If firms have to spend money on creating and protecting their monopoly power, they’re
going to buy:
A. more monopoly power than if it were free.
B. the same monopoly power as if it were free.
C. less monopoly power than if it were free.
D. no monopoly power.
Answer:
Refer to the graphs shown, which show indifference curve analysis with the associated
demand curves. An increase in the price of Y most likely would cause a rational
consumer to move from point:
A. C to point B.
B. F to point D.
C. B to point A.
D. H to point I.
Answer:
A firm is producing 100 units of output at a total cost of $400. The firm’s average
variable cost is $3 per unit. What is the firm’s total fixed cost?
A. $1
B. $50
C. $100
D. $300
Answer:
If technological innovation occurs when a firm is experiencing diseconomies of scale:
A. the long-run average total cost curve will shift down but still will rise as output
expands.
B. long-run average total costs will remain the same as output expands.
C. short-run average total costs will fall as output expands.
D. product prices will rise, leading to inflation.
Answer:
According to economist Colin Camerer of the California Institute of Technology, many
New York taxi drivers decide when to finish work by setting an income goal for
themselves. If this is true, on busy days when the effective hourly wage is higher, tax
drivers will:
A. work the same number of hours as they will on slower days.
B. work fewer hours than they will on slower days.
C. work more hours than they will on slower days.
D. not work any hours.
Answer:
Suppose that when you consume the third piece of chicken, total utility rises from 420
to 520. Marginal utility for the third piece of chicken is:
A. 520
B. 420
C. 140
D. 100
Answer:
Technological change:
A. reduces average total cost without changing production techniques.
B. reduces average total cost by changing production techniques.
C. does not reduce average total cost but does change production techniques.
D. reduces average total cost by expanding plant size.
Answer:
Refer to the graph shown. Given the quantity restriction of QR, a reduction in demand
will:
A. raise equilibrium price.
B. raise equilibrium quantity.
C. have no impact on market price.
D. lower the market price.
Answer:
Suppose there are 200 firms in a perfectly competitive market and each maximizes
profit at 120 units of output when market price is $5.00 per unit. One of the points on
the market supply curve must be at:
A. price = $5 and quantity supplied = 320.
B. price = $5 and quantity supplied = 24,000.
C. price = $1,000 and quantity supplied = 320.
D. price = $1,000 and quantity supplied = 24,000.
Answer:
Suppose there is an improvement in the technology of producing TVs and the
production of TVs is a competitive industry. Assuming that the TV industry is initially
in equilibrium, the long-run effect of this improvement is:
A. higher TV prices and greater TV production.
B. lower TV prices and greater TV production.
C. higher TV prices and lower TV production.
D. lower TV prices and lower TV production.
Answer:
What relates positive economics to normative economics?
A. Microeconomics
B. Macroeconomics
C. The art of economics
D. The science of economics
Answer:
The voluntary export restraints on autos by Japan in the early 1980s were:
A. prohibited by the WTO.
B. unlike an import quota and did not affect the price of cars imported.
C. unlike a tariff and did not affect the price of imports.
D. a bad deal for the U.S. consumers.
Answer:
The group of economists who believe politicians are subject to the laws of demand and
supply and focus on this in their analysis are known as:
A. public choice economists.
B. radical economists.
C. orthodox economists.
D. libertarian economists.
Answer:
The elasticity of the labor supply curve depends on all of the following factors except:
A. individuals’ opportunity cost of working.
B. the number of workers who enter or leave the labor market.
C. the elasticity of demand for a firm’s output.
D. the elasticity of individuals’ labor supply curves.
Answer:
The optimal level of employment for a monopsonist corresponds to the point where
labor:
A. demand intersects labor supply.
B. supply intersects marginal factor cost.
C. demand intersects marginal factor cost.
D. supply intersects marginal revenue product.
Answer:
An important law in the U.S. regulation of markets is the:
A. Standard Oil Antitrust Act of 1890.
B. Sherman Antitrust Act of 1890.
C. Alcoa Antitrust Act of 1890.
D. Lincoln Antitrust Act of 1890.
Answer:
A downward-sloping line that makes a 45 degree angle with the horizontal and vertical
axes has a slope of:
A. zero.
B. 1.
C. -1.
D. infinity.
Answer:
Refer to the graph shown of a monopolistically competitive firm. You can conclude
that:
A. new firms will enter the industry in the long run.
B. existing firms will exit the industry in the long run.
C. the industry is in long-run equilibrium.
D. the price of ladies’ dresses is equal to the minimum possible average total cost.
Answer:
Refer to the graph shown. Assuming a consumer has $5 to spend, if a soda costs $0.25
and a chocolate bar costs $0.50, the consumer will optimally choose to consume:
A. at point A.
B. at point B.
C. 0 cans of soda and 10 chocolate bars.
D. 20 cans of soda and 0 chocolate bars.
Answer:
Do economists tend to favor a system in which power plants buy and sell the right to
pollute in the form of emission credits?
A. No; these programs are ineffective because they encourage major polluters to free
ride on the efforts of others.
B. No; it is possible for some firms to do nothing if they simply buy enough credits.
C. Yes; they encourage all firms to cut pollution by the same percentage.
D. Yes; they believe that such a proposal would achieve a level of pollution reduction
with the lowest cost to society.
Answer:
Refer to the graph shown. If the monopoly firm maximizes profit, it will produce:
A. 15 units of output and producer surplus will be $28.125.
B. 15 units of output and producer surplus will be $16.875.
C. 25 units of output and producer surplus will be $15.625.
D. 30 units of output and producer surplus will be $60.
Answer:
If the price of a good goes up by 5 percent% and, in response, the quantity demanded
falls by 15 percent, the price elasticity of demand will be:
A. .05.
B. 3.
C. 0.3333.
D. 0.15.
Answer:
Suppose that the free market labor supply and labor demand equations are given by Qs
= 5W and Qd = 30 – 5W. If the minimum wage were set at $2.50 an hour, how many
people would not be able to find work?
A. 30
B. 20
C. 10
D. 0
Answer:
Until the 1940s economics tended to focus on deductive reasoning. This can be
attributed to:
A. the lack of computational power to analyze data.
B. the laissez-faire approach to the economy.
C. the fact that inductive reasoning was viewed as obsolete.
D. the lack of quality economists.
Answer:
The minimum point of the average variable cost curve is reached at the output level
where:
A. marginal product is maximized.
B. neither marginal nor average product is maximized.
C. average product is maximized.
D. average and marginal products are maximized.
Answer:
Juan works at Texas Burgers in El Paso and earns $8.00 per hour. His twin brother
Felipe works in Mexico Burgers in Ciudad Juarez just across the border and earns $3.00
per hour for exactly the same work. An economist looking at this situation sees:
A. an incentive for Felipe to cross the border to get a job and thus reduce the gap.
B. an incentive for Felipe to quit and find another job in Mexico.
C. the tendency of the rich to get richer and the poor to get poorer, widening the gap.
D. evidence that the law of one price has no support in the real world.
Answer:
Refer to the graph above. If suppliers can reduce output from M to L, consumer surplus
is reduced by area(s):
A. A.
B. A and B.
C. B and D.
D. A, B, and D.
Answer:
What controls the price that natural monopolies charge so that it will be a “fair price”?
A. patents
B. regulatory boards
C. consumers
D. competition
Answer:
Government has:
A. deregulated the electricity industry because domestic producers are facing fierce
international competition.
B. deregulated the entire electricity industry because the bureaucratic costs of
maintaining the regulations became too high.
C. broken the electricity industry into subindustries and deregulated the portions that do
not exhibit economies of scale.
D. broken the electricity industry into subindustries and deregulated the portions that
exhibit economies of scale.
Answer:
Two economists are debating whether to remove a tariff on luxury vehicles. They agree
that consumers will benefit by $5 billion and that the harm done to domestic businesses
and workers will be only $4 billion. One argues that these facts make it obvious that the
tariff should be removed. The other disagrees. What would be a likely reason for the
second economist to disagree?
A. There is no good reason because the benefits outweigh the costs.
B. He or she is using a different economic model to understand the world.
C. He or she has a different interpretation of the empirical evidence.
D. He or she has different value judgments about the weights that should be put on the
benefits and costs.
Answer: