Barriers to entry:
A. do not affect the number of firms in an industry.
B. exist only in perfectly competitive markets.
C. restrict the number of firms in an industry.
D. limit output in an industry.
Answer:
A labor supply elasticity of 0.1 means that a wage increase of 10 percent will:
A. reduce the quantity of labor supplied by 10 percent.
B. increase the quantity of labor supplied by 10 percent.
C. increase the quantity of labor supplied by 1 percent.
D. reduce the quantity of labor supplied by 1 percent.
Answer:
The long-run average cost curve is typically:
A. downward-sloping at first but then upward-sloping.
B. upward-sloping at first but then downward-sloping.
C. always downward-sloping.
D. always upward-sloping.
Answer:
If the government simultaneously increases marginal income tax rates and
unemployment compensation, the:
A. incentive to work will increase.
B. incentive to work will diminish.
C. incentive to work will not change.
D. effect on the incentive to work cannot be predicted.
Answer:
Refer to the following table to answer the question. Supply shown by the table is:
A. elastic.
B. unit elastic.
C. inelastic.
D. changing as price changes.
Answer:
Refer to the graph shown. If this graph represents a competitive market, the equilibrium
price and quantity will be:
A. $13.50 and 325, respectively.
B. $7 and 325, respectively.
C. $10 and 500, respectively.
D. $7 and 750, respectively.
Answer:
Refer to the graph shown. The cheapest way to produce 1,000 units of output is with:
A. 12 units of capital and no workers.
B. 5 workers and no capital.
C. 2 workers and 7.2 units of capital.
D. 4 workers and 2.4 units of capital.
Answer:
Refer to the graph shown. When the market is in equilibrium, consumer surplus is equal
to:
A. 500.
B. 1,000.
C. 1,500.
D. 2,000.
Answer:
If a market has no externalities, marginal private costs:
A. exceed marginal social costs.
B. equal marginal social costs.
C. are below marginal social costs.
D. intersect marginal social costs.
Answer:
In practice, regulatory boards try to set the price of a natural monopoly so that price:
A. equals marginal cost.
B. covers all explicit costs.
C. includes all costs plus a normal return on capital investment.
D. is constant over time.
Answer:
If a monopolistically competitive firm is earning economic profits in the short run:
A. these profits will persist in the long run because of the firm’s limited monopoly
power.
B. these profits will be eliminated in the long run as new firms enter the industry.
C. its output will increase in the long run.
D. price will be driven down to minimum average total cost in the long run.
Answer:
Focal point equilibria are consistent with:
A. rational choice theory.
B. the “you get what you pay for” rule.
C. the “follow the leader” rule.
D. a nonmarket economy.
Answer:
The basis of judgment for the Standard Oil case was ____________, whereas the basis
of judgment for the ALCOA case was _____________:
A. market structure, market performance.
B. unfair business practices, price discrimination.
C. monopolistic abuses, market structure.
D. market concentration, interlocking directorships.
Answer:
Politics enters into the determination of economic policy in a negative way because:
A. it does not take market failures or failures of market outcome into account in
formulating policy.
B. political decisions always reflect the will of society.
C. it takes market failures and failures of market outcome into account in formulating
policy.
D. political decisions do not always reflect the will of society.
Answer:
According to Adam Smith, individuals are directed to do those things for which they
have a comparative advantage by:
A. their self interest.
B. corporate management.
C. government policy.
D. the educational system.
Answer:
Refer to the graph shown. In equilibrium, consumer surplus is equal to:
A. 600.
B. 1,200.
C. 1,400.
D. 2,000.
Answer:
Which of the following is most likely to slow technological development?
A. barriers to trade
B. learning by doing
C. globalization
D. specialization
Answer:
Refer to the graph shown. If regulators wanted this monopolist to earn only a normal
profit, they would set price equal to:
A. $2.
B. $3.
C. $8.
D. $12.00.
Answer:
The cost of repositioning an automobile gas tank for greater safety is $11 per vehicle for
12.5 million vehicles. The automobile company places a value on life of $500,000. To
justify redesigning the location of the gas tank, the number of deaths expected to occur
if the gas tank location is not redesigned would have to be at least:
A. 1.
B. 100.
C. 175.
D. 275.
Answer:
Long-run market supply is a downward-sloping line in a(n):
A. decreasing-cost industry.
B. constant-cost industry.
C. increasing-cost industry.
D. perfectly competitive industry.
Answer:
John and Jane Smith are both economists who are deciding how to split household
chores of cooking and cleaning. They discover that John has a comparative advantage
in cooking. Does this discovery tell them anything about comparative advantage in
cleaning?
A. No; both or neither may have a comparative advantage in cleaning.
B. No; either one may have a comparative advantage in cleaning.
C. Yes; John must also have a comparative advantage in cleaning.
D. Yes; Jane must have a comparative advantage in cleaning.
Answer:
Experimental economics is:
A. a naturally occurring event that approximates a controlled experiment.
B. not possible given that economists study real-world events.
C. a branch of economics that studies the economy through controlled lab experiments.
D. what all economists do when they develop their models.
Answer:
At the minimum efficient level of production:
A. a firm will be at the only technically efficient level of production.
B. the market has expanded sufficiently to take advantage of all economies of scale.
C. production has expanded to make the firm profitable at any price.
D. a firm will be at the only short-run economically efficient level of production.
Answer:
According to the kinked demand curve theory of sticky prices, in an oligopolistic
market:
A. a price decrease by one firm will not be followed by the other firms.
B. a price increase by one firm will be followed by the other firms.
C. the kinked demand curve is inelastic in the upper portion and elastic in the lower
portion of the curve.
D. the kinked demand curve is elastic in the upper portion and inelastic in the lower
portion of the curve.
Answer:
The distance between the supply curve and the price the producer receives for a product
for a given quantity supplied is referred to as:
A. market surplus.
B. market shortage.
C. consumer surplus.
D. producer surplus.
Answer:
A perfectly competitive firm facing a price of $50 decides to produce 500 widgets. Its
marginal cost of producing the last widget is $50. If the firm’s goal is maximize profit, it
should:
A. produce more widgets.
B. produce fewer widgets.
C. continue producing 500 widgets.
D. shut down.
Answer:
A group of countries that allows free trade among its members and puts up common
barriers against all other countries’ goods is called:
A. a tariff-free zone.
B. a most-favored-nation agreement.
C. an autarky.
D. a free trade association.
Answer:
When a country runs a trade surplus, it will:
A. borrow from foreign countries or sell assets to them.
B. borrow from foreign countries or buy assets from them.
C. lend to foreign countries or sell assets to them.
D. lend to foreign countries or buy assets from them.
Answer:
In 2004, oil facilities in Iraq were attacked amid strong demand for oil. In response,
political pressure motivated OPEC to increase the daily quota by 2 million barrels a
day. Assuming demand did not change, which of the following series of prices most
likely matches how the price of a barrel of oil changed from (1) before the attack, to (2)
just after the attack, to (3) after OPEC increased the quota?
A. $42, $38, $40
B. $38, $40, $42
C. $42, $40, $38
D. $40, $42, $38
Answer:
Which of the following is most likely to be an example of economies of scale?
A. The per-unit costs on Excel Publishing Company’s manuals fall because it adopted a
new technology after receiving a large order from the government.
B. Alpha-Beta Inc. raised its price by 10 percent after a 5 percent increase in production
costs.
C. Widget Manufacturing doubled its production by opening a new plant that was
identical to its old plant.
D. The XYZ Co. increased production 25 percent after a 30 percent increase in all
inputs.
Answer:
In the goods market:
A. households supply factors of production to businesses and are paid by businesses for
doing so.
B. households supply goods to businesses and are paid by businesses for doing so.
C. businesses produce goods and services and sells them to households and
government.
D. government produces goods and services and supplies them to households and
businesses.
Answer:
Microeconomics and macroeconomics are:
A. not related because they are taught as separate courses.
B. virtually identical, though one is much more difficult than the other.
C. interrelated because what happens in the economy as a whole is based on individual
decisions.
D. interrelated because both are taught by the same teacher.
Answer:
Long-run average costs at any output level will:
A. always be less than or equal to short-run average total costs.
B. always be greater than or equal to short-run average total costs.
C. always be equal to short-run average total costs.
D. sometimes be less than and sometimes greater than short-run average total costs.
Answer:
Suppose two economists disagree about whether a particular tax cut is good policy. The
economist supporting the cut believes that it will increase economic growth. The other
economist opposes it because he thinks it will have no effect on growth. The source of
their disagreement in this case most likely is due to different:
A. value judgments.
B. interpretations of empirical evidence.
C. interpretation of Pareto optimality.
D. levels of coldheartedness.
Answer: