46.

You have driven 1,000 miles on a vacation and then you notice that you are only 50 miles from an attraction you hadn’t
known about, but would really like to see. In computing the opportunity cost of visiting this attraction you had not
planned to visit, you should include
a. both the cost of driving the first 1,000 and the next 50 miles.
b the cost of driving the first 1,000 miles, but not the cost of driving the next 50.
.
c. the cost of driving the next 50 miles, but not the cost of driving the first 1,000.
d neither the cost of driving the first 1,000 miles nor the cost of driving the next 50 miles.
.

71. You are considering staying in college another semester so that you can complete a major in economics. In deciding
whether or not to stay you should
a. compare the total cost of your education to the total benefits of your education.
b. compare the total cost of your education to the benefits of staying one more semester.
c. compare the cost of staying one more semester to the benefits of staying one more semester.
d. compare the total benefits of your education to the cost of staying one more semester.
73. Your professor loves her work, teaching economics. She has been offered other positions in the corporate world that
would increase her income by 25 percent, but she has decided to continue working as a professor. Her decision would not
change unless the marginal
a. cost of teaching increased.
b benefit of teaching increased.
.
c. cost of teaching decreased.
d cost of a corporate job increased.
.
21.You know an economist has crossed the line from policy adviser to scientist when he or she
a. claims that the problem at hand is widely misunderstood by non-economists.
b makes positive statements.
c. talks about values.
d makes a claim about how the world should be.

ANS:B
22.You know an economist has crossed the line from scientist to policy adviser when he or she
a. claims that the problem at hand is widely misunderstood by non-economists.
b talks about the evidence.
c. makes normative statements.
d makes a claim about how the world is.

ANS:C
28. You have been asked by your economics professor to graph the market for lumber and then to analyze the
change that would occur in equilibrium price as a result of recent forest fires in the west. Your first step would be to
a. decide which direction to shift the curve.
B decide whether the fires affected demand or supply.
c. graph the shift to see the effect on equilibrium.
d None of the above are correct.

ANS: B
106. You have responsibility for economic policy in the country of Freedonia. Recently, the neighboring country of
Sylvania has cut off all exports of oranges to Freedonia. Harpo, who is one of your advisors, suggests that you should
impose a binding price ceiling in order to avoid a shortage of oranges. Chico, another one of your advisors, argues that
without a binding price floor, a shortage will certainly develop. Zeppo, a third advisor, says that the best way to avoid a
shortage of oranges is to take no action at all. Which of your three advisors is most likely to have studied economics?
a. Harpo
b Chico
c. Zeppo
d. Apparently, all three advisors have studied economics, but their views on positive economics are different.
62. You lose your job and, as a result, you buy fewer romance novels. This shows that you consider romance novels
to be a(n)
a. luxury good.
b inferior good.
c. normal good.
d complementary good.
76. You wear either shorts or sweatpants every day. You notice that sweatpants have gone on sale, so your demand
for
a. sweatpants will increase.
b sweatpants will decrease.
c. shorts will increase.
d shorts will decrease.
96. You love peanut butter. You hear on the news that 50 percent of the peanut crop in the South has been wiped
out by drought, and that this will cause the price of peanuts to double by the end of the year. As a result,
a. your demand for peanut butter will increase, but not until the end of the year.
b your demand for peanut butter increases today.
c. your demand for peanut butter decreases as you look for a substitute good.
d your demand for peanut butter shifts left today.
25. Years ago, thousands of country music fans risked their lives by rushing to buy tickets for a Willie Nelson
concert at Carnegie Hall. This behavior indicates
a. the ticket price was above the equilibrium price.
b the ticket price was below the equilibrium price.
c. the ticket price was at the equilibrium price.
d nothing about the equilibrium price.
2. You own a small town movie theatre. You currently charge $5 per ticket for everyone who comes to your
movies. Your friend who took an economics course in college tells you that there may be a way to increase your total
revenue. Given the demand curves shown, answer the following questions.

a. What is your current total revenue for both groups?

