question

economics is most importantly concerned with?

answer

studying how we allocate scarce resources to satisfy unlimited wants

question

economic choices or tradeoffs are the result of?

answer

scarcity

question

economics is concerned with

answer

all of the answers are correct

question

economic resources are also known as?

answer

factors of production

question

which of the following is not an example of a resource?

answer

all of the answers are resources

question

human capital is?

answer

the expertise or knowledge possessed by workers

question

which of the following is true?

answer

poverty could be eliminated but scarcity could not

question

which of the following is true of resources?

answer

they are the inputs used to produce goods and services

question

an example of a capital resource is?

answer

a dump truck

question

entrepreneurship is

answer

the resource that organizes the other factors of production in order to produce goods and or services

question

which of the following is an example of an individual motivated be self-interest?

answer

all answers are correct

question

economists believe that individuals act as if they are motivated by self-interest and..

answer

respond in predictable ways to changing circumstances

question

from an economists perspective which of the following observations is not true

answer

self-interest is purely monetary in nature

question

when economists refer to economic behavior, they mean that?

answer

rational people try to anticipate the likely consequences of their actions

question

what according to an economist, forms the basis of rational human behavior under current and anticipated circumstances

answer

values and information

question

"as a rational person, you would expect individuals to always avoid actions that are illegal"

answer

This is a false statement because it is expected that individuals will consider the consequences of their actions and that some will choose to commit illegal acts anyway.

question

when economists speak of markets, they primarily mean

answer

mechanisms that coordinate actions of buyers and sellers.

question

which of the following serve as the language of the market system

answer

Market prices

question

which of the following is an example of a market failure

answer

all the examples are market failures

question

market failure occurs when

answer

the economy fails to allocate resources efficiently on its own

question

a hypothesis is

answer

a testable proposition

question

a theory can best be defined as

answer

a deliberate simplification of factual relationships that attempts to explain and predict how those relationships work

question

the importance of the ceteris paribus assumption is that it

answer

allows one to analyze the relationship between two variables apart from the influences of other variables

question

economics is different from a "hard" science like physics because

answer

economists cannot easily control all the variables that might influence human behavior

question

macroeconomis topics do not usually include

answer

the profit maximizing decisions of an individual manufacturer

question

which of the following lies primarily within the realm of microeconomics

answer

a study of supply and demand conditions in the market for orange juice

question

which of the following best illustrates the fallacy of composition

answer

if ms. spann had more money, she could buy more scarce goods; if the nation had more money,everyone could buy more scarce goods

question

which of the following is a statement of positive economics

answer

the income tax reduces after-tax incomes of the rich

question

Suppose there are two members of the U.S. Congress who were once economics professors. Why is it important to be able to distinguish their positive from their normative statements about economic policy?

answer

Their positive statements help us understand the economy's response to a particular policy, while their normative statements reflect their value judgments.

question

Which of the following is not an example of the use of the problem solving perspective provided by economics?

answer

The Fogelberg family takes its vacation at Lake Arrowhead this year simply because they have done so for as long as anyone can remember.

question

because of scarcity

answer

we must sacrifice valuable alternatives to obtain more goods and services we desire

question

Trent decides to spend an hour playing basketball rather than studying. His opportunity cost is:

answer

the benefit to his grades from studying for an hour.

question

the opportunity cost of an item is

answer

the highest valued alternative you give up to get that item

question

the opportunity cost of going to college includes

answer

both tuition and the value of the students time

question

opportunity cost includes

answer

both monetary and non-monetary costs

question

economists believe that in regards to criminal behavior

answer

those choosing to commit criminal acts weigh the expected marginal benefits rather than the expected marginal costs

question

Despite the warning on a package of cigarettes about the potential health hazards of smoking, a man lights up a cigarette. An economist would conclude that:

answer

in the man's judgment, the expected marginal benefit of smoking the cigarette outweighs the expected marginal cost.

question

which of the following best defines rational behavior

answer

undertaking activities whenever the marginal benefit exceeds the marginal cost

question

if people are self-interested

answer

as their preferences for leisure time increases, they are likely to work less. as the wages they are offered increases, they are likely to work more

question

Pollution damages the environment we live in. An economist would advise that we reduce air pollution:

answer

as long as the marginal benefit from air pollution reduction outweighs the marginal cost of achieving the reduction.

question

specialization is a way for

answer

individuals to make the best use of resources by devoting themselves to one primary productive activity

question

Resources are used more efficiently if people, regions, and countries specialize in goods for which they have a(n)

answer

comparative advantage in production.

question

Sergei makes millions of dollars a year playing hockey. Sergei is also the best tailor in his hometown in Russia. Why doesn't Sergei make his own clothes?

answer

The opportunity cost to him of making his own clothes is very high because it takes away from his lucrative hockey career.

question

A nation has a comparative advantage in the production of cars over another nation if:

answer

it can produce cars at a lower opportunity cost than the other country.

question

Mike is able to complete a tax return in two hours earning a fee of $100. As an alternative, he could pitch in at a volunteer car wash washing four cars in one hour. His roommate Joe would take four hours to complete a tax return earning a $100 fee and also can wash four cars in one hour. Both individuals could benefit if

answer

Mike worked on tax returns for eight hours and paid Joe $10 for each car he washed.

