question

Scarcity

answer

Economics is the study of choices. People need to make choices because of...

question

Market for used cars

answer

The classic example of adverse selection is the...

question

$100

answer

You and your friend are offered some money for your upcoming travels with conditions: both of you are asked to write down a dollar amount on a piece of paper. The dollar amount written down must be between $100 and $250. You then reveal your values. If both of you wrote the same valley, you will both be awarded that value. But if the values are different, you will both be awarded the small amount, and the one who wrote the greater number will pay the one who wrote the smaller number $5. Assume you only care about yourself getting the most money and so does your friend, and you can not communicate in anyway. What is the equilibrium, i.e., what number should you write?

question

Moral hazard, but not adverse action

answer

When a night watchman only performs two walk-throughs per night when he is being paid to perform five walk-throughs per night, it is an example of...

question

5

answer

In your city, each police officer has a budgetary cost of $50,000 per year. The property loss from each burglary is $4000. The first officer hired will reduce 52 burglaries, and each additional officer will reduce 8 burglaries less compared to the previous one. How many officers should your city hire?

question

-decrease in price -increase in income -increase in the price of a substitute -all of the above -NONE OF THE ABOVE

answer

Which of the following will definitely shift demand curve to the left?

question

-when price is expected to increase

answer

Which of the following will definitely shift supply curve to the left?

question

Quantity demanded is equal to quantity supplied

answer

When a competitive market is in equilibrium,

question

-equilibrium quantity goes up -equilibrium price goes down -the size of consumer surplus goes up -ALL OF THE ABOVE

answer

A competitive market is now equilibrium. If supply increases while demand stays the same in the next day, which of the following statements must be true?

question

Equilibrium quantity goes up

answer

A competitive market is now in equilibrium. If both supply and demand increase in the next day, which of the following statements must be true?

question

Equilibrium price does down

answer

A competitive market is now in equilibrium. If supply increases while demand decreases in the next day, which of the following statements must be true?

question

-an effective price floor -a quota/ration

answer

Which of the following will definitely result in a decline in the size of consumer surplus?

question

An effective price ceiling

answer

Which of the following will definitely result in a decline in the size of producer surplus?

question

-an effective price ceiling -an effective price floor -a quota -ALL OF THE ABOVE

answer

Which of the following will definitely create dead weight loss?

question

An effective price floor is set ABOVE equilibrium because it identifies the LOWEST price allowed.

answer

Which of the following statements is correct?

question

Negative but greater than -1

answer

Demand is inelastic if the price elasticity of deman is...

question

Tends to be elastic

answer

For a good to be a luxury, demand..

question

-2

answer

If a 10% decrease in price for a good results in a 20% increase in quantity demanded, the price elasticity of demand is...

question

2.5% decrease in the quantity demanded

answer

If the price elasticity of demand for a good is 0.5, then a 5% increase in price results in a...

question

$25

answer

Suppose the demand curve is given by the equation Qd=150-3P where Qd denotes quantity demanded and P denotes price. Total revenue reaches its maximum value at the price of..

question

A private good or a club good

answer

People can be prevented from using a good if the good is..

question

Receives the benefit of a good but avoids paying for it

answer

A free rider is a person who...

question

All goods provided by the government are public goods

answer

Which of the following statement is not correct?

question

Both buyers and sellers of the good are made worse off

answer

When a good is taxed...

question

Induces buyers to consume less, and sellers to produce less

answer

A deadweight loss is a consequence of a tax on a good because the tax..

question

Price elasticities of both supply and demand

answer

The size of the dead weight loss generated from a tax is affected by the...

question

(200 airplanes, 12,500 cars) and (150 airplanes, 15,000 cars)

answer

Assume for the United States that the opportunity cost of each airplane is 50 cars. Which of these pairs of points could be on the United States' Production possibilities frontier?

question

Opportunity cost

answer

Comparative advantage is related most closely to which of the following?

question

Allows people to specialize according to comparative advantage

answer

Trade can make everybody better off because it...

question

Cannot affect world prices by trading with other countries

answer

When, in our analysis of the gains and losses from international trade, we assume that a country is small, we are effect assuming that the country...

question

Domestic producers become worse off, and domestic consumers become better off

answer

When a country allows trade an becomes an importer of a good...

question

-domestic producers of the good become better off -domestic consumers of the goood become worse off -the gains of the winner exceed the losses of the losers -ALL OF THE ABOVE ARE CORRECT

answer

When a country allows international trade and becomes an exporter of a good...

question

Whether it produces output or not

answer

In the short run, a firm incurs fixed costs...

