According to the contestable market model, the higher an industry’s concentration ratio,
the more profitable the industry.
Answer:
Domestic producers prefer quotas to tariffs because quotas raise the price of imports
and tariffs do not.
Answer:
An entrepreneur is an individual who sees an opportunity to sell an item at a price
higher than the average total cost of producing it.
Answer:
The more competition there is in international trade, the larger the traders’ proportion of
the gains from trade.
Answer:
Suppliers will supply more of a good when the price of that good rises because the
opportunity cost of not producing that good has risen.
Answer:
Efficiency wages are above-market wages that are paid to workers to keep them
productive.
Answer:
When government uses the judgment by performance criterion, a firm is considered a
monopoly if it controls a significant segment of the market.
Answer:
An optimal policy is one in which the marginal cost of undertaking a policy is less than
the marginal benefit of that policy.
Answer:
If total cost is 100, total fixed cost is 30, and output is 20, average variable cost is 3.5.
Answer:
Manufacturing wages have risen significantly for 20 years.
Answer:
The more complex a model is, the easier it is to arrive at a conclusion.
Answer:
The demand for labor is derived from the demand for output.
Answer:
Comparable worth laws can be justified by the fact that wages are determined
exclusively by market forces.
Answer:
Traditional economists prefer simpler models because they give clear-cut results that
can better highlight certain important insights.
Answer:
Two nations with differing comparative advantages will be able to consume more if
they specialize and trade with each other than if they did not specialize or trade with
each other.
Answer:
If a program requires people to pay a price that reflects the cost of an externality
associated with their actions that they previously did not pay, it will be in their best
interest to change their behavior.
Answer:
When average total cost is rising, the marginal cost curve must be above the average
total cost curve.
Answer:
John is maximizing utility when consuming two goods: French fries and hot dogs. If the
marginal utility from the last box of fries John consumed is 60 and the marginal utility
of the last hot dog John consumed is 120 and hot dogs cost $1.00 apiece, a box of fries
must cost $0.50.
Answer:
Loss aversion means that people are made worse off by losses.
Answer:
The vertical distance between the average total cost and average variable cost curves
falls as output rises.
Answer:
If a monopolist can price discriminate among buyers, it will charge buyers with more
elastic demands a higher price.
Answer:
Liberal and conservative economists agree more often on policy prescriptions than most
noneconomists think they do.
Answer:
Real-world competition should not be viewed as a static condition but rather as a fight
between the forces of monopolization and the forces of competition.
Answer:
Government intervention may create more problems than it is designed to solve.
Answer:
According to the law of demand, only the price of a good influences the amount people
will choose to purchase.
Answer:
If you sign up for a class and then drop it mid-semester, you must not have been making
a rational choice when you were enrolling in classes.
Answer:
At a price of $3.50, the quantity supplied by the market will be 14.
Answer:
Game theory replaces the standard supply and demand model used by economists.
Answer:
A profit-maximizing monopolist will always set price equal to marginal cost.
Answer:
A monopolistically competitive firm faces a downward-sloping demand curve.
Answer:
Implicit collusion occurs when oligopolistic firms negotiate a common price.
Answer:
Behavioral economists attempt to take into account predictably irrational behavior.
Answer:
An economically efficient method of production produces a given level of output at the
lowest possible cost.
Answer:
Natural monopolies are mostly regulated industries because otherwise too many firms
would enter the market and price would be driven too low for any firm to offer goods
for a profit.
Answer:
Macroeconomics is the study of how individual choices are affected by economic
forces.
Answer:
The total cost of taxation to consumers and producers generally exceeds the amount of
tax revenue collected by government.
Answer:
If the demand for insulin is highly inelastic, the burden of a tax on insulin will be borne
almost entirely by sellers.
Answer:
All real-world Lorenz curves are below the diagonal line because income is always
distributed unequally in the real world.
Answer:
Refer to the graphs shown, which show indifference curve analysis with the associated
demand curves. The best explanation for a movement from point D to point F is:
A. an outward rotation of the budget constraint along the x-axis, allowing the consumer
to move from point A to point B.
B. a parallel shift of the budget constraint, allowing the consumer to move from point A
to point C.
C. an inward rotation of the budget constraint along the x-axis, forcing the consumer to
move from point B to point A.
D. an outward rotation of the budget constraint along the y-axis, allowing the consumer
to move from point B to point C.
Answer:
Economists who use supply/demand models:
A. support the free market.
B. oppose the free market.
C. could support or oppose the free market.
D. generally oppose the free market.
Answer:
When Marxist economists look at labor markets, they:
A. capture the same aspects of reality that are captured by other economists.
B. focus on the tensions among social classes and generally see exploitation of workers
by capitalists.
C. generally see supply and demand forces leading to equilibrium.
D. see individuals using government to protect their monopolies.
Answer:
Most economists:
A. focus on the costs of international trade and discount its benefits in lower consumer
prices.
B. include the effects of trade on the distribution of income.
C. recognize both the costs of international trade in lost jobs and the benefits in terms of
lower prices.
D. support free trade because it raises the wages of those in countries who can hardly
meet their basic needs.
Answer:
When output is 500, a firm’s fixed costs are $10,000 and its variable costs are $15,000.
The firm’s total costs are therefore:
A. $5,000.
B. $10,000.
C. $15,000.
D. $25,000.
Answer:
Refer to the graph shown. Within which part of the production function is the firm most
likely to operate?
A. A
B. B
C. C
D. B and C
Answer:
Who probably would argue that you need to study the trees before you can understand
the forest?