question

Which of the following is true?

answer

A. People specialize by concentrating their energies on the activity to which they are best suited, because they incur lower opportunity costs as a result. B. The primary reason people pursue their comparative advantage is their self-interest. C. One advantage of specialization is that workers acquire greater skill from repetition. D. If a person, a region, or a country can produce a good or service at a lower opportunity cost than others, we say that they have a comparative advantage in the production of that good or service. E. All of the above are true.

question

Which of the following is true?

answer

A. Voluntary trades give both parties more in value than what they give up. B. Without the ability to trade, people would not tend to specialize in those areas where they had a comparative advantage. C. People can gain by specializing in the production of the good in which they have a comparative advantage. D. Voluntary trade directly increases wealth by making both parties better off, and it is the prospect of wealth-increasing exchange that leads to productive specialization. E. All of the above are true.

question

Which of the following is not true?

answer

What one trader gains from a trade, the other must lose.

question

advantages of specialization do not include

answer

reduced interdependence

question

Tom is a castaway who washes up on a remote island. He can kill eight birds per hour or catch ten fish per day. The natives on the island can kill ten birds per day or catch twenty fish per day. According to comparative advantage,

answer

tom should kill more birds and fish less, then trade birds for fish

question

which of the following is true of a competitive market

answer

buyer and sellers have little market power

question

the law of demand refers to

answer

inverse relationship between the price of a good and the quantity demanded

question

in economics, the demand for a good refers to the amount of the good people

answer

will buy at various prices

question

the demand schedule for a good

answer

indicates the quantities that will be purchased at alternative market prices

question

the price of music downloads decreases, which of the following is most likely to happen

answer

quantity demanded will increase

question

if the price of tennis rackets were to increase, we would expect

answer

the demand for tennis balls to decrease

question

which of the following is most likely to be an inferior good

answer

used clothing

question

a decrease in consumer incomes will

answer

A. decrease the demand for an inferior good. B. decrease the supply of an inferior good. C. increase the demand for a normal good. D. increase the supply of a normal good. E. do none of the above.

question

Whenever the price of Good A decreases, the demand for Good B increases. Good A and B appear to be:

answer

complements

question

A change in which of the following variables does not cause a change in demand?

answer

prices of unrelated goods

question

the supply curve shows

answer

how the quantity produced varies with price

question

an upward sloping supply curve shows that

answer

suppliers are willing to increase production of their goods if they receive higher prices for them

question

a supply schedule shows

answer

how many units producers are willing and able to sell at various prices

question

each point on the supply curve shows

answer

quantity supplied at that price

question

the market supply schedule reflects the total quantity

answer

supplied at each price by all of the producers

question

which of the following would NOT cause a change in the supply of milk?

answer

an increase in the price of milk

question

to an economists, a decrease in supply means a

answer

A. rightward shift of the supply curve. B. movement up along a supply curve. C. downward shift of the supply curve. D. movement down along the supply curve. E. none of the above

question

The difference between a change in quantity supplied and a change in supply is that a change in:

answer

quantity supplied is caused by a change in a good's own, current price, while a change in supply is caused by a change in some other variable, such as input prices, prices of related goods, expectations, or taxes.

question

Which of the following would be most likely to cause a reduction in the supply of Nintendo video games?

answer

an increase in the price of computer chips used to make Nintendo games

question

Which of the following would not shift the supply curve for swordfish?

answer

an increase in the price of swordfish

question

If there is a surplus, ____ will be frustrated by their inability to exchange at the current price, and they will compete the prices ____ as a result.

answer

sellers; down.

question

Ceteris paribus, if the vacancy rate in an apartment complex increased from 5% to 20% over the past two years, we would expect to see

answer

the price decrease leading to an increase in quantity demanded.

question

Which of the following is the correct way to describe equilibrium in a market?

answer

At equilibrium, quantity demanded equals quantity supplied.

question

At the equilibrium price for gasoline:

answer

both a. and d. are correct.

question

When there is an excess quantity supplied of a product at the current price, then:

answer

both c. and d. will occur.

question

Interpret the following statement: "Demand exceeds the available quantity of apartment housing. If the price of apartment rentals were increased, demand would decrease and an equilibrium could be achieved."

answer

The statement is incorrect because it confuses "demand" with "quantity demanded."

question

When there is an excess quantity demanded of a product at the current price, then:

answer

the price will tend to rise.

question

Which of the following would increase the quantity of LCD TVs demanded but would not increase the demand for LCD TVs?

answer

a decrease in the current price of LCD TVs

question

Assume that coffee and tea are substitutes for each other. If weather conditions cause a substantial portion of the available coffee crop to be destroyed, then most probably:

answer

the demand for tea will increase.

question

A shortage currently exists in the market for strawberries. Which of the following statements is correct?

answer

The quantity of strawberries demanded exceeds the quantity supplied and the market price is below the equilibrium price.

question

price elasticity of demand is defines as

answer

the percentage change in quantity demanded divided by the percentage change in price

question

Demand is said to be ____ when the quantity demanded is very responsive to changes in price.