question

Average fixed cost is 50 cents

answer

A firm produces 400 units of output at a total cost of $1,200. If total variable costs are $1,000,

question

Marginal cost

answer

The cost of producing an additional unit of output if the firm's...

question

entry is limited

answer

Which of the following is not a characteristic of a competitive market?

question

buyers and sellers are price takers

answer

Which of the following is a characteristic of a competitive market?

question

have a negligible impact on the market price

answer

In a competitive market, the actions of any single buyer or seller will

question

dairy farming

answer

Which of the following industries is most likely to exhibit the characteristic of free entry?

question

-there are many sellers -goods offered for sale are largely the same

answer

Which of the following characteristics of competitive markets is necessary for firms to be price takers?

question

no change in the product's market price

answer

For a firm in a competitive market, an increase in the quantity produced by the firm will result in

question

total revenue doubles

answer

When a competitive firm doubles the quantity of output it sells, its

question

as many units as possible

answer

Price Quantity $3 0 $3 1 $3 2 $3 3 $3 4 $3 5 This firm maximizes total revenue by producing

question

$13

answer

Quantity Total Revenue 0 $0 1 $13 2 $26 3 $39 4 $52 For this firm, the marginal revenue is

question

only for competitive firms does average revenue equal marginal revenue

answer

Which of the following statements is correct?

question

$80

answer

When a certain competitive firm produces and sells 100 units of output, marginal revenue is $80. When the same firm produces and sells 200 units of output, what is the average revenue?

question

does not change

answer

Whenever a perfectly competitive firm chooses to change its level or output, its marginal revenue

question

will in infinite

answer

If the market elasticity of demand for potatoes is -0.3 in a perfectly competitive market, then the individual farmer's elasticity of demand

question

decreasing output would increase the firm's profit

answer

If a competitive firm is currently producing a level of output at which marginal cost exceeds marginal revenue, then

question

marginal revenue equals marginal cost

answer

At the profit-maximizing level of output,

question

the quantity at which market price is equal to Mr. McDonald's marginal cost of production

answer

Farmer McDonald sells wheat to a broker in Kansas City, Missouri. Because the market for wheat is generally considered to be competitive, Mr. McDonald maximizes his profit by choosing

question

new firms will enter the market

answer

When profit-maximizing firms in competitive markets are earning profits,

question

marginal cost equals marginal revenue

answer

Profit-maximizing firms in a competitive market produce an output level where

question

increase its output

answer

If a profit-maximizing firm in a competitive market discovers that, at its current level or production, price is greater than marginal cost, it should

question

continue to operate in the short run but shut down in the long run

answer

Mrs. Smith operates a business in a competitive market. The current market price is $8.10. At her profit-maximizing level of production, the average variable cost is $8.00, and the average total cost is $8.25. Mrs. Smith should

question

new firms to enter the market

answer

Suppose a firm operates in the short run at a price above its average total cost of production. In the long run the firm should expect

question

(P-ATC) x Q

answer

We can measure the profits earned by a firm in a competitive industry as

question

$250

answer

Suppose that a firm in a competitive market is currently maximizing its short-run profit at an output of 50 units. If the current price is $9, the marginal cost of the 50th unit is $9, and the average total cost of producing 50 units is $4, what is the firm's profit?

question

$12

answer

Consider a firm operating in a competitive market. The firm is producing 40 units of output, has an average total cost of production equal to $6, and is earning $240 economic profit in the short run. What is the current market price?

question

the portion of its marginal cost curve that lies above its average variable cost

answer

The short-run supply curve for a firm in a perfectly competitive market is

question

experience losses but will continue to produce rubber bands

answer

Suppose a profit-maximizing firm in a competitive market produces rubber bands. When the market price for rubber bands falls below the minimum of its average total cost, but still lies above the minimum of average variable cost, in the short run the firm will

question

sunk costs

answer

When fixed costs are ignored because they are irrelevant to a business's production decision, that are called

question

To maximize profit, firms should profit, firms should produce at a level of output where price equals average variable cost

answer

Which of the following statements is not correct?

question

zero economic profits

answer

In the long run, each firm in a competitive industry earns

question

rise in the short run. Some firms will enter the industry. Price will then fall to reach the new long-run equilibrium..

answer

A competitive market is in long-run equilibrium. If demand increases, we can be certain that price will

question

the long-run market supply curve must be horizontal

answer

When entry and exit behavior of firms in an industry does not affect a firm's cost structure,

question

False

answer

For a firm operating in a perfectly competitive industry, total revenue, marginal revenue, and average revenue are all equal

question

True

answer

A profit-maximizing firm in a competitive market will increase production when average revenue exceeds marginal cost.

