question

1. The relationship between an individual's consumption bundle and utility is called a: A) demand function. B) production function. C) consumption function. D) utility function.

answer

D

question

To say that you can't have too much of a good thing means that for any good that you enjoy (for example, pizza): A) higher consumption will always lead to higher utility. B) higher consumption will cause utility to decrease at an increasing rate. C) higher consumption will increase utility, but only up to a point; after that utility will start to decrease. D) it is valid to measure utility in utils.

answer

A

question

Economists identify the satisfaction a person derives from the consumption of goods and services as: A) happiness. B) usefulness. C) utility. D) pleasure.

answer

C

question

Utility is most closely related to: A) usefulness. B) satisfaction. C) requirement. D) necessity.

answer

B

question

An individual gets 5 units of utility from one slice of pizza and 9 units of utility from two slices of pizza. The principle of diminishing marginal utility implies that the total utility from three slices of pizza will be: A) exactly 12 units of utility. B) less than 13 units of utility. C) less than 9 units of utility. D) more than 14 units of utility.

answer

B

question

The principle of diminishing marginal utility states that as an individual consumes more of a good: A) the total utility obtained will eventually fall. B) the total utility obtained will eventually become negative. C) the addition to total utility obtained from the nth unit of the good will be less than that obtained from the (n - 1) unit of the good. D) the marginal utility will eventually become negative.

answer

C

question

The amount by which total utility increases when an additional unit of a good is consumed is called ________ utility. A) average B) additional C) maximum D) marginal

answer

D

question

Assume that the marginal utilities for the first three units of a good consumed are 200, 150, and 125, respectively. The total utility when two units are consumed is: A) 150. B) 200. C) 350. D) 475.

answer

C

question

When total utility is at a maximum, marginal utility is: A) rising. B) at its average value. C) at a maximum. D) zero.

answer

D

question

. Which of the following statements is true because of the principle of diminishing marginal utility? A) When a customer continues to eat more pie at the Pie Palace, each additional piece of pie gives a larger amount of marginal utility. B) When a customer continues to eat more pie at the Pie Palace, each additional piece of pie gives a smaller amount of marginal utility. C) The marginal utility of a piece of pie is maximized when the total utility of pie is zero. D) The total utility of pie is at a maximum while the marginal utility of pie is still increasing.

answer

B

question

If total utility is rising as more salsa is consumed, we can definitely say that marginal utility is: A) falling. B) constant. C) rising. D) greater than zero.

answer

D

question

Freddy has eaten three corn dogs at the county fair and knows that if he eats another, he will get sick on the roller coaster. Knowing this, and ignoring any impact that price might have on his decision, we can say that the: A) total utility of the fourth corn dog is less than zero. B) marginal utility of the fourth corn dog is less than zero. C) total utility curve is still increasing at the fourth corn dog. D) marginal utility curve is still increasing at the fourth corn dog.

answer

B

question

The amount by which total utility ______ when an additional unit of a good is consumed is ________. A) changes; average utility B) increases; additional utility C) decreases; maximum utility D) changes; marginal utility

answer

D

question

Joe's budget line reflects the ________ available to Joe if he spends ________ of his income. A) consumption bundles; all B) consumption bundles; part C) utility; all D) utility; part

answer

A

question

A consumer's spending is restricted because of: A) marginal utility. B) total utility. C) a budget constraint. D) utility maximization.

answer

C

question

An increase in a consumer's income will do all of the following except: A) shift the budget line away from the origin. B) increase the horizontal intercept. C) increase the vertical intercept. D) change the slope of the budget line.

answer

D

question

A decrease in a consumer's income will do all of the following except: A) shift the budget line away from the origin. B) decrease the horizontal intercept. C) decrease the vertical intercept. D) reduce the individual's consumption possibilities.

answer

A

question

Adam has a monthly income of $20 that can be spent on books (B) and pencils (P). The price of a book is $5 and the price of a pencil is $0.50. Which of the following bundles of books and pencils is affordable but does not use all of Adam's income? A) 1 book and 30 pencils B) zero books and 40 pencils C) 2 books and 20 pencils D) 1 book and 10 pencils

answer

D

question

Adam has a monthly income of $20 that can be spent on books (B) and pencils (P). The price of a book is $5 and the price of a pencil is $0.50. Which of the following bundles of books and pencils lies on Adam's budget line?

answer

C

question

The price of popcorn is $0.50 per box and the price of peanuts is $0.25 per bag, and you have $10 to spend on both goods. The maximum number of boxes of popcorn that you can purchase is: A) 5. B) 10. C) 20. D) 40.

