Recall the Application. In most cases where satellite TV service is introduced in an area
with cable TV service, the quality of the cable TV service usually:
A) increases.
B) decreases.
C) initially increases, then decreases.
D) is unaffected.
Recall the Application about the method used by the Commerce Department to
determine if imported products are being sold at lower prices in the United States
than in their countries of origin to answer the following question(s).
Recall the Application. Firms that sell products at a lower price in foreign countries
than they do in their domestic markets are said to be engaging in :
A) dumping.
B) protecting infant industries.
C) learning by doing.
D) voluntarily restricting exports.
A good is said to be “inferior” if:
A) it is of low quality.
B) consumers buy less of it at a high price.
C) it has a negative income elasticity of demand.
D) it has many substitutes.
Assume that Pura Water, a local monopoly water utility company, is currently selling
10,000 gallons per hour at a price of $0.10 per gallon. If Pura Water wants to sell 1000
gallons more, it will have to lower the price to $0.09 per gallon. The marginal revenue
of the 10,001 is approximately:
A) -$99.91.
B) $99.91.
C) $9.91.
D) -$999.91.
Which of the following is a characteristic of a monopolistically competitive market?
I. There are many sellers.
II. Firms sell slightly differentiated products.
III. Each firm faces a downward-sloping demand curve.
A) I only
B) I and II only
C) II and III only
D) I, II, and III
The quantity produced by a natural monopolist facing an average-cost pricing policy
will be:
A) less than the quantity produced by a marginal cost pricing policy.
B) that quantity at which average costs are at their minimum.
C) that quantity at which marginal costs are at their minimum.
D) the same as the quantity that would be produced in perfect competition.
Recall the Application. If the decrease in price of illegal drugs is primarily due to a
change in demand, the equilibrium quantity of drugs:
A) will increase.
B) will decrease.
C) will not change.
D) may or may not change.
In a market system, prices:
A) signal the relative scarcity of a product.
B) are unfair.
C) are too high.
D) all of the above.
The more times a worker performs a particular task, the more proficient the worker
becomes at that task. This is called:
A) continuity.
B) innovation.
C) specialization.
D) repetition.
If Cowland can produce milk at a lower opportunity cost than any other nation,
Cowland is said to have a(n) ________ in the production of milk.
A) autarky
B) absolute advantage
C) comparative advantage
D) comparative disadvantage
A product’s patent lasts for ________ years.
A) 7
B) 17
C) 20
D) 27
Consider Figure 12.5. Not confessing is a dominant strategy for:
A) player A but not player B.
B) player B but not player A.
C) both players.
D) neither player.
In the absence of government, an underallocation of resources generally exists for:
A) goods with external costs.
B) imported goods and services.
C) public goods.
D) all of the above
The Aire Fresco Ceiling Fan Factory hires workers to make ceiling fans. The factory
sells the fans for $50. The marginal revenue product of this factory’s sixth worker is
$300. The marginal product of the sixth worker is:
A) 12 ceiling fans.
B) 6 ceiling fans.
C) 150 ceiling fans.
D) It cannot be determined; more information is needed.
When the firm increases output and the costs rise proportionately, then the long-run
average cost curve is ________ and the firm is experiencing ________.
A) horizontal; constant returns to scale
B) downward sloping; constant returns to scale
C) upward sloping; diseconomies of scale
D) downward sloping; economies of scale
If the relative price of plasma TVs (a normal good) decreases and real income
increases, the quantity of plasma TVs increases, which is represented by a ________.
A) movement downward along the demand curve
B) movement upward along the demand curve
C) rightward shift of the demand curve
D) leftward shift of the demand curve
An increase in supply caused no change in the equilibrium quantity bought and sold.
Thus, demand must be:
A) perfectly inelastic.
B) horizontal.
C) elastic.
D) unitary elastic.
If, regardless of price, the quantity supplied is a constant amount, then the supply curve
is:
A) horizontal.
B) vertical.
C) upward sloping.
D) downward sloping.
A firm that faces the duopolists’ dilemma can avoid the dilemma by:
A) telling customers that it will match any competitor’s price.
B) undercutting its competitor’s price.
C) agreeing to join a cartel.
D) always choosing its dominant strategy regardless of the other firm’s action.
Prices above the free market equilibrium price are inefficient because:
A) no one can be made better off without hurting someone by participating in another
transaction.
B) they prevent mutually beneficial transactions.
C) all mutually beneficial transactions happen.
D) more goods could be produced using society’s resources.
Most empirical studies show that firms’ long-run average cost curves:
A) are L-shaped.
B) are downward-sloping.
C) are upward-sloping.
D) are flat.
In the event of excess supply in the coffee market:
A) the price of coffee will increase.
B) the price of coffee will decrease.
C) the supply of coffee will decrease (supply will shift to the left) to meet the demand.
D) the demand for coffee will increase (demand will shift to the right) to meet the
supply.
Suppose that the elasticity of demand for newspapers is 2.0 and quantity demanded
decreases by 40%. What must the percentage increase in price have been?
A) 2%
B) 20%
C) 80%
D) 200%
Consider Figure 12.5. The “dilemma” in the prisoners’ dilemma is that:
A) one of the players cannot get to the best outcome.
B) both players would be better off by not confessing, but confessing is a dominant
strategy.
C) both players would be better off by confessing, but not confessing is a dominant
strategy.
D) the player with first-mover advantage always gets the better outcome.
As price falls along the elastic portion of a linear demand curve ________ decrease(s)
while ________ increase(s).
A) only price; quantity demanded, consumer surplus, and consumer expenditures
B) consumer surplus and price; quantity demanded and consumer expenditures
C) quantity demanded and price; consumer surplus and consumer expenditures
D) consumer expenditures, quantity demanded, and price; consumer surplus
One efficient solution to congestion is to:
A) impose a congestion tax on drivers who use the road during the rush hour.
B) prevent cars from using the roads during the rush hour.
C) give subsidies to drivers who use the road during the rush hour.
D) lower gasoline taxes.
One common source of market failure is:
A) perfect competition.
B) pollution.
C) perfect information.
D) private goods.
A change in the relative prices of two goods is represented graphically by:
A) a change in the slope of an indifference curve.
B) a rightward parallel shift of the budget line.
C) a leftward parallel shift of the budget line.
D) a change in the slope of the budget line.
Refer to Table 7.1. The marginal utility of the third donut per day is:
Table 7.1
A) 60.
B) 15.
C) 20.
D) 75.
Experiments by psychologists and neuroscientists have consistently shown that people
systematically ________ the strength of positive gut feelings and ________ the strength
of negative gut feelings.
A) underestimate; underestimate
B) underestimate; overestimate
C) overestimate; underestimate
D) overestimate; overestimate
An arrangement in which firms conspire to fix prices is called:
A) a cartel.
B) price-ceiling.
C) price-fixing.
D) a duopoly.