1. Suppose Larry's Lariats produces lassos in a factory and uses nine feet of rope to make each lasso. The rope is put into a machine that automatically cuts it to the right length, then seals the ends to prevent fraying. The rope is then hand tied, dipped, and wound before being placed in a packaging machine to prepare it for retail sale. If Larry were to decrease the production of lassos, which of the following is true regarding the company's costs?
A. The variable costs of rope would drop to zero.
B. The fixed cost of the rope cutting machine would stay the same.
C. The fixed cost of the employee's wages would stay the same.
D. None of these is true.
2. A price ceiling is:
A. a legal maximum price.
B. a legal minimum price.
C. a legal maximum quantity that can be sold at a particular price.
D. a legal minimum quantity that can be sold at a particular price.
3. A price floor is:
A. a legal maximum price.
B. a legal minimum price.
C. a legal maximum quantity that can be sold at a particular price.
D. a legal minimum quantity that can be sold at a particular price.
4. An effective price ceiling:
A. must be set above the equilibrium price.
B. must be set below the equilibrium price.
C. must be set at the equilibrium price.
D. can lead more goods to be produced in a market.
5. You decide to donate $5 to Jerry's Kids at the grocery store checkout and get to sign your name to a shamrock and hang it in their window. This is an example of the economic concept of:
A. marginal utility.
B. altruism.
C. reciprocity.
D. selfishness.