b. The elasticity of demand is more elastic in which market?
c. Which market has the more inelastic demand?
d. What is the elasticity of demand between the prices of $5 and $2 in the adult market? Is this elastic or
inelastic?
e. What is the elasticity of demand between $5 and $2 in the children's market? Is this elastic or inelastic?
f. Given the graphs and what your friend knows about economics, he recommends you increase the price of
adult tickets to $8 each and lower the price of a child's ticket to $3. How much could you increase total
revenue if you take his advice?
ANS:
a. Total revenue from children's tickets is $100 and from adult tickets is $250. Total revenue from all sales
would be $350.
b. The demand for children's tickets is more elastic.
c. The adult ticket market has the more inelastic demand.
d. The elasticity of demand between $5 and $2 is 0.26, which is inelastic.
e. The elasticity of demand between $5 and $2 is 1.0, which is unit elastic.
f. Total revenue in the adult market would be $320. Total revenue in the children’s market would be $120, so
total revenue for both groups would be $440. $440 - $350 is an increase in total revenue of $90.
30. Other things equal, the demand for a good tends to be more inelastic, the
a. fewer the available substitutes.
b longer the time period considered.
c. more the good is considered a luxury good.
d more narrowly defined is the market for the good.
183. You have just been hired as a business consultant to determine what pricing policy would be appropriate in order to
increase the total revenue of a major shoe store. The first step you would take would be to
a. increase the price of every shoe in the store.
b look for ways to cut costs and increase profit for the store.
c. determine the price elasticity of demand for the store's products.
d determine the price elasticity of supply for the store’s products.
184. 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 expenses. The mayor advises you to increase the price of a round of golf. The city manager
recommends reducing the price of a round of golf. You realize that
a. the mayor thinks demand is elastic, and the city manager thinks demand is inelastic.
b both the mayor and the city manager think that demand is elastic.
c. both the mayor and the city manager think that demand is inelastic.
d the mayor thinks demand is inelastic, and the city manager thinks demand is elastic.
185. 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 expenses. The mayor advises you to decrease the price of a round of golf. The city manager
recommends increasing the price of a round of golf. You realize that
a. the mayor thinks demand is elastic, and the city manager thinks demand is inelastic.
b both the mayor and the city manager think that demand is elastic.
c. both the mayor and the city manager think that demand is inelastic.
d the mayor thinks demand is inelastic, and the city manager thinks demand is elastic.
202. Your younger sister needs $50 to buy a new bike. She has opened a lemonade stand to make the money she
needs. Your mother is paying for all of the ingredients. She currently is charging 25 cents per cup, but she wants to
adjust her price to earn the $50 faster. If you know that the demand for lemonade is elastic, what is your advice to her?
a. Leave the price at 25 cents and be patient.
b Raise the price to increase total revenue.
c. Lower the price to increase total revenue.
d There isn't enough information given to answer this question.

221. You and your college roommate eat three packages of Ramen noodles each week. After graduation last month,
both of you were hired at several times your college income. You still enjoy Ramen noodles very much and buy even
more, but your roommate plans to buy fewer Ramen noodles in favor of foods she prefers more. When looking at income
elasticity of demand for Ramen noodles,
a. yours would be negative and your roommate's would be positive.
b yours would be positive and your roommate's would be negative.
c. yours would be zero and your roommate's would approach infinity.
d yours would approach infinity and your roommate's would be zero.

222. You and your college roommate eat three packages of Ramen noodles each week. After graduation last month,
both of you were hired at several times your college income. Your roommate still enjoys Ramen noodles very much and
buys even more, but you plan to buy fewer Ramen noodles in favor of foods you prefer more. When looking at income
elasticity of demand for Ramen noodles,
a. yours would be negative and your roommate's would be positive.
b yours would be positive and your roommate's would be negative.
c. yours would be zero and your roommate's would approach infinity.
d yours would approach infinity and your roommate's would be zero.

47. You are offered a free ticket to see the Chicago Cubs play the Chicago White Sox at Wrigley Field. Assume the
ticket has no resale value. Willie Nelson is performing on the same night, and his concert is your next-best alternative
activity. Tickets to see Willie Nelson cost $40. On any given day, you would be willing to pay up to $50 to see and hear
Willie Nelson perform. Assume there are no other costs of seeing either event. Based on this information, at a minimum,
how much would you have to value seeing the Cubs play the White Sox to accept the ticket and go to the game?
a. $0
b $10
c. $40
d $50

130. You purchase a $30, nonrefundable ticket to a play at a local theater. Ten minutes into the show you realize that it is
not a very good show and place only a $10 value on seeing the remainder of the show. Alternatively you could leave the theater
and go home and watch TV or read a book. You place an $8 value on watching TV and a $12 value on reading a book.
a. You should stay and watch the remainder of the show.
b You should go home and watch TV.
c. You should go home and read a book.
d You should go home and either watch TV or read a book.
129. You purchase a $30, nonrefundable ticket to a play at a local theater. Ten minutes into the show you realize that it is
not a very good show and place only a $10 value on seeing the remainder of the show. Alternatively you could leave the theater
and go home and watch TV or read a book. You place an $8 value on watching TV and a $6 value on reading a book.
a. You should leave the theater since the net benefit from seeing the remainder of the show is -$20, while going
home will earn you at least $8 of satisfaction.
b You should stay and watch the remainder of the show.
c. You should go home and watch TV.
d You should go home and read a book.
2 Young Johnny inherited the only local cable TV company in town after his father passed away The company is
completely unregulated by the government and is therefore free to operate as it wishes Assume that Johnny understands the true
power of his new monopoly Which of the following statements is (are) correct?
(i) He will be able to set the price of cable TV service at whatever level he wishes
(ii) The customers will be forced to purchase cable TV service at whatever price he wants to set
(iii) He will be able to achieve any profit level that he desires

a (i) only
b (ii) only
c (i) and (iii) only
d (i), (ii), and (iii)