Which of the following is a characteristic of a single-price monopoly?
A) Many substitutes for the firm’s product exist.
B) Price exceeds marginal revenue.
C) Demand is perfectly elastic.
D) The firm is a price taker.
E) Marginal revenue is greater than marginal cost.
Suppose John and Joe each have different production possibility frontiers; John
specializes in cloth and Joe specializes in corn. John’s island unexpectedly has
exceptionally good weather, and suddenly he is twice as productive in the production of
both corn and cloth. Select the best statement.
A) This is an example of unemployed resources becoming employed.
B) As a result, John will have an absolute advantage in both corn and cloth.
C) As a result, it is possible that John and Joe will switch the goods in which they
specialize.
D) There will be no change to the goods in which John and Joe specialize, because
John’s comparative advantage has not changed.
E) There will be a change to the goods in which John and Joe specialize, because John’s
opportunity cost of corn has decreased.
When an economy is operating on its long-run aggregate supply curve,
A) the actual inflation rate is greater than the anticipated inflation rate.
B) the actual unemployment rate equals the natural unemployment rate.
C) unemployment will fall to an unusually low rate that is not likely to last into the
future.
D) real GDP demanded exceeds real GDP supplied.
E) inflation must be positive.
Use the figure below to answer the following question.
Figure 2.3.1
Refer to the production possibilities frontier in Figure 2.3.1. The production
possibilities frontier will shift rightward most rapidly if current production is at
A) A.
B) B.
C) C.
D) D.
E) E.
Although both cable television and air traffic control are nonrival, they differ from each
other because
A) cable television is a private good and air traffic control is a public good.
B) cable television is a public good and air traffic control is a private good.
C) cable television is nonexcludable and air traffic control is a public good.
D) cable television is nonexcludable and air traffic control is excludable.
E) cable television is excludable and air traffic control is nonexcludable.
Which of the following activities is most likely to be coordinated by a firm, instead of a
market?
A) a large rock concert in Vancouver
B) producing paperclips
C) running a golf course
D) selling groceries
E) all of the above except A
The firms Trick and Gear form a cartel to collude to maximize profit. If this game is
nonrepeated, the Nash equilibrium is
A) both firms cheat on the agreement.
B) both firms comply with the agreement.
C) Trick cheats, while Gear complies with the agreement.
D) Gear cheats, while Trick complies with the agreement.
E) unknown.
Use the information below to answer the following questions.
Fact 12.4.2 Exxon Mobil Selling All Its Retail Gas Stations
Exxon Mobil is not alone among Big Oil exiting the retail gas business, a market where
profits have gotten tougher as crude oil prices have risen. Gas station owners say they’re
struggling to turn a profit because while wholesale gasoline prices have risen sharply,
they’ve been unable to raise pump prices fast enough to keep pace.
Refer to Fact 12.4.2. Exxon Mobil is making ________ decision in the retail gasoline
market.
This decision maximizes Exxon Mobil’s economic profit if ________.
A) a shutdown; price in the retail gas market is less than average total cost
B) an exit; other retail gasoline firms also leave the market
C) an exit; price in the retail gas market is less than average total cost
D) a shutdown; price is less than average variable cost
E) an irrational; the demand for gasoline decreases
The equation of a line is y = 4 + 2x. What is the y-intercept of this line?
A) 4
B) -2
C) -1/2
D) 1/4
E) 0
Consumer surplus
A) will definitely be low for inexpensive goods.
B) will definitely be high for inexpensive goods.
C) will definitely be low for expensive goods.
D) will definitely be high for expensive goods.
E) may be low or high for any type of good, expensive or inexpensive, depending on
the characteristics of demand.
In a perfectly competitive market, the short-run market supply curve is
A) the horizontal sum of the supply curves of all the individual firms.
B) the vertical sum of the supply curves of all the individual firms.
C) vertical at the total level of output being produced by all firms.
D) horizontal at the current market price.
E) upward sloping with a constant slope.
Table 6.2.1 gives the supply and demand schedules for teenage labour in Genoa City.
Suppose a new fast food restaurant opens and increases the quantity demanded of
teenage labour by 400 hours per week at each wage rate. If the teenage labour market is
unregulated, there is an increase in teenage employment to
A) 1,000 hours per week and a wage of $5 per hour.
B) 1,000 hours per week and a wage of $7 per hour.
C) 800 hours per week and a wage of $6 per hour.
D) 600 hours per week and a wage of $7 per hour.
E) 400 hours per week and a wage of $7 per hour.
When the real interest rate increases,
A) the supply of loanable funds curve shifts rightward.
B) the supply of loanable funds curve shifts leftward.
C) there is a movement up along the supply of loanable funds curve.
