A perfectly competitive firm will maximize its profit at the rate of output where the
vertical distance between its total revenue curve and total cost curve is the largest. This
is the same rate of output where
A) average total cost equals marginal revenue.
B) marginal revenue equals marginal profit.
C) marginal revenue equals marginal cost.
D) marginal revenue equals average revenue.
Recent research has shown that the first firm to enter a market often does not have a
long-term advantage over later entrants into the market. An example that has been used
to illustrate this is
A) McDonald’s entry into the high-end coffee market.
B) Xerox, which became a generic term for making photocopies.
C) Abercrombie and Fitch, which was the first clothing company to market to young
men.
D) the introduction of the first ballpoint pen in 1945.
Table 9-6
Production and
Consumption Production
Without Trade With Trade
Denmark and Belize can produce both clocks and hats. Table 9-6 shows the production
and consumption quantities without trade, and the production numbers with trade.
Refer to Table 9-6. With trade, what is the total gain in hat production?
A) 150
B) 300
C) 400
D) 650
Table 4-1
Refer to Table 4-1. The table above lists the highest prices three consumers, Tom, Dick,
and Harriet, are willing to pay for a short-sleeved polo shirt. If the price of one of the
shirts is $28 dollars
A) Tom will buy two shirts, Dick will buy one shirt and Harriet will buy no shirts.
B) Tom will receive $12 of consumer surplus from buying one shirt.
C) Tom and Dick receive a total of $70 of consumer surplus from buying one shirt each.
Harriet will buy no shirts.
D) Harriet will receive $25 of consumer surplus since she will buy no shirts.
Which of the following is true of trademarks?
A) A successful trademark is one that becomes a generic name for a product, for
example, “Xerox” has become a generic term for making photocopies.
B) A successful trademark is one that allows consumers to immediately identify the
source or producer of the product.
C) If a firm is granted a trademark, then no other firms can legally produce similar
products for a given period of time.
D) If a firm is granted a trademark, then no other firms can legally sell in the same
geographic area for a given period of time.
If a firm’s long-run average total curve shows that it can produce 5,000 DVDs at an
average cost of $2.00 and 15,000 DVDs at an average cost of $1.50, this is evidence of
A) diminishing returns.
B) economies of scale.
C) diseconomies of scale.
D) the law of supply.
Figure 12-16
Refer to Figure 12-16. Which panel best represents the perfectly competitive organic
produce market in which firms are breaking even, economically, organic produce is
considered a normal good, and the average income level of consumers is rising?
A) Panel A
B) Panel B
C) Panel C
D) Panel D
Which of the following can a firm use to defend a successful product’s brand name?
A) The firm can obtain a patent on the brand name.
B) The firm can apply for a trademark to ban other firm’s from using the product’s
name.
C) The firm can increase the amount it spends on advertising for the product.
D) The firm can attempt to copyright the brand name.
Price discrimination
A) is the practice of charging different prices to different customers based on a seller’s
personal preferences and prejudices.
B) is the practice of charging different prices to different customers based on the
different costs of supplying the product to different customers.
C) is the practice of charging different prices to different customers when the price
differences cannot be attributed to variations in cost.
D) is the practice of giving preferential treatment to certain groups of customers based
on their long-standing relationship to the producer.
In 2015, the Educational Testing Service (ETS) charged $52.50 to take the Scholastic
Aptitude Test (SAT) but $195 to take the Graduate Record Exam (GRE). One reason for
this difference in price is
A) more people took the SAT than the GRE in 2015.
B) the GRE is a longer test with more questions.
C) an average, those who take the GRE have higher incomes than those who take the
SAT.
D) the ETS faces competition in the market for the SAT but no competition for the
GRE.
Which of the following describes the relative positions of the demand curve and the
average total cost (ATC) curve of a monopolistically competitive firm that earns a profit
in the short run?
A) In the short run, the firm’s demand curve will lie above its ATC curve. The demand
curve will be tangent to the ATC curve in the long run.
B) In the short run, the firm’s demand curve will lie below its ATC curve. The demand
curve will be tangent to the ATC curve in the long run.
C) In the short run, the firm’s demand curve will cross its ATC curve at the ATC curve’s
lowest point. The demand curve will be above the ATC curve in the long run.
D) In the short run, the firm’s ATC curve will cross the demand curve at the profit
maximizing level of output. The demand curve will be tangent to the ATC curve in the
long run.
Although some economists believe network externalities are important barriers to entry,
other economists disagree because
A) they believe that the dominant positions of firms that are supposedly due to network
externalities are to a greater extent the result of the efficiency of firms in offering
products that satisfy consumer preferences.
B) they believe that most examples of network externalities are really barriers to entry
caused by the control of a key resource.
C) network externalities are really negative externalities.
D) they believe that the dominant positions of firms that are supposedly due to network
externalities are to a greater extent the result of economies of scale.
Table 10-6
Table 10-6 lists Jay’s marginal utilities for burgers and Pepsi. Jay has $7 to spend on
these two goods. The price of a burger is $2 and the price of a can of Pepsi is $1.