answer

elastic

question

A steel mill raises the price of steel by 7%, which results in a 20% reduction in the quantity of steel demanded. The demand curve facing this firm is:

answer

elastic

question

Fantastic Cuts Hair Salon knows that a 15% increase in the price of their haircuts will result in a 5% decrease in the number of haircuts sold. What is the elasticity of demand facing Fantastic Cuts?

answer

0.33

question

Which of the following is false?

answer

A. The price elasticity of demand measures the responsiveness of quantity demanded to a change in price. B. The price elasticity of demand is defined as the percentage change in quantity demanded divided by the percentage change in price. C. If demand is elastic, it means the quantity demanded changes by a relatively larger amount than the price change. D. If demand is inelastic, it means the quantity demanded changes by a relatively smaller amount than the price change. E. All of the above are true

question

If the price elasticity of demand was 4.0 (in absolute terms), a 10% off sale would lead to:

answer

a 40% increase in purchases by customers.

question

The Shoe Emporium reduces the price of its shoes by 50% and finds that the quantity demanded for its shoes more than doubles. The demand for shoes from The Shoe Emporium appears to be:

answer

. elastic.

question

If the demand is perfectly inelastic, what would happen to the quantity demanded if there is a tiny increase in price?

answer

quantity demanded will remain the same

question

which of the following would most likely feature elastic demand

answer

fresh green beans

question

Elasticity of demand will ____ as the availability of substitutes ____.

answer

Both c. and d. are correct answers.

question

If the elasticity of demand for bangles is equal to 1, moving along the demand curve for bangles, an increase in price will:

answer

increase the quantity demanded and leave total revenue unchanged.

question

A price cut will increase the total revenue a firm receives if the demand for its product is:

answer

elastic

question

The Book Nook reduces prices by 20%. If the dollar value of The Book Nook's sales remain constant, it indicates that:

answer

the quantity of books sold increases by 20%

question

A 10% decrease in the price of energy bars leads to a 20% increase in the quantity of energy bars demanded. It appears that:

answer

demand is elastic and total revenue will increase

question

If the elasticity of supply of a good was 2, how much would the price have to increase to lead to an increase in output of 6 percent?

answer

3%

question

If the elasticity of supply of bangles is equal to 1, moving along the supply curve for bangles, an increase in price will:

answer

increases the quantity supplied and increases total revenue

question

The elasticity of supply is defined as the ____ change in quantity supplied divided by the ____ change in price.

answer

percentage, percentage

question

if the supply curve for a product is vertical, then the elasticity of supply is

answer

equal to zero

question

a perfectly elastic supply curve is

answer

horizontal

question

the longer the time period considered, the elasticity of supply tends to

answer

increase

question

a surplus will result whenever the

answer

government imposes a price floor above the equilibrium price

question

Assume a price floor is imposed at the current equilibrium price in the market for lettuce. If the demand for lettuce then increases:

answer

the quantity of lettuce supplied will increase

question

the imposition of a price ceiling on a market often results in

answer

a shortage

question

Which of the below is true?

answer

Both price floors and price ceilings generally reduce the quantity exchanged in the market.

question

Which of the following is an example of an unintended consequence?

answer

a price ceiling on gasoline that causes a gas shortage

question

If the demand for apples is highly elastic and the supply is highly inelastic, then if a tax is imposed on apples it will be paid:

answer

largely by the sellers of apples

question

Consumer surplus is:

answer

the difference between what consumers are willing to pay and what they are required to pay for a good.

question

Graphically, consumer surplus is measured by:

answer

the area below the demand curve, but above the market price.

question

Which of the following best explains the source of consumer surplus for Good A?

answer

Many consumers would be willing to pay more than the market price for some units of Good A.

question

ceteris paribus, an increase in the price of a good will cause the

answer

consumer surplus derived from the good to decrease

question

ethics

answer

can be defined in any of the above ways

question

in free market economics

answer

most market exchanges will result in all parties "winning."

question

A market economy without any ethics would have:

answer

no value

question

Effective free market ethical systems must provide for all of the following EXCEPT:

answer

a clearly defined moral foundation

question

Cost-benefit analysis can determine the optimal amount of all the following EXCEPT

answer

fairness of rules

question

More efficient positive market ethics will generally help improve all of the following challenges EXCEPT:

answer

moral externalities of a market

question

In order for a market's ethics to be effective, all of the following must occur, EXCEPT

answer

everyone must agree to take part in the market

question

Ethical rules based on morals or concepts of fairness are called

answer

normative ethics

question

If we know someone pays all their taxes and gives money to charity, we know that

answer

only that they pay their taxes and give money to charity

question

Which of the following does not specify positive ethical rules?

answer

websters dictionary

question

which of the following statements is TRUE

answer

The U.S. government defines and enforces business ethics in order to protect the economy.

