Refer to the graph shown. If the firm is attempting to maximize profit, it will:
A. earn just normal profits, that is, zero economic profits.
B. earn economic profits.
C. incur a loss.
D. make enough to cover its variable costs but not its fixed costs.
Answer:
Refer to the graph shown. Other things equal, an increase in U.S. income will shift the
supply of dollars from:
A. S1 to S0, causing the price per dollar to fall.
B. S1 to S0, causing the price per dollar to rise.
C. S0 to S1, causing the price per dollar to fall.
D. S0 to S1, causing the price per dollar to rise.
Answer:
Refer to the following graph.
Suppose the graph depicted market demand for British cars sold in the United States. A
tariff of $1,000 a car would result in tax revenue of:
A. $10 million.
B. less than $10 million.
C. greater than $10 million.
D. zero.
Answer:
Which of the following is an example of the law of one price in action?
A. Prices are just one of the many factors that firms use when deciding where to locate
production.
B. If one county has a comparative advantage in producing a particular good, another
country must have a comparative advantage in producing another good.
C. Wages in India are lower than wages in the United States, and so firms move their
call centers to India. This tends to raise wages in India and depress wages in the United
States.
D. Because most industries in the United States are dominated by one or two firms, the
dominant firm sets the price and other firms in the industry follow.
Answer:
Refer to the table shown. If total output is 41, employment is:
A. 4.
B. 5.
C. 6.
D. 7.
Answer:
Currently it is illegal to import prescription drugs into the United States despite the fact
that U.S. consumers could buy drugs from Canada at lower prices than those available
in the United States. What set of cost curves is most consistent with the price
differential between the United States and Canada?
A. Producing a drug has a high and constant marginal cost.
B. Producing a drug has a high fixed cost with a relatively low marginal cost.
C. Producing a drug has a low fixed cost with a relatively high marginal cost.
D. Producing a drug has a low fixed cost and a rising marginal cost.
Answer:
A behavioral economist:
A. assumes that people are always irrational.
B. tends to use heuristic models.
C. uses models that assume that people are purposeful rather than rational.
D. uses models that assumes that people are rational rather than purposeful.
Answer:
If marginal cost is greater than average variable cost, average variable cost will:
A. increase as output increases.
B. decrease as output increases.
C. not change as output increases.
D. equal average total cost.
Answer:
In the long-run equilibrium for a monopolistically competitive firm, price:
A. exceeds marginal cost.
B. exceeds average total cost.
C. is equal to marginal revenue.
D. is equal to marginal cost.
Answer:
A proposal to build a dam on a wild river may look like a good idea from the
cost/benefit study done by the Army Corps of Engineers, but an analysis done by the
Sierra Club might suggest that the dam would be a complete waste of money.
Differences in cost/benefit studies such as this are expected because:
A. at least one side is definitely making mistakes in the analysis.
B. at least one side is trying to deceive the public.
C. cost/benefit studies describe what people want to happen, not what will actually
happen.
D. items that do not have market prices, such as the environment, are very difficult to
value.
Answer:
In a monopolistically competitive market:
A. firms produce differentiated products.
B. there are barriers to entry.
C. firms produce homogeneous products.
D. the demand for any firm’s product is perfectly elastic.
Answer:
In a noncooperative duopoly both firms will:
A. achieve zero profits.
B. always earn profits.
C. produce at lowest average total costs.
D. set a price too high for the customers.
Answer:
Entrepreneurship is defined as the ability to:
A. organize and get something done.
B. raise investment capital.
C. earn above-average profits.
D. minimize production costs.
Answer:
Refer to the graph shown. Total cost of producing Q * is represented by:
A. area 0Q * AF.
B. area 0Q * BE.
C. area 0Q * CD.
D. cannot be determined.
Answer:
If a union gains significant monopoly power in a competitive market, employment:
A. and wages should increase.
B. and wages should decrease.
C. should increase and wages should decrease.
D. should decrease and wages should increase.
Answer:
When gasoline prices fall, the demand for alternative fuel cars likely:
A. falls, lowering their equilibrium price and raising equilibrium quantity.
B. rises, raising their equilibrium price and quantity.
C. falls, raising their equilibrium price and lowering equilibrium quantity.
D. falls, lowering their equilibrium price and quantity.
Answer:
Business lobbyists tend to argue against a living wage law by arguing that it is a price:
A. ceiling that will cause a shortage of labor.
B. ceiling that will cause a surplus of labor.
C. floor that will cause a shortage of labor.
D. floor that will cause a surplus of labor.
Answer:
Refer to the following graph.
