Question 1

the fundamental problem of economics is  a. to achieve a more equitable distribution of income to mitigate poverty b. the scarcity of productive resources relative to seemingly unlimited wants c. to establish a democratic political framework for the provision of public goods and services d. to assure that all equilibrium prices are fair

Accepted Answer

B

Question 2

economists assume that people are rational. behaving rationally requires that opportunity cost be  a. ignored in making a decision b. considered for individual choices, but not for social choices c. computed, but not actually used in making a decision d. considered in making a decision

Accepted Answer

D

Question 3

economics is a social science rather than a \"hard\" science like physics because  a. economists abstract from reality when creating their theories b. economics is easier to study than physics c. economists must explain their theories to government policy makers who lack formal mathematical training d. economists study human behavior, which is influenced by many things

Accepted Answer

D

Question 4

abstraction can be thought of as  a. ignoring reality in order to build a theory b. omitting unimportant details in order to understand complex phenomena c. creating absurdity in order to explain simplicity d. stylizing reality rather than analyzing cause and effect

Accepted Answer

B

Question 5

what is the appropriate degree of abstraction in a theory?  a. the more detail there is, the better b. detail should be minimized to avoid complexity c. abstraction is the essence of analysis and should be pursued for its own sake d. it depends upon the objective of the analysis

Accepted Answer

D

Question 6

ceteris paribus, which of the following would shift the economy\'s production possibilities frontier inward and downward?  a. an increase in the proportion of the economy\'s output that consists of capital b. passage of a law requiring mandatory retirement at age 55 c. the entrance of more women into the nation\'s labor force d. the discovery of a large new oil field within the nation\'s borders

Accepted Answer

B

Question 7

as more of a good is produced along a production possibilities frontier, producing additional units of the good will have increasing opportunity costs because of  a. corporate income taxes b. firms\' needs to produce profits c. the fact that it is more difficult to use resources efficiently the more society produces d. the fact that resources are not equally productive in alternative uses

Accepted Answer

D

Question 8

if the marginal benefit of a good exceeds its marginal cost  a. we\'ve achieved efficient resource use b. we should produce more to achieve the allocatively efficient use of resources c. we should produce less to achieve the allocatively efficient use of resources d. we cannot tell if more or less should be produced to achieve the allocatively efficient use of resources

Accepted Answer

B

Question 9

when an economy produces at its allocatively efficient production point,  a. if a society increases the production of one good the cost of doing so will exceed the benefit of doing so b. scarcity is not a problem c. resources are not limited d. a society can increase the production of all goods

Accepted Answer

A

Question 10

the opportunity cost of a faster rate of economic growth is  a. the production of fewer consumption goods in the present time period b. decreased by the creation of capital goods rather than consumption goods c. so high that places such as Hong Kong have had to do without it d. zero

Accepted Answer

A

Question 11

the principle of absolute advantage explains why  a. advanced nations will trade with less-developed countries b. less-developed countries only trade among themselves c. advanced nations should not trade with less-developed countries d. none of the above

Accepted Answer

D

Question 12

for a consumer good, which of the following would not result in a change in \"supply\"?  a. a change in its price b. a change int he price of labor used to produce that good c. a change int he technology used to produce the good d. an increase in the expected future prices of the good

Accepted Answer

A

Question 13

if the price of print cartridges falls, then  a. the demand for printers will shift to the left b. the demand for printers will shift to the right c. the demand for print cartridges will shift to the left d. the demand for print cartridges will shift to the right

Accepted Answer

B

Question 14

a shortage in the market for a good will lead to  a. a lower price and lower profits for sellers of the good b. a lower price and higher profits for sellers of the good c. a higher price and higher profits for the sellers of the good d. a higher price and lower profits for sellers of the good

Accepted Answer

C

Question 15

the incomes of US citizens who wish to vacation in Paris rise. at the same time, the price of jet fuel rises. the equilibrium price of a flight to Paris ____ and the equilibrium quantity of flights to Paris ____.  a. might rise, fall or not change; increases b. falls; decreases c. rises; increases rises; might increase, decrease, or not change

