Cross-price elasticity of demand measures
a. elasticity of demand at the intersection of the supply and demand curves
b. elasticity of supply at the intersection of supply and demand curves
c. the relative elasticity of supply and demand at the intersection of the two curves
d. the relationship between the demand for one good and the price of another
e. the relationship between the demand for one good and the supply of another
Which of the following helps to make a cartel successful?
a. stable demand and costs
b. differentiated output
c. highly variable cost conditions
d. highly variable demand conditions
e. rapidly changing technology
Game theory is a separate model of oligopoly therefore it is of limited value when
trying to generally understand firm level behavior
a. True
b. False
Interdependent decision making on price, quality, or advertising is characteristic of
a. perfect competition
b. monopolies
c. oligopolies
d. monopolistic competition
e. both oligopolies and monopolistic competition
A medical doctor who specializes in a particular field (e.g., surgery) generally earns
more than a general practitioner because
a. of greater education and training requirements
b. of differences in labor mobility
c. a general practitioner is more likely to work in an urban area
d. of discrimination
e. a general practitioner treats a greater number of patients per day
Firms that face downward-sloping demand curves for their output are called
a. perfectly competitive
b. price takers
c. price searchers
d. resource price takers
e. resource price searchers
An improvement in technology would shift
a. the demand curve leftward
b. the demand curve rightward
c. the supply curve leftward
d. neither the supply nor the demand curve; instead, there is movement along both of
them
e. the supply curve rightward
DeBeers is a natural monopoly in the world’s diamond trade.
a. True
b. False
Suppose that you allow yourself $50 per month to spend on compact disks. You spend
exactly this much every month regardless of the price of compact disks. Therefore, your
demand for CDs
a. is elastic
b. is inelastic
c. is unit elastic
d. cannot be characterized unless we know the price of a disk
e. cannot be characterized unless we know the price and quantity of compact disks
purchased
A simultaneous increase in supply and demand will always lead to an increase in the
prices of a good.
a. True
b. False
Studies have found a growing similarity between women’s wages before marriage and
the future earnings of the men they marry.
a. True
b. False
A perfectly competitive firm has no control over the
a. quantity of output produced
b. quantities of inputs used
c. price of the product
d. type of good produced
e. types of inputs used
A functional relationship exists between two variables if the value of one variable
depends on the value of the other variable.
a. True
b. False
According to a 2011 Payscale.com survey the highest paying college major is:
a. Economics
b. Management
c. Finance
d. Computer Engineering
e. Political Science
The current account shows transactions in goods and services; the capital account
shows purchases and sales of assets; and the official reserve transactions account shows
movement of international reserves.
a. True
b. False
Price elasticity of demand is defined as
a. the percentage change in price divided by the percentage change in quantity
demanded
b. the percentage change in quantity demanded divided by the percentage change in
price
c. the change in quantity demanded divided by the change in price
d. the change in price divided by the change in quantity demanded
e. the quantity demanded divided by the price
The socially optimal level of output of a good with an externality occurs when
a. the marginal private costs of production are equal to marginal private revenues
b. the firm maximizes its profits
c. the consumer maximizes his or her utility
d. the marginal social cost of production equals the marginal social benefit of the good
e. the firm is making a normal profit
Exhibit 9-3
At the profit-maximizing output for the firm in Exhibit 9-3, the single price monopolist
will earn a profit of ______ per unit of output?
a. $10
b. $5
c. $4
d. $0
e. -$5
In defending itself against the government’s antitrust action, Microsoft
a. argued that its high market share would rapidly deteriorate unless the firm continued
to innovate
b. argued that it did not have a high market share
c. admitted that it had used tying contracts
d. offered to sign a consent decree
e. offered to split itself into three separate firms
The great majority of labor economists believe that a minimum wage __________
unemployment among young and unskilled workers.
a. increases
b. decreases
c. eliminates
d. has no effect on
e. There is not enough information to answer the question.
A successful advertising campaign would likely
a. increase price elasticity of demand by stressing the uniqueness of the product
b. reduce price elasticity of demand by stressing the uniqueness of the product
c. reduce price elasticity of demand by informing consumers of the availability of
substitutes
d. not alter the demand curve
e. generally make the demand curve shift inward
An entrepreneur is a(n)
a. individual who has much education
b. organizer who seeks profitable opportunities and is willing to accept risks
c. business organization that uses inputs to produce output
d. administrator who runs an enterprise without accepting any risk of financial loss
e. depot or storehouse for commercial products
Intellectual property is
a. a special form of capital
b. a type of labor
c. a special type of service
d. cheap to produce, but expensive to transmit
e. a kind of entrepreneurial ability
Gross Domestic Product is the market value of
a. all exchanges made during the course of a year
b. all final goods produced during the course of a year
c. all monetary transactions during the course of a year
d. all the goods produced during the course of a year over and above what is required to
maintain the population and the stock of capital
e. all final goods sold during the course of a year
If consumers decide to increase their rate of saving, the
a. supply of loanable funds will decrease
b. supply of loanable funds will increase
c. demand for loanable funds will decrease
d. demand for loanable funds will increase
e. interest rate will increase
Exhibit 19-5
If the country illustrated in Exhibit 19-5 is initially trading without restrictions at a
world price of $1.00, net welfare loss as a result of a tariff of $0.50 per unit is
represented by area
a. c + i + e + f
b. i + f
c. i
d. f
e. b + d
A common assumption that economists make about the behavior of elected officials is
that they try to
a. maximize the size of their government salaries
b. maximize the size of their control over the budget process
c. maximize the number of votes they receive in the next election
d. minimize the government’s expenditures in order to balance the budget
e. conform to the wishes of special interest groups so that the government behaves as a
single, consistent decision maker
If the minimum efficient scale in the production of rubber exceeds the quantity of
rubber any individual tire producer buys,
a. tire producers should integrate backward into rubber production
b. there will be a monopoly in rubber production
c. tire producers should not integrate backward into rubber production
d. tire producers will be charged prices above what the cost of producing rubber
themselves would be
e. tire companies will switch to fiberglass
The Hound Dog Bus Company contemplates expanding its New Mexico operations by
offering service from Raton to Milk-of-Magnesia. The total cost of the trip would be
$400, of which $150 is fixed cost, which it has already paid. The firm expects to earn
$275 in revenue from the trip. The Hound Dog Bus Co. should
a. offer this service because it will earn a positive economic profit
b. not offer this service because the marginal revenue is less than the marginal cost
c. offer this service because the revenue exceeds fixed cost
d. not offer this service because the total cost exceeds the total revenue
e. offer this service because the added revenue exceeds the added cost of this service
Exhibit 1-2
In Exhibit 1-2, at x = 8, the
a. value of y is larger on curve A than on curve B
b. value of y is smaller on curve A than on curve B
c. value of y is the same on curve A as on curve B
d. slope of line A is negative
e. slope of line B is positive