answer

C

question

The price of popcorn is $0.50 per box and the price of peanuts is $0.25 per bag, and you have $10 to spend on both goods. The maximum number of bags of peanuts that you can purchase is: A) 5. B) 10. C) 20. D) 40.

answer

D

question

Which of the following statements is true? A) A budget constraint limits what a poor consumer can spend, but there is no similar constraint on rich people. B) Utility maximization requires seeking the most utility from a given budget. C) In consumer choice theory, we assume all goods and services are inferior. D) The slope of the budget constraint depends on how much of each good is consumed.

answer

B

question

You go to an all-you-can-eat buffet. If you maximize utility, the marginal utility of the last bite that you eat will be: A) equal to the price of the buffet. B) as high as possible. C) zero. D) dependent on how much you like the buffet.

answer

C

question

Which of the following best describes the amount of utility that is gained by spending an additional dollar on yogurt? A) The average utility of yogurt divided by the price of yogurt. B) The marginal utility of one tub of yogurt divided by the price of yogurt. C) The total utility of a tub of yogurt divided by the price of yogurt D) The value equal to the price of a related good.

answer

B

question

Assume that Maia spends all her income on halvah (X) and pomegranates (Y) and is purchasing the optimal consumption bundle. If MUX/MUY = 3 and the price of halvah is $12, then the price of pomegranates is: A) $36. B) $4. C) $12. D) $3.

answer

B

question

Suzy knows she has maximized her utility, because she is on her budget constraint and: A) her consumption of cameras equals her consumption of coffee. B) what she spends on cameras equals what she spends on coffee. C) MUCameras/PCameras = MUCoffee/PCoffee. D) MUCameras = MUCoffee.

answer

C

question

Joseph consumes pizza and soda. He is currently consuming three units of pizza and two units of soda. The price of pizza is $5 and the price of soda is $1. If he is consuming the optimal consumption bundle and his marginal utility of pizza is 50, then his marginal utility of soda is: A) 50. B) 10. C) 5. D) impossible to determine unless you know Joseph's income.

answer

B

question

. At the optimal consumption bundle: A) the marginal utility of all goods consumed is equal. B) the marginal utility per dollar spent is equal for all goods consumed. C) the price of all goods consumed is equal. D) total utility from all goods consumed is equal.

answer

B

question

. Diego spends all of his income on milkshakes and French fries. At his current consumption levels the marginal utility of one milkshake and the marginal utility of one order of French fries are equal. According to the optimal consumption rule: A) Diego is maximizing his utility. B) Diego is maximizing his utility only if one milkshake and one order of French fries have the same price. C) Diego should buy more milkshakes and fewer fries if a milkshake costs more than an order of fries. D) Diego will maximize his utility by specializing in consumption and buying either milkshakes or fries but not both.

answer

B

question

Jacquelyn is a student at a major state university. Which of the following is not an example of an explicit cost of her attending college? A) tuition B) textbooks C) the salary that she could have earned working full-time D) computer lab fees

answer

C

question

Accountants use only ________ costs in their computations of cost. A) opportunity B) implicit C) explicit D) variable

answer

C

question

. You own a small deli that sells sandwiches, salads, and soup to the community. Which of the following is an implicit cost of the business? A) wages paid to part-time employees B) the job offer you did not accept at a local catering service C) bread, meat, and vegetables used to produce the items on your menu D) your monthly utility bill

answer

B

question

Suppose the Chicago Cubs could rent out Wrigley Field (the field the players play on) to local youth leagues for $11,000 per month. The $11,000 per month reflects the ________ of capital. A) implicit cost B) explicit cost C) direct cost D) total cost

answer

A

question

Sarah's accountant tells her that she made a profit of $43,002 running a pottery studio in Orlando. Sarah's husband, an economist, claims Sarah lost $43,002 running her pottery studio. This means her husband is claiming that she incurred ________ in ________ costs. A) $86,004; implicit B) $43,002; implicit C) $43,002; explicit D) $86,004; explicit

answer

A

question

Accounting profit differs from economic profit because: A) of differences in the manner in which revenue is calculated. B) economic costs include depreciation, while accounting costs do not. C) accounting costs are generally higher than economic costs because accounting costs include explicit and implicit costs, while economic costs include only explicit costs. D) economic costs are generally higher than accounting costs because economic costs include all opportunity costs, while accounting costs include explicit costs only.

