If MR < MC, a monopolist should:
A. decrease production.
B. increase production.
C. maintain the same level of production.
D. stop producing.
Answer:
Refer to the following graph.
The perfectly competitive firm depicted is currently:
A. earning positive economic profit.
B. earning zero economic profit.
C. incurring a loss, but the loss is smaller than it would be if the firm shut down.
D. incurring a loss that is larger than total fixed cost, and so the firm should shut down.
Answer:
A policy rule that concludes that a particular course of action is preferable is known as
a(n):
A. precept.
B. theorem.
C. insight.
D. policy.
Answer:
Which of the following factors most likely would explain why a U.S. company would
choose to operate in the United States despite much lower wages in Mexico?
A. The low cost of transportation between the two countries
B. The lower productivity of Mexican workers
C. The absence of significant trade barriers
D. The presence of many Japanese companies in Mexico
Answer:
A behavioral economist, in contrast to a traditional economist, would argue that one
reason people have a hard time losing weight is that:
A. people prefer to eat sweets and fatty foods and therefore are making an optimal
choice.
B. the cost of losing weight (exercising and eating less) must be incurred now, whereas
the benefit (being thinner) isn’t enjoyed till later.
C. fatty and sweet foods cost more than healthy foods in general, and therefore people
buy more sweet and fatty foods.
D. we live in a sedentary society with little opportunity for rigorous exercise.
Answer:
The U shape of the average total cost curve reflects the fact that:
A. average productivity falls and then rises.
B. average productivity rises and then falls.
C. average productivity is constant.
D. marginal product falls and then rises.
Answer:
GreenTree Corporation sells live Christmas trees. It observes that when it increases the
price of Christmas trees by 10 percent, revenue rises by 2.5 percent. The demand for
Christmas trees is:
A. inelastic.
B. elastic.
C. unit elastic.
D. perfectly elastic.
Answer:
In 2008 the net worth of 8.2 million American households exceeded $1 million. This
means:
A. their assets minus liabilities were greater than $1 million.
B. their total income minus expenses was greater than $1 million.
C. more than $1 million flowed through the accounts of 8.2 million people.
D. the Lorenz curve would show $1 million for 8.2 million people.
Answer:
Refer to the graph above. Suppliers producing L will spend up to area(s) ______ to
limit output to L.
A. A
B. B
C. A and B
D. B and D
Answer:
For substitutes:
A. cross-price elasticity of demand can be a negative value.
B. cross-price elasticity of demand can be any positive value.
C. cross-price elasticity of demand can be any value less than 1.
D. price elasticity of demand can be any positive value.
Answer:
According to the text, globalization has led to greater U.S. specialization in:
A. marketing.
B. manufacturing.
C. farming.
D. manual labor.
Answer:
A European Union official, Mr. McGreevey, claims a portion of EU law involves
overregulation. McGreevey is suggesting the EU suffers in part from:
A. market failure
B. fairness.
C. government failure.
D. the rule of law.
Answer:
Which of the following was a Marxist prediction?
A. Production would move from large to ever-smaller factories.
B. Standards of living would increase because of improved productivity and
technological advance.
C. There would be significant differentiation between workers and owners of factories.
D. The use of business power would increase competition.
Answer:
Microsoft sells a special version of its Windows operating system at a low price in
countries where cheap pirated software is widespread. Since the cost of producing
another copy of this software is the same as the cost of producing another copy of the
regular Windows product, why is Microsoft charging this lower price?
A. It is trying to take advantage of the different demand elasticities in the different
countries.
B. The price differential is explained by the lower cost to develop the new software.
C. The price differences are due to differences in cost among countries.
D. The differential pricing reflects the differences in the barriers to entry.
Answer:
Charging different prices to different individuals or groups for the same product is
called:
A. market segmentation.
B. price differentiation.
C. quantity discrimination.
D. price discrimination.
Answer:
Long-run equilibrium for firms in monopolistically competitive industries is similar to
that for firms in perfect competition in that:
A. price equals minimum possible average total cost.
B. price equals marginal cost.
C. marginal revenue equals price.
D. price equals average total cost.
Answer:
If a country’s exchange rate appreciates,
A. the world price level rises.
B. the world price level falls.
C. the world price level remains unchanged.
D. Exchange rates have no impact on world prices.
Answer:
Direct regulation is inefficient because:
A. affected firms ignore regulations, for example, by dumping toxic waste illegally.
B. it does not take into account that the costs of reducing consumption are the same for
all individuals.
C. it does not take into account the fact that the costs of reducing consumption may
differ among individuals.
D. it does not take negative externalities into account.
Answer:
If the hourly wage of German workers is $6, the hourly wage of Canadian workers is
$10, and German workers produce half as much output per hour as Canadian workers,
all else equal, it would be efficient to locate production facilities in:
A. Germany since the cost per unit of output will be higher.
B. Germany since the cost per unit of output will be lower.
C. Canada since the cost per unit of output will be higher.
D. Canada since the cost per unit of output will be lower.
Answer:
Which of the following statements is true on average?
A. Female executives earn less than male clerical workers.
B. Female machine operators earn more than female administrators.
C. Male and female service workers earn the same amount.
D. Professional specialists earn more than workers in precision production.
Answer:
A meeting of the United Nations Convention on International Trade in Endangered
Species ended with greater protection given to great white sharks. Why should sharks
need special protection?
A. There is an informational problem in the market; people do not understand the full
consequences of their actions.
B. Sharks are not privately owned and can be subject to a tragedy of the commons
problem.
C. Sharks are what economists call a public good, and hence there are no incentives to
produce or protect them.
D. Sharks are subject to adverse selection problems.
Answer:
Variable costs:
A. do not exist in the long run.
B. are the only costs that exist in the long run.
C. do not exist in the short run.
D. are the only costs that exist in the short run.
Answer:
In which of the following decisions would a case for a nudge policy be most difficult to
make?
A. When benefits and costs are separated over time
B. When the choice is complicated and has many dimensions
C. When the choice is made infrequently
D. When it is difficult to tell what is best for the person making the choice
Answer:
Transferable comparative advantages are:
A. Based on factors that are relatively unchangeable.
B. Based on factors that can change relatively easily.
C. Becoming more like inherent comparative advantages with technological
innovations.
D. Rarely eroded over time.
Answer:
To engage in economic reasoning, one must compare:
A. total cost and total benefit.
B. marginal cost, sunk cost, and total benefit.
C. sunk cost and marginal cost.
D. marginal cost and marginal benefit.
Answer:
Businesses do all of the following except:
A. pay taxes to the government.
B. demand labor services from households in the factor market.
C. demand goods and services from households in the goods market.
D. supply goods and services to the government in the goods market.
Answer:
When the price of a good increases, we would expect to see ______________ in the
markets for its substitutes.
A. higher prices and increased sales
B. higher prices and decreased sales
C. lower prices and decreased sales
D. lower prices and increased sales
Answer:
Monopolies that exist because economies of scale create a barrier to entry are called:
A. normal monopolies.
B. natural monopolies.
C. price-discriminating monopolies.
D. government monopolies.
Answer:
The law of supply states that, other things equal, as the price of a good goes:
A. up, the quantity supplied goes up.
B. up, the supply goes down.
C. down, the quantity supplied goes up.
D. down, the supply goes down.
Answer:
If you observe a market where quantity demanded doesn’t equal quantity supplied, a
logical conclusion is that:
A. the law of demand and supply do not hold in the market.
B. the fallacy of composition is not operative in the market.
C. the invisible hand is the only force at work in the market.
D. social and political forces are likely to exist.
Answer: