A public franchise
A) is a corporation that is owned by stockholders.
B) results from ownership of a key raw material.
C) is a government designation that a private firm is the only legal producer of a good
or service.
D) is an unregulated monopoly necessary for the public good.
What is a second-price auction?
A) An auction in which the bidder who submitted the highest bid is awarded the object
being sold and pays a price equal to the second highest amount bid.
B) An auction in which the bidder who submitted the second highest bid is awarded the
object being sold.
C) An auction in which the bidder who submitted the highest bid is awarded the object
being sold and pays a price equal to the average of the highest and second highest
amount bid.
D) An auction in which the bidder who submitted the second highest bid is awarded the
object being sold and pays a price equal to the average of the highest and second
highest amount bid.
Table 4.7
Refer to Table 4-7. The equations above describe the demand and supply for Bubba’s
Fried Jellybeans. What are the equilibrium price and quantity (in thousands) for Bubba’s
Fried Jellybeans?
A) $80 and 40 thousand
B) $60 and 10 thousand
C) $20 and 20 thousand
D) $40 and 5 thousand
The most important of the factors that make a firm successful and that can be controlled
by the firm’s owners and managers are
A) the establishment of trademarks for its products and the aggressive defense of those
trademarks.
B) lobbying government to erect or enforce entry barriers in its markets and the
marketing of its products as widely as possible.
C) the differentiation of its products and the production of products at a lower average
cost than competing firms.
D) the selection of the prices of its products and the selection of the most productive
and loyal employees.
A cooperative equilibrium results when firms
A) choose the best strategy regardless of what other players do.
B) choose the strategy that maximizes the total game payoff.
C) choose the strategy that minimizes the payoff to other players.
D) choose a strategy by random chance.
Marginal revenue product falls as more labor is hired because
A) the price of the product must fall for a perfectly competitive firm to sell more.
B) the wage rate rises as more workers work more hours.
C) the marginal product of labor is negative as additional units of labor are hired.
D) the marginal product of labor falls as a result of the law of diminishing returns.
In October 2005, the U.S. Fish and Wildlife Service banned the importation of beluga
caviar, the most prized of caviars, from the Caspian Sea. What happened in the market
for caviar in the U.S.?
A) The supply curve shifted to the left.
B) The supply curve shifted to the right.
C) The demand curve shifted to the right.
D) The demand curve shifted to the left.
A partnership is ________ type of business.
A) the most common
B) the least common
C) the least risky
D) the most profitable
Table 11-8
Elegant Settings manufactures stainless steel cutlery. Table 11-8 shows the company’s
cost data.
Refer to Table 11-8. What is the minimum efficient scale of production?
A) 100 units
B) 200 units
C) 300 units
D) 400 units
The demand for capital is similar to the demand for labor in that
A) the marginal product of labor is derived from the marginal product of capital.
B) the marginal revenue product curve for labor is the same as the marginal revenue
product curve for capital.
C) both are derived demands.
D) both are inelastic at high prices and elastic at low prices.
Table 3-1
Refer to Table 3-1. The table above shows the demand schedules for loose-leaf tea of
two individuals (Sunil and Mia) and the rest of the market. At a price of $5, the quantity
demanded in the market would be
A) 51 lbs.
B) 63 lbs.
C) 76 lbs
D) 146 lbs.
Table 2-10
Table 2-10 shows the output per day of two pet groomers, Tammi and Horace. They can
either devote their time to grooming dogs or bathing cats.
Refer to Table 2-10. What is Horace’s opportunity cost of grooming a dog?
A) half a bathed cat
B) two bathed cats
C) two-thirds of a bathed cat
D) one and a half bathed cats
A table that shows the possible payoffs each firm earns from every combination of
strategies by all firms is called
A) an earnings table.
B) a payoff table.
C) a payoff matrix.
D) a strategic matrix.
Which of the following are positive economic statements and which are normative
economic statements?
a. An increase in the price of gasoline will decrease the quantity of gasoline purchased.
b. The government should eliminate the minimum wage.
c. All states should raise the minimum wage to at least $10 per hour.
d. The government should scrap its current income tax structure in favor of a flat tax.
e. Unemployment has increased since the onset of the recession.
f. The government should not bail out investment banks during a financial crisis.
Which of the following items is likely to have the highest income elasticity of demand?
A) a luxury cruise to several European countries
B) water
C) breakfast cereal
D) a hamburger
Figure 15-4
Figure 15-4 shows the demand and cost curves for a monopolist.
Refer to Figure 15-4. What is the amount of the monopoly’s total cost of production?