answer

D

question

. If the accounting profit for a firm is negative: A) the economic profit must be positive B) the economic profit must be negative. C) the firm should produce more. D) the firm will not owe any taxes to the government.

answer

B

question

Suppose a local floral shop has explicit costs of $200,000 per year and implicit costs of $50,000 per year. If the store earned an economic profit of $50,000 last year, this means that the store's accounting profit equaled: A) $10,000. B) $50,000. C) $100,000. D) $200,000.

answer

C

question

The costs economists use in the concept of economic profit are: A) accounting costs. B) strictly dollar costs, not opportunity costs. C) opportunity costs, or the value of the best opportunity forgone. D) accounting costs and opportunity costs (i.e., the value of the best opportunity forgone).

answer

D

question

Profit is the difference between ________ and ________. A) total sales; total revenues B) total profits; total costs C) total revenues; total costs D) marginal costs; marginal revenues

answer

C

question

An "either-or" decision involves A) deciding how much of an activity to do. B) a choice between two activities. C) calculating marginal costs for each activity. D) calculating the marginal benefits for each activity.

answer

B

question

The amount by which an additional unit of an activity increases total benefit is: A) net benefit. B) marginal benefit. C) marginal cost. D) utility.

answer

B

question

The amount by which an additional unit of an activity increases total cost is: A) net benefit. B) marginal benefit. C) negative benefit. D) marginal cost.

answer

D

question

In economic analysis, the principle of marginal analysis refers to: A) a method of analysis that divides large problems into smaller, more manageable ones. B) the notion that problems facing a group of individuals can be effectively analyzed by focusing on only a small subsample of the group. C) the result that the optimal quantity of an activity is that at which marginal benefit is equal to marginal cost. D) the result that the optimal quantity of an activity is that at which the net benefit of the representative, or marginal, individual is maximized.

answer

C

question

Constant marginal costs occur when each individual unit costs A) less than the previous one to produce. B) more than the previous one to produce. C) the same to produce as the previous one. D) nothing to produce.

answer

C

question

Marginal benefit: A) is the subsidiary benefit from an activity; for example, the main benefit from weight training is an increase in muscle mass, and the subsidiary or marginal benefit might be a reduction in cholesterol. B) is the addition to total benefit due to undertaking one more unit of an activity. C) must be increasing if total benefit is increasing. D) normally increases as more of an activity is undertaken.

answer

B

question

. According to the optimal output rule, if the marginal benefit is: A) more than the marginal cost, an activity should be increased. B) less than the marginal cost, an activity should be increased. C) equal to the marginal cost, an activity should be increased. D) more than the marginal cost, net benefit is maximized

answer

A

question

According to the optimal output rule, if the marginal benefit is: A) more than the marginal cost, an activity should be reduced. B) less than the marginal cost, an activity should be increased. C) equal to the marginal cost, net benefit is maximized. D) more than marginal cost, net benefit is maximized.

answer

C

question

While eating pizza, you discover that the marginal benefit of eating one more slice is greater than the marginal cost of that slice. You then conclude: A) you will be better off if you eat one more slice. B) you will be no better off and no worse off from eating one more slice. C) you will be worse off if you eat one more slice. D) the total cost of eating the pizza will be more than the total benefit of eating the pizza.

answer

A

question

To maximize her grade in economics, Stacey should study until: A) her marginal cost of studying begins to increase. B) her marginal benefit of studying begins to decrease. C) her marginal benefit of studying equals her marginal cost of studying. D) her marginal cost of studying reaches zero.

answer

C

question

In economics, the assumption is that consumers and firms will make choices that maximize the ________ of each activity. A) total net benefit B) total benefit C) sum of total benefit and total cost D) product of total benefit and total cost

answer

A

question

To maximize total net benefit, consumers and firms evaluate each activity at the: A) average. B) top. C) margin. D) end.

answer

C

question

Total net gain is maximized when marginal benefit ________ marginal cost. A) is more than B) is less than C) is equal to D) approaches

answer

C

question

A ________ is an organization that produces goods or services for sale. A) production function B) firm C) variable input D) fixed input

answer

B

question

. In the short run: A) all inputs are fixed. B) all inputs are variable. C) some inputs are fixed and some inputs are variable. D) all costs are variable.

answer

C

question

The ________ is the increase in output that is produced when hiring an additional worker. A) average product B) total product C) marginal product D) marginal cost

answer

C

question

. The total product curve: A) shows the relation between output and the quantity of a variable input for varying levels of the fixed input. B) will become flatter as output increases if there are diminishing returns to the variable input. C) will be downward sloping if there are diminishing returns to the variable input. D) will become horizontal when the marginal product of the variable input is constant.