A government-imposed price floor of $2 will result in:
A. neither excess supply nor excess demand since it is binding.
B. neither excess supply nor excess demand since it is not binding.
C. an excess demand of 2.
D. an excess supply of 2.
Answer:
What are trade adjustment assistance programs?
A. A way of subsidizing exports
B. A form of regulatory trade restriction
C. The use of exchange rate policies to equalize exports and imports
D. Attempts to compensate those who suffer losses when trade restrictions are reduced
Answer:
Discrimination based on individual characteristics that don’t affect job performance:
A. is the hardest kind of discrimination to eliminate.
B. is costly to a firm, and so market forces will work toward eliminating it.
C. is not costly to a firm and thus is easy to eliminate.
D. may be profit-maximizing in some cases.
Answer:
Some years ago, Stuyvesant Town and Peter Cooper Village in Manhattan were sold for
redevelopment. These villages had been rent controlled, but now that these
neighborhoods are no longer rent controlled, one would expect:
A. the houses to be not as well maintained since rent will be so high.
B. the housing shortage in the neighborhood to worsen.
C. the rent to rise in those neighborhoods.
D. the quantity of rentals demanded to rise.
Answer:
Suppose the supply and demand tables shown reflect the supply and demand for milk
per week. At a price of $4, there is a:
A. surplus of 1,000 gallons per week.
B. surplus of 2,000 gallons per week.
C. shortage of 1,000 gallons per week.
D. shortage of 2,000 gallons per week.
Answer:
Along a straight-line demand curve, elasticity:
A. rises as price rises.
B. declines as price rises.
C. is equal to slope.
D. is always zero.
Answer:
The price a monopolist sets is equal to:
A. marginal revenue.
B. average revenue.
C. average total costs.
D. marginal cost.
Answer:
From 1913 until the 1980s, the government granted AT&T a monopoly because it was
thought that telephone service:
A. had increasing marginal productivity.
B. was incapable of being provided by more than one firm.
C. was a natural monopoly.
D. had diminishing returns to scale.
Answer:
From society’s perspective, a possible benefit of a cartel is that it could:
A. provide incentives for firms to cooperate in setting price and output.
B. not earn economic profits.
C. minimize average total costs.
D. provide incentives for the introduction of superior products by competitors.
Answer:
If the government imposes a sin tax on alcohol and the demand for alcohol is inelastic,
the tax will cause a:
A. large decrease in quantity demanded but will generate less revenue than it would if
the demand were elastic.
B. large decrease in quantity demanded but will generate more revenue than it would if
the demand were elastic.
C. small decrease in quantity demanded but will generate less revenue than it would if
the demand were elastic.
D. small decrease in quantity demanded but will generate more revenue than it would if
the demand were elastic.
Answer:
The distance between the demand curve and the price the consumer has to pay for a
product (given quantity demanded) is referred to as:
A. market surplus.
B. market shortage.
C. consumer surplus.
D. producer surplus.
Answer:
In the graph below, the value of the dollar is:
A. appreciating because the dollar buys more yuan.
B. depreciating because the dollar buys more yuan.
C. appreciating because the dollar buys fewer yuan.
D. depreciating because the dollar buys fewer yuan.
Answer:
A business produces 400 items and sells them for $15 each for a total of $6,000. The
total cost of producing the items is $4,500 in explicit cost and $1,000 in implicit cost.
Economic profit is:
A. $0.
B. $500.
C. $1,000.
D. $1,500.
Answer:
To derive a market demand curve from individual demand curves, it would be necessary
to:
A. take the maximum quantity of each demand curve as the market quantity demanded
at each price.
B. sum the curves horizontally, adding quantities demanded at each price.
C. take the demand curve that is the furthest to the right as the market demand curve.
D. multiply the quantities demanded on each demand curve at each price to find the
market quantity demanded at each price.
Answer:
The deadweight loss from monopoly exists because:
A. there are no net gains to society at the output level produced by a monopolist.
B. resource owners hired by the monopolist gain at the expense of consumers.
C. the monopolist produces at an output level at which no one can be made better off
without making someone worse off.
D. the marginal benefit of the monopolist’s product to society exceeds the monopolist’s
marginal cost.
Answer: