Question 25.During the last few decades in the United States, health offi

25.During the last few decades in the United States, health officials have argued that eating too much beef might be harmful to human health. As a result there has been a significant decrease in the amount of beef produced. Which of the following best explains the decrease in production?

a.Beef producers, concerned about the health of their consumers, decide

to produce relatively less beef.

b.Government officials, concerned about consumers health, ordered beef

producers to produce relatively less beef.

c.Individual consumers, concerned about their own health, decreased their

demand for beef, which lower the price of beef, making it less attractive to

produce.

d.Anti?beef protesters have made it difficult for both buyers and sellers of beef to

meet in the marketplace

26.A consumer has preferences over two goods: pizza and beer. The four bundles shown in the table below lie on the same indifference curve for the consumer.

Bundle Pizza Beer

A 2 8

B 2 2

C 9 2

D 6 2

Which of the following statements regarding these bundles is correct?

a.The goods are perfect substitutes for this consumer.

b.The goods are perfect complements for this consumer.

c.These bundles violate the property that indifference curves are bowed inward.

d.These bundles violate the property that indifference curves do not cross.

27.Demand curve for normal goods slope downward because

a.the substitution effect of a price change is greater than the income effect.

b.substitution and income effects work in the same direction.

c.the income effect is greater than the substitution effect.

d.None of the above; demand curve for normal goods slope upward.

28.You are in charge of the local city?owned golf course. You need to increase the revenue

generated by the golf course in order to meet the expenses. The mayor advises you to increase the price of around of golf. The city manager recommends

reducing the price of a round of golf. You realize thata.the mayor thinks demand is elastic and the city manager thinks demand Is inelastic

b.both the mayor and city manager think that demand is elastic

c.both the mayor and city manager think that demand is inelastic

d.the mayor thinks demand is inelastic and the city manager thinks demand is

elastic

29.For perfectly competitive firms, what is the relationship between market price (P), average revenue (AR), and marginal revenue (MR)?

a.P = AR = MR

b.P > AR = MR

c.P = AR > MR

d.P = AR < MR

30.In the prisoners’ dilemma,

a.the prisoners easily collude in order to achieve the best possible payoff for both.

b.only one player has a dominant strategy.

c.when each player chooses his dominant strategy the players achieve the best

joint outcome.

d.when each player chooses his dominant strategy the players reach a Nash

equilibrium.

31.Which of the following statements is correct?

a.If marginal cost is rising, then average total cost is rising.

b.If marginal cost is rising, then average variable cost is rising.

c.If average variable cost is rising, then marginal cost is minimized.

d.If average total cost is rising, then marginal cost is greater than average total

cost.

32.Which of the following best describes the idea of excess capacity in monopolistic competition?

a.Firms produce more output than is socially desirable.

b.The output produced by a typical firm is less than what would occur at the

minimum point on its ATC curve.

c.Due to product differentiation, firms choose output levels where P > ATC.

d.Firms keep some surplus output on hand in case there is a shift in the demand

for their product.

33.A free?rider problem exists for any good that is NOT

a.rival.

b.a private good.

c.free.

d.excludable.

34.A reduction in a monopolist’s fixed costs would

a.decrease the profit?maximizing price and increase the profit?maximizing quantity

produced.

b.increase the profit?maximizing price and decrease the profit?maximizing quantity

produced.

c.not effect the profit?maximizing price or quantity.

d.possibly increase, decrease or not effect profit?maximizing price and quantity,

depending on the elasticity of demand.

35.A consumer is currently spending all of her available income on two goods: music CDs and DVDs. At her current consumption bundle she is spending twice as much on CDs as she is on DVDs. If the consumer has $120 of income and is consuming 10 CDs and 2 DVDs, what is the price of a CD?

a.$4

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