answer

B

question

The term diminishing returns refers to: A) a falling interest rate that can be expected as one's investment in a single asset increases. B) a reduction in profits caused by increasing output beyond the optimal point. C) a decrease in total output due to the firm hiring uneducated workers. D) a decrease in the extra output due to the use of an additional unit of a variable input when all other inputs are held constant.

answer

D

question

The idea of diminishing returns to an input in production suggests that if a local college adds more custodians, the marginal product of labor for the custodial staff will ________. A) increase at an increasing rate B) increase at a decreasing rate C) decrease D) not change

answer

C

question

Diminishing returns to an input occur: A) when all inputs are fixed. B) when some inputs are fixed and some are variable. C) when all inputs are variable. D) only in the long run.

answer

B

question

If two firms are identical in all respects except that one has more capital than another, the total product curve for the firm with more capital: A) must equal the total product curve for the firm with less capital. B) will lie above the total product curve for the firm with less capital. C) will lie below the total product curve for the firm with less capital. D) will show no diminishing marginal returns.

answer

B

question

In economics, the short run is defined as: A) less than 1 year. B) less than 6 months. C) period in which some inputs are considered to be fixed in quantity. D) period in which some inputs are fixed, but it cannot exceed 1 year.

answer

C

question

An input whose quantity can be changed in the short run is: A) a marginal input. B) a fixed input. C) an incremental input. D) a variable input.

answer

D

question

An input whose quantity cannot be changed in the short run is: A) a marginal input. B) a fixed input. C) an incremental input. D) a variable input.

answer

B

question

The long run is a planning period: A) over which a firm can consider all inputs as variable. B) that is at least 5 years in length. C) that must be over 6 months in length. D) that must be between 6 months and 5 years.

answer

A

question

The marginal product of labor is: A) the change in labor divided by the change in total product. B) the slope of the total product of labor curve. C) the change in average product divided by the change in the quantity of labor. D) the change in output that occurs when capital increases by one unit.

answer

B

question

A farm can produce 1,000 bushels of wheat per year with two workers and 1,300 bushels of wheat per year with three workers. The marginal product of the third worker is: A) 100 bushels. B) 300 bushels. C) 1,300 bushels. D) 2,300 bushels.

answer

B

question

When an additional unit of a variable input adds less to total product than the previous unit, the firm must be experiencing: A) increasing returns. B) diminishing marginal returns. C) diminishing total returns. D) diminishing marginal returns and diminishing total returns.

answer

B

question

You own a small deli that produces sandwiches, soups, and other items for customers in your town. Which of the following is a fixed input for the production function at your deli? A) the dining room where customers eat their meals B) the loaves of bread used to make sandwiches C) the cans of tomato sauce used to make soups D) the employees hired to help make the food

answer

A

question

Suppose that when a coal-production firm hires one, two, three, four, and five workers, the corresponding total outputs are 10, 15, 19, 22, and 24 tons, respectively. The marginal product of the third worker is ________ tons. A) 3 B) 4 C) 15 D) 19

answer

B

question

The costs associated with variable inputs are ________ costs and the costs associated with ________ inputs are ________costs. A) variable; fixed; fixed B) fixed; fixed; variable C) variable; fixed; variable D) fixed; fixed; fixed

answer

A

question

Which of the following cost concepts is correctly defined? A) MC = TC / FC B) ATC = VC + FC C) ATC = AVC + AFC D) TC = AVC + AFC

answer

C

question

A cost that does not depend on the quantity of output produced is called a: A) marginal cost. B) fixed cost. C) variable cost. D) average cost.

answer

B

question

The total cost curve for a snowmobile dealership shows how ________ cost depends on the quantity of ________. A) total; fixed inputs B) average; variable C) total; output D) marginal; output

answer

C

question

The sum of fixed and variable costs is: A) total cost. B) marginal cost. C) variable cost. D) average cost.

answer

A

question

Austin's total fixed cost at the bakery is $3,600 a month. Austin employs 20 workers and pays each worker $8 an hour. The marginal product of the twentieth worker is 12 iced cupcakes an hour. What is the marginal cost of the last cupcake produced by the last worker Austin hired? A) $0.26 B) $0.66 C) $3.81 D) $8

answer

B

question

For Heidi, the marginal cost of producing one additional photograph equals the change in ________ divided by the change in the ________. A) total cost; number of photographs B) marginal cost; number of photographs C) total cost; marginal product of photographs D) average cost; number of photographs

answer

A

question

When a cherry orchard in Oregon adds a worker, the total cost of production increases by $24,000. Adding the worker increases total cherry output by 600 pounds. Therefore, the marginal cost of the last pound of cherries produced is: A) $40. B) $19. C) $4,000. D) $24,000.

