- Suppose the county government sends each
parent a coupon that can be used to subsidize
the cost of sending each child to daycare. What
would you expect to occur in the market for
daycare services?
(A) The demand for daycare falls, lowering the
market price.
(B) The demand for daycare rises, increasing the
market price.
(C) The supply of daycare rises, lowering the
market price.
(D) The supply of daycare falls, increasing the
market price.
(E) A permanent shortage of daycare services
exists.- Monopoly deadweight loss is the result of
(A) setting the price above marginal cost.
(B) setting the price above average total cost.
(C) monopoly output being greater than the
competitive output.
(D) long-run normal profits.
(E) marginal revenue equaling marginal cost.- The market for Cincinnati Reds baseball tickets
is currently in equilibrium. Which of the fol-
lowing events would most likely increase the
consumer surplus received by Reds fans?
(A) The Reds offer discounted parking for all
home games.
(B) The Reds increase hot dog prices to reflect a
higher cost of buns.
(C) The city of Cincinnati is undertaking a huge
highway construction project that strands
fans in pregame traffic jams for hours.
(D) The Reds must increase ticket prices to
afford the most talented players.
(E) Fans must pay a steep service charge in order
to purchase tickets online or over the phone.- If Matt’s total utility from consuming bratwurst
increased at a constant rate, no matter how
many bratwurst Matt consumed, what would
Matt’s demand curve for bratwurst look like?
(A) Vertical
(B) Horizontal
(C) Downward sloping
(D) Upward sloping
(E) First upward, but eventually downward
sloping- When a firm is earning a normal profit from the
production of a good, it is true that
(A) total revenues from production are equal to
explicit costs.
(B) explicit costs are equal to implicit costs.
(C) total revenues from production are equal to
implicit costs.
(D) total revenues from production are equal to
the sum of explicit and implicit costs.
(E) implicit costs are greater than explicit costs.- You are told that the cross-price elasticity
between goods X and Y is +2.0. This means that
(A) goods X and Y are normal goods.
(B) goods X and Y are inferior goods.
(C) goods X and Y are complementary goods.
(D) goods X and Y are substitute goods.
(E) good X is twice as elastic as good Y.- Which of the following is an example of a long-
run adjustment for the owners of a small café?
(A) The owners switch from whole wheat to
sourdough bread.
(B) The owners hire several part-time workers
to cover the dinner shifts.
(C) The owners work overtime on a busy week-
end.
(D) The owners install more energy-efficient
lightbulbs in all of the light fixtures.
(E) The owners buy the office next door, and
this doubles the customer seating.- If total product of labor is rising at an increasing
rate,
(A) marginal product of labor is rising.
(B) marginal product of labor is at its mini-
mum.
(C) marginal product of labor is at its maxi-
mum.
(D) marginal cost is rising.
(E) average product of labor is at its minimum.- The demand curve for a perfectly competitive
firm’s product is
(A) downward sloping and equal to the market
demand curve.
(B) perfectly elastic.
(C) perfectly inelastic.
(D) “kinked” at the going market price.
(E) the same as the firm’s marginal cost curve.172 › Step 5. Build Your Test-Taking Confidence
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