If firms in a monopolistically competitive industry are making profits in the short run
A) barriers to entry will be erected to keep out rivals.
B) some firms will ultimately exit the industry.
C) they will resort to advertising wars to help sustain these profits.
D) new firms will enter the market.
Figure 9-2
Suppose the U.S. government imposes a $0.40 per pound tariff on rice imports. Figure
9-2 shows the impact of this tariff.
Refer to Figure 9-2. As a result of the tariff, domestic producers increase their quantity
supplied by
A) 31 million pounds of rice.
B) 22 million pounds of rice.
C) 15 million pounds or rice.
D) 6 million pounds of rice.
Which of the following statements is true?
A) If a tax is imposed on a product sold by a monopolist, the monopolist will maximize
its profits by producing where marginal revenue equals marginal cost.
B) A monopolist will always charge the highest possible price.
C) If a tax is imposed on a product sold by a monopolist, the monopolist can increase
its price to pass along the entire tax to consumers.
D) Because a monopolist faces no competition, the demand for its product is perfectly
inelastic.
Assume a firm is able to use an optimal two-part tariff.
a. Is the outcome economically efficient? Why or why not?
b. What happens to consumer surplus?
c. Does this represent perfect price discrimination? Why or why not?
A Nash equilibrium is
A) reached when an oligopoly’s market demand and supply intersect.
B) reached when each player chooses the best strategy for himself and for the group.
C) reached when each player chooses the best strategy for himself, given the other
strategies chosen by the other players in the group.
D) an equilibrium comprising non-dominant strategies only.
In an experiment that employed the dictator game,economists at Cornell University
gave student “allocators” the option of dividing $20 in only two ways (a) $18 for
themselves and $2 to another student, or (b) $10 for themselves and $10 to another
student. What was one result from this experiment?
A) Most allocators chose to give themselves $18 and $2 to the other students.
B) Most of the students who were not allocators did not like having someone else make
decisions for them.
C) A majority of the female allocators chose option (a); a majority of the male
allocators chose option (b).
D) Most of the allocators apparently valued acting fairly.
Each member of OPEC can increase its income by selling more oil than its output quota
because
A) by selling more at OPEC’s cartel price, a member will automatically earn more
income.
B) each member’s demand is more elastic than the total demand for oil.
C) the demand for oil is inelastic so total revenue increases.
D) the demand for oil is perfectly elastic.
Which of the following products allows the seller to identify different groups of
consumers (segment the market) at virtually no cost?
A) early bird dinner specials
B) books sold online
C) a pair of Bose speakers
D) iPhones
Table 13-4
Table 13-4 lists estimated revenues and costs (per week) for plastic vials (100 vials per
box) for the Victoria Biological Supplies Company. Victoria sells plastic vials to
university and private research laboratories.
Refer to Table 13-4. Victoria’s profit-maximizing output is where
A) total profit equals $3.
B) marginal revenue and marginal cost both equal $4.
C) marginal revenue and marginal cost both equal $3.
D) marginal cost is at its minimum value.
If a nation changes its laws to more actively enforce intellectual property rights, all of
the following will most likely take place except
A) more software companies will choose to export their products to that country.
B) more film makers will choose to do business in that country.
C) the black market for intellectual property will become more prosperous in that
country.
D) foreign investment in that country will increase.
All but one of the following economists were awarded a Nobel prize for their
contributions to experimental economics and their explorations of the influence fairness
has on consumer decision-making. Which economist did not receive a Nobel Prize for
this work?
A) Vernon Smith
B) Alan Krueger
C) Daniel Kahneman
D) Maurice Allais
Terence has $50 per week to spend on Subway sandwiches and milkshakes. The price
of a Subway sandwich is $5 and the price of a milkshake is $4. He buys 6 sandwiches
and 5 milkshakes. The marginal utility of the 6th sandwich = 25 and the marginal utility
of the 5th milkshake = 24. Which of the following is true?
A) He is not maximizing his utility and should buy more milkshakes.
B) He is maximizing his utility.
C) He is not maximizing his utility and should buy more Subway sandwiches.
D) He is not maximizing his utility because he is not spending all of his income.
In a typical year, ________ new firms open in the United States.
A) more than 400,000
B) more than 1 million
C) less than 200,000
D) approximately 125,000
Absolute poverty measures vary from country to country. For example, in 2015, the
poverty line in the United States for a family of four with two children was an annual
income of $24,250 but economists often use a much lower threshold income of $1 per
day when calculating the rate of poverty in poor countries. How is this absolute poverty
measured?
A) by comparing the percentage of households living below the poverty line to the total
population
B) by comparing a household’s income to the income required to maintain the average
standard of living in a society at a particular time
C) by comparing the amount of goods and services that a household’s income can
purchase to an objective measure of the amount of income needed to sustain a certain
predetermined standard of living
D) by comparing the amount of goods and services that a household’s income can
purchase in one country to the amount of goods and services that a household’s income
can purchase in another country of comparable living standard
An economist observes two consumers in a supermarket. One of the consumers buys a
case of Coca-Cola and the other buys a case of Pepsi-Cola. Both colas sell for the same
price and the ages and incomes of the consumers are also the same. Based on this
information, how would the economist explain the consumers’ choices?
A) One of the consumers made the wrong choice, but it is impossible to say which one.
B) Both consumers should have considered buying other colas that had lower prices.
C) Both consumers should have purchased less than a case because they would be able
to buy more later.
D) Apparently, the consumers had different tastes.
Figure 10-3
Refer to Figure 10-3. Best friends Laurel and Hardy both enjoy watching romantic
comedies and science fiction movies. Based on the diagrams above what can you
conclude about their movie preferences?
A) They have identical movie preferences.
B) Hardy enjoys romantic comedies more than Laurel.
C) Hardy enjoys science fiction movies more than Laurel.
D) The diagrams do not provide any information about relative preferences.
Table 10-4
Refer to Table 10-4. For steak and cheese sandwiches and grilled chicken sandwiches,
the table contains the values of the marginal utility (MU) and marginal utility per dollar
(MU/P) for Mabel Jarvis. Mabel has $14 to spend on steak and cheese sandwiches and
grilled chicken sandwiches. Which of the following statements is false?
A) The price of steak and cheese sandwiches is $4. The price of grilled chicken
sandwiches is $2.
B) If Mabel maximizes her utility she will buy three grilled chicken sandwiches.
C) If Mabel maximizes her utility she will buy two steak and cheese sandwiches.
D) We do not have enough information to determine how many sandwiches Mabel will
buy to maximize her utility.
The selling of a product for a price below its cost of production is called
A) fair competition.
B) dumping.
C) unfair competition.
D) operating at a loss.
Table 13-4
Table 13-4 lists estimated revenues and costs (per week) for plastic vials (100 vials per
box) for the Victoria Biological Supplies Company. Victoria sells plastic vials to
university and private research laboratories.
Refer to Table 13-4. Based on the data in the table, which of the following statements is
true?
A) The table summarizes Victoria’s short-run, rather than long-run, market for plastic
vials.
B) Victoria could be either a monopolistically competitive or a perfectly competitive
firm.
C) Victoria should shut down temporarily.
D) Victoria should advertise more in order to increase the demand for plastic vials.
The United States has developed a comparative advantage in film production due to the
film industry being long-established in southern California, and lower costs result from
the size of the industry in the area. This source of comparative advantage is referred to
as
A) the abundance of natural resources.
B) superior process technology.
C) external economies.
D) best practices of unskilled labor.
Figure 5-13
Figure 5-13 illustrates the market for gasoline before and after the government imposes
a tax to bring about the efficient level of gasoline production.
Refer to Figure 5-13. The market equilibrium price of gasoline is ________ per gallon.
A) $3.00
B) $3.75
C) $4.25
D) $5.00
In order for a labor supply curve to be backward bending at high wages
A) leisure must be an inferior good.
B) the substitution effect of a wage increase must be greater than the income effect.
C) workers must have an irrational response to wage increases.
D) the income effect of a wage increase must be greater than the substitution effect.
Who controls a sole proprietorship?
A) stockholders
B) bondholders
C) the owner
D) all of these
If national laws protecting the health and safety of workers completely eliminate any
and all risk, then
A) workers in risky occupations become better off.
B) compensating wage differentials disappear and workers in risky occupations may be
no better off.
C) compensating differentials would grow because workers could not be compensated
by being given lower risk jobs.
D) more people would be employed.
One reason why the “fast-casual” restaurant market is competitive is that
A) demand for “fast -casual” food is very high.
B) it is trendy and therefore is likely to have a customer following.
C) barriers to entry are low.
D) consumption takes place in public.
Figure 13-17
Refer to Figure 13-17. Suppose the firm is currently producing Qf units. What happens
if it increases its output to Qgunits?
A) Its average cost of production will fall and its profit will rise.
B) It will be taking advantage of economies of scale and will be able to lower the price
of its product.
C) It will move from a zero profit situation to a profit situation.
D) It will move from a zero profit situation to a loss situation.
The profits a corporation keeps to finance future expansion are known as
A) retained earnings.
B) preferred stock.
C) dividends.
D) capital gains.
Which of the following is a characteristic of a monopoly?
A) It is easy for new firms to enter the market.
B) There is only one seller in the market.
C) The product is not unique.
D) The firm has no control over price.
Suppose a decrease in the supply of paper results in an increase in revenue. This
indicates that
A) the demand for paper is inelastic.
B) the demand for paper is elastic.
C) the supply of paper is inelastic.
D) the supply of paper is elastic.
If the percentage increase in price is 15 percent and the value of the price elasticity of
demand is -3, then quantity demanded
A) will increase by 45 percent.
B) will increase by 5 percent.
C) will decrease by 45 percent.
D) will decrease by 5 percent.
The lawsuit the Justice Department brought against Apple regarding the pricing of
e-books for its iPad is an example of attempts by the government
A) to prevent vertical mergers which would significantly reduce competition.
B) to prevent horizontal mergers which would significantly reduce competition.
C) to regulate a natural monopoly by establishing government-regulated prices.
D) to keep firms from artificially restricting competition to raise prices.