A) $21,600
B) $17,700
C) $9,340
D) $7,800
Figure 11-18
Refer to Figure 11-18. A curve that connects points a, d and e is called
A) an input-output curve.
B) a total cost line.
C) an expansion path.
D) an indifference line.
In San Francisco there are many restaurants that specialize in a wide variety of cuisines.
Patronage at these restaurants is influenced by factors such as tastes, price and location.
This market is
A) perfectly competitive.
B) monopolistically competitive.
C) oligopolistic.
D) monopolistic.
Table 2-8
Table 2-8 shows the number of labor hours required to produce a digital camera and a
pound of wheat in China and South Korea.
Refer to Table 2-8. What is China’s opportunity cost of producing one pound of wheat?
A) 0.04 units of a digital camera
B) 4 digital cameras
C) 25 digital cameras
D) 40 digital cameras
Network externalities
A) can only exist when there are economies of scale.
B) prevent the dominance of a market by one firm.
C) exist when the usefulness of a product increases with the number of consumers who
use it.
D) are created when celebrity endorsements of products lead to a surge in the demand
for those products.
What is the formula you should use to determine a bank account’s future value in one
year?
A) Future value equals the present value plus the rate of interest.
B) Future value equals the present value minus the rate of interest.
C) Future value equals the present value multiplied by one plus the rate of interest in
decimals.
D) Future value equals the present value divided by one plus the rate of interest in
decimals.
When there is a negative externality, the private cost of production ________ the social
cost of production.
A) is greater than
B) is equal to
C) eliminates
D) is less than
Figure 7-2
Figure 7-2 represents the market for medical services with and without insurance, and
the effect of a third-party payer system on the demand for medical services.
Refer to Figure 7-2. With insurance and a third-party payer system, what is the amount
of the deadweight loss?
A) $0
B) $1,500
C) $3,000
D) $9,500
The demand for labor is described as a derived demand because
A) it is derived by workers seeking to earn income to fund the consumption of goods
and services.
B) it is derived by producers seeking to make profits by starting new businesses.
C) it is derived from the demand for products that use labor in the production process.
D) it is derived from government institutions which rely on labor markets for the
purpose of raising tax revenue.
Table 14-2
Table 14-2 shows the payoff matrix for Wal-Mart and Target from every combination of
pricing strategies for the popular PlayStation 3. At the start of the game each firm
charges a low price and each earns a profit of $7,000.
Refer to Table 14-2. Is the current strategy in which each firm charges the low price and
earns a profit of $7,000 a Nash equilibrium? If not, why and what is the Nash
equilibrium?
A) No, it is not a Nash equilibrium because each firm can do better by charging the high
price. The Nash equilibrium occurs when each firm charges the high price and earns a
profit of $10,000.
B) No, the current situation is not a Nash equilibrium; it is a dominant strategy
equilibrium. There is no Nash equilibrium in this game.
C) No, the current situation is not a Nash equilibrium. The Nash equilibrium for each
firm is to have the other charge a high price and for the firm in question charge a low
price.
D) Yes, the current situation is a Nash equilibrium.
Behavioral economics helps explain why customers ________ at J.C. Penney.
A) favored the policy of everyday low prices and not sales and coupons
B) favored sales and coupons and not the policy of everyday low prices
C) were equally happy with sales and coupons and the policy of everyday low prices
D) responded negatively to both sales and coupons and the policy of everyday low
prices
Which one of the following about a monopoly is false?
A) A monopoly could make profits in the long run.
B) A monopoly could break even in the long run.
C) A monopoly must have some kind of government privilege or government imposed
barrier to maintain its monopoly.
D) A monopoly status could be temporary.
Suppose Joe is maximizing total utility within his budget constraint. If the price of the
last pair of jeans purchased is $25 and it yields 100 units of extra satisfaction and the
price of the last shirt purchased is $20, then, using the rule of equal marginal utility per
dollar spent, the extra satisfaction received from the last shirt must be
A) 2,000 units of utility.
B) 500 units of utility.
C) 100 units of utility.
D) 80 units of utility.
An example of a supplier that used its bargaining power to charge high prices to its
customers is
A) Wal-Mart, which required many of its suppliers to alter their distribution systems to
accommodate Wal-Mart’s need to control the flow of goods to its stores.
B) the firms that supply paper napkins to McDonald’s restaurants.
C) the Technicolor Company, the sole producer of cameras and film that movie studios
needed to produce color movies in the 1930s and 1940s.
D) the publishers of the Encyclopedia Britannica.
Optimal decisions are made
A) in the marketplace.
B) if information about prices and marginal utilities is known.
C) when marginal utility is minimized.
D) at the margin.