1) Billy likes candy and popcorn. Candy sells for $0.50 a bag and popcorn sells for $1 per bag. Currently he is in consumer equilibrium. Then the price of candy rises to $1 a bag. Which statement is true in the new consumer equilibrium?

A) The marginal utility from popcorn will increase.

B) Marginal utility per dollar on candy will be equal to 2.

C) Total utility will increase.

D) The marginal utility from candy will decrease.

E) The marginal utility from candy will be equal to the marginal utility from popcorn.

2) Beverly is currently in consumer equilibrium. An increase in her income

A) increases her total utility.

B) decreases her total utility.

C) increases her marginal utility from all goods.

D) decreases her marginal utility from all goods.

E) increases her consumption of all goods.

3) With respect to water and diamonds, water

A) has a higher marginal utility.

B) has a lower marginal utility.

C) has a lower total utility.

D) is cheaper than diamonds because it has a lower total utility.

E) has zero marginal utility.

4) Neuroeconomics studies all of the following concepts except

A) the prefrontal cortex.

B) the hippocampus.

C) the production possibilities frontier.

D) dopamine.

E) anxiety and fear.

5) Suppose all prices double and income also doubles. Which statement is true?

A) The budget line does not change.

B) The slope of the budget line increases.

C) The slope of the budget line decreases.

D) The budget line shifts rightward.

E) The budget line shifts leftward.

6) Bill consumes apples and bananas. Apples are measured on the vertical axis and bananas are measured on the horizontal axis. Bill's income doubles, the price of apples doubles, and  the price of bananas triples. Bill's budget line

A) remains unchanged.

B) shifts rightward and the slope does not change.

C) shifts rightward and becomes steeper.

D) shifts rightward and becomes flatter.

E) becomes steeper.

7) Goods that can be bought in any quantity desired are called   

A) divisible goods.

B) invisible goods.

C) inferior goods.

D) services.

E) normal goods.

8) A firm's goal is to

A) maximize revenue.

B) maximize cost while minimizing revenue.

C) maximize profit.

D) minimize costs.

E) minimize risk.

9) Which one of the following statements about the implicit rental rate of capital is true?

A) It is the market value of capital.

B) It is the opportunity cost to a firm of using its own capital.

C) It includes normal profit.

D) It is the amount paid for the use of land or buildings.

E) It is the depreciated value of capital.

10) Flora's Flowers bought a new van last year for $10,000. It can now sell the van for $8,500. To buy this year's model of the same van it would have to pay $11,000. What is the one-year amount of economic depreciation?

A) $2,500

B) $1,500

C) $1,000

D) $10,000

E) $3,500

11) Economic profit equals total revenue minus

A) the cost of resources bought in the market.

B) the implicit rental rate.

C) the opportunity cost of production.

D) the cost of resources supplied by the owner.

E) the cost of resources owned by the firm.

12) To produce a unit of output, Alphaworks uses 10 hours of labour and 5 kilograms of material. Betaworks uses 5 hours of labour and 10 kilograms of material, and Gammaworks uses 10 hours of labour and 10 kilograms of material. If labour costs $10 per hour and material costs $5 per kilogram, which firm is economically efficient?

A) Alphaworks only

B) Betaworks only

C) Gammaworks only

D) Alphaworks and Betaworks

E) Alphaworks and Gammaworks

13) Which one of the following statements is true?

A) All technologically efficient methods are also economically efficient.

B) All economically efficient methods are also technologically efficient.

C) Technological efficiency changes with changes in relative input prices.

D) Technologically efficient firms will be more likely to survive than economically efficient firms.

E) Technological efficiency is more important than economical efficiency.

14) Some firms use large amounts of capital and small amounts of labour, while others use small amounts of capital and large amounts of labour to

A) use surpluses of labour and capital and eliminate unemployment of these resources.

B) use the best available technology.

C) use the resources that are most readily available.

D) maximize profit.

E) maximize production.

15) A firm with a single owner who has unlimited liability is

A) a corporation.

B) a sole proprietorship.

C) a limited partnership.

D) an unlimited partnership.

E) a cooperative.

16) The short run is a time frame in which

A) the firm is not able to hire more workers.

B) the amount of output produced is fixed.

C) there is a shortage of most factors of production.

D) at least one factor of production is fixed.

E) there is not enough time to make all of the decisions necessary to maximize profit.

17) Plant refers to those factors of production

A) that are too expensive for the firm to purchase.

B) that must be held in storage for at least one year.

C) that are fixed in the short run.

D) that have a decreasing marginal product as more of the factor is used.

E) which can be purchased only in fixed quantity lots.

18) The long run refers to a time period

A) of one year or less.

B) in which all factors of production are variable.

C) in which labour is variable, but plant is fixed.

D) when there is at least one variable factor of production.

E) of at least 5 years.

19) After constructing a new factory, the cost of building the factor is a

A) past cost.

B) variable cost.

C) significant cost.

D) taxable cost.

E) sunk cost.

20) Which of the following factors are fixed in the long run?

A) labour

B) capital

C) land

D) entrepreneurship

E) No factors of production are fixed in the long run.

21) Marginal product of labour is the increase in total product that results from a

A) one-unit increase in the quantity of labour employed, other inputs remaining the same.

B) one-unit increase in the quantity of fixed inputs employed, holding the quantity of labour constant.

C) one-unit increase in both the quantity of variable and fixed inputs.

D) change in the cost of labour.

E) 1 percent change in the quantity of labour and the quantity of capital employed.

Refer to the table below to answer the following questions.

Table 1

22) Refer to Table 1which gives Tania's total product schedule. The marginal product when the firm increases the number of workers from 3 to 4 per day is

A) 6 teapots.

B) 2 teapots.

C) 9 teapots.

D) 7 teapots.

E) 4 teapots.

23) Refer to Table 1 which gives Tania's total product schedule. The marginal product when the number of workers increases from 1 to 2 is

A) 3 teapots.

B) 12 teapots.

C) 7 teapots.

D) 9 teapots.

E) 6 teapots.

24) Refer to Table 1 which gives Tania's total product schedule. The average product when the firm hires two workers is

A) 3 teapots per worker.

B) 6 teapots per worker.

C) 7 teapots per worker.

D) 9 teapots per worker.

E) 12 teapots per worker.

25) A firm's total fixed cost is $100. If total cost is $200 for one unit of output and $310 for two units, what is the marginal cost of the second unit?

A) $100

B) $110

C) $200

D) $210

E) $310

26) Consider a graph that shows the total cost curve and the total variable cost curve. As output increases, the vertical distance between these two curves

A) increases.

B) decreases.

C) becomes smaller and then larger.

D) becomes larger and then smaller.

E) is constant.

27) A production function is the relationship between the maximum output attainable and the

A) price of output.

B) change in technology.

C) demand for output.

D) quantities of inputs used.

E) amount of labour used.

28) Suppose a candy manufacturer can triple its production of fudge by doubling its production facility for making fudge. This indicates the presence of

A) constant returns to scale.

B) economies of scale.

C) diseconomies of scale.

D) market constraints.

E) the law of diminishing returns.

29) Perfect competition occurs in a market where there are many firms, each selling

A) an identical product.

B) a similar product.

C) a unique product.

D) a capital-intensive product.

E) a competitive product.

30) Which one of the following does not occur in perfect competition?

A) No single firm can exert a significant influence on the market price of the good.

B) There are many buyers.

C) There are significant restrictions on entry into the market.

D) Sellers and buyers are well informed about prices.

E) Established firms have no advantage over new ones.

31) An example of a perfectly competitive industry is the

A) airline industry.

B) beer industry.

C) running shoe industry.

D) fast food industry.

E) wheat industry.

32) Economic profit equals

A) total fixed cost plus total variable cost.

B) total revenue minus marginal cost.

C) marginal revenue minus marginal cost.

D) total revenue minus total cost.

E) total revenue minus total variable cost.

33) A firm shuts down if price is

A) above minimum average variable cost.

B) below minimum average variable cost.

C) above minimum average fixed cost.

D) less than marginal cost.

E) below average total cost.

34) If a perfectly competitive firm's marginal revenue is less than its marginal cost, the firm

A) cannot increase its economic profit.

B) must be making an economic profit.

C) will decrease its output to increase economic profit.

D) will increase its output to increase economic profit.

E) must raise the price.

35) If firms exit an market, the

A) market supply curve shifts leftward.

B) price of the good falls.

C) economic profit of the remaining firms decrease.

D) total market output increases.

E) economic profit of the remaining firms stay the same.

36) Technological change

A) brings only temporary gains to producers.

B) brings only temporary gains to consumers.

C) brings permanent gains to producers.

D) decreases the number of firms in an industry.

E) decreases the number of consumers in a market.

37) An exclusive right granted to a firm to supply a good or service is

A) a licence.

B) a patent.

C) a public franchise.

D) the essential characteristic of natural monopoly.

E) an economy of scale.

38) A natural monopoly exists when

A) the government protects the firm by granting an exclusive franchise.

B) production can take place with constant returns to scale.

C) there are no rivals in the market.

D) one firm can supply the entire market at a lower cost than two or more firms.

E) the average total cost curve is upward sloping.

39) A single-price monopoly is a firm that                   each unit of its output                   . A

 monopoly sells different units of a good or service for different prices.

A) produces; at a constant cost; discriminatory

B) must sell; for the same price to all its customers; price-discriminating

C) produces; at a constant cost; price-discriminating

D) must sell; for the same price to all its customers; discriminatory

E) must sell; at the same price as a perfectly competitive firm; price-discriminating

40) In monopolistic competition

A) firms practice product differentiation.