Accepted Answer

D

Question 16

which of the following statements is NOT true  a. An individual\'s consumer suprlus is the difference between what they would be willing to pay for a good and the market price of that good. b. a firm\'s producer surplus is the difference between the market price of the good it sells and lowest price at which it would be willing to supply that good c. when a market is in equilibrium, consumer surplus is always greater than producer surplus d. when a market is in equilibrium, the max values of both consumer surplus and producer surplus have been obtained

Accepted Answer

C

Question 17

based on the following pieces of information, which fast food options do consumers see as the closest substitute for Wendy\'s hamburgers?  a. quiznos\' subs, which have a cross elasticity of 0.0 with wendys b. arby\'s roast beef sandqiches, which have a cross elasticity of 1.50 with wendys c. five guys hamburgers, which have a cross elasticity of 1.3 with wendys d. taco bell tacos, which have a cross elasticity of -1.25 with wendys

Accepted Answer

B

Question 18

to say that a turnip is an inferior good means that the income elasticity of demand for turnips  a. is definitely greater than 1 b. is definitely between 0 and 1 c. is positive but could be greater than, less than, or equal to 1 d. is negative

Accepted Answer

D

Question 19

kirk consumer normal goods. if kirk\'s income decreases and the prices of all goods remain the same, in his new consumer equilibrium his marginal utility from each good will ____ and his total utility will _____  a. increase; increase b. increase; decrease c. decrease; increase d. decrease; decrease

Accepted Answer

B

Question 20

the water and diamonds paradox of value  a. is that water is essential for life and yet is cheap, whereas diamonds are totally nonessential and yet are expensive b. points out that we generally have a low total utility of water and a high total utility of diamonds. c. is resolved by the principle that market price is determined by total utility, not marginal utility d. none of the above

Accepted Answer

A

Question 21

water is cheap and diamonds are expensive because water has a ______, and diamonds have a _______  a. low total utility; high total utility b. low marginal utility; high marginal utility c. high marginal utility; low marginal utility d. low marginal utility and a low total utility; high marginal utility and a high total utility

Accepted Answer

B

Question 22

a firm\'s total opportunity cost   a. is equal to the sum of all payments made for resources obtained from external suppliers b. includes the cost of the resources supplied by the owners of the firm c. is impossible to determine d. is irrelevant

Accepted Answer

B

Question 23

when a firm\'s economic profit equals zero,  a. a firm must exit the industry b. the firm wil shut down until the market improves c. its total revenue does not cover all opportunity costs d. the firm is receiving a normal profit

Accepted Answer

D

Question 24

economic profits greater than zero a. are nor an economic cost because they need not be realized for a business to retain entrepreneurial ability b. are not an economic cost because they are impossible to calculate.  c. are not an economic cost because they are really a part of wage costs d. are an economic cost

Accepted Answer

A

Question 25

_____ account for the largest portion of all firms; ____ account for most of the total revenue received by businesses  a. proprietorships; partnerships b. proprietorships; corporations c. partnerships; corporations d. corporations; proprietorships

Accepted Answer

B

Question 26

industry concentration refers to the extent to which  a. the products of firms in the industry are not exactly the same b. the market is dominated by a small number of firms c. the industry executives concentrate on their product d. consumers are geographically concentrated

Accepted Answer

B

Question 27

if the four-firm concentration ratio is a very small number, then  a. there is a high degree of competition in the market b. there is no competition in the market c. the market must be dominated by a few firms d. the market is oligopolistic

Accepted Answer

A

Question 28

the difference between the short run and the long run is that  a. all inputs are fixed in the short run while they are all variable in the long run b. fixed costs are more important to decision-making in the long run than they are in the short run c. in the long run all inputs are variable while in short run at least one input is fixed d. the law of diminishing returns applies in the long run, but not in the short run