Refer to Table 10-6. If Jay can eat all the burgers he wants for free, how many burgers
will he consume?
A) 7 burgers
B) 6 burgers
C) 5 burgers
D) 3 burgers
How much is a bond that pays $50 in coupon payments for 3 years and $1,000 at the
end of the third year worth if the interest rate is 10%?
A) $876
B) $952
C) $1,045
D) $1,150
The Federal Trade Commission (FTC) Act
A) gave the FTC full power to regulate mergers.
B) closed the loopholes in the Sherman and Clayton Acts.
C) divided authority to police mergers between the FTC and the Department of Justice.
D) prohibited charging buyers different prices if the result would reduce competition.
The slope of an indifference curve
A) is calculated by dividing the price of good on the vertical axis by price of the good
on the horizontal axis.
B) measures total utility.
C) measures the marginal rate of substitution between the two goods in question.
D) is calculated by dividing the quantity of the good on the vertical axis by the quantity
of the good on the horizontal axis.
Which of the following does not arise from price discrimination?
A) an increase in producer surplus
B) an increase in consumer surplus
C) an increase in quantity sold
D) an increase in profits
Figure 12-9
Figure 12-9 shows cost and demand curves facing a profit-maximizing, perfectly
competitive firm.
Refer to Figure 12-9. At price P3, the firm would
A) lose an amount equal to its fixed cost.
B) lose an amount more than fixed cost.
C) lose an amount less than fixed cost.
D) break even.
One argument advanced in favor of not increasing the income tax on individuals with
high income is that
A) increasing income tax increases wealth which contributes to increases in GDP.
B) increasing the income tax on these individuals will reduce economic efficiency.
C) increasing the income tax affects mostly middle-income and low-income individuals
who are already paying heavy income taxes.
D) not increasing income taxes will discourage corporations from increasing
investment.
If you pay a constant percentage of your taxable income in taxes, the tax is
A) regressive.
B) proportional.
C) progressive.
D) random.
Identify the one statement that does not demonstrate how social effects influence
consumer choice.
A) Students in an Economics class are required to purchase a textbook assigned by the
professor.
B) There is utility gained from consuming goods or services that others are consuming.
C) Some products that people consume are determined by the social popularity of the
products.
D) Companies such as Zappos.com and Netflix invite their consumers to write reviews
about their experience with their products which are then posted on the internet for
others to see.
In addition to requiring that CEO’s personally certify the accuracy of financial
statements, the Sarbanes-Oxley Act of 2002 also requires that
A) CEO’s conduct audits of their corporations themselves.
B) firms raise funds for expansion through the sale of bonds only, not stocks.
C) auditors disclose any potential conflicts of interest.
D) corporations issue financial statements monthly rather than quarterly.
Conceptually, the efficient level of carbon emissions is the level for which
A) the marginal benefit of reducing carbon emissions is maximized.
B) the marginal cost of reducing carbon emissions is minimized.
C) the marginal benefit of reducing carbon emissions is equal to the marginal cost of
reducing carbon emissions.
D) the marginal benefit of reducing carbon emissions is minimized and the marginal
cost of reducing carbon emissions is maximized.
An oligopoly firm is similar to a monopolistically competitive firm in that
A) both firms face the prisoner’s dilemma.
B) both operate in a market in which there are significant entry barriers.
C) both firms have market power.
D) both firms are in industries characterized by an interdependent firm.
When production generates a negative externality, the true cost of production is the
A) private cost of production.
B) public cost of production.
C) social cost of production.
D) average cost of production.
Table 9-5
Table 9-5 shows the output per week for bows and arrows by Ahmet and MyLinh.
Refer to Table 9-5.
a. Which person has an absolute advantage in the production of bows? arrows?
b. Which person has a comparative advantage in the production of bows?
c. Which person has a comparative advantage in the production of arrows?
Economists estimated that the cross-price elasticity of demand for beer and wine is
-0.83 and the income elasticity of wine is 5.03. This means that
A) beer and wine are substitutes and wine is an inferior good.
B) beer and wine are complements and wine is a luxury good.
C) beer and wine are substitutes and wine is a luxury good.
D) beer and wine are complements and wine is an inferior good.
Table 4-6
Refer to Table 4-6. The equations above describe the demand and supply for Chef
Ernie’s Sushi-on-a-Stick. What are the equilibrium price and quantity (in thousands) for
Chef Ernie’s sushi?
A) $80 and 80 thousand
B) $60 and 20 thousand
C) $50 and 100 thousand
D) $40 and 50 thousand
Which of the following is not a characteristic of oligopoly?
A) the ability to influence price
B) a small number of firms
C) low barriers to entry
D) interdependent firms
Table 15-3
Assume Table 15-3 gives the monthly demand and costs for subscriptions to basic cable
for Comcast, a cable television monopoly in Philadelphia.
Refer to Table 15-3. If Comcast maximizes its profits how much profit will it earn?
A) $84
B) $40
C) $4
D) Comcast will break even.