Figure 18-7
Figure 18-7 shows the Lorenz curve for a hypothetical country.
Refer to Figure 18-7. The second highest 20 percent of households
A) earn 24 percent of the society’s total income.
B) earn 28 percent of the society’s total income.
C) earn 42 percent of the society’s total income.
D) earn 72 percent of the society’s total income.
Jeremy is thinking of starting up a small business selling NASCAR memorabilia. He is
considering setting up his business as a corporation. What is one advantage to Jeremy
of setting up his business as a corporation?
A) By setting up the business as a corporation, Jeremy would not face double taxation.
B) By setting up the business as a corporation, Jeremy would have the ability to share
risk with shareholders.
C) By setting up the business as a corporation, Jeremy would have both ownership and
control over the business.
D) All of the above would be advantages of setting up his business as a corporation.
Assume that a perfectly competitive market is in long-run equilibrium. Suppose as a
result of a health hazard associated with the industry’s product, demand decreases
drastically. What is the immediate result of this event?
A) The market price falls and the typical firm suffers an economic loss.
B) The market supply increases to offset the fall in demand.
C) The typical firm’s average total cost curve shifts downward.
D) The typical firm’s marginal cost curve shifts to the left.
Sefronia and Bella share an apartment and they are deciding whether or not to purchase
a weekly housecleaning service. The value of the service to each of them is $50 and it
costs $80 to hire a housecleaner. Should they hire a housecleaner?
A) Yes, if each contributes $50, then each stands to gain a consumer surplus.
B) No, because each will wait for the other to hire the housecleaner.
C) Yes, but only if a housecleaner will accept $50 so that each can take turns to pay the
housecleaner.
D) No, because it will be difficult for them to agree on which housecleaning service to
use.
Figure 6-7
Refer to Figure 6-7. Between points a and b on the demand curve, demand is
A) perfectly inelastic.
B) unit-elastic.
C) perfectly elastic.
D) elastic.
The explicit cost of production is also called
A) variable cost.
B) accounting cost.
C) direct cost.
D) overhead cost.
Which of the following is the best example of a short-run adjustment?
A) A local bakery purchases another commercial oven as part of its capacity expansion.
B) Your local Walmart hires two more associates.
C) Smith University completed negotiations to acquire a large piece of land to build its
new library.
D) Toyota builds a new assembly plant in Texas.
The antitrust law that prohibits price discrimination on grounds that it reduces
competition is
A) the Clayton Act.
B) the Federal Trade Commission Act.
C) the Robinson-Patman Act.
D) the Sherman Act.
Which of the following is not a characteristic of a monopolistically competitive market
structure?
A) There is a large number of independently acting small sellers.
B) All sellers sell products that are differentiated.
C) There are low barriers to entry of new firms.
D) Each firm must react to actions of other firms.
The additional utility that George receives from consuming one more slice of pizza is
called
A) average utility.
B) marginal utility.
C) total utility.
D) diminishing utility.
Which of the following statements is generally true?
A) Rivalry is less the larger the number of firms in an industry.
B) The smaller the number of firms in an industry, the greater the rivalry.
C) The larger the number of firms in an industry, the greater the rivalry.
D) The degree of rivalry in an industry is largely independent of the number of firms.
In the United States in 2012, the number of new, diagnosed diabetes cases was highest
for people in the age range of ________, and the rate of new diabetes cases per 1,000
people was highest for people in the age range of ________.
A) 20-44; 45-64
B) 45-64; 65 and older
C) 45-64; 45-64
D) 65 and older; 20-44
What is productive efficiency?
A) a situation in which resources are allocated to their highest profit use
B) a situation in which resources are allocated such that goods can be produced at their
lowest possible average cost
C) a situation in which resources are allocated such the last unit of output produced
provides a marginal benefit to consumers equal to the marginal cost of producing it
D) a situation in which firms produce as much as possible
A study of the effects of the minimum wage on employment of low-skilled workers
estimated the price elasticity of demand for low-skilled workers is -0.75. Suppose that
the government is considering raising the minimum wage from $7.25 per hour to $7.75
per hour. Based on this information, calculate the percentage change in the employment
of low skilled workers. Use the midpoint formula.
An example of a factor of production is
A) stock issued by Dell.
B) the computers exported by Dell.
C) a computer produced by an Dell.
D) a worker hired by Dell.
When there is an externality in a market
A) the externality will move the market to an economically efficient equilibrium.
B) the externality will cause the market price to be less than or greater than the
equilibrium price.
C) the government should use price controls to enable the market to reach equilibrium.
D) government intervention may increase economic efficiency.
According to projections for 2016 by the Tax Policy Center, the 20 percent of U.S.
taxpayers who make the highest incomes
A) use loopholes and tax exemptions to reduce their share of federal income taxes to
less than 20 percent.
B) pay almost 69 percent of federal income taxes.
C) pay about 92 percent of federal income taxes but only about 20 percent of Social
Security and Medicare payroll taxes.
