocolate and lace. If Belgium has a comparative advantage in 

lace, a move toward free trade will __________ . 

A. benefit chocolate workers, harm lace workers in the short run, but benefit the nation as a 

whole 

B. harm chocolate workers in the short run, benefit lace workers, but benefit the nation as a 

whole 

C. harm chocolate workers in the short run, harm lace workers, but benefit the nation as a whole 

D. benefit chocolate workers, harm lace workers in the short run, but harm the nation as a whole 


20 

5.0/ 5.0 Points 

A(n. __________ is a trade policy by which a nation agrees to limit its exports of a good in order to avoid more 

restrictive trade policies. 

A. tariff 

B. voluntary export 

restraint 

C. import quota 

D. import ban 


20 

5.0/ 5.0 Points 

A(n. __________ is a tax on an imported good.

A. tariff 

B. import quota 

C. voluntary export 

restraint 

D. export quota 


20 

5.0/ 5.0 Points 

Which of the following situations will arise in the domestic market following the imposition of an import quota? 

A. imports increase, domestic production decreases, prices 

decrease 

B. imports decrease, domestic production increases, prices decrease 

C. imports decrease, domestic production decreases, prices increase 

D. imports decrease, domestic production increases, prices increase 


20 

5.0/ 5.0 Points 

A possible reason a nation might impose a protectionist policy such as a tariff is to __________ . 

A. increase the level of imports 

B. protect an infant industry from foreign competitors 

C. encourage specialization in the good in which the nation has a comparative 

advantage 

D. slow domestic production 


20 

5.0/ 5.0 Points

Suppose there are only two nations, Atlantis and Pacifica, and only two goods, surfboards and kayaks. If 

Atlantis produces only surfboards, it can make 27 per day. If Atlantis produces only kayaks, it can make 18 per 

day. If Pacifica produces only surfboards, it can make 32 per day. If Pacifica produces only kayaks, it can make 

24 per day. After trade begins, __________ will specialize in the production of surfboards and __________ will 

specialize in the production of kayaks. 

A. Atlantis; Atlantis 

B. Pacifica; Atlantis 

C. Atlantis; Pacifica 

D. No trade will 

occur. 


20 

0.0/ 5.0 Points 

Suppose there are only two nations, Atlantis and Pacifica, and only two goods, surfboards and kayaks. If 

Atlantis produces only surfboards, it can make 50 per day. If Atlantis produces only kayaks, it can make 75 per 

day. If Pacifica produces only surfboards, it can make 75 per day. If Pacifica produces only kayaks, it can make 

75 per day. After trade begins, __________ will specialize in the production of surfboards and __________ will 

specialize in the production of kayaks. 

A. Atlantis; Atlantis 

B. Pacifica; 

Pacifica 

C. Atlantis; Pacifica 

D. Pacifica; 

Atlantis 


20 

5.0/ 5.0 Points 

Which of the following situations will arise in the domestic market following the imposition of a tariff? 

A. imports decrease, domestic production increases, prices increase 

B. imports increase, domestic production increases, prices increase

C. imports increase, domestic production decreases, prices decrease 

D. imports decrease, domestic production increases, prices 

decrease 


20 

5.0/ 5.0 Points 

Which of the following situations will arise in the domestic market following the imposition of an import ban? 

A. imports increase, domestic production increases, prices increase 

B. imports increase, domestic production decreases, prices decrease 

C. imports decrease, domestic production increases, prices increase 

D. imports decrease, domestic production increases, prices 

decrease 


20 

5.0/ 5.0 Points 

An import ban results in __________ . 

A. a decrease in the supply of the product 

B. an increase in the product's price 

C. a decrease in the quantity of the product bought and 

sold 



20 

5.0/ 5.0 Points 

The consumption possibilities curve shows the combinations of goods that can be __________ . 

A. consumed by a nation before trade begins 

B. consumed by a nation after trading begins

C. produced by a nation before trading 

begins 

D. produced by a nation after trade begins

C13 Microeconomics Online Exams 1-8 Answers (Ashworth College)

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