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Multiple choice questions with graphs

1. Consider the following demand table and the graph below.

Which of the demand curves best reflects the demand table?
a. A.
b. B.
c. C.
d. D.

2. Two economists are debating whether or not to remove a tariff on luxury vehicles. They agree that consumers will benefit by $5 billion and that the harm done to domestic businesses and workers will only be $4 billion. One argues these facts make it obvious that the tariff should be removed. The other disagrees. What would be a likely reason for the second economist to disagree?
a. There is no good reason because the benefits outweigh the costs.
b. He is using a different economic model to understand the world.
c. He has a different interpretation of the empirical evidence.
d. He has different value judgments about the weights that should be put on the benefits and costs.

3. Refer to the graph below.

Floods in the U.S. Midwest in the early 1990s reduced the U.S. corn crop. Which graph depicts the effect of the floods on the U.S. corn market?
a. I
b. II
c. III
d. IV

4. Refer to the table above. The marginal physical product of the sixth worker is _____ and the average product of six workers is _____.
a. 15; 6.
b. 6; 15.
c. 13; 2.
d. 2; 13.

5. Owen runs a delivery business and currently employs three drivers. He owns three vans that employees use to make deliveries, but he is considering hiring a fourth driver. If he hires a fourth driver, he can schedule breaks and lunch hours so that all three vans are in constant use, allowing him to increase deliveries per day from 60 to 75. It will cost an additional $75 per day to hire the fourth driver. The marginal cost per delivery of increasing output beyond 60 deliveries per day:
a. is $0 since Owen does not have to purchase another van.
b. is $5.
c. is $75.
d. cannot be calculated without knowing Owen's total fixed costs.

6. Refer to the graph above. The profits earned by the monopolistically competitive firm represented in the above graph equal:
a. $15.
b. $45.
c. $120.
d. $0.

7. If a production possibility curve representing a tradeoff between a grade in English and a grade in math has a negative slope we know that:
a. there is a direct relationship between grades in English and grades in math.
b. there is no relationship between grades in English and grades in math.
c. there is an inverse relationship between grades in English and grades in math.
d. one can get better grades in English only if one gets better grades in math.

8. Chuck offers $70,000 for a house. The seller turns down the offer but says she will sell the house for $72,000. However, Chuck refuses to pay the higher price. If Chuck was following the economic decision rule, the marginal benefit of the house to:
a. Chuck must be less than $72,000.
b. Chuck must be greater than $72,000.
c. the seller must be less than $72,000.
d. the seller must be less than $70,000.

9. Once vaccinated, a person cannot catch a cold nor give a cold to someone else. As a result the marginal social benefit resulting from consumption of the vaccine:
a. exceeds the marginal benefit received by consumers of the vaccine.
b. equals the marginal social cost of producing the vaccine in a competitive equilibrium.
c. equals the marginal benefit received by consumers of the vaccine in a competitive equilibrium.
d. is less than the marginal benefit received by consumers of the vaccine.

10. Jack Sprat could eat no fat, his wife could eat no lean. And so betwixt them both, they licked the platter clean, which of the following is true about Jack and his wife?
a. Marginal utility of fat is negative for Jack; marginal utility of lean is negative for his wife.
b. Marginal utility of fat is falling for Jack; marginal utility of lean is falling for his wife.
c. Marginal utility of lean is negative for Jack; marginal utility of fat is negative for his wife.
d. Marginal utility of lean is rising for Jack; marginal utility of fat is rising for his wife.

11. World trade declined in the 1930s. Which of the following is the best explanation of that decline?
a. World income shrank and trade restrictions increased.
b. World income shrank but there were few changes in trade restrictions.
c. Trade restrictions increased but there was little change in world income.
d. Income of most nations increased allowing them to become more self-sufficient.

12. You bought one share of McDonalds stock for $10, one share of Coca-Cola for $15, and one share of Pepto-Bismol for $20. Currently, each stock is priced at $15. Assuming no tax issues and you cannot predict the price of either in the future stock, if you needed $15, which stock would you sell?
a. McDonalds.
b. Coca-Cola.
c. Pepto-Bismol.
d. It doesn't matter which one you sell.

13. One study of the distribution of wealth indicates that the bottom 40% of households hold 1% or less of total marketable wealth in the U.S. Which of the following people is most likely to be in the bottom 40%?
a. Ann is 29 years old, earns $120,000 a year, has no financial assets but still has student loans of $4,000.
b. Betty is 29 years old, earns $40,000 a year, has $80,000 in a savings account, and has credit card debt of $4,000.
c. Carol is 69 years old, disabled, living on Social Security and dividends from her mutual funds. She has no debt.
d. Debra is 45 years old and the only money she gets is $40,000 of rental payments from an apartment building she owns that is worth $250,000. She owes the bank $50,000.

14. Refer to the graph below.

Suppose this represents a monopolist with a patent. Up to how much is the monopolist willing to spend to defend its patent?
a. Area A
b. Area B
c. Area A and B.
d. Area D.

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1.

c. C.

Using Price as the y coordinate and Quantity as the x coordinate, we can see that line C describes the demand curve.

2. Two economists are debating whether or not to remove a tariff on luxury vehicles. They agree that consumers will benefit by $5 billion and that the harm done to domestic businesses and workers will only be $4 billion. One argues these facts make it obvious that the tariff should be removed. The other disagrees. What would be a likely reason for the second economist to disagree?

d. He has different value judgments about the weights that should be put on the benefits and costs.

3.
d. IV

Because a decline in quantity produced causes a backward shift in the supply curve, we see that only graph IV represents this situation.

4. Refer to the table above. The marginal physical product of the sixth worker is _____ and the average product of six workers is _____.

b. 6; 15.

MPP = difference between prior output and new output = 6
Average product = total product / total workers = 90/6 =15

5. Owen runs a delivery business and currently employs three drivers. He owns three vans that employees use to make deliveries, but he is considering hiring a fourth ...

Solution Summary

Taxation of luxury vehicles; when to hire more workers; which stock to sell and other questions.

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