question

Whenever external benefits exist:

answer

Social demand will exceed market demand.

question

If the economy relies entirely on markets to answer the WHAT question, it tends to:

answer

Overproduce private goods and underproduce public goods.

question

Payments to individuals for which no current goods or services are exchanged are known as:

answer

Income transfers.

question

Market failure occurs when:

answer

An imperfection in the market mechanism prevents an optimal outcome.

question

In economics, a public good:

answer

Allows free riders to benefit from the good.

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Antitrust laws address:

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Market Power

question

Market failure implies that a policy of laissez-faire:

answer

Leads the economy to an undesirable point on the production-possibilities curve.

question

The marginal physical product of labor decreases as more labor is hired because of:

answer

The law of diminishing returns.

question

The best way for consumers to increase both the wages and the number of jobs for strawberry pickers would be to:

answer

Buy more strawberries.

question

A firm's demand for labor is downward sloping because:

answer

The marginal physical product of labor decreases as more labor is hired.

question

As a person works more, the number of additional hours that he is willing to work is determined by the trade-off between increasing:

answer

Marginal utility for leisure and decreasing marginal utility for income.

question

When a worker's MRP is difficult to measure, for example, a college professor or corporate CEO, wages can be determined by:

answer

The wages the worker would receive in his or her best alternative job.

question

An industry in which one firm can achieve economies of scale over the entire range of output is referred to as:

answer

A natural monopoly.

question

Which of the following is an example of perfect competition?

answer

Many small firms all produce the same good.

question

Economic profits disappear when:

answer

Price falls to the level of minimum average total cost.

question

Ceteris paribus, if the cost of insecticide decreases for tomato farmers, in order to maximize profits tomato farmers should:

answer

Increase output.

question

The difference between the total cost and total revenue is:

answer

Total profit.

question

Total profit is equal to:

answer

Total revenue minus total cost.

question

In making a production decision, a business owner:

answer

Decides the short-run rate of output.

question

An industry in which a few large firms supply most or all of a product is known as:

answer

An oligopoly.

question

In which of the following industries is the firm referred to as a price taker?

answer

Perfect competition.

question

The ability and willingness to sell specific quantities of a good at alternative prices in a given period of time, ceteris paribus, defines:

answer

Supply.

question

Which of the following is most likely to have social demand greater than market demand?

answer

Health services.

question

Externalities are:

answer

The difference between social and private costs or benefits.

question

Government intervention in the economy:

answer

May result in government failure.

question

An individual is not motivated to pay for a national park because he knows that those who do not pay for it will still benefit from it. This is an example of:

answer

The free-rider dilemma.

question

A public good is:

answer

The source of the free-rider dilemma.

question

Which of the following occurs when the economy experiences inflation?

answer

Macroeconomic failure.

question

An emission charge is a:

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Fee imposed on polluters based on the quantity of pollution they impose on society.

question

The first antitrust act to prohibit "conspiracies in restraint of trade" was:

answer

The Sherman Act

question

In economics, a public good:

answer

Cannot be denied to consumers who do not pay.

question

Concerns about the fairness of the distribution of output focus on:

answer

Equity.

question

A private good is a good that:

answer

Can be consumed by just one person.

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Noise generated by an airport best illustrates:

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An externality.

question

Which of the following is a goal of macro intervention?

answer

To foster economic growth. To get us on the production-possibilities curve (full employment). To maintain a stable price level (price stability). To increase our capacity to produce (growth).

question

The federal government's role in antitrust enforcement is justified by considerations of:

answer

Market Power

question

If external benefits occur for society when a good is consumed, then the government should:

answer

Subsidize the consumption or production of the good.

question

Whenever there is a divergence between social costs and market costs, the result is:

answer

Market Failure

question

One HEADLINE article in the text links secondhand smoke to breast cancer. Which type of market failure does the article illustrate?

answer

Negative externality.

question

A minimum wage impacts the labor market by causing

answer

An increase in the quantity of labor supplied and a decrease in the quantity of labor demanded

question

Labor supply is the willingness and ability of

answer

individuals to offer their labor services at various wage rates

question

The marginal revenue product of labor curve is the firm's

answer

labor demand curve

question

The demand curve facing a monopoly

answer

is equal to the industry demand curve

question

For a monopolist

answer

MR < P, MR < average revenue, MR declines as output increases

question

If your firm is a monopoly

answer

it may earn positive economic profit, zero economic profit, or suffer losses depending on demand conditions

question

The ________ cost of working is the amount of leisure time that must be given up in the product

answer

opportunity

question

An individual's labor-supply curve reflects

answer

the increasing opportunity cost of labor and the decreasing marginal utility of income as a person works more hours.

question

Derived demand means that

answer

-the quantity of resources purchased by a business depend son the firm's sales and output -the demand for labor depends on the demand for the product that labor is produced -the demand for as resource is derived from the demand for the final product it is used to produce

question

What is the term for the quantities of labor employers are willing and able to hire at alternative wage rates in a given time period, ceteris paribus?

answer

Demand for labor

question

Marginal revenue product is:

answer

the change in total revenue associated with one additional unit of input and the change in total revenue divided by the change in the quantity of labor

question

The ____ curve is the labor-demand curve

answer

marginal revenue product

question

A minimum wage causes a market:

answer

surplus

question

A legal minimum wage _______ the quantity of supplied labor and _____ the quantity demanded of labor

answer

increases; decreases

question

If the market price of a product increases, the marginal revenue product will

answer

shift to the right

question

The ___ wage is the highest wage an individual would earn in his or her alternative job

answer

opportunity wage

question

As the opportunity cost of job time increases, we require ____ rates of pay

answer

higher

question

Labor ____ is the willingness and ability to work specific amounts of time at alternative wage rates in a given time period, ceteris paribus

answer

supply

question

The labor ___ curve slopes ____

answer

demand; downward

question

The demand for labor is ___ the demand for the final goods and services produced by this labor

answer

derived from

question

The equilibrium wage

answer

-occurs at the intersection of the market supply and demand curves -is the only wage at which the quantity of labor supplied equals the quantity of labor demanded -is the only one that clears the market

question

In most situations, the marginal physical product ______ as more workers are added

answer

decreases

question

A minimum wage

answer

makes some workers better off and some workers worse off

question

Unions are successful at ___ wage rates

answer

increasing

question

Which of the following can alter wages and employment levels?

answer

All are true. -labor unions -legal minimum wages -changes in labor productivity

question

A monopolist maximizes profit by producing at the output for which

answer

marginal cost= marginal revenue

question

If a firm converts a previously competitive industry into a monopoly without any changes the cost curves

answer

it will reduce output and raise price to generate more profit

question

Monopolies have some undesirable characteristics; however

answer

-they may have an offsetting benefit due to their greater financial resources for conducting valuable research and development -they may have an offsetting benefit if they can achieve economies of scale resulting in reduced cost and,hence, reduced resource use

question

When a monopoly operates in a contestable market

answer

it is unable to charge a price above cost without inducing entry by a rival firm

question

If firms are earning positive economic profits

answer

-entry would tend to erode those profits in competitive industries but not monopolistic industries -barriers to entry would permit those profits to persist -both competitive firms and monopolists would still be producing where MR=MC

question

In a monopoly, marginal revenue is always _____ price

answer

less than

question

Marginal revenue is the

answer

-additional revenue from selling one more of a good -change in total revenue from a one-unit increase in the quantity sold -extra money received when another good is sold

question

Assuming equal costs, a monopolist produces ____ and charges ___ than a competitive industry

answer

less;more

question

Which of the following are example of barriers to entry? -patents -Exclusive licensing -Government -All of the above are examples

answer

-All of the above are examples

question

Which of the following is an example of a natural monopoly? -local telephone service -cable tv -public utilities -All of the above are examples

answer

-All of the above are examples

question

A monopoly consists of ___ firm(s) in an industry

answer

one

question

An industry structure with many firms each of of which has some distance brand image is called

answer

monopolistic competition

question

If P>AVC, a monopolist is experiencing a

answer

profit

question

A ______ gives a firm the exclusive right to produce or license a product

answer

patent

question

In an industry that is a monopoly, industry price _____ marginal cost at all times

answer

is greater than

question

The profit maximizing rules are applicable

answer

to any firm

question

A natural monopoly achieves ____ over the entire range of market supply

answer

economies of scale

question

To calculate profit, take total revenue ____ total cost

answer

minus

question

Two firms produce entire market supply. Ex. Coke and Pepsi

answer

Duopoly

question

In a competitive market

answer

no buyer and seller has market power

question

If price exceeds marginal costs, a perfectly competitive firm can increase profits by

answer

increasing output

question

For a competitive firm, the marginal cost curve

answer

is the short-run supply curve

question

When the competitive firm maximizes profit, the marginal cost of an additional unit of output is always equal to the

answer

price

question

Barrier to entry include

answer

-price taking -standardized products -brand loyalty

question

Which of the following market structures has the fewest barriers to entry?

answer

perfect competition

question

Which of the following is an example of perfect competition?

answer

many small firms all produce the same good

question

Marginal cost is

answer

the increase in total costs because of a one-unit increase in output

question

Market power is

answer

the ability to alter the market price of a good or service

question

When a new firm enters the market, it

answer

reduces profits of existing firms

question

Total revenue is equal to the

answer

price of the product multiplied by the quantity sold

question

The market supply curve is calculated by

answer

summing the marginal cost curves of all firms

question

Which of the following conditions always characterizes a competitive firm that is maximizing profits in the short run?

answer

price equals marginal cost

question

Which of the following is not considered a barrier to entry?

answer

equilibrium pricing

question

The goal of most business firms is to

answer

maximize total profit

question

If marginal cost exceeds price, a competitive firm can increase profit by

answer

decreasing output

question

A perfectly competitive firm is a price taker because

answer

it has no control over the selling price of its product

question

Market structure is determined by

answer

the number and relative size of firms in an industry

question

The difference between the total cost and total revenue is

answer

total profit

question

When firms exit an industry, price ____ and industry output _____

answer

increases;decreases

question

Economic profits disappear when

answer

price falls to the level of minimum average total cost

question

A market made up of a few firms that work together to set a high price is called

answer

an oligopoly

question

A minimum wage tends to create a market

answer

surplus

question

The law of diminishing returns says that marginal physical product will ____ as more workers are added

answer

decrease

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