TEST BANK FOR CHAPTER 10: General Equilibrium and Welfare
Consider a two-good production economy in which both goods are produced with fixed
proportions production functions. Then, some efficient allocations will exhibit unemployment
TEST BANK FOR CHAPTER 14: Capital and Time
In the two-period utility maximization model the opportunity cost of one unit of C1 is
a. one unit of C0.
b. 1 + r units of C0.
c. 1/(1 + r) units of C0.
d. cannot be determined without more in
TEST BANK FOR CHAPTER 15: Asymmetric Information
The principal is distinct from the agent in the principal-agent model because
a. the principal offers the contract to the agent.
b. the principal is fully informed.
c. both a and b.
TEST BANK FOR CHAPTER 4: Uncertainty
Probability is sometimes defined as
a. the expected profit of a fair bet.
b. the most likely outcome of a given experiment.
c. the outcome that will occur on average for a given experiment.
d. the re
TEST BANK FOR CHAPTER 17: Behavioral Economics
What are the main differences between neoclassical economics and behavioral economics?
a. neoclassical economics is mainly theoretical.
b. behavioral economics does not take as given that d
TEST BANK FOR CHAPTER 3: Demand Curves
Which of the following functional forms for utility suggests the greatest substitution effect
when starting at the point where PX = PY
a. U = min (X, Y)
b. U = X + Y
c. U = X1/2Y1/2
d. U = X1/4Y3/4
TEST BANK FOR CHAPTER 8: Profit Maximization and Supply
In general, microeconomic theory assumes that firms attempt to maximize the difference
a. total revenue and accounting costs.
b. price and marginal cost.
c. total revenues
TEST BANK FOR CHAPTER 6: Production
With a cubic production with fixed capital Q = A + BL + CL2 + DL3 and a shape shown
above, A is
a. positive and greater than B.
b. positive and less than B.
With a cubi
TEST BANK FOR CHAPTER 11: Monopoly
A monopolist with constant average and marginal cost equal to 8 (AC = MC = 8) faces
demand Q = 100 - P, implying that its marginal revenue is MR = 100 - 2Q. Its profit
maximizing quantity is
TEST BANK FOR CHAPTER 9: Perfect Competition in a Single
In the very short run
a. new firms may enter the industry.
b. existing firms may change the quantity they are supplying.
c. price and quantity supplied is absolutely fixed.
TEST BANK FOR CHAPTER 16: Externalities and Public Goods
Suppose the market for oranges is perfectly competitive and unregulated. Suppose also that
the chemicals used to keep the oranges insect-free damage the environment by an estimate
TEST BANK FOR CHAPTER 12: Imperfect Competition
Suppose there are two firms, Boors and Cudweiser, each selling identical-tasting
nonalcoholic beer. Consumers of this beer have no brand loyalty so market demand can be
TEST BANK FOR CHAPTER 7: Costs
Suppose the production function for coffee (C) is C = min(B,W) where B = beans in pounds
and W = water in gallons and the price of water is $.10 per gallon and the price of beans is
$10 per pound. the cost
TEST BANK FOR CHAPTER 13: Pricing in Input Markets
A firms demand for labor is known as a derived demand because
a. the firm gains utility from hiring more labor.
b. the amount of labor hired depends upon how much output the firm can se
TEST BANK FOR CHAPTER 5: Game Theory
A football team has the chance of scoring the game-winning touchdown on the last play of
the game. It can either run or pass. The defense can play for the run or play for the pass.
The following norm