question

True

answer

Firms operating in perfectly competitive markets produce an output level where marginal revenue equals marginal cost.

question

True

answer

When a profit-maximizing firm in a competitive market experiences rising prices, it will respond with an increase in production.

question

False

answer

The supply curve of a firm in a competitive market is the average variable cost curve above the minimum of marginal cost.

question

True

answer

A firm will shut down in the short run if revenue is not sufficient to cover its variable costs of production.

question

True

answer

Because nothing can be done about sunk costs, they are irrelevant to decisions about business strategy.

question

False

answer

In making a short-run profit-maximizing production decision, the firm must consider both fixed and variable cost.

question

True

answer

The long-run supply curve in a competitive market is more elastic than the short-run supply curve.

question

profit that can be invested in research and development

answer

A benefit of a monopoly is

question

-is not likely to be concerned about new entrants eroding is monopoly power -is taking advantage of economies of scale -would experience a higher average total cost if more firms entered the market -ALL OF THE ABOVE ARE CORRECT

answer

A firm that is a natural monopoly

question

barriers to entry

answer

A fundamental source of monopoly market power arises from

question

does not have a supply curve because the monopolist sets its price at the same time it chooses to quantity to supply

answer

A monopolist

question

-$75.40

answer

A monopolist can sell 300 units of output for $45 per unit. Alternately, is can sell 301 units of output for $44.60 per unit. The marginal revenue of the 301st unit of output is

question

downward-sloping demand curve

answer

A monopolist faces a

question

producing an output level where marginal revenue equals marginal cost

answer

A monopolist maximizes profits by

question

marginal revenue is equal to marginal cost

answer

A profit-maximizing monopolist will produce the level of output at which

question

marginal revenue is less than price

answer

Because a monopolist must lower its price in order to sell another unit or output,

question

the price of Bob's bison burgers will exceed Bob's marginal cost

answer

Bob's Butcher Shop is the only place within 100 miles that sells bison burgers. Assuming that Bob is maximizing his profit, which of the following statements is true?

question

never

answer

For a monopolist, when does marginal revenue exceed average revenue?

question

-profit-maximizing price -shape and position of the marginal-revenue curve

answer

For a monopoly firm, the shape and position of the demand curve play a role in determining the

question

price=average revenue

answer

For a monopoly firm, which of the following equalities is always true?

question

P>MR=MC

answer

For a profit-maximizing monopolist,

question

is protected by barriers to entry

answer

Sizable economic profits can persist over time under monopoly if the monopolist

question

the monopolist is not currently maximizing profits; it should produce fewer units and charge a higher price to maximize profits

answer

Suppose when a monopolist produces 75 units its average revenue is $10 per unit, its marginal revenue is $5 per unit, its marginal cost is $6 per unit, and its average total cost is $5 per unit. What can we conclude about this monopolist?

question

does not exist

answer

The supply curve for the monopolist

question

false; price increases will mean fewer sales, which may lower profits

answer

"Monopolists do not worry about efficient production and minimizing costs since they can just pass along any increase in costs to their consumers." This statement is

question

less than the socially efficient quantity of output but at a higher price than in a competitive

answer

A monopolist produces

question

creates no deadweight loss

answer

A monopolist that practices perfect price discrimination

question

higher than if the firm charged just one price because the firm will capture more consumer surplus

answer

A monopolist's profits with price discrimination will be

question

marginal revenue and marginal cost curves

answer

A monopoly chooses to supply the market with a quantity of a product that is determined by the intersection of the

question

price discrimination

answer

Customers who purchase an audio CD from Sally's Sounds are charged 20% more than customers who purchase the audio CD from the Sally's Sounds website. This is an example of

question

it must have some market power

answer

For a firm to price discriminate,

question

average revenue equals marginal cost

answer

For a monopoly, the socially efficient level of output occurs where

question

-eliminate consumer surplus -eliminate deadweight loss -maximize profits -ALL OF THE ABOVE ARE CORRECT

answer

If a monopolist can practice perfect price discrimination, the monopolist will

question

decreases consumer surplus

answer

In theory, perfect price discrimination

question

knows the exact willingness to pay of each of its customers

answer

Perfect price discrimination describes a situation in which the monopolist

question

eliminates deadweight loss

answer

Perfect price discrimination

question

selling the same good at different prices to different customers

answer

Price discrimination is the business practice of

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