question

In free markets which allows a high level of unethical corruption:

answer

suppliers will be forced to be corrupt or to leave the market

question

Ethics violators like embezzlers, frauds, tax cheats and bank robbers

answer

A. usually follow most rules and other ethics most of the time. B. not only injure individuals and companies, but also often hurt entire markets. C. often use rational cost-benefit analysis when deciding whether to cheat. D. may feel so ashamed and guilty of their crimes that they are driven to suicide. E. All of the above may be true of ethics violators.

question

which of the following would break a positive ethic

answer

driving two miles per hour over the speed limit

question

Which of these conditions are most likely to motivate honest people to become corrupt?

answer

seeing your boss and fellow workers get rich by lying and cheating

question

plagiarism is unethical because

answer

A. plagiarism might result in stealing profits from the original writer B. plagiarism can decrease the value of honest students' diplomas C. plagiarism can make it more difficult for instructors to assess the quality of students' writings D. plagiarism is a type of fraud E. all of the above are reasons

question

Which of the following are NOT very important to maintaining effective market ethics?

answer

whether people understand the reasons for the rules or regulations

question

which of the following people are more likely to break ethical rules

answer

someone who is ignorant

question

Which of the following are reasons why most owners of companies want their employees to act ethically?

answer

A. Because they care about the well-being of their customers B. To enhance productivity C. To maximize public good will toward the company D. To avoid large fines and expensive lawsuits E. All the above are reasons why.

question

A free market lacking clear ethical rules, adequate oversight and meaningful punishments for rule breakers might suffer:

answer

A. decrease in market demand. B. decrease in market supply. C. decrease in equilibrium price. D. total market collapse. E. all of the above.

question

An externality occurs when:

answer

people other than those making the demand and supply decisions share the benefits or the costs of an activity.

question

Costs that accrue to the total population are called ____ costs. Costs incurred by the producer or consumer who makes the decision are called ____ costs.

answer

social, private

question

If a negative externality results from the refining of oil, the cost of production as seen by the oil refinery:

answer

does not include the external cost

question

which of the following statements is true

answer

externalities can never refer to costs borne by the seller

question

If Don paints the outside of his house a horrendous color:

answer

he probably has lowered the value of his home and the value of his neighbors' homeshe is unlikely to bear all the social costs of his actions.

question

If there are significant external costs associated with the production of a product, it can be said that the private cost of production to the firm ____ the cost to society associated with this product and output should ____ to move toward the efficient situation.

answer

understates; decreases

question

If a positive externality results from the consumption of higher education, then the marginal benefit students receive from education:

answer

is less than the marginal social benefit

question

If a good that features a positive externality is produced in an unregulated free market, the good will be:

answer

under-produced and under-priced

question

to internalize a positive externality

answer

the consumers of a good could receive a subsidy equal to the external benefit resulting from the production or consumption of the good.

question

If the production of a particular good involves significant external benefits, to force the externality to be internalized the government might:

answer

offer a subsidy for production of the good in order to increase production.

question

which of the following is an example of a public good

answer

clean air

question

As an additional consumer obtains the benefits of a public good such as national defense, the benefits to existing consumers:

answer

do not change

question

Which of the following is true?

answer

It is extremely difficult to limit the benefits of a public good to the people who pay for it.

question

public goods are those that are consumed

answer

by the paying and nonpaying public alike

question

Public goods are characterized by:

answer

nonrivalry in consumption. nonexcludability of nonpayers

question

Without government intervention, society is likely to get too little production of:

answer

both private goods that generate external benefits and public goods

question

the determination of which goods are public depends on

answer

whether it is possible to exclude additional users from consuming the good if they do not pay for it.

question

Which of the following is true?

answer

A. The government may be able to overcome the free rider problem with public goods by providing the public goods and imposing taxes to pay for them. B. The nature of public goods is such that the government cannot accurately assess the benefits and costs of those affected. C. National defense and flood control are illustrations of public goods. D. Just as in the case of external benefits, public goods tend to be underprovided by the private sector. E. All of the above are true.

question

in a competitive economy with no government sector

answer

there will be too few public goods produced

question

The free rider problem suggests that competitive markets will tend to:

answer

produce less than the optimal quantity of a public good

question

The practice of potential buyers offering lower prices for a product of uncertain quality than they would for a product of certain quality is known as:

answer

the lemon problem

question

sellers may choose not to sell in certain markets because

answer

buyers are unable to accurately perceive the quality of their goods and are, therefore, less willing to pay an appropriate price for them.

question

Which of the following is most likely to be an example of asymmetric information?

answer

a collectible baseball card purchased on eBay

question

If a company offers a medical and dental care plan that offers benefits to all of the members of each employee's family for a given monthly premium, an employee who is a mother of five children and who has bad teeth who elects that plan would be an illustration of:

answer

the adverse selection problem

question

which of the following is true

answer

Reducing information costs to consumers and suppliers could permit more intelligent market decisions and lead to greater satisfaction.

question

a warranty offered by a seller is one way to overcome

answer

an adverse selection problem

question

the tendency of those who are insured to take more risks is a problem of

answer

moral hazard

question

The U.S. government establishing a policy that it will bail out troubled financial institutions and a resulting increase in the number of bank failures is an example of:

answer

the moral hazard problem

question

Which of the following statements best summarizes the essence of public choice analysis?

answer

Public choice analysis applies economic principles to political science issues.

question

The view that those whose preferences represent the middle position on an issue will tend to determine the outcome of an election is called:

answer

the median voter model

question

an explicit cost is

answer

an opportunity cost. an out of pocket expense

question

an implicit cost

answer

is characterized by an opportunity cost and does not require an outlay of money

question

A firm which owns its own equipment and is earning positive economic profits

answer

is probably earning positive accounting profits

question

economic profits will exist

answer

economic profits are not sure to exist in any of the above cases

question

When economic profits in an industry are zero and implicit costs are positive:

answer

accounting profits will be greater than zero. resources will not tend to either enter or leave the industry, other things equal

question

economic profits will take into account

answer

both implicit and explicit costs.

question

economic profits are

answer

less than accounting profits if implicit costs are greater than zero

question

when a firm makes zero economic profit, it means that

answer

the firm is covering he total opportunity costs of its resources

question

an economic profit of zero implies

answer

A. normal profit. B. the firm is covering both explicit and implicit costs. C. the firm's revenues are sufficient to compensate the money and time that the owners put into the business. D. all of the above

question

which of the following observations is true

answer

sunk costs are irrelevant for any future actions

question

Don Keene promotes boxing matches. He makes $6,500 per fight. Which cost is most relevant to a decision as to whether to promote one more fight?

answer

the marginal cost of promoting all boxing matches during the year

question

fixed costs are best defined as

answer

costs that do not vary with output

question

the marginal cost of good is

answer

the addition to total cost from producing one more unit of output

question

which of the following is most likely to be a fixed cost for a business

answer

. interest payments on a loan used to finance the construction of a building

question

the sum of AVC and AFC equals

answer

average total cost

question

Assuming fixed costs are positive, over a range of output in which average total costs were constant,

answer

average variable cost would be rising as output increases

question

total variable cost

answer

increases as production increases

question

when economics of scale exist, a decrease in the level of output will lead to

answer

an increase in cost per unit

question

when economies of scale exist

answer

per unit production costs decline as output expands

question

constant returns to scale indicate that a firm is experiencing

answer

per unit costs of production that remain stable as the scale of output expands.

question

a perfectly competitive firm is a

answer

price taker

question

which of the following best resembles a perfectly competitive market

answer

the stock market

question

which of the following is a characteristic of perfect competition

answer

homogeneous products

question

perfect competition is the term used to describe

answer

an industry in which numerous price-taking firms produce identical products.

question

the perfectly competitive model assumes that

answer

firms can enter and exit the industry with relative ease

question

which of the following is true about perfect competition

answer

A. Since a perfectly competitive seller can sell all he wants at the market price, her demand curve is horizontal at the market price over the entire range of output that she could possibly produce. B. Because perfectly competitive markets have many buyers and sellers, each firm is so small in relation to the industry that its production decisions have no impact on the market. C. Because consumers believe that all firms in a perfectly competitive market sell identical (homogeneous) products, the products of all the firms are perfect substitutes. D. Perfectly competitive markets have easy entry and exit. E. All of the above are true about perfect competition.

question

which of the following is true of perfectly competitive firms

answer

none of the above

question

a perfectly competitive firm faces a demand curve that is

answer

horizontal and perfectly elastic

question

a competitive firm facing a perfectly elastic demand curve can

answer

sell all of its output at the market price

question

a perfectly competitive firm has no influence over price because

answer

its output is insignificant relative to the market as a whole

question

a firm facing a horizontal demand curve

answer

is characterized by all of the above

question

in a perfectly competitive industry, influence over price is exerted by

answer

the forced of supply and demand

question

which of the following is false of perfectly competitive firms

answer

Because perfectly competitive firms are price takers, each firm's demand curve remains unchanged even when the market price changes.

question

The horizontal demand curve facing an individual firm in a perfectly competitive market:

answer

is a reflection of the firm's small size relative to the total market.

question

If the market demand curve in a perfectly competitive industry shifts right, the demand curve for each existing firm will:

answer

shift up

question

A profit-maximizing firm in a perfectly competitive market will always produce a quantity of output that:

answer

maximizes the amount by which total revenue exceeds total cost

question

for a perfectly competitive firm, which of the following is always true

answer

p=mr=d

question

A firm sells grapefruit in a perfectly competitive market at a price of $1.50 per pound. The firm's marginal revenue:

answer

equals $1.50

question

for a perfectly competitive firm, average revenue is

answer

equal to marginal revenue at all levels of output. equal to price at all levels of output

question

f a perfectly competitive firm's marginal revenue was less than its marginal cost,

answer

it would contract its output (but not raise its price) in order to increase its profits.

question

If a perfectly competitive firm is operating in the short run and seeks to maximize profit, the firm should:

answer

increase output whenever market price exceeds marginal cost

question

In perfect competition, at the firm's profit maximizing short run output, which of the following is true?

