Consumers will pay the full tax that is placed on the sellers of a good if demand is
__________ or supply is __________.
a. perfectly inelastic; perfectly inelastic
b. elastic; inelastic
c. perfectly inelastic; unit elastic
d. perfectly elastic; perfectly inelastic
e. perfectly inelastic; perfectly elastic
Exhibit 20-5
Which of the graphs represents a greater percentage change in quantity demanded than
the percentage change in price?
a. (1)
b. (2)
c. (3)
d. (2) and (3)
Fill in blanks (A) and (B) respectively with the market quantity supplied at each given
price.
a. 12.25; 14.75
b. 49; 59
c. 37; 45
d. 39; 49
e. none of the above
The act that made tying contracts illegal was the
a. Clayton Act.
b. Robinson-Patman Act.
c. Federal Trade Commission Act.
d. Wheeler-Lea Act.
e. Celler-Kefauver Antimerger Act.
Value marginal product (VMP) equals
a. P x MPP.
b. P/MPP.
c. P x MFC.
d. b and c
e. none of the above
If the price of good X rises and the demand for good X is inelastic, then the percentage
fall in quantity demanded is __________ the percentage rise in price, and total revenue
__________.
a. greater than; rises
b. less than; falls
c. equal to; remains constant
d. greater than; falls
e. none of the above
Economist David Friedman pointed out that
a. the endowment effect is not limited to humans.
b. the law of diminishing marginal utility does not hold for money.
c. the diamond-water paradox would not exist if water was scarce and diamonds were
plentiful.
d. the government should provide the necessities of life for free.
Exhibit 23-3
What is the increase in profit that would result from producing 43 units of the product
rather than producing 40 units?
a. $60
b. $48
c. $28
d. $16
e. $13
By adhering to the MR = MC rule, a single-price monopoly
a. will always have an above-zero profit.
b. will always have a normal profit.
c. maximizes its profit, which may in some cases mean minimizing its losses.
d. is not earning as large a profit as it can by setting MR = (MC – P).
When the price of a good rises, total revenue will fall if the good is elastic in demand.
a. True
b. False
The Coase theorem states that
a. transaction costs consist of marginal private costs and marginal social costs and are
higher when exchange is subject to increasing marginal costs.
b. transaction costs are the difference between marginal social costs and marginal
private costs and are higher when exchange is subject to decreasing marginal costs.
c. when transaction costs are significant, the resource-allocative outcome will be the
same regardless of who is assigned the property rights.
d. when transaction costs are insignificant, the resource-allocative outcome will be the
same regardless of who is assigned the property rights.
e. b and c
A firm that is a price taker can sell
a. any quantity of product it wants at any price.
b. less of its product at a higher price than at a lower price.
c. any quantity of product it can produce at the market equilibrium price.
d. more of its product at a higher price than at a lower price.
e. none of the above
How does contestable markets theory challenge orthodox market structure theory?
a. Contestable markets theory argues that firms do not maximize sales; orthodox market
structure theory argues that they do.
b. Orthodox market structure theory places much greater weight than contestable
markets theory on the number of firms in an industry as a major factor in determining a
firm’s behavior.
c. Contestable markets theory emphasizes product differentiation; orthodox market
structure theory does not.
d. Contestable markets theory emphasizes nonprice competition; orthodox market
structure theory does not.
Suppose you just finished your third plateful of Thanksgiving dinner and it yielded zero
units of additional satisfaction. Should you go back for more?
a. Why not? Since the third plateful gave you zero units, the fourth can’t give you any
less than zero.
b. No way. You could get negative utility from the fourth plateful.
c. Yes or no. It won’t make any difference because your total utility is at its peak.
d. Yes. If you received zero units of satisfaction from the third, then obviously the law
of diminishing marginal utility is not working in this case.
Which of the following statements is true?
a. Monopolistic competitive firms will earn economic profits in the long run because of
their ability to control the price of the product.
b. Monopolistic competitive firms that earn economic profits in the short run commonly
will find their profits competed away in the long run.
c. Monopolistic competitive firms will earn zero economic profits in both the short and
the long run.
d. Monopolistic competitive firms must earn economic profits in the long run, or they
will shut down.
e. Monopolistic competitive firms must earn economic profits in the short run, or they
will shut down.
Assuming the wage-employment tradeoff exists, if labor in a particular geographic area
is homogeneous and the unionized workers successfully negotiate a higher wage rate,
then
a. nonunion workers will also experience an increase in their wages.
b. nonunion workers will not be affected by what happens in the unionized labor
market.
c. the nonunion labor market will experience an increase in the number of workers, and
this will cause wage rates to decrease in this market.
d. nonunion workers will become members of the union that has just negotiated a wage
increase because they want higher wages.
What value goes in blank (A)?
a. 12.0
b. 13.5
c. 10.0
d. 14.0
e. There is not enough information to answer this question.
In the long run, new firms will enter a monopolistic competitive industry until
a. minimum average total cost is achieved.
b. all firms are incurring losses.
c. economic profits in the industry are zero.
d. a and b
If a firm is incurring a loss, the loss is a signal that
a. the firm is not a monopolist.
b. the firm has never enjoyed profits.
c. consumers would rather have some of the resources used by the loss maker be used to
produce other goods.
d. the government has withdrawn its “protection” of the firm.
Which of the following statements is false?
a. For a price taker, P = MR, but for a price searcher, P > MR.
b. A monopoly firm’s demand curve lies above its marginal revenue curve.
c. A single-price monopolist charges the same price for all units of its product.
d. If a single-price monopolist sells the first unit of its product for $11, it cannot sell two
units of its product for $11 each.
e. none of the above