Accepted Answer

C

Question 29

the marginal product of labor is equal to the  a. firm\'s total product divided by the total number of workers hired b. increase in the total product that results from hiring one more worker with all other inputs remaining the same c. slope of the marginal product of labor curve d. none of the above

Accepted Answer

B

Question 30

according to the law of diminishing marginal returns, as a firm increases output,  a. the average product of the variable input eventually diminishes b. the firm hires cheap, less-skilled workers in place of expensive, high-skilled worker c. total product diminishes d. the marginal product of an additional worker will be less that the marginal product of the previous worker hired

Accepted Answer

D

Question 31

when diseconomies of scale would result from choosing a larger plant size in the long run,  a. AFC will fall b. AFC will rise c. LRAC rises d. the MC curve intersects ATC e. LRAC falls

Accepted Answer

C

Question 32

a perfectly competitive firm is a \"price taker\" because  a. there are no good substitutes for its product b. each seller supplies a negligible fraction of total supply c. of product differentiation reinforced by extensive advertising d, the firm\'s demand curve is downward sloping

Accepted Answer

B

Question 33

in perfect competition, the marginal revenue of an individual firm  a. is zero b. is positive but less than the price of the product c. equals the price of the product d. exceeds the price of the product

Accepted Answer

C

Question 34

a competitive firm will maximize profit at that output at which  a. the diff between price and MC is maximum b. the diff between marginal revenue and price is at a max c. marginal revenue equals marginal cost d. price minus AVC is greatest

Accepted Answer

C

Question 35

a perfectly competitive firm with no fixed cost is producing where MR = $4.00 and MC = $2.00. this firm can increase profit by  a. expanding output b. reducing output to reduce costs and increase profit c. continue to do what it is doing - it\'s already making a profit d. raising price to increase total revenue

Accepted Answer

A

Question 36

a perfectly competitive firm is producing at the point where its MC = MR. if the firm increases its output, its TR will ____ and its profit will _____  a. rise; rise b. rise; fall c. fall; rise d. fall; fall

Accepted Answer

B

Question 37

in the short run, a perfectly competitve firm\'s economic profit  a. must equal zero; that is, the firm earns a normal profit b. must be positive c. must be positive, negative, or zero d. must be negative

Accepted Answer

C

Question 38

when new firms enter a perfectly competitive industry  a. the individual demand curves facing the firms already in the industry shift to the point of minimum average cost in the long run b. they are creating economic inefficiency c. the short run industry supply curves shifts to the left the original firms will be incurring economic losses

Accepted Answer

A

Question 39

as perfectly competitive firms leave a market because they are incurring an economic loss, the price of the good _____ and the economic loss of each remaining firm____  a. rises; becomes larger b. rises; becomes smaller c. falls; becomes larger d. falls; becomes smaller

Accepted Answer

B

Question 40

if an industry is in a perfectly competitive long run equilibrium, then  a. only allocative efficiency will be obtained b. only efficiency in production will be obtained c. both allocative efficiency and efficiency in production are obtained d. neither allocative efficiency nor efficiency in production is obtained

Accepted Answer

C

Question 41

if a firm in a perfectly competitive industry is earning an economic profit in the short run, then  a. only allocative efficiency will be obtained b. only efficiency in production will be obtained c. both allocative efficiency and efficiency in production are obtained d. neither allocative efficiency nor efficiency in production is obtained

Accepted Answer

A

Question 42

the value of marginal product of an input such as labor is the  a. additional output produced by the last unit of an input b. total revenue divided by the units of the input employed c. extra revenue gained by selling one more unit of output d. extra revenue gained by employing one more unit of the input

Accepted Answer

D

Question 43

as the quantity of labor employed by a firm decreases, labor\'s _____ increases.  a. marginal cost b. value of marginal product c. marginal revenue d. average cost

Accepted Answer

B

Question 44

if the value of marginal product of labor is less than the wage rate at the quantity of labor employed by the firm, it would  a. decrease the wage rate b. increase the wage rate c. employ more workers d. employ fewer workers

Accepted Answer

D

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