1. A restaurant currently has two cooks and ten waiters. Cooks earn $20 an hour and waiters earn $10 an hour. The last cook added 40 meals served to total output, while the last waiter added 20 meals served to total output. In order to maximize the number of meals served with a fixed budget, the manager should
a. should use more waiters and fewer cooks because productivity per dollar is higher for waiters than for cooks.
b. should use more waiters and fewer cooks because waiters are paid less than cooks.
c. should use more cooks and fewer waiters because cooks are more productive than waiters.
d. continue to use two cooks and ten waiters because cost is minimized for the given amount of output.

2. Suppose that you run a house-painting company and currently have 2 workers painting a total of 4 houses per month. If you hire a third worker, 6 houses can be painted per month. If you hire a fourth worker, 9 houses can be painted, and a fifth and sixth worker will increase the number of houses painted to 13 and 15, respectively. Diminishing returns
a. set in when the fourth worker is hired.
b. set in when the fifth worker is hired.
c. set in when the sixth worker is hired.
d. have not yet set in because output is still increasing

3. Use the following table to answer this question.
Price Total Revenue
$10 $100
$12 $108
$14 $112
$16 $112
Demand is unit elastic when quantity demanded changes from
a. 10 to 9.
b. 9 to 8.
c. 8 to 7.
d. There is not enough information given to determine the correct answer.

4. Using the midpoint method, the price elasticity of demand for a good is computed to be approximately 0.75. Which of the following events is consistent with a 10 percent decrease in the quantity of the good demanded?
a. an increase in the price of the good from $10 to $17.50
b. an increase in the price of the good from $7.50 to $10
c. a 13.33 percent increase in the price of the good
d. a 7.5 increase in the price of the good

5. Refer to the following table showing a monopolist’s demand schedule:
Price Quantity
$50 300
40 600
20 800
10 1,000
What is marginal revenue for a price decrease from $50 to $40?
a. $9,000
b. $24,000
c. $30
d. $20

6. The market demand for a monopoly firm is estimated to be:
Qd = 100,000 – 500P +2M + 5,000PR
where Qd is is quantity demanded, P is price, M is income, and PR is the price of a related good. The manager has forecasted the values of M and PR will be $50,000 and $20, respectively, in 2012. The marginal cost function is estimated to be MC = 500 + 0.006Q. Total fixed cost in 2012 is expected to be $4 million.
The profit-maximizing price for 2012 is
a. $580.
b. $400.
c. $80.
d. $20.

7. The market demand for a monopoly firm is estimated to be:
Qd = 100,000 – 500P +2M + 5,000PR
where Qd is is quantity demanded, P is price, M is income, and PR is the price of a related good. The manager has forecasted the values of M and PR will be $50,000 and $20, respectively, in 2012. The marginal cost function is estimated to be MC = 500 + 0.006Q. Total fixed cost in 2012 is expected to be $4 million. 
For 2012, the inverse demand function is
a. P = 600 − 0.001Q.
b. P = 300 − 0.002Q.
c. P = 600 − 0.004Q.
d. P = 600 – 0.002Q.

8. When a firm’s demand curve is tangent to its average total cost curve, the
a. firm must be operating at its efficient scale.
b. firm’s economic profit is zero.
c. firm must be incurring economic losses.
d. firm must be earning economic profits.

9. “Airlines” Scenario
An airline knows that there are two types of travelers: business travelers and vacationers. For a particular flight, there are 100 business travelers who will pay $600 for a ticket while there are 50 vacationers who will pay $300 for a ticket. There are 150 seats available on the plane. Suppose the cost to the airline of providing the flight is $20,000, which includes the cost of the pilots, flight attendants, fuel, etc.
Refer to “Airlines” Scenario. How much additional profit can the firm earn by charging each customer their willingness to pay relative to charging a flat price of $600 per ticket?
a. $15,000
b. $40,000
c. $70,000
d. $25,000

10. Price discrimination
a. is an attempt by a monopoly to prevent some customers from purchasing its product by charging a high price.
b. forces monopolies to charge a lower price as a result of government regulation.
c. is an attempt by a monopoly to increases its profit by selling the same good to different customers at different prices.
d. increases the consumer surplus associated with a monopolistic market.

11. Suppose that you run a house-painting company and currently have 2 workers painting a total of 4 houses per month. If you hire a third worker, 6 houses can be painted per month. If you hire a fourth worker, 9 houses can be painted, and a fifth and sixth worker will increase the number of houses painted to 13 and 15, respectively. Diminishing returns
a. set in when the fourth worker is hired.
b. set in when the fifth worker is hired.
c. set in when the sixth worker is hired.
d. have not yet set in because output is still increasing

12. Use the following table to answer this question.
Price Total Revenue
$10 $100
$12 $108
$14 $112
$16 $112
Demand is unit elastic when quantity demanded changes from
a. 10 to 9.
b. 9 to 8.
c. 8 to 7.
d. There is not enough information given to determine the correct answer.

13. As to the stopping of the skateboard, for which of the following intentional torts is Carl most likely liable?
A. Assault 
B. Battery
C. False imprisonment 
D. Infliction of emotional distress

14. If Frank sues Dave for battery he will:
A. recover. 
B. not recover, because Dave was aiming at Bob.
C. not recover, because Dave as a ten-year-old is not liable for his torts. 
D. not recover, because Dave did not intend to hurt anyone.

15. If Bob sues Carl, Dave, and Ed for battery due to being hit by the rock he will:
A. recover. 
B. not recover, because he does not know who threw the stone that hit him. 
C. not recover, because he suffered no injury.
D. not recover, because he is presumed to have consented. 

16. Tye and Carlwere students at Culver Junior High School. In Latin class one morning, Carl decided to play a practical joke on Tye. As Tye was about to sit down at his desk, Carl pulled Tye’s chair from behind. As a result, Tye fell on his rump. Although he was not injured, Tye was embarrassed by the incident. If Tye asserts a claim against Carl, Tye will most likely
A. A. recover for assault
B. B. recover for battery
C. C. recover for intentional infliction of mental distress
D. D. recover for trespass to chattels

17. Passenger entered a subway car at the 42nd Street station. Since all of the seats were occupied, Passenger stood in the subway car and grabbed a pole to secure his balance. As the subway car was proceeding cross-town, Passenger glanced at a voloptuous blonde girl standing next to him. Suddenly, the subway car made an unexpected stop. Rider momentarily lost his balance, and grabbed the blonde girl around the waist (to avoid falling). Once Passenger regained his balance, he removed his hands from the girl’s waist and grasped the pole again.
In a civil action instituted by the blonde girl against Passenger, he will most likely be found
A. liable for battery
B. liable, if Rider mistakenly believed that the girl consented to the contact
C. not liable, since Rider’s conduct was socially acceptable under the circumstances
D. not liable, since the girl was not harmed by the contact

18. While relaxing poolside one Sunday afternoon, Dickie was struck by a golf ball driven by Marty, a 14-year-old boy, who was playing the 9th hole at the Pike Creek Golf Club. The fairway for the 9th hole was 65 feet wide and 437 yards long, with a dog-leg in an easterly direction. Between the fairway and Dickie’s property was a “rough” containing brush and low lying trees. As Marty was approaching the green, he hit a towering shot which deflected off a tree, struck Dickie, bounced off his head and knocked a straw hat off of his girlfriend Patty’s head. Although the ball did not strike Patty herself, she became startled and fell from her beach chair, thus breaking her arm. 
At trial plaintiff offered uncontested evidence that golf balls from the Club’s links regularly traversed onto his property two to three times a day. Which of the following statements is most accurate regarding the liability of the Pike Creek Golf Club/Marty for trespass?

A. Defendants are not liable, since they did not intentionally cause the golf ball(s) to traverse onto the plaintiff’s property.
B. Defendants would remain liable for the unpermitted intrusion of the golf ball(s) onto the plaintiff’s property.
C. Since the plaintiff should have reasonably anticipated that living next to a golf course would result in stray golf balls landing on his property, defendants would not be held liable.
D. Since the golf balls did not substantially interfere with the plaintiff’s use and enjoyment of his land, defendants would not be held liable.

19. Which of the following would be Dickie’s proper cause of action against Marty as a result of the golf ball hitting his head?
A. Assault but not battery
B. Battery but not assault
C. Assault and battery
D. Neither assault nor battery, since Marty did not intentionally cause Dickie to be struck

20. If Patty initiates a suit against Marty to recover damages for her broken arm, Patty will
A. recover for assault only
B. recover for battery only
C. recover for assault and battery
D. not recover