answer

all the above

question

Assume a perfectly competitive firm sells its output for $250 per unit. At its current 2,000 units of output, marginal cost is $180 and increasing, and average variable cost is $160. Assuming it wants to maximize its profits, it should:

answer

increase output

question

If a profit-maximizing firm finds that price exceeds average variable cost and marginal cost is greater than marginal revenue, it should:

answer

reduce output, but continue producing in the short run

question

A price-taking firm will tend to expand its output as long as price exceeds average variable cost and:

answer

its marginal cost is less than the market price

question

Firms will continue to enter a competitive industry until:

answer

any economic profits have been competed away

question

If new entry occurs in a perfectly competitive industry, the demand curve for each existing firm will:

answer

shift down

question

If perfectly competitive industry B is currently realizing economic profits, we would expect that:

answer

industry output will rise, good B will fall in price, and economic profits will tend to disappear.

question

When perfectly competitive firms in an industry are earning positive economic profits,

answer

we would expect entry into the industry.

question

If a perfectly competitive industry is neither expanding nor contracting, we would typically expect that:

answer

economic profits to be zero the price of the good will be stable

question

If the long-run industry supply curve in a perfectly competitive market slopes upward, then very likely input prices will ____ as industry output expands.

answer

increases

question

If input costs remain the same as industry output expands, what would you expect to be the long-run impact of an increase in demand on an industry currently in long-run equilibrium?

answer

there will be more firms but the price will remain the same

question

extractive industries such as farming mining or lumbering typically

answer

are considered to be increasing cost industries

question

If your company is in the range of output where it experiences economies of scale, you know:

answer

a 5 percent increase in all inputs will increase output by more than 5 percent.

question

Which of the following is true about the long run operations of perfectly competitive firms?

answer

all the above

question

monopoly is at the other end of the spectrum from

answer

perfect competition

question

a monopolist firm is a

answer

price maker that faces the market demand curve

question

In a perfectly competitive industry, the industry demand curve is ____, while in a monopolistic industry, the industry demand curve is:

answer

downward sloping; downward sloping

question

barriers that prevent the entry of new firms may arise because

answer

economies of scale exist over a substantial range of industry demand.the government protects some firms from competition.

question

pure monopoly

answer

is characterized by all the above

question

which of the following is a characteristic of a monopoly

answer

larger barriers to entry

question

a key element to preserving a monopoly is

answer

keeping potential rivals out of the market

question

Why does the government allow some markets to be monopolized by granting patents?

answer

to promote technological progress

question

which of the following would likely be an example of a monopolistic industry

answer

none of the above

question

If there are economies of scale throughout the relevant output range of production, which is false?

answer

It would typically result from a firm's possession of an exclusive patent

question

A natural gas monopoly currently sells 100 cubic feet of gas at $1.10 per cubic foot. To sell one more cubic foot, the natural gas company must lower the price of gas to $1.09. Which of the following best describes the marginal revenue of the 101st cubic foot of natural gas?

answer

the marginal revenue is less than $1.09

question

A monopolist can sell 6 units per day at $8 per unit, or 7 units per day at $7 per unit. Its marginal revenue for the seventh unit of output is:

answer

$1

question

the demand curve facing a monopolist

answer

is less elastic than a perfectly competitive firms demand curve

question

Graphically which of the following is true for a monopoly?

answer

The marginal revenue curve lies below the demand curve and is steeper than the demand curve.

question

a monopolist will operate at the quantity where

answer

MR = MC and charge a price corresponding to demand at that level.

question

Profit-maximizing monopolists choose a level of output such that:

answer

marginal revenue equals marginal cost

question

For a profit-maximizing monopolist, the price of a product is:

answer

always greater than marginal revenue

question

Which of the following is true for a monopolist but not for a perfectly competitive firm?

answer

a. and b. are true for a monopolist but not for a perfectly competitive firm.

question

in the long run, economic profits are

answer

possible for a monopolist but not for a perfectly competitive firm

question

in both perfect competition and monopoly, a firm

answer

will be characterized by both b. and c.

question

A monopolist would charge ____ prices and produce ____ output than would exist under perfect competition.

answer

higher; less

question

which of the following is generally true of monopoly

answer

All of the above are generally true of monopoly.

question

which of the following is likely in a monopolized market

answer

all of the above

question

If an unregulated monopolist operates in a market, then:

answer

all the above

question

the aim of antitrust policy is to

answer

prevent firms from acquiring or exercising undue market power

question

What was the first important law regulating monopoly that prohibited "restraint of trade"?

answer

sherman act

question

Which landmark legislation made it illegal to engage in predatory pricing and also prohibited mergers if it led to weakened competition?

answer

clayton act

question

U.S public utilities are often

answer

regulated natural monopolies

question

If a regulatory commission wishes to allow a firm to earn a normal rate of return, it should set price equal to:

answer

average total cost

question

If a regulatory board wanted to make sure that a natural monopoly earned a normal rate of return, it should set price which is equal to:

answer

average total cost

question

Price ____ occurs when producers charge different customers different prices for the same good or service.

answer

discrimination

question

price discrimination refers to

answer

charging different prices to different groups without a basis for doing so because of differences in production costs.

