Several firms are operating in a market where they take the other firms’ response to
their actions into account. This market is:
A. a competitive market.
B. a monopolistically competitive market.
C. an oligopolistic market.
D. a monopoly.
Answer:
Total revenue minus explicit measurable costs equals:
A. economic profit.
B. normal profit.
C. accounting profit.
D. average profit.
Answer:
A market for information is more likely to develop even in the absence of government
regulation of information as long as the marginal:
A. cost of information is zero.
B. benefit of information is zero.
C. cost of information exceeds the marginal benefit.
D. benefit of information exceeds the marginal cost.
Answer:
Refer to the graph above. If suppliers can reduce output from M to L, the remaining
firms in the market that are still producing L will find that their revenues will rise by:
A. area A.
B. area B.
C. area A, B, and C.
D. area A, B, and D.
Answer:
When most people talk about believing in equality of income, they mean they believe in
equality of:
A. effort for comparably endowed individuals.
B. opportunity for comparably endowed individuals.
C. after-tax income for comparably endowed individuals.
D. before-tax income for comparably endowed individuals.
Answer:
Refer to the graph shown. If the price were somehow held at $8.15 per unit, producer
surplus would then equal:
A. 1,400.
B. 600.
C. 423.5.
D. 1,171.5.
Answer:
Suppose that college tuition is higher this year than last year and that more students are
enrolled in college this year than last year. Based on this information, we can best
conclude that:
A. the law of demand is invalid.
B. despite the increase in price, quantity demanded rose due to some other factor
changing.
C. this situation has nothing to do with the law of demand.
D. the demand for a college education is positively sloped.
Answer:
An economist observes that a pharmaceutical company is sponsoring a diabetes clinic
and providing free medications. She concludes that the pharmaceutical company is
concerned not only about profits but also about fair distribution of drugs to those who
need them. This economist is most likely a(n):
A. traditional economist.
B. behavioral economist.
C. irrational economist.
D. engineering economist.
Answer:
A company such as Microsoft or Pepsi Co. is a legal hassle to organize, difficult to
monitor, and possibly could double tax income. It is an example of a:
A. consumer.
B. sole proprietorship.
C. partnership.
D. corporation.
Answer:
In the long run:
A. all inputs are fixed.
B. all inputs are variable.
C. some inputs are not variable.
D. per-unit costs are fixed.
Answer:
The effect of higher gasoline prices is most likely to:
A. increase the demand for hybrid cars and increase the demand for the gas guzzler
Hummer.
B. decrease the demand for hybrid cars and decrease the demand for the gas guzzler
Hummer.
C. increase the demand for hybrid cars and decrease the demand for the gas guzzler
Hummer.
D. decrease the demand for hybrid cars and increase the demand for the gas guzzler
Hummer.
Answer:
What kind of costs remain the same regardless of the level of production?
A. Fixed.
B. Variable.
C. Total.
D. Marginal.
Answer:
If the government were to regulate the way AT&T presents its phone plans, such a
policy would be a:
A. nudge.
B. push.
C. tax.
D. tariff.
Answer:
Which of the following statements is true about a downward-sloping demand curve that
is a straight line?
A. The slope and the elasticity are the same at all points.
B. The slope remains the same, but elasticity rises as you move down the demand
curve.
C. The slope remains the same, but elasticity falls as you move down the demand curve.
D. The slope and the elasticity fall as you move down the demand curve.
Answer:
The following table lists the utility that Sarah receives from consuming bananas at
$0.25 a banana. What is the marginal utility of consuming the fourth banana?
A. 40
B. 32
C. 8
D. 2
Answer:
In Europe, government regulations discourage consumer credit. “It’s to protect the
consumer from himself,” says Jacques Zeegers, secretary general to the Belgian
Banking Association. Zeeger’s position is based on what the text calls a:
A. market failure.
B. government failure.
C. failure of market outcomes.
D. failure of government outcomes.
Answer:
Suppose that the table shown shows the demand and supply schedules for pork bellies.
There is a shortage of 15,000 pounds at a price of:
A. $0.25.
B. $0.50.
C. $0.75.
D. $0.95.
Answer:
Mike is maximizing utility by working 10 hours a week and studying 10 hours a week.
Mike has only 20 hours to devote to either working or studying. If Mike realizes that
another hour of studying will give him an A on the exam, thus raising the utility of
another hour of study, Mike will:
A. study less to raise the marginal utility of studying even more.
B. work fewer hours, moving him down along his labor supply curve.
C. work fewer hours, shifting his labor supply curve to the left.
D. substitute work for studying, raising his total utility.
Answer:
A cartel is:
A. legal in the United States as long as collusion is explicit.
B. a group of firms that collude to maximize group profits.
C. found in monopolistically competitive industries.
D. a group of fringe firms.
Answer:
The invisible hand theorem relates mostly to:
A. microeconomics.
B. macroeconomics.
C. normative economics.
D. Marshallian economics.
Answer:
Most laypeople:
A. fear that the United States is losing its comparative advantage in all goods.
B. don’t see the effect of trade on the distribution of income.
C. recognize both the costs of international trade in lost jobs and the benefits in terms of
lower prices.
D. recognize that if China has a comparative advantage in one good, the United States
has a comparative advantage in another good.
Answer:
Refer to the following graph.
The marginal product and average product curves:
A. are A and B, respectively.
B. are B and A, respectively.
C. could be either A or B.
D. are not drawn properly.
Answer:
The Group of Eight is an informal international institution that is comprised primarily
of the:
A. leading petroleum exporting countries.
B. leading socialist countries.
C. leading industrial democracies.
D. major developing countries.
Answer:
Which of the following is not an example of a failure of market outcome?
A. Income is not distributed in a way society wants.
B. Emission of pollutants is producing acid rain and killing wildlife.
C. Addicts continue to use heroin even though they would be better off without it.
D. A person with a gun offers you your life for your money.
Answer:
If the world supply curve is SW0,
A. there is a trade deficit.
B. there is a trade surplus.
C. trade is in balance.
D. there is no trade.
Answer:
The telecommunications industry is best described as:
A. perfectly competitive, with very few technological innovations.
B. perfectly competitive, with rapid technological innovations.
C. oligopolistic, with very few technological innovations.
D. oligopolistic, with rapid technological innovations.
Answer:
Refer to the graph shown. The firm’s profit-maximizing price is:
A. e.
B. f.
C. g.
D. h.
Answer:
Refer to the graph shown. If a price control is used to eliminate deadweight loss, the
new price and quantity in this market will be:
A. P1 and Q1, respectively.
B. P2 and Q1, respectively.
C. P2 and Q2, respectively.
D. P3 and Q3, respectively.
Answer:
Wages under a bilateral monopoly are determined by:
A. the positions of the labor supply and demand curves.
B. the bargaining power of monopsonists and unions.
C. marginal factor cost.
D. labor productivity.
Answer:
In the Justice Department’s antitrust case against Microsoft, the Court ruled that there
was:
A. insufficient evidence to reach a ruling.
B. no evidence of unfair business practices, and Microsoft was not a monopoly.
C. evidence of unfair business practices, and Microsoft was a monopoly.
D. evidence of unfair business practices, but Microsoft was not a monopoly.
Answer:
When an effective price ceiling is removed, we would expect the price of the good to:
A. increase and the quantity demanded to decrease.
B. increase and the quantity demanded to increase.
C. decrease and the quantity demanded to decrease.
D. decrease and the quantity demanded to increase.
Answer: