Production Possibilities, Opportunity Cost and
Topic: Three economic questions, Difficulty: E, Type: RE, Answer: a
Which of the following is not one of the three fundamental economic questions?
Introducing the Economic Way of Thinking
Topic: Scarcity, Difficulty: E, Type: RE, Answer: c
Scarcity is a problem:
a. measured by the amount of goods available.
b. of the poor, but not the rich.
c. because human wants are unl
Price Elasticity of Demand
Topic: Price elasticity of demand, Difficulty: M, Type: SA, Answer: b
Suppose that a jewelry store found that when it increased prices by 10 percent, sales revenue
increased by 3 percent. Which of th
Topic: Monopoly, Difficulty: E, Type: RE, Answer: a
Which of the following is not associated with the monopoly market structure?
a. Many sellers.
b. A single seller.
c. A unique product.
d. Impossible entry into the m
Markets in Action
Topic: Change in equilibrium, Difficulty: D, Type: CA, Answer: c
An increased equilibrium price and a decreased equilibrium quantity results from a(an):
a. decrease in demand.
b. increase in supply.
Topic: Explicit cost, Difficulty: M, Type: SA, Answer: c
Which of the following is an explicit cost?
a. The opportunity cost of an owner/entrepreneurs time invested in the firm.
b. The opportunity cost of the
Labor Markets and Income Distribution
Topic: Marginal revenue product, Difficulty: E, Type: RE, Answer: b
Which of the following best explains the decline in marginal revenue product (MRP)?
a. As more and more of a variable f
Topic: Market structure, Difficulty: E, Type: RE, Answer: b
Which of the following is not a characteristic of the structure of perfectly competitive
a. Each individual firm is small in size relativ
Market Demand and Supply
Topic: Law of demand, Difficulty: D, Type: CA, Answer: c
Suppose that each of the seven dwarfs buys 4 mugs of ginger ale per week from Snow Whites
caf, when the price per mug is $2. If the seven dwarfs
Monopolistic Competition and Oligopoly
Topic: Monopolistic competition, Difficulty: E, Type: RE, Answer: b
Which of the following is not a characteristic of the monopolistic competition market structure?
a. Many sellers, each
Week 5 Exercises
1. When Ticketmaster Corporation bought out its major competitor, Ticketron,
it became a virtual monopoly in the computerized ticket service industry. Ticketmaster
pays arenas millions of dollars for the right to sell t
Week 2 Exercises
1. On November 4, 1988 The Wall Street Journal reported that American Express
Company planned to raise its annual fees for green and gold cards by $10. Green card
fees jumped from $45.00 to $55.00 while those for Gold c
Week 1 Exercises
1. Tracking the Economy - Historical Statistics: For each of the following variables,
find its value in the years 1960, 1965, 1970, 1975, 1980, 1985, 1990, 1995 and 2000.
You may use a variety of resources on the Web. s
Week 2 Answers
1. Question. What would be the change in quantity demanded from the 20 percent
increase in the price of American Express Cards? Was the increase a good move on
the part of American Express? Should American Express increase its price more,
Week 4 Answers
1. The question is really if diminishing marginal return means another unit has no
value. Look at the graphs below. Diminishing returns means we've reached point L 1,
thus the marginal product of additional labor was indeed decreasing. Most
Tracking the Economy - Historical Statistics:
From ERP, 2001, real 1996 dollars
real gdp govt/gdp
Week 6: Answers
1. We assume that even if the U.S. develops alternative sources and technologies, it
will displace only a limited amount of oil as long as the price of oil stays low
so OPEC profit is 100, U.S. costs are 120. But if the price of oil soars,
1. During a crush to get a job done, a construction manager lamented that adding
additional labor would not help because the staffing had reached a point of
diminishing marginal returns. Was the construction manager correc
The graph to the left
tells the story. At a service charge (price) of $1.00 per ticket too many consumers (Q 1)
would try to buy tickets through computerized ticket services. Especially when the
number of tickets is limited, say at Q 3, there is
Week 3 Answers
Question. Draw 2 constraints on one indifference graph, one for money and one for
time, with waiting in line the "price" of a good in terms of time. How does this
show that residents of East Germany would save lots of their income? (HINT:
Week 3 Exercises
1. When the Federal Republic of Germany (West Germany) absorbed the German
Democratic Republic (East Germany) in 1990, one of the most controversial issues
was the rate of exchange that would be established between the c
Week 6 exercises
1. Saudi Arabia is the strongest partner in the OPEC oil cartel. The Saudis have tried
to maintain the price to maximize long term profits to the cartel by keeping price low
enough that demand is not squelched but high