question

When a monopolist is able to sell its product at different prices to different customers, it is likely engaging in:

answer

price discrimination

question

The practice of selling a product to different customers at different prices when marginal cost is the same is known as:

answer

price discrimination

question

When setting prices, the monopolist may choose to charge alternative customers different prices based on:

answer

all the above

question

A price-discriminating monopolist will tend to charge a higher price to senior citizens if it believes that senior citizens:

answer

have a greater willingness to pay than other demanders

question

A monopolist who is able to price discriminate by charging two different groups different prices:

answer

will set prices so that both group's demand curves are elastic at the prices charged.

question

Ceteris paribus, in which of the following cases would we expect economic profits to be greatest?

answer

an unregulated monopolist who is able to price discriminate.

question

When a monopolist is able to price-discriminate:

answer

both its profits and output tend to increase.

question

A monopolist who is unable to price discriminate:

answer

will be characterized by both b. and d.

question

An industry characterized by only a few firms in the market is called:

answer

an oligopoly

question

which of the following is characteristic of an oligopolistic industry

answer

all the above

question

A basic characteristic of the firms in an oligopoly market structure is that they are:

answer

large and interdependent

question

The key characteristic of oligopoly markets is "interdependence among firms." This means that:

answer

each firm must consider how its decisions will affect its competitors

question

high barriers to entry are generally found in

answer

both c and d

question

oligopoly firms

answer

base their pricing and output decisions on the likely responses of rival firms

question

an example of an oligopoly is

answer

the automobile indusrty

question

Economists believe that oligopolists like American Airlines and the Kellogg Company:

answer

carefully watch and anticipate the pricing and advertizing moves of their competitors.

question

Under conditions of oligopoly, economies of large-scale production mean that:

answer

small firms are at a disadvantage in competing with relatively large firms.

question

In which of the following industry models are the individual firms not price takers?

answer

a and b

question

a cartel is

answer

a group of oligopolists who try to behave like a single monopolist and split the benefits among themselves.

question

The Organization of Petroleum Exporting Countries is an example of:

answer

a periodically successful cartel

question

If the firms in an oligopoly collude, the results will represent what other type of industry?

answer

monopoly

question

If firms meet together to decide on prices and outputs, it is called:

answer

overt collusion

question

overt cartels are relatively because

answer

all the above

question

Which of the following is true for a typical firm in a typical cartel?

answer

"If I alone cheat, I'm better off; if everyone cheats, I'm worse off."

question

Cartel members have a collective interest in ____ industry output and a private interest in ____ their own output.

answer

decreasing; increasing

question

____ facilitates joint profit maximization for the oligopoly.

answer

collusion

question

The maximum possible profit that could be earned by a cartel is:

answer

equal to the monopoly profit

question

predatory pricing

answer

both c and d

question

Approximately ____ of national income goes to wages and salaries for labor services.

answer

75 percent

question

The price of any productive resource is ____ related to ____ the final good or service:

answer

directly; demand for

question

Which of the following best illustrates the concept of "derived demand"?

answer

An automobile firm faces an increase in the demand for cars it supplies to the market, which leads to an increase in the demand for autoworkers.

question

When labor is a firm's only variable input in its production process, a profit-maximizing firm will continue to employ additional workers as long as:

answer

the marginal revenue product of labor > the marginal resource cost.

question

Which of the following statements are true regarding profit-maximizing firms?

answer

They will attempt to maximize the difference between total revenues and total costs.

question

Which of the following would cause the demand for carpenters to increase?

answer

an increase in the demand for housing

question

The relationship between the wage rate and the quantity of labor that employers wish to hire is called:

answer

the market demand curve for labor

question

If labor is the only variable input, an additional worker increases output from 72 to 78 units, and the product price is $6, the marginal revenue product from an additional worker:

answer

is $36

question

When a firm evaluates the contribution of a worker to its ____, it must calculate the worker's contribution to revenue, minus the worker's ____.

answer

profits; wage

question

the market supply curve for labor

answer

shows the relationship between the wage rate and the quantity of labor that workers are willing to supply.

question

Which of the following does NOT contribute to increased worker productivity?

answer

increased labor supply

question

If the demand for software engineers ____ more slowly than does supply, wages of software engineers will ____

answer

increase; fall

question

Which of the following will NOT contribute to higher wage rates for labor?

answer

significantly relaxed immigration standards

question

Which of the following will NOT result in a leftward shift of the market demand curve for labor?

answer

an increase in the wage rate

question

improvements in the productivity of labor will tend to

answer

increase wages

question

Which of the following is the best example of an investment in human capital?

answer

a summer internship at a law firm filled by someone attending law school

question

which of the following is false

answer

an increase in wage will lead to an increase in the supply of labor

question

Wages are approximately ____ higher in union jobs than in comparable nonunion jobs.

answer

15%

question

Not all similarly skilled workers are included in unions. As a result, wages for unionized workers tend to be ____ than for nonunion workers. Additionally, as a significant number of skilled workers seek work in the nonunion sector, the supply curve for nonunion labor shifts to the ____, thereby ____ wages for nonunion workers.

answer

higher; right; reducing

question

Which of the following is not part of an argument that unions lead to increased productivity?

answer

benefits from featherbedding

question

Since the 1980s the proportion of income received by the top (richest) 5 percent of Americans has ____, and the measured income of Americans in the lowest (poorest) fifth has ____.

