Question 1

Suppose the market for coffee is in equilibrium at a price of $5 per pound. This means that:

Accepted Answer

A) any producer who sells coffee can earn a positive economic profit. 
B) potential producers not producing coffee have reservation prices less than $5 per pound. 
C) everyone can afford to buy coffee. 
D) potential consumers not buying coffee value it at less than $5 per pound. 
A) any producer who sells coffee can earn a positive economic profit. 
B) potential producers not producing coffee have reservation prices less than $5 per pound. 
C) everyone can afford to buy coffee. 
D) potential consumers not buying coffee value it at less than $5 per pound.

Question 2

Mary Jane is willing to babysit for $6 an hour. Her neighbor has asked her to babysit for $8 an hour. Assuming Mary Jane accepts the offer:

Accepted Answer

A) her consumer surplus will be $2 per hour. 
B) her economic rent will be $2 per hour. 
C) her economic profit will be $8 per hour. 
D) her accounting profit will be $8 per hour, and her economic profit will be $0 per hour. 
A) her consumer surplus will be $2 per hour. 
B) her economic rent will be $2 per hour. 
C) her economic profit will be $8 per hour. 
D) her accounting profit will be $8 per hour, and her economic profit will be $0 per hour.

Question 3

Generally, ______ motivates firms to enter an industry, while ______ motivates firms to exit an industry.

Accepted Answer

A) economic profit; economic loss 
B) accounting profit; accounting loss 
C) accounting profit; economic loss 
D) economic profit; accounting loss 
A) economic profit; economic loss 
B) accounting profit; accounting loss 
C) accounting profit; economic loss 
D) economic profit; accounting loss

Question 4

Suppose a small island nation imports sugar for its population at the world price of $1,500 per ton. The domestic market for sugar is shown below.   With no subsidy, the equilibrium price of sugar is ______ per ton, and the equilibrium quantity is ______ tons per day.

Accepted Answer

A) $1,000; 12 
B) $1,000; 8 
C) $1,500; 12 
D) $1,500; 8 
A) $1,000; 12 
B) $1,000; 8 
C) $1,500; 12 
D) $1,500; 8

Question 5

In a perfectly competitive market, if supply and demand fully reflect all of the costs and benefits associated with production and consumption, then total economic surplus is maximized when:

Accepted Answer

A) price controls keep prices low enough that most consumers can purchase the item. 
B) consumer surplus and producer surplus are equal. 
C) consumer surplus is greater than producer surplus. 
D) the market is in equilibrium. 
A) price controls keep prices low enough that most consumers can purchase the item. 
B) consumer surplus and producer surplus are equal. 
C) consumer surplus is greater than producer surplus. 
D) the market is in equilibrium.

Question 6

The figure below depicts the short-run market equilibrium in a perfectly competitive market and the cost curves for a representative firm in that market. Assume that all firms in this market have identical cost curves.   In the long run equilibrium in this market:

Accepted Answer

A) price will equal $5, and there will be 20 firms in the industry. 
B) price will equal $5, and there will be 10 firms in the industry. 
C) price will equal $8, and there will be 20 firms in the industry. 
D) price will equal $5 and total output will equal 500 units, but there is not enough information to determine how many firms will be in the industry. 
A) price will equal $5, and there will be 20 firms in the industry. 
B) price will equal $5, and there will be 10 firms in the industry. 
C) price will equal $8, and there will be 20 firms in the industry. 
D) price will equal $5 and total output will equal 500 units, but there is not enough information to determine how many firms will be in the industry.

Question 7

Assume that all firms in this industry have identical cost curves, and that the market is perfectly competitive.   In the short run, firms in this market will shut down if the market price is:

Accepted Answer

A) greater than $10. 
B) less than $15. 
C) less than $10. 
D) less than $5. 
A) greater than $10. 
B) less than $15. 
C) less than $10. 
D) less than $5.

Question 8

Entry into a perfectly competitive industry to occurs whenever:

Accepted Answer

A) accounting profit is equal to zero. 
B) accounting profit is greater than zero. 
C) economic profit is greater than zero. 
D) economic profit is equal to zero. 
A) accounting profit is equal to zero. 
B) accounting profit is greater than zero. 
C) economic profit is greater than zero. 
D) economic profit is equal to zero.

Question 9

Superstar professional athletes can sustain their economic rents because:

Accepted Answer

A) team owners will pay anything to win a championship. 
B) they are represented by highly-skilled agents. 
C) their opportunity costs of playing their sport are high. 
D) they have unique talents that they can sell to the highest bidder. 
A) team owners will pay anything to win a championship. 
B) they are represented by highly-skilled agents. 
C) their opportunity costs of playing their sport are high. 
D) they have unique talents that they can sell to the highest bidder.

Question 10

The sum of producer surplus and consumer surplus is:

Accepted Answer

A) normal profit. 
B) total economic profit. 
C) total surplus. 
D) the marginal benefit of a good. 
A) normal profit. 
B) total economic profit. 
C) total surplus. 
D) the marginal benefit of a good.

Question 11

The supplier of a factor of production has a reservation price of $100. The purchaser of the factor of production has a reservation price of $200. If the factor of production is unique, then:

Accepted Answer

A) there will be no transaction since $200 is greater than $100. 
B) a transaction will occur, and the price paid for the factor of production will be $150. 
C) a transaction will occur, and the price paid for the factor of production will be $200. 
D) a transaction will occur, and the price paid for the factor of production will be $100. 
A) there will be no transaction since $200 is greater than $100. 
B) a transaction will occur, and the price paid for the factor of production will be $150. 
C) a transaction will occur, and the price paid for the factor of production will be $200. 
D) a transaction will occur, and the price paid for the factor of production will be $100.

Suppose the market for coffee is in equilibrium at a price of $5 per pound. This means that:

Mary Jane is willing to babysit for $6 an hour. Her neighbor has asked her to babysit for $8 an hour. Assuming Mary Jane accepts the offer:

Generally, motivates firms to enter an industry, while motivates firms to exit an industry.

Suppose a small island nation imports sugar for its population at the world price of $1,500 per ton. The domestic market for sugar is shown below. With no subsidy, the equilibrium price of sugar is per ton, and the equilibrium quantity is tons per day.

In a perfectly competitive market, if supply and demand fully reflect all of the costs and benefits associated with production and consumption, then total economic surplus is maximized when:

The figure below depicts the short-run market equilibrium in a perfectly competitive market and the cost curves for a representative firm in that market. Assume that all firms in this market have identical cost curves. In the long run equilibrium in this market:

Assume that all firms in this industry have identical cost curves, and that the market is perfectly competitive. In the short run, firms in this market will shut down if the market price is:

Entry into a perfectly competitive industry to occurs whenever:

Superstar professional athletes can sustain their economic rents because:

The sum of producer surplus and consumer surplus is:

The supplier of a factor of production has a reservation price of $100. The purchaser of the factor of production has a reservation price of $200. If the factor of production is unique, then:

Thinking Like an Economist

Comparative Advantage

Supply and Demand

Elasticity

Demand

Perfectly Competitive Supply

Monopoly, Oligopoly, and Monopolistic Competition

Games and Strategic Behavior

Externalities and Property Rights

The Economics of Information

Labor Markets, Poverty, and Income Distribution

The Environment, Health, and Safety

Public Goods and Tax Policy

Filters

Exam 7: Efficiency, Exchange, and the Invisible Hand in Action

Suppose the market for coffee is in equilibrium at a price of $5 per pound. This means that:

Mary Jane is willing to babysit for $6 an hour. Her neighbor has asked her to babysit for $8 an hour. Assuming Mary Jane accepts the offer:

Generally, ______ motivates firms to enter an industry, while ______ motivates firms to exit an industry.

Suppose a small island nation imports sugar for its population at the world price of $1,500 per ton. The domestic market for sugar is shown below. With no subsidy, the equilibrium price of sugar is ______ per ton, and the equilibrium quantity is ______ tons per day.

In a perfectly competitive market, if supply and demand fully reflect all of the costs and benefits associated with production and consumption, then total economic surplus is maximized when:

The figure below depicts the short-run market equilibrium in a perfectly competitive market and the cost curves for a representative firm in that market. Assume that all firms in this market have identical cost curves. In the long run equilibrium in this market:

Assume that all firms in this industry have identical cost curves, and that the market is perfectly competitive. In the short run, firms in this market will shut down if the market price is:

Entry into a perfectly competitive industry to occurs whenever:

Superstar professional athletes can sustain their economic rents because:

The sum of producer surplus and consumer surplus is:

The supplier of a factor of production has a reservation price of $100. The purchaser of the factor of production has a reservation price of $200. If the factor of production is unique, then:

Thinking Like an Economist

Comparative Advantage

Supply and Demand

Elasticity

Demand

Perfectly Competitive Supply

Monopoly, Oligopoly, and Monopolistic Competition

Games and Strategic Behavior

Externalities and Property Rights

The Economics of Information

Labor Markets, Poverty, and Income Distribution

The Environment, Health, and Safety

Public Goods and Tax Policy

Filters

Generally, motivates firms to enter an industry, while motivates firms to exit an industry.

Suppose a small island nation imports sugar for its population at the world price of $1,500 per ton. The domestic market for sugar is shown below. With no subsidy, the equilibrium price of sugar is per ton, and the equilibrium quantity is tons per day.