Monopolistic competition differs from oligopoly in that in monopolistic competition
firms act independently while in oligopoly firms act interdependently.
Answer:
A decrease in the price of inputs will cause the supply curve for a product to shift to the
right.
Answer:
The only Giffen goods that have been identified so far in the real world are luxury
goods.
Answer:
The most important factor contributing to wage differences in the labor market is
differences in the level of education and training among workers.
Answer:
All else equal, a decrease in the supply of labor will shift the labor supply curve to the
left and decrease the equilibrium wage.
Answer:
In a market with positive externalities, the market equilibrium price will be less than the
efficient equilibrium price.
Answer:
Managed float exchange systems were abandoned with the implementation of the gold
standard.
Answer:
Contractionary fiscal policy involves decreasing government purchases or increasing
taxes.
Answer:
If, when price changes by 35 percent, the quantity demanded changes by 7 percent, then
the absolute value of the price elasticity of demand is 5.
Answer:
If aggregate expenditure is less than GDP, then inventories rise and GDP falls.
Answer:
If the demand curve for a product shifts to the right and the supply curve for the product
shifts to the left, equilibrium price and equilibrium quantity will both increase.
Answer:
Inflation rates during the years 1979-1981 were the highest the United States has ever
experienced during peacetime.
Answer:
The total amount of producer surplus in a market is equal to the area above the market
supply curve and below the market price.
Answer:
When Audrina raised the price of her homemade cookies, her total revenue increased.
This suggests that the demand for Audrina’s cookies is elastic.
Answer:
When products that create positive externalities are produced, at the market equilibrium
output, the social benefit generated by consuming the product exceeds the private
benefit.
Answer:
Table 16-1
Table 16-1 shows the price for the hardcover version of the novel Inferno by Dan
Brown at four online bookstores.
Which of the following can one conclude from the data above?
A) The data provides clear evidence of price discrimination in online bookstore market.
B) Amazon.com and Walmart.com are able to charge a lower price for the item because
they are more cost efficient than the other two companies.
C) The items offered for sale are similar but not identical; the quality of service and
delivery time might vary from store to store, which justifies the price differences.
D) Walmart.com and Amazon.com have deliberately underpriced their product to force
the other two companies out of business.
Answer:
If your nominal wage rises faster than the price level, we can say your real wage has
________ and the purchasing power of your income has ________.
A) fallen; fallen
B) fallen; risen
C) risen; risen
D) risen; fallen
Answer:
In the early 1900s, Henry Ford revolutionized the automotive manufacturing industry
by instituting the assembly line. What impact did the assembly line method for
producing automobiles have on the per-worker production function for Ford?
A) It became flatter.
B) It shifted up.
C) It shifted down.
D) It became linear.
Answer:
Suppose a hurricane decreased the supply of oranges so that the price of oranges rose
from $120 a ton to $180 a ton and quantity sold decreased from 800 tons to 240 tons.
What is the absolute value of the price elasticity of demand?
A) 0.11
B) 0.37
C) 2.69
D) 9.33
Answer:
The graph below represents the market for alfalfa. The market price is $7.00 per bushel.
Identify the areas representing consumer surplus, producer surplus, and economic
surplus.
Answer:
An increase in the expected inflation rate will
A) shift the short-run Phillips curve to the right.
B) shift the short-run Phillips curve to the left.
C) reduce the inflation rate.
D) reduce the unemployment rate.
Answer:
Figure 3-8
The graph in this figure illustrates an initial competitive equilibrium in the market for
motorcycles at the intersection of D2 and S1 (point C). Which of the following changes
would cause the equilibrium to change to point B?
A) A positive change in the technology used to produce motorcycles and decrease in the
price of motorcycle insurance, a complement to motorcycles.
B) An increase in the wages of motorcycle workers and a decrease in the price of
motorcycle insurance, a complement to motorcycles.