answer

risen; fall

question

With regard to the income quintile (20% of the population) listings below, which one indicates the greatest degree of income inequality?

answer

b

question

an example of in-kind income is

answer

subsidized housing

question

Scholars argue that government activity should be considered when evaluating the measured income distribution because:

answer

the middle and higher-income quintiles have benefited more than the poor from state-subsidized airports, airlines, operas, and museums.

question

Which of the following changes would tend to increase measured income inequality?

answer

an increase in the number of divorced people

question

which of the following countries has the greatest degree of income inequality

answer

the US

question

The official poverty rate for the United States for a family of four is approximately:

answer

$20,000

question

The poverty rate in the United States is defined as the proportion of the population that fails to earn a ____ absolute income standard. Poverty rates in the United States have largely ____ since the year 2000.

answer

minimum; risen

question

Ceteris paribus, if the cost of feeding and housing a family were to increase, it would increase a family's level of ____ poverty.

answer

absolute

question

under a progressive tax system

answer

higher marginal taxes are imposed on higher incomes

question

A major macroeconomic goal of nearly every society is:

answer

all the above

question

The first formal acknowledgement of the primary macroeconomic goals of price stability, high employment, and promoting economic growth in the United States came with passage of the:

answer

the Employment Act of 1946

question

The unemployment rate is the number of people classified as unemployed as a percentage of:

answer

the labor force

question

the labor force equals

answer

the number of employed plus the number of unemployed persons

question

Kathryn chooses to go to college full-time rather than to work. Kathryn:

answer

is not part of the labor force

question

discouraged workers are defined as those

answer

who have given up looking for a job and are not counted as unemployed.

question

which of the following individuals are considered officially unemployed

answer

none of the above

question

The unemployment rate may underestimate the true extent of unemployment if:

answer

many part-time employees would like to work full-time, but are unable to get the additional work.

question

which of the following is false

answer

none of the above. they are all true

question

underemployment occurs when

answer

a worker is over-qualified and possesses more skills than his job demands.

question

Frictional unemployment occurs when:

answer

a worker decides to quit to see a different job

question

A federal program aimed at retraining the unemployed workers of the declining coal and steel industries is designed to reduce which type of unemployment?

answer

structural

question

cyclical unemployment arises when

answer

business activity in the macroeconomy declines

question

which of the following people is structurally unemployed

answer

Clem, a skilled corset maker, lost his job when his factory shut down due to a permanent reduction in the demand for corsets.

question

According to Okun's law, a 2 percent increase in cyclical unemployment reduces output by almost:

answer

4%

question

When unemployment rises above the natural rate it reflects the existence of ____ unemployment.

answer

cyclical

question

the natural rate of unemployment

answer

is the sum of both frictional and structural unemployment when they are at a maximum.

question

If the economy is operating with full employment, which of the following is essentially eliminated?

answer

cyclical unemployment

question

In recent years, economists have come to believe that full employment in the U.S. economy occurs at an unemployment rate between:

answer

4.5% and 5.5%

question

which of the following is true

answer

all of the above

question

inflation exists when

answer

the overall price level is rising

question

In the typical CPI shopping basket, which of the categories below represents the largest percentage of consumer spending?

answer

housing

question

The GDP deflator represents a somewhat ____ measure of prices that the CPI and the GDP deflator tends to be ____ volatile than the CPI.

answer

broader; less

question

During an inflationary period, those most likely to suffer reduced wealth are those who are holding their wealth in:

answer

currency

question

what are creditors harmed by unexpected inflation

answer

Creditors are paid back money with less spending power than when it was originally loaned out.

question

an unanticipated period of deflation will

answer

redistribute income form borrowers to lenders

question

given a fixed nominal interest rate on a loan, unanticipated deflation

answer

increases the burden of paying off the loan

question

which of the following groups would not tend to loss form unexpected inflation

answer

Those whose wages have cost of living adjustment clauses in their contracts

question

the cost imposed on a firm from changing listed prices are called

answer

the menu costs of inflation

question

economists use the term "business cycle" to refer to

answer

fluctuations in economic activity, measured by GDP or unemployment

question

The period of declining growth in real GDP, between the peak of the business cycle and the trough, is called the:

answer

contractionary phase

question

in the expansion phase of the business cycle

answer

all the above

question

Unemployment rises in ____, and falls in ____.

answer

contractions; expansions

question

Which of the following observations concerning phases of a business cycle is NOT correct?

answer

maximum amount of unemployment occurs exactly at the trough

question

economists usually use the term "recession" to refer to

answer

two or more consecutive quarters of declining real GDP

question

Which of the following describes the historical record of the business cycle in the United States?

answer

periods of contraction seem to have gotten shorter over time

question

which of the following is true

answer

The expansions and contractions of real world business cycles last varying lengths of time and often differ in magnitude

question

the type of unemployment that occurs because of a recession is called

answer

cyclical unemployment

question

which of the following is not a leading economic indicator

answer

unemployment rate

question

Which of the following observations concerning leading economic indicators is true?

answer

they provide warnings of likely downturns

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