answer

A

question

A firm's marginal cost is: A) the ratio of the change in fixed cost to the change in the quantity of output. B) the slope of the total cost curve. C) the slope of the average variable cost curve. D) the ratio of the change in total output to the change in the quantity of labor.

answer

B

question

The larger the output, the greater the quantity of output over which fixed cost is spread. Called the ________ effect, this leads to a ___________. A) spreading; lower average fixed cost. B) spreading; higher average fixed cost. C) diminishing returns; lower average variable cost. D) diminishing returns; higher average variable cost

answer

A

question

The larger the output, the greater the amount of variable input required to produce additional units. Called the ________ effect, this leads to a ___________. A) spreading; lower average fixed cost. B) spreading; higher average fixed cost. C) diminishing returns; lower average variable cost. D) diminishing returns; higher average variable cost.

answer

D

question

Oscar has negotiated a lease for his sporting goods store in which he is required to pay $2,500 per month in rent. Oscar pays his staff $9 per hour to sell sporting goods and his monthly electricity bill averages $700, depending on his total hours of operation. Oscar's fixed costs of production equal: A) $2,500 per month. B) $3,200 per month. C) $9 per hour multiplied by total hours of work plus $700. D) $9 per hour multiplied by total hours of work plus $3,200.

answer

A

question

Darren runs a barbershop with average fixed costs equal to $60 per day and a total output of 50 haircuts per day. What is his weekly total fixed cost if he is open six days per week? A) $18,000 B) $3,000 C) $60 D) The answer cannot be determined with the information available.

answer

A

question

The average total cost of producing cell phones in a factory is $20 at the current output level of 100 units per week. If fixed cost is $1,200 per week: A) average fixed cost is $20. B) total cost is $3,200. C) variable cost is $2,000. D) average variable cost is $8.

answer

D

question

For every restaurant in Cleveland, the average total cost curve ________ at ________ levels of output, then ________ at ________ levels. A) falls; low; rises; higher B) rises; low; falls; higher C) rises; higher; rises; low D) falls; higher; falls; low

answer

A

question

The ________ curve continually declines as more output is produced in the short run. A) marginal cost B) average variable cost C) average fixed cost D) average total cost

answer

C

question

Average total cost is: A) the change in cost divided by the change in output. B) total cost divided by output. C) the change in output divided by the change in costs. D) total cost times output.

answer

B

question

If an eyeglass business produces 10 pairs of eyeglasses and incurs $30 in average variable cost and $5 in average fixed cost, then average total cost is: A) $30. B) $35. C) $50. D) $300.

answer

B

question

If an eyeglass business produces 10 pairs of eyeglasses and incurs $35 in average total cost and $5 in average fixed cost, then average variable cost is: A) $30. B) $35. C) $50. D) $300.

answer

A

question

. If an eyeglass business produces 10 pairs of eyeglasses and incurs $30 in average variable cost and $5 in average fixed cost, then total cost is: A) $35. B) $50. C) $300. D) $350.

answer

D

question

The marginal cost curve intersects the average variable cost curve at: A) its lowest point. B) its maximum. C) its end point. D) no point; the curves don't intersect

answer

A

question

When marginal cost is below average variable cost, average variable cost must be: A) at its minimum. B) at its maximum. C) falling. D) rising.

answer

C

question

If marginal cost is greater than average total cost, then: A) average total cost is increasing. B) average total cost is decreasing. C) average total cost is unchanged. D) marginal cost is decreasing.

answer

A

question

In the long run, all costs are: A) fixed. B) constant. C) variable. D) marginal.

answer

C

question

The long-run average cost curve will be upward sloping when the firm is experiencing: A) economies of scale. B) diseconomies of scale. C) constant returns to scale. D) diminishing returns.

answer

B

question

When an increase in the firm's output reduces its long-run average total cost, it achieves: A) economies of scale. B) diseconomies of scale. C) constant returns to scale. D) variable returns to scale.

answer

A

question

When diseconomies of scale occur, the: A) long-run average cost curve rises. B) marginal cost curve declines. C) average total cost curve declines. D) average variable cost curve declines.

answer

A

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