D) pay more in excise and other taxes than they pay in Social Security and Medicare
payroll taxes.
The federal government and some state governments levy taxes on specific goods such
as gasoline, cigarettes, and beer. These are known as
A) sales taxes.
B) sin taxes.
C) specific taxes.
D) excise taxes.
You are planning to open a new Italian restaurant in your hometown where there are
three other Italian restaurants. You plan to distinguish your restaurant from your
competitors by offering northern Italian cuisine and using locally grown organic
produce. What is likely to happen in the restaurant market in your hometown after you
open?
A) Your competitors are likely to change their menus to make their products more
similar to yours.
B) The demand curve facing each restaurant owner shifts to the right.
C) The demand curve facing each restaurant owner becomes more elastic.
D) While the demand curves facing your competitors becomes more elastic, your
demand curve will be inelastic.
According to a study of the price elasticities of products sold in supermarkets, the price
elasticity of demand for toothpaste is estimated at -0.45. Which of the following could
explain why the price elasticity of demand for toothpaste is so low?
A) The toothpaste industry is highly competitive.
B) Toothpaste is relatively inexpensive.
C) Toothpaste is heavily endorsed by dentists.
D) There are few close substitutes for toothpaste.
Collusion occurs when
A) a firm chooses a level of output to maximize its own profit.
B) two firms’ price and output decisions come into conflict.
C) there is an agreement among firms to charge the same price or otherwise not to
compete.
D) firms refuse to follow their price leaders.
Market power refers to
A) the ability of consumers to dictate what products should be produced.
B) the ability of a firm to advertise its product and succeed in selling more output.
C) the ability of a firm to sell at a lower price than rival sellers.
D) the ability of a firm to charge a price higher than the marginal cost of production.
Comparative advantage means the ability to produce a good or service
A) at a lower selling price than any other producer.
B) at a lower opportunity cost than any other producer.
C) of a higher quality than any other producer.
D) at a higher profit level than any other producer.
The president of Toyota’s Georgetown plant was quoted as saying, “Demand for high
volumes saps your energy. Over a period of time, it eroded our focus [and] thinned out
the expertise and knowledge we painstakingly built up over the years.” This quote
suggests that
A) Toyota was experiencing an excess demand for its automobiles which it had
difficulty keeping up with.
B) as Toyota expanded its capacity, it experienced diseconomies of scale.
C) Toyota was focused on “churning” out cars for which it did not invest sufficiently in
training its workers.
D) high demand for Toyota’s cars prevented the company from focusing on its strength:
auto design.
Figure 11-7
Figure 11-7 shows the cost structure for a firm.
Refer to Figure 11-7. When the output level is 100 units average fixed cost is
A) $10.
B) $8.
C) $5.
D) This cannot be determined from the diagram.
Perfectly competitive firms produce up to the point where the price of the good equals
the marginal cost of producing the last unit. This condition is referred to as
A) productive efficiency.
B) constant returns to scale.
C) allocative efficiency.
D) perfectly competitive efficiency.
A corporation is the type of business that has ________ government rules and
regulations affecting it.
A) no
B) the fewest
C) the most
D) only federal
If a firm produces 20 units of output and incurs a total cost of $1,000 and a variable cost
is $700, calculate the firm’s average fixed cost of production if it expands output to 25
units.
A) $300
B) $15
C) $12
D) It is impossible to determine without additional information.
The financial statement that sums up a firm’s revenues, costs, and profit over a period of
time is its
A) income statement.
B) balance sheet.
C) dividend yield statement.
D) price-earnings statement.
Where do economic agents such as individuals, firms, and nations, interact with each
other?
A) in public locations monitored by the government
B) in any arena that brings together buyers and sellers
C) in any physical location where people can physically get together for selling goods,
such as shopping malls
D) in any location where transactions can be monitored by consumer groups and taxed
by the government
If the paint on your house was eaten away by the fumes from a factory nearby and you
hired a lawyer to sue the polluting firm, your legal fees would be considered
A) external costs.
B) transactions costs.
C) marginal benefits.
D) social costs of the pollution.
Which of the following displays these two characteristics: rivalry and nonexcludability?
A) a public good
B) a private good
C) a quasi-public good
D) a common resource
A member of a cartel like OPEC has an incentive to
A) argue for larger production quotas for each member of the cartel.
B) agree to a low cartel production level and then produce more than its quota.
C) abide by its individual production quota.
D) support equal production quotas for each member.
Table 13-3
Table 13-3 shows the demand and cost schedules for a monopolistically competitive
firm.
Refer to Table 13-3. If this firm continues to produce, what is likely to happen to the
product’s price in the long run?
A) It will fall.
B) It will increase.
C) It will remain constant.
D) It cannot be determined without information on its long run demand curve.
Table 3-2
Refer to Table 3-2. The table above shows the demand schedules for caviar of two
individuals (Ari and Sonia) and the rest of the market. At a price of $55, the quantity
demanded in the market would be
A) 42 oz.
B) 136 oz.
C) 178 oz.
D) 233 oz.