A firm will maximize its profits by hiring factors up to the point at which
a. MR = MC, if the firm is a monopolist, monopolistic competitor, or oligopolist.
b. P = MC, if the firm is a perfect competitor.
c. MRP = MFC.
d. VMP = MFC, if the firm is a price searcher (monopolist, etc.).
e. a and b
Exhibit 4-3
If price P3 is a price ceiling, then
a. the price ceiling does not have an effect on the market for good X.
b. the price at which exchange takes place is P3.
c. the price at which exchange takes place is P2.
d. there is a shortage in the market for good X.
e. both a and c
The U.S. Postal Service is an example of a public franchise.
a. True
b. False
The supply curve of loanable funds is __________ sloping, which implies that as the
interest rate __________, the __________ loanable funds will increase.
a. downward; decreases; demand for
b. upward; increases; supply of
c. upward; decreases; supply of
d. downward; decreases; quantity demanded of
e. upward; increases; quantity supplied of
An increase in the supply of corn will lower the total revenue from corn if
a. the demand curve for corn is inelastic between the current and new price of corn.
b. the demand curve for corn is elastic between the current and new price of corn.
c. there are many substitutes for corn.
d. there are only a few substitutes for corn.
e. none of the above
One of the main criticisms of the theory of contestable markets is that the assumption of
extremely free entry into (and costless exit from) the industry is unlikely to hold in the
real world.
a. True
b. False
When a positive externality exists, the market is said to fail because it overproduces the
good associated with the positive externality.
a. True
b. False
Exhibit 39-4
The price elasticity of demand for wheat between the prices of $3 and $4 is
a. equal to 1.
b. less than 1.
c. greater than 1.
d. equal to 100.
e. c and d
To an economist, the terms factor and resource are synonyms.
a. True
b. False
Economies of scale are exclusively a long-run phenomenon, while the law of
diminishing marginal returns applies to both the short-run and to the long-run.
a. True
b. False
Since most colleges and universities charge the same tuition to every student regardless
of what time students choose to take their classes,
a. the schools must develop some type of non-price rationing device.
b. it follows that all classes will have a shortage of seats.
c. it follows that all classes will have a surplus of seats.
d. it follows that some classes will likely have a shortage of seats while other classes
may have a surplus of seats.
e. a and d
The eight-firm concentration ratio for an industry is 0.80. If the top four firms in the
industry account for $45 million in sales, what do total sales equal?
a. $56.25 million
b. $45 million
c. $11 million
d. $20 million
e. There is not enough information to answer the question.
Which of the following is a reason why wage rates differ?
a. In the short run, demand conditions are not the same in all labor markets.
b. Some jobs have special nonpecuniary aspects.
c. Labor is not homogeneous.
d. b and c
e. a, b, and c
Which of the following is inconsistent with long-run industry equilibrium?
a. upward-sloping marginal cost curves for all of the firms in the industry
b. zero economic profits
c. P = minimum ATC
d. SRATC = LRATC
e. none of the above
Political candidates in a two-person race prefer to be viewed as occupying the center of
the political distribution because
a. occupying the center is a sign of being a leader.
b. political candidates usually prefer to maintain the status quo and the center is the
status quo.
c. the electorate is largely in the “wings” (extreme ends) of the political distribution.
d. whoever comes closer to the center usually wins the election.
When someone wins a lottery jackpot they are often given the choice between receiving
their winnings over some period of time or receiving less money but receiving it all at
once. It makes the most economic sense to
a. receive the money over time because the amount received will be greater.
b. receive the reduced amount of money in one lump sum because it is always better to
have money sooner rather than later.
c. receive whichever option yields the greatest present value.
d. none of the above
The short run is
a. a period of time in which all inputs are fixed.
b. a period of time in which all inputs are variable.
c. a period of time in which some inputs are fixed.
d. always less than a year.
e. a and d