C) An increase in the number of motorcycle producers and an increase in the number of
consumers who prefer riding motorcycles.
D) An increase in the wages of motorcycle workers and an increase in the price of
motorcycle insurance, a complement to motorcycles.
Answer:
Which of the following is true?
A) The money market model is essentially a model that determines the short-term
nominal rate of interest.
B) The money market model is essentially a model that determines the short-term real
rate of interest.
C) The loanable funds model is essentially a model that determines the short-term real
rate of interest.
D) The loanable funds model is essentially a model that determines the long-term
nominal rate of interest.
Answer:
All of the following are disadvantages of cost-plus pricing except
A) It ignores the price elasticity of demand: for example, it may be possible to increase
profits by raising or lowering price.
B) If the industry comprises identical firms (with identical costs), markups could be
consistent among firms leading to no one firm having a competitive edge in terms of
price.
C) Allocating and apportioning business overheads to individual products could be
somewhat arbitrary.
D) The business has less incentive to cut or control costs: if costs increase, then selling
prices increase. Consequently, this might further erode a firm’s competitiveness.
Answer:
Table 14-1 Godrickporter
and Star Connections are the only two airport shuttle and limousine rental service
companies in the mid-sized town of Godrick Hollow. Each firm must decide on whether
to increase its advertising spending to compete for customers. Table 14-1 shows the
payoff matrix for this advertising game. Is there a dominant strategy for Godrickporter
and if so, what is it?
A) No, its outcome depends on what Star Connections does.
B) Yes, Godrickporter should increase its advertising spending.
C) Yes, Godrickporter should reduce its advertising spending.
D) Yes, Godrickporter’s dominant strategy is to collude with Star Connections.
Answer:
If the number of employees who quit, are fired, or retire increases while the hiring of
new employees declines, this indicates that the
A) labor demand curve is shifting to the right.
B) labor supply curve is shifting to the right.
C) labor demand curve is shifting to the left.
D) labor supply curve and labor demand curve are both shifting to the right.
Answer:
Who owns a corporation?
A) the board of directors
B) the stockholders
C) the employees
D) the CEO
Answer:
Which of the following is not one of the three sources of technological change?
A) additional amounts of existing capital
B) better machinery and equipment
C) increases in human capital
D) better means of organizing and managing production
Answer:
Let D = demand, S = supply, P = equilibrium price, Q = equilibrium quantity. What
happens in the market for electric vehicles if the government offers incentives to
manufacturers to produce more electric vehicles?
A) D increases, S no change, P and Q increase
B) S increases, D no change, P decreases, Q increases
C) D and S increase, P and Q decrease
D) D no change, S increases, P decreases, Q decreases
Answer:
The equilibrium wage and quantity of labor in the market for skilled workers is
determined by
A) the strength of labor unions.
B) the monopsony power of firms.
C) the demand and supply of labor.
D) the market value created by the output of these skilled workers.
Answer:
Figure 13-17
What is the allocatively efficient output for the firm represented in the diagram?
A) Qf units
B) Qg units
C) Qh units
D) Qj units
Answer:
Along an upward sloping labor supply curve, as the wage rate increases, the opportunity
cost of leisure ________, causing individuals to supply a ________ quantity of labor.
A) increases; greater
B) increases; lower
C) decreases; greater
D) remains constant, constant
Answer:
Explain and show graphically the effect of a decrease in U.S. budget deficits that
decrease U.S. interest rates on the demand and supply of U.S. dollars for euros.
Answer:
What are some of the limitations of the Coase theorem in practice?
Answer:
What type of consumer goods are most affected by the business cycle: durable goods or
nondurable goods? Why?
Answer:
Table 9-12
Consider a simple economy that produces only three products: burritos, flashlights, and
golf balls. Use the information in the table to calculate the inflation rate for 2013, as
measured by the consumer price index.
Answer:
How does a network externality serve as a barrier to entry? Is this barrier
surmountable? Explain.
Answer: