What does the negative slope of the production possibilities frontier imply? A) Diminishing marginal utility. B) The only way to increase one person’s utility is to decrease the other’s. C) Diminishing marginal rates of technical substitution. D) The only way to increase output of one good is to decrease output of another. ANSWER D […]
Refer to Figure 9.8. Under free trade in sugar, domestic producer surplus will be A) $100. B) $175. C) $10,000. D) $25,000. E) $30,625. ANSWER C
In a recent article, two economists estimated that the 37.5% increase in price that would result from a 75 cent tax increase on cigarettes would lead to a decrease in smoking among college students of 30%. What can you conclude about the demand for cigarettes among college students? A) It is price elastic. B) It […]
Suppose the observed annual quantity of steel exchanged in the European market is 30 million metric tons, and the observed market price is 90 euros per ton. If the price elasticity of demand for steel is -0.3 in Europe, what is an appropriate value for the price coefficient (b) in a linear demand function Q […]
Which of the following actions may be explained by the law of small numbers? A) People buy lottery tickets. B) People buy air travel insurance. C) People purchase extended or long-term warranties or maintenance contracts for new automobiles and appliances. D) all of the above ANSWER D
Refer to Scenario 7.3. When Q = 200, what is the marginal cost? A) 0 B) 5 C) 10 D) 15 E) 25 ANSWER B
Refer to Scenario 7.3. Which of the following combinations of inputs is on the isoquant to produce 400 units of output? A) L = 0, K = 400 B) L = 400, K = 0 C) L = 100, K = 100 D) all of the above E) A and B, but not C […]
Refer to Figure 9.8. If free trade in sugar is allowed, consumer surplus will be A) $175. B) $250. C) $30,625. D) $61,250. E) $62,500. ANSWER E
Suppose the current stock of greenhouse gases in the atmosphere is 100 million tons, the stock dissipation rate is 0.02, and we will emit 4 million tons into the atmosphere this year. What is the stock level of greenhouse gases expected to be for next year? A) 98 million tons B) 100 million tons C) […]
The key disadvantage of the kinked-demand model is that it: A) explains why firms may collude, but it does not explain how they interact. B) does not explain why prices may be rigid in an oligopoly. C) requires the assumptions of perfect competition. D) only holds under price leadership. ANSWER B
