economics data bank

____ 31. Which of the following statements is correct?

a. Neither economic theory nor evidence from the U.S. economy suggests that there is a close link

between productivity and real wages.

b. Economic theory suggests that there is a close link between productivity and real wages, but

evidence from the U.S. economy fails to confirm that link.

c. Evidence from the U.S. economy suggests a close link between productivity and real wages, but

economic theory provides no basis for such a link.

d. Both economic theory and evidence from the U.S. economy suggest that there is a close link

between productivity and real wages.

____ 32. Laura consumes only beer and chips. Her indifference curves are all bowed inward. Consider the bundles (2,6), (4,4),

and (6,2). If Laura is indifferent between (2,6) and (6,2), then Laura must

a. prefer (4,4) to (6,2). c. prefer (6,2) to (4,4).

b. be indifferent between (4,4) and (6,2). d. prefer (2,6) to (4,4).

____ 33. Figure 14-9

MC

ATC

P1

Q1

(a)

P0

P2

Q2 Quantity

Price

P1

QA

(b)

P0

P2

QBQD QC

S0 S1

D0

D1

A

B

C

D

Quantity

Price

Refer to Figure 14-9. Assume that the market starts in equilibrium at point A in panel (b). An increase in demand from D0 to D1 will result in

a. a new market equilibrium at point D.

b. an eventual increase in the number of firms in the market and a new long-run equilibrium at point

C.

c. rising prices and falling profits for existing firms in the market.

d. falling prices and falling profits for existing firms in the market.

____ 34. Which of the following statements is correct for a monopolist?

i) The firm maximizes profits by equating marginal revenue with marginal cost.

ii) The firm maximizes profits by equating price with marginal cost.

iii) Demand equals marginal revenue.

iv) Average revenue equals price.

a. i), iii), and iv) only

b. CHOICE BLANK

c. i), ii), and iv) only

d. i), ii), iii), and iv)

e. and iv) only

____ 35. Figure 15-5

Curve B Curve A

Curve D

Curve C

Q3

P4

P2

Q4

P3

Q1

P0

P1

Q2

P5

Quantity

Price

Refer to Figure 15-5. A profit-maximizing monopoly's profit is equal to

a. P4 x Q3. c. (P4-P1) x Q3.

b. (P4-P2) x Q3. d. (P5-P0) x Q1.

____ 36. Refer to Figure 15-5. Profit on a typical unit sold for a profit-maximizing monopoly would equal

a. P5-P0. c. P4-P1.

b. P4-P2. d. P4-P3.

____ 37. Refer to Figure 15-5. At the profit-maximizing level of output,

a. marginal revenue is equal to P3. c. average revenue is equal to P4.

b. marginal cost is equal to P3. d. average total cost is equal to P0.

____ 38. A monopolistically competitive firm faces the following demand schedule for its product:

Price ($)10 9 8 7 6 5 4 3 2 1

Quantity2 4 6 9 11 13 15 17 19 21

The firm has total fixed costs of $20 and a constant marginal cost of $2 per unit. The firm will maximize profit with

a. 6 units of output. c. 11 units of output.

b. 9 units of output. d. 13 units of output.

____ 39. If "too much choice" is a problem for consumers, it would occur in which market structure(s)?

a. perfect competition

b. monopoly

c. monopolistic competition

d. perfect competition and monopolistic competition

____ 40. When a market is monopolistically competitive, the typical firm in the market is likely to experience a

a. positive profit in the short run and in the long run.

b. positive or negative profit in the short run and a zero profit in the long run.

c. zero profit in the short run and a positive or negative profit in the long run.

d. zero profit in the short run and in the long run.