A. A microeconomist
B. A macroeconomist
C. A positive economist
D. A Marshallian economist
Answer:
A newspaper recently lowered its price from 50 cents to 30 cents, causing the number
of newspapers sold to increase from 240,000 to 280,000. Other things equal, the data
imply that the elasticity of demand for this newspaper is about:
A. 3.25.
B. 0.5.
C. 0.3.
D. 0.15.
Answer:
Economic efficiency is achieved at a particular output level if:
A. marginal cost is as low as possible.
B. average fixed cost is as low as possible.
C. average total cost is as low as possible.
D. average variable cost is as low as possible.
Answer:
Refer to the graphs shown. What arrow shows the effect of an increase in the number of
consumers in the market on the demand for CDs?
A. A
B. B
C. C
D. D
Answer:
If fixed costs equal $120, variable costs equal $800, and output is 10, average variable
cost equals:
A. $40.
B. $80.
C. $92.
D. $120.
Answer:
If a market with monopolistic competition became a monopoly market, output would:
A. rise.
B. fall.
C. not change.
D. be incomparable.
Answer:
Which of the following is an example of conspicuous consumption?
A. Purchasing an expensive automobile to impress others
B. Avoiding cheap computers because low price indicates low quality
C. Purchasing of hip-hugger pants because pop stars wear them
D. Purchasing fast food because it is cheap and convenient
Answer:
Mainstream economists tend to focus on:
A. the size distribution of income, whereas nonmainstream economists emphasize class
and group structures.
B. class and group structures, whereas nonmainstream economists emphasize the size
distribution of income.
C. the control that the upper class has over the decision process and the political
process.
D. the role of special interests in shaping government policy.
Answer:
Suppose that the men’s suit business is monopolistically competitive. It follows that in
equilibrium, the marginal revenue of any firm in the industry:
A. is greater than the price.
B. is equal to the price.
C. is less than the price.
D. has no relation to price.
Answer:
Given the graph, the quantity that would be associated with the price of $4 in a demand
table would be:
A. 1.
B. 2.
C. 3.
D. 4.
Answer:
Refer to the following table to answer the question. Demand is inelastic between:
A. $6 and $8.
B. $8 and $10.
C. $10 and $12.
D. $12 and $14.
Answer:
When the cost minimization condition is met:
A. marginal cost equals marginal revenue.
B. the marginal products of all inputs are equal.
C. the marginal revenue products of all inputs are equal.
D. the ratio of marginal product to price is equal for all inputs.
Answer:
In a Vickrey auction, a bidder’s strategy:
A. is to bid what he or she would be willing to pay.
B. is to bid just slightly more than the next bidder.
C. is to bid just below the next highest bidder.
D. requires the bidder to understand game theory to bid properly.
Answer:
With regard to a public good provided by the government:
A. individuals reveal their demand when they buy the good.
B. a free rider problem is unlikely.
C. individuals have an incentive to conceal their willingness to buy the good.
D. individuals have an incentive to exaggerate their willingness to buy the good.
Answer:
Popeye cannot eat enough free spinach. With this information, we know that Popeye’s:
A. marginal utility for spinach never falls.
B. total utility for spinach is always rising.
C. total utility for spinach is falling.
D. marginal utility for spinach is falling.
Answer:
The graph shown exhibits constant returns to scale:
A. in region a.
B. in region b.
C. in region c.
D. over the entire range of output.
Answer:
When output is 50, fixed costs are $1,000, and variable costs are $2,000, what is the
average total cost?
A. $20
B. $40
C. $60
D. $80
Answer:
Taxi medallions were issued in New York City to:
A. help commuters afford transportation.
B. increase the wages of taxi drivers.
C. help new immigrants find jobs.
D. raise revenue for the city.
Answer:
Behavioral mechanism design economists face which of the following problems when
solving policy issues?
A. How much mathematics to include in the model, an issue only behavioral
economists face
B. How to find the right combination of market, social, and moral incentives that will
work
C. How to find the right combination of social and moral incentives but without
considering prices
D. How to convince people that their approach to policy issues will work, an issue only
behavioral economists face.
Answer:
Refer to the graphs shown, which depict a perfectly competitive market and firm. If
market demand decreases from D0 to D1:
A. market price falls from P0 to P1 and the firm’s output rises from q0 to q1.
B. market price falls from P0 to P1 and the firm’s output falls from q1 to q0.
C. market price remains at P0 because perfectly competitive firms can’t earn positive
economic profit.
D. the firm’s output remains at q1 because perfectly competitive firms can’t earn
positive economic profit.
Answer:
Refer to the graph shown. Assuming a $0.10-per-gallon marginal cost external to the
trade that is associated with gasoline, the market price of gasoline necessary to induce
consumers to purchase the efficient quantity each year is:
A. $1.10.
B. $1.00.
C. $1.05.
D. $0.95.
Answer:
Concluding that a company is in violation of antitrust laws because it controls over 90
percent of the market is an application of judgment by:
A. performance.
B. structure.
C. design.
D. comparative advantage.
Answer:
Wyoming has a right-to-work law that prohibits requiring employees to join a union.
What is another name for what the Wyoming law prohibits?
A. Union shop.
B. Closed shop.
C. Open shop.
D. Labor shop.
Answer:
Who would probably argue that you need to study the forest before you can understand
the trees?
A. A microeconomist
B. A macroeconomist
C. A normative economist
D. A classical economist
Answer: