Questions:
1) A leftward shift in the supply curve of product X will increase equilibrium price to a greater extent the:
A. more inelastic the demand for the product.
B. more elastic the supply curve.
C. larger the elasticity of demand coefficient.
D. more elastic the demand for the product.
2) In a competitive market economy firms will select the least-cost production technique because:
A. "dollar voting" by consumers mandates such a choice.
B. such choices will result in the full employment of available resources.
C. to do so will maximize the firms' profits.
D. this will prevent new firms from entering the industry.
3) If the demand for farm products is price inelastic, a good harvest will cause farm revenues to:
A. decrease
B. increase
C. either increase or decrease, depending on what happens to supply.
D. be unchanged.
4) Camille's Creations and Julia's Jewels both sell beads in a competitive market. If at the market price of $5, both are running out of beads to sell (they can't keep up with the quantity demanded at that price), then we would expect both Camille's and Julia's to:
A. raise their price and increase their quantity supplied.
B. raise their price and reduce their quantity supplied.
C. lower their price and increase their quantity supplied.
D. lower their price and reduce their quantity supplied.
5) Since their introduction, prices of DVD players have fallen and the quantity purchased has increased. This statement:
A. suggests that the demand for DVD players has increased.
B. suggests that the supply of DVD players has increased.
C. constitutes an exception to the law of supply in that they suggest a downward sloping supply curve.
D. constitutes an exception to the law of demand in that they suggest an upward sloping demand curve.
6) If price is above the equilibrium level, competition among sellers to reduce the resulting:
A. shortage will decrease quantity demanded and increase quantity supplied.
B. surplus will increase quantity demanded and decrease quantity supplied.
C. shortage will increase quantity demanded and decrease quantity supplied.
D. surplus will decrease quantity demanded and increase quantity supplied.
7) A firm that is motivated by self interest should:
A. hire each input so the productivity of each is equal at the margin.
B. employ the combination of resources that will produce the profit-maximizing output at the minimum cost.
C. always use large amounts of cheap inputs and small amounts of expensive inputs in producing its output.
D. always use large amounts of the most productive inputs and small amounts of the least productive inputs in producing its output.
8) If technology dictates that labor and capital must be used in fixed proportions, an increase in the price of capital will cause a firm to use:
A. more labor as a consequence of the output effect.
B. more labor as a consequence of the substitution effect.
C. less labor as a consequence of the output effect.
D. less labor as a consequence of the substitution effect.
9) If a firm is selling in an imperfectly competitive product market, then:
A. the marginal products of successive workers can be sold at a constant price.
B. A. average product will be less than marginal product for any number of workers hired.
C. the marginal products of successive workers must be sold at lower prices.
D. the marginal products of successive workers can be sold at higher prices.
10) Which of the following represents a long-run adjustment?
A. a supermarket hires four additional clerks
B. a farmer uses an extra dose of fertilizer on his corn crop
C. unable to meet foreign competition, a U.S. watch manufacturer sells one of its branch plants
D. a steel manufacturer cuts back on its purchases of coke and iron ore
11) In the short run the Sure-Screen T-Shirt Company is producing 500 units of output. Its average variable costs are $2.00 and its average fixed costs are $.50. The firm's total costs:
A. are $1,100.
B. are $2.50.
C. are $1,250.
D. are $750.
12) In which of the following industries are economies of scale exhausted at relatively low levels of output?
A. newspaper printing
B. aircraft production
C. automobile manufacturing
D. concrete mixing
13) A firm can hire six workers at a wage rate of $8 per hour but must pay $9 per hour to all of its employees to attract a seventh worker. The marginal wage cost of the seventh worker is:
A. $21.
B. $9.
C. $10.
D. $15.
14) Construction workers frequently sponsor political lobbying in support of greater public spending on highways and public buildings. One reason they do this is to:
A. increase the price of substitute inputs.
B. restrict the supply of construction workers.
C. increase the elasticity of demand for construction worke