Under which of the following market conditions is it most difficult to maintain a cartel
agreement?
a. There are many firms in the industry and these firms have similar costs.
b. There are many firms in the industry and these firms have different costs.
c. There are few firms in the industry and these firms have similar costs.
d. There are few firms in the industry and these firms have different costs.
e. There are many firms in the industry and these firms produce homogeneous products.
When constructing an economic model, economists
a. rely mostly on their own value judgments and ignore the far more complex world of
facts
b. always try to duplicate reality by including all available information
c. use assumptions that are true for the individual but never true for the whole economy
d. must rely on simplifying assumptions that abstract from the complexity of the real
world
e. are primarily concerned with making realistic assumptions
An effective import quota
a. lowers the price of imports
b. lowers the price of domestic goods competing with imports
c. increases the variety of goods available to the consumer
d. increases tax revenues
e. lowers the quantity demanded of the imported good
The fire department receives its revenues from the government budget, not on a
per-fire-extinguished basis. As a result, it is difficult for department officials to know if
a. the fire department is even needed
b. too much or too little fire protection is being supplied
c. fires should be extinguished
d. they should raise or lower price
e. keep the difference between revenues and costs
The slope of a line
a. can only be calculated for straight lines
b. varies at different points along a straight line
c. indicates whether or not there is a causal relationship between variables
d. is independent of the units of measurement used
e. indicates how much the vertical variable changes for a given change in the horizontal
variable
Exhibit 6-20
Refer to Exhibit 6-20. If D, D” and D”” represents the demand curves for the only three
consumers in a market, then the market quantity demanded at a price of $15 will be:
a. 150
b. 120
c. 90
d. 60
e. 30
In economics, money is an example of capital.
a. True
b. False
Exhibit 9-18
Consider the firm in Exhibit 9-18, who charges the same price to all customers. Which
of the following most accurately describes the price elasticity of demand at the level of
output produced by the firm?
a. demand is price inelastic
b. demand is price elastic
c. demand is unitary elastic
d. price elasticity is equal to 1
e. price elasticity greater than 1
Exhibit 5-13
Which of the following is true of the demand curve in Exhibit 5-13?
a. Its slope is 0, and the value of elasticity is negative infinity.
b. Its slope is infinite, and the value of elasticity is 0.
c. Both its slope and the value of elasticity are 0.
d. Both its slope and the value of elasticity are negative infinity.
e. Its slope is 0, and demand is unit elastic.
If demand for personal computers increases as a result of an increase in income,
a. personal computers must be a normal good
b. personal computers must be an inferior good
c. personal computers must be a complement
d. the substitutes for personal computers must be inferior goods
e. the substitution effect is larger than the income effect
Firms in monopolistic competition and perfect competition typically
a. are price takers
b. produce identical products
c. earn zero economic profit in the long run
d. face a downward-sloping demand curve
e. face an upward-sloping total revenue curve at all rates of output
A cheerleader-turned-pop-vocalist is offered a choice by her producer of either a lump
sum of $20 million for all future work or a stipend of $1 million per year, payable to her
and her heirs forever. She should choose the $1 million
a. no matter what the interest rate is
b. if the interest rate is greater than 20 percent
c. if the interest rate is less than 20 percent
d. if the interest rate is greater than 5 percent
e. if the interest rate is less than 5 percent
Given the availability of California oranges, demand for Florida oranges will
a. be less elastic than if there were no California oranges
b. be more elastic than if there were no California oranges
c. have the same elasticity as it would if there were no California oranges
d. be perfectly elastic
e. be perfectly inelastic
If the marginal revenue product of the fifth worker is $15, the price of the last unit of
output produced is $5, and the firm sells as a price searcher, then the marginal product
of the fifth worker is
a. 3 units of output
b. 45 units of output
c. fewer than 3 units of output
d. greater than 3 units of output
e. greater than 75 units of output
A line is tangent to a curve if it
a. crosses the curve at one point
b. touches the curve at one point, without crossing it
c. crosses the curve at a minimum of two points
d. never touches the curve
e. forms a right triangle with the curve
Consumer surplus is
a. the amount by which quantity supplied exceeds quantity demanded at the current
market price
b. the amount by which quantity demanded exceeds quantity supplied at the current
market price
c. the change in total utility derived from a one-unit change in the consumption of a
good
d. the difference between the price of the good paid by the consumer and the costs of
production to the seller
e. the difference between the maximum amount that a consumer is willing to pay for a
given amount of a good and the amount that the consumer actually pays
Which of the following would be considered part of the underground economy?
a. tips reported to the IRS by a waitress
b. a barber giving a person a haircut in exchange for a meal
c. income earned through selling shares of stock
d. the portion of a professional athlete’s salary that is economic rent
e. donations received by a local church in their collection plate on Sunday morning
Which of the following would cause an increase in the supply of wheat?
a. an increase in fertilizer costs
b. a decrease in the price of bread
c. a decrease in the price of corn
d. an increase in land prices
e. an expectation that the price of wheat will be higher next period
Exhibit 7-16
In terms of output produced, which of the following expresses the relationships
illustrated in Exhibit 7-16?
a. a > b > c
b. a = b > c
c. b > c > a
d. c > b = a
e. c > b > a
To maximize cartel profit, the members must allocate output so that the marginal cost
for the final unit produced by each firm is
a. identical
b. unequal
c. negative
d. equal to the firm’s average total cost
e. maximized
Exhibit 4-2
Consider Exhibit 4-2. Which of the following represents an increase in the quantity
supplied?
a. a movement from C to D
b. a movement from C to B
c. a movement from E to D
d. a movement from F to E
e. none of the above represents an increase in the quantity supplied
You are more likely to hire your teenage child to cut your lawn than a landscaping firm
a. since the teenager is paid each time when she finishes and the landscaping firm bills
your credit card each month
b. if the teenager has a lower opportunity cost of cutting the lawn than the landscaping
firm does
c. because the teenager is less likely to have the specialized tools necessary to complete
the job quickly
d. due to the bounded rationality of the diversified landscaping firm
e. when it does not take a substantial amount of time and effort to find a reputable
landscaping firm to do the job
If the centrally planned economy of Rowboat dismantles central controls before
institutions such as property rights are in place, instability will most likely result.
a. True
b. False
Public choices are government decisions about
a. public goods only
b. taxes only
c. public goods and taxes
d. private goods
e. private services
The market value of ABC Corp., whose securities are publicly traded, can be found by
a. multiplying the price of its stock by the number of shares outstanding
b. dividing the number of shares outstanding by the price of the stock
c. adding the total value of its outstanding stock to the total value of its outstanding
bonds
d. subtracting the total value of its outstanding bonds from the total value of its
outstanding stock
e. subtracting the total value of its outstanding stock from the total value of its
outstanding bonds
Exhibit 5-8
Which of the following is not true in the range of the total revenue curve labeled A in
Exhibit 5-8?
a. Demand is inelastic.
b. Total revenue is increasing.
c. Total revenue is positive.
d. Demand is elastic.
e. Demand elasticity decreases as total revenue increases.
Exhibit 7-21
For the three isocost lines shown in Exhibit 7-21 which of the following is true:
a. the ratio of the price of labor to the price of capital increases as the isocost lines get
farther from the origin
b. the ratio of the price of labor to the price of capital gets smaller as the isocost lines ge
farther from the origin
c. the ratio of the price of labor to the price of capital is the same
d. the wage rate gets larger as the isocost lines get farther from the origin
e. the price of capital gets larger as the isocost lines get farther from the origin
Relative to a perfectly competitive market, as long as the monopolist does notbenefit
from substantial economies of scale,
a. price and quantity are higher under monopoly
b. price and quantity are lower under monopoly
c. quantity is higher and price is lower under monopoly
d. quantity is lower and price is higher under monopoly
e. there are no differences in price and quantity
The Herfindahl index would be 5000 if the only two firms in an industry have equal
market shares.
a. True
b. False
If on Monday you can buy 13 Mexican pesos per U.S. dollar and on Wednesday you
can buy 15 Mexican pesos per U.S. dollar,
a. both the U.S. dollar and the Mexican peso have appreciated
b. both the U.S. dollar and the Mexican peso have depreciated
c. the U.S. dollar has appreciated and the Mexican peso has depreciated
d. the U.S. dollar has depreciated and the Mexican peso has appreciated
e. the Mexican peso has appreciated and the U.S. dollar has remained constant
Exhibit 4-6
In Exhibit 4-6, suppose a price floor is established at $20.00. What is the result?
a. a shortage of 10 units
b. a surplus of 10 units
c. a shortage of 20 units
d. a surplus of 20 units
e. there is no change from the situation that exists at the equilibrium price
Exhibit 7-8
In Exhibit 7-8, when output is 10,
a. total cost equals $80
b. fixed cost equals $10
c. variable cost equals $70
d. marginal cost equals $10
e. fixed cost equals $7