Which of the following markets best approximates the perfectly competitive market
structure?
a. automobile manufacturing
b. insurance
c. world commodity markets
d. airlines
e. manufacture of stereo equipment
In a natural monopoly, throughout the range of market demand,
a. marginal cost exceeds average cost and therefore pulls average cost upward
b. average cost exceeds marginal cost and therefore pulls marginal cost upward
c. marginal cost is below average cost and therefore pulls average cost downward
d. average cost is equal to marginal cost
e. there are diseconomies of scale
If the interest rate increases, the
a. cost of saving will increase
b. cost of borrowing will increase
c. firm should decrease the amount of capital it owns by selling capital
d. firm should acquire more capital
e. supply of loanable funds will increase
Exhibit 17-6
In Exhibit 17-6, a subsidy of $3 per unit will lead to the socially optimal level of
production.
a. True
b. False
A decrease in supply will cause a(n)
a. increase in demand
b. decrease in demand
c. increase in quantity demanded
d. decrease in quantity demanded
e. decrease in equilibrium price
A requirement that buyers of one service also purchase another service from the same
seller is called
a. exclusive dealing
b. an interlocking merger
c. a second good contract
d. a tying contract
e. a legal agreement
If Eddie Li is a skilled worker employed in a low-skill job, he is
a. underemployed
b. unemployed
c. overemployed
d. fully employed
e. All the answers are correct
Exhibit 1-16
Refer to exhibit 1-16. Which of the graphs illustrates a direct or positive relationship
between variable X and variable Y?
a. a
b. b
c. c
d. d
e. e
A good that is nonrival but exclusive is called
a. a private good
b. a public good
c. a quasi-private good
d. an external good
e. a normal good
If zinc suppliers are successful in forming an international zinc cartel, they will
experience
a. lower output and higher prices, which discourage the entry of new firms into the
industry
b. lower output, higher prices, and the need to organize an effort to prevent the entry of
new firms into the industry
c. higher output and higher prices, which discourage the entry of new firms into the
industry
d. higher output, higher prices, and the need to organize an effort to prevent the entry of
new firms into the industry
e. none of the above
Suppose you have an hour before your next class starts. From your most preferred
alternative to the least, you can either read a book, get something to eat, or take a nap.
The opportunity cost of getting something to eat is
a. the cost of what you eat
b. the value of an hour’s worth of reading your book
c. the loss of value from not reading or sleeping
d. the net benefit of sleeping for another hour
e. impossible to determine because the most preferred alternative is not known
Other things equal, the supply of labor will be lower to a job that
a. offers less strenuous physical activity
b. requires a supervisor to closely monitor employee performance
c. allows for flexible work schedules
d. offers free room and board
e. is exciting due to slightly elevated risk
Price elasticity is unit elastic at the midpoint of a linear, downward-sloping demand
curve.
a. True
b. False
A monopolistically competitive firm
a. earns no long-run economic profit and is therefore allocatively efficient
b. earns no long-run economic profit and therefore produces at the minimum point of its
ATC curve
c. earns no long-run economic profit and is allocatively efficient even though it is not
producing at the minimum point of its ATC curve
d. earns no long-run economic profit, is allocatively inefficient, and does not produce at
the minimum point of its ATC curve
e. has a chance of making a long-run economic profit and is therefore allocatively
inefficient
If demand is elastic, a decrease in price leads to a decrease in total revenue.
a. True
b. False
For a renter, the income effect of an increase in apartment rents will
a. have a greater effect than the income effect of an increase in the price of chewing
gum
b. have no impact on the demand curve for apartments, because everything except price
is assumed constant
c. have less of an effect than the income effect of an increase in the price of chewing
gum
d. be almost negligible, because housing is a necessity
e. occur only when income increases
The price that represents the shutdown point for a perfectly competitive firm is the
a. highest point on the marginal cost curve
b. lowest point on the marginal cost curve
c. highest point on the average variable cost curve
d. lowest point on the average variable cost curve
e. lowest point on the average total cost curve
On a graph, to determine the price a profit-maximizing monopolist would charge, find
the quantity at which MC and MR intersect and read up to the demand curve.
a. True
b. False
The expansion path
a. is always a straight line that slopes upward
b. shows the least-cost input combinations for producing each level of output, if input
prices are constant
c. shows the utility-maximizing combinations of products that society can produce,
given resources and technology
d. shows the economic growth made possible when technology improves
e. shows the firm’s profit-maximizing quantity of output at various product prices
Which of the following is not an example of a “workfare” component in a welfare
program?
a. job skill training
b. required job searches
c. tougher child support laws
d. required work in paid or unpaid jobs
e. required participation in training programs
Because women make up 54 percent of those ages 18 to 24 enrolled in college, graduate
school, or professional school, men and women are now more likely to meet their future
spouses
a. at hayrides
b. in some educational setting
c. in entry-level jobs such as in food service
d. at volunteer events
e. during military service
Most real economic choices involve small (or marginal) changes, rather than
all-or-nothing decisions.
a. True
b. False
Suppose you have purchased a non-refundable plane ticket and, at the last moment, you
cannot take the trip. You can, however, sell the ticket. If you paid $700 for the ticket,
the cost of sending the ticket to someone through overnight mail is $20, and you spend
$10 on a courier to get the ticket to the post office for overnight delivery, what is the
minimum you should accept for the ticket?
a. $700 because that is what the ticket cost.
b. $720 because that is the cost of the ticket and of getting it to the buyer.
c. $730 because that is the total cost of the ticket and getting it to the buyer.
d. More than $730, so that you can make a profit.
e. $30 because the $700 is a sunk cost.
Exhibit 8-14
In Exhibit 8-14, what area represents totalcost at the loss-minimizing output?
a. 0cda
b. 0jka
c. 0efa
d. 0hib
e. 0egb
If the premerger Herfindahl index is less than 1,000, the Department of Justice is likely
to challenge a merger.
a. True
b. False
United States net unilateral transfers have been
a. positive every year since 1950
b. negative every year since 1950
c. positive every year since 1950 except 1991, during the Persian Gulf War
d. negative every year since 1950 except 1991, during the Persian Gulf War
e. positive about half the time and negative about half the time since 1950
Exhibit 9-21
In Exhibit 9-21, D = AR represents the market demand curve for bicycles, MRm
represents the marginal revenue curve for a monopolist producer of bicycles and Sc =
MC = AC represents the marginal cost curve for a monopolist producer of bicycles and
the market supply curve when the market is perfectly competitive. The deadweight loss
due to monopoly would be
a. $10
b. $20
c. $30
d. $40
e. $50
Exhibit 8-19 A Single Firm in a Perfectly Competitive Market
Exhibit 8-19 shows the demand and cost situation facing a single perfectly competitive
firm. If P5 represents the equilibrium market price. What is the profit-maximizing
quantity for the firm?
a. Q1bushels
b. Q2bushels
c. Q3bushels
d. Q4bushels
e. 0 bushels
With perfect price discrimination, each consumer is charged the marginal value of each
unit consumed.
a. True
b. False
Exhibit 19-10
In Exhibit 19-10 the domestic demand for sugar is represented by D and the domestic
supply is represented by S, if the world price of sugar is $.13 per pound and there are no
trade restrictions, the United States will
a. produce 10 million lbs., consume 27 million lbs., and import 17 million lbs. of sugar
b. have an excess demand for sugar
c. produce 13 million lbs., consume 25 million lbs., and import 12 million lbs. of sugar
d. not produce any sugar
e. consume only a portion of what is produced
Exhibit 9-17
Which area in Exhibit 9-17 represents deadweight loss under monopoly with perfect
price discrimination?
a. area a
b. area b
c. area c
d. there is no deadweight loss
e. area e
Exhibit 6-5
In Exhibit 6-5, the marginal utility of consuming the second scone is
a. 12
b. 9
c. 8
d. 19
e. 6
When a firm is operating at its minimum efficient scale, its short-run average total cost
of production is minimized.
a. True
b. False
Collusion is most likely to occur in those oligopolies in which firms have vastly
different cost structures.
a. True
b. False