OK 16) If the price of hotdogs are expected to increase in the future, then: 16)
ID: 1181556 • Letter: O
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16) If the price of hotdogs are expected to increase in the future, then: 16) ______
A) the current demand for hotdogs will decrease.
B) the current quantity demanded for hotdogs will increase.
C) the current demand for hotdogs will increase.
D) the current quantity demanded for hotdogs will decrease.
17) Assume the price of ice cream cones falls from $1.50 to $1.00 and the quantity supplied decreases from 150 to 125 per
week. Using the initial price method the price elasticity of supply is: 17) ______
A) 2. B) 1.2. C) .50. D) .75.
18) Suppose the price elasticity of supply for rocking chairs is 1.2 and the price increases by 20%. The quantity supplied
will increase by ________ %. 18) ______
A) 20 B) 18 C) 24 D) 12
19) Which of the following is a true statement? 19) ______
A) If demand is elastic and the price increases, the total revenue will increase.
B) If demand is elastic and the price decreases, the quantity demanded will decrease.
C) If demand is inelastic and the price increases, the total revenue will decrease.
D) If demand is inelastic and the price increases, the total revenue will increase.
22) Assume that the supply of smartphones remains constant, but the price of smartphones increases. Producer surplus:
22) ______
A) will remain constant.
B) will increase.
C) will decrease.
D) may increase or decrease depending on the amount of the price increase.
Additional Application
Prior to 2001 Canada annually exported billions of board feet of lumber to the USA tariff-free. The two countries had
followed an agreement in which there would be no restrictions on the lumber from Canadian companies. In March 2001
the agreement ended and in 2002 the USA imposed tariffs and duties on imported Canadian lumber. What were the
effects of these changes and who gained and who lost?
The forestry workers of Canada were hurt. About 15,000 workers lost their jobs in British Columbia and many Canadian
towns suffered from the loss of income from lumber sales and related industries. Exports to the USA fell from 14.7 billion
board feet in 2000 to 20.9 million board feet in 2004. When the lumber prices rose in the USA, the costs of production for
home building firms increased.
The USA government has realized $3.5 billion from the tariffs and that is sitting in the Treasury awaiting resolution of
legal disputes. Lumber companies in the USA have seen their prices rise with less competition.
James Thayer, "Soft Wood, Hard Dispute," The Weekly Standard, November 18, 2005. Online
23) According to this application about the USA imposing tariffs on lumber from Canada, if the cost of production for US
construction companies increased, then their ________ curve should shift ________. 23) ______
A) supply; left B) demand; left C) demand; right D) supply; right
24) With respect to the equimarginal rule, a person will maximize utility when the: 24) ______
A) marginal utility per dollar spent is equalized across products.
B) total utility is equalized across products.
C) total utility per dollar spent is equalized across products.
D) marginal utility is equalized across products.
26) Consumers should allocate their scarce income so that: 26) ______
A) the marginal utility for all goods consumed is equal.
B) the marginal utility divided by price is equal for all goods consumed.
C) the marginal utility divided by price is maximized for all goods consumed.
D) the marginal utility for all goods consumed is zero.
27) The period of time when a firm is able to change all of inputs, or factors of production, is called the: 27) ______
A) accounting term. B) short run.
C) economic term. D) long run.
28) The short run can be defined as any period of time: 28) ______
A) less than one year. B) in which all inputs are variable.
C) in which some inputs are fixed. D) in which price is fixed.
29) Every point on the long-run average cost curve represents: 29) ______
A) the minimum point of the associated short-run average cost curve.
B) the minimum cost at which the associated output level can be produced when the scale of plant cannot be changed.
C) the minimum cost at which the associated output level can be produced when the scale of plant can be changed.
D) both A and B
Scenario 9.1: 21st Century Pen Inc. produces 2000 pens per day, and hires 20 workers at a cost of $200 per day per worker.
The price of each pen is $5 each. 21st Century Pen Inc. pays a daily rental rate of $60 on its factory and a daily insurance
rate of $20. 21st Century Pen Inc. has a ten year lease on the factory and insurance contract for a year, the company has no
other expenses.
31) Refer to Scenario 9.1. 21st Century Pen Inc.'s average total cost at an output of 2000 pens per day is approximately:
31) ______
A) $2 per unit. B) $2 .01 per unit. C) $2 .03 per unit. D) $2 .04 per unit.
32) If a firm in a perfectly competitive market tries to raise its price above the going market price, then: 32) ______
A) it will sell more output.
B) it will sell some output, but not as much as before.
C) it will sell the same amount of output as before.
D) it will not be able to sell any output.
33) If a firm is producing where marginal revenue is greater than marginal cost: 33) ______
A) the revenue gained by producing one more unit of output equals the additional cost incurred by doing so.
B) the firm is already maximizing profits because revenue is being increased by more than costs.
C) the revenue gained by producing one more unit of output exceeds the additional cost incurred by doing so.
D) the revenue gained by producing one more unit of output is less than the additional cost incurred by doing so.
34) Refer to Figure 10.8. If the paper books industry becomes monopolized, the profit-maximizing price will be ________
and the profit-maximizing quantity will be ________ units. 34) ______
A) $10; 400 B) $20; 800 C) $25; 600 D) $23; 400
37) In monopolistic competition, firms can have some market power based on the fact that: 37) ______
A) there are barriers to entry. B) they produce differentiated goods.
C) there is only one firm in the industry. D) they are large in size.
38) Which of the following goods are sold in a monopolistically competitive market? 38) ______
A) cookies B) oil C) corn D) wheat
Number of Workes/ Total Product
0 0
1 40
2 70
3 90
4 100
5 105
6 102
Table 17.3
39) Refer to Table 17.3. If the market price of the product is $5 and the wage rate is $40, the firm should hire ________
workers. 39) ______
A) 4 B) 5 C) 2 D) 3
40) The owner of Instant Printing, a firm that prints business cards, tells you that as a result of an increase in the wage rate
of printer operators he has reduced the amount of output he produces and the amount of capital he uses. How would you
respond to this? 40) ______
A) This seems logical, because the output effect of an input price increase would cause a firm to demand less of all inputs,
not just the input whose price increased.
B) You tell him that the input-substitution effect and the scale effect both suggest that he decrease the amount of capital
he uses when his workers' wage rate increases.
C) You should tell him that this doesn't make any economic sense because according to the input-substitution effect he
should have substituted toward capital and away from labor.
D) You should tell him that instead of reducing output and the demand for all inputs, he should increase output and the
demand for inputs so that he can meet the higher labor costs by generating more revenue.
Explanation / Answer
16) A
17)B
18)B
19)A
20)D
21)c
22)a
23)a
24)b
25)c
26)c
27)b
28)a
29)b
30)b
31)a
32)a
33)d
34)d
35)c
36)b
37)d
38)d
39)a
40)b
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