D) there is a movement down along the supply of loanable funds curve.
E) the demand for loanable funds curve shifts leftward.
Advertising and brand names
A) are never efficient.
B) can be efficient but are not always efficient.
C) are equally efficient in monopolistically competitive markets and perfectly
competitive markets.
D) are always efficient.
E) are more efficient in perfectly competitive markets than in monopolistically
competitive markets.
With higher fuel costs, airlines raise their average fare from $0.50 to $1.50 per
passenger kilometre and the number of passenger kilometres decreases from 2.5 million
a day to 1.5 million a day. Over this price range, demand is
A) perfectly elastic.
B) perfectly inelastic.
C) unit elastic.
D) elastic, but not perfectly elastic.
E) inelastic, but not perfectly inelastic.
Let Y = $100, QX = quantity of good X, and QW = quantity of good W, PX = $4 and PW
= $5. The budget equation is
A) 100 = 4QX + 5QW.
B) 100 = QX + (4/5)QW.
C) QX = 100 + (4/5)QW.
D) QX = QW + (4/5)Y.
E) QW = QX + (4/5)Y.
All normal goods have
A) an income elasticity of demand greater than 1.0.
B) a price elasticity of demand greater than 1.0.
C) a negative price elasticity of demand.
D) a positive income elasticity of demand.
E) a negative cross elasticity of demand.
The key feature of monopolistic competition that distinguishes it from perfect
competition is
A) many sellers.
B) barriers to entry.
C) perfectly elastic demand.
D) product differentiation.
E) perfectly inelastic demand.
Suppose the current real interest rate is 4 percent and the equilibrium real interest rate is
3 percent. Choose the correct statement.
A) The supply of loanable funds increases.
B) There is a surplus of loanable funds.
C) There is a shortage of loanable funds.
D) There is neither a shortage nor surplus of loanable funds.
E) The demand for loanable funds decreases.
When the nominal interest rate rises, the opportunity cost of holding money
A) rises and people hold more money.
B) falls and people hold more money.
C) falls and people hold less money.
D) rises and people hold less money.
E) does not change.
The scientific purpose of simplifying assumptions in an economic model is to
A) avoid confronting difficult issues.
B) eliminate the need for further testing of the implications of the model.
C) abstract from the complexities of the real world those issues that are not important
for the issues under examination.
D) eliminate the possibility of personal bias in the model.
E) add necessary hypotheses to the problem.
A single-price monopoly is a firm that ________ each unit of its output ________. A
________ monopoly sells different units of a good or service for different prices.
A) produces; at a constant cost; discriminatory
B) must sell; for the same price to all its customers; price-discriminating
C) produces; at a constant cost; price-discriminating
D) must sell; for the same price to all its customers; discriminatory
E) must sell; at the same price as a perfectly competitive firm; price-discriminating
If the supply curve passes through the origin, then the price elasticity of supply is
A) zero.
B) 1.
C) -1.
D) greater than 1.
E) less than 1 but greater than zero.
Consider Table 23.3.7. If the government’s budget becomes a deficit of $1.0 trillion,
what is the quantity of private saving?
A) $8.0 trillion
B) $7.5 trillion
C) $8.5 trillion
D) $7.0 trillion
E) $6.5 trillion
Overproduction of a good means that
A) deadweight loss has been eliminated.
B) the sum of consumer surplus and producer surplus is greater than the sum for an
efficient allocation.
C) marginal social cost exceeds marginal social benefit.
D) marginal social benefit exceeds marginal social cost.
E) this is a public good.
Choose the correct statement.
A) Contractionary fiscal policy can eliminate inflationary pressure.
B) Eliminating an inflationary gap is very simple calculate the size of the gap and the
size of the multiplier, then change government expenditure for an immediate decrease
in real GDP.
C) When an economy is in an above full-employment equilibrium, an equal decrease in
government expenditure and autonomous taxes cannot return the economy to full
employment.
D) When an economy is in an above full-employment equilibrium, an increase in taxes
will decrease aggregate demand, but because the autonomous tax multiplier is smaller
than the government expenditure multiplier, the economy will not return to potential
GDP.
E) All of the above
The slope of the consumption function is
A) less than the slope of the 45 line.
B) greater than the slope of the 45 line.
C) equal to the slope of the 45 line.
D) one.
E) zero.
If aggregate planned expenditure exceeds real GDP, then inventories
A) increase and real GDP increases.
B) increase and real GDP falls.
C) decrease and real GDP increases.
D) decrease and real GDP decreases.
E) remain constant and real GDP remains constant.
Use the figure below to answer the following questions.
Figure 19.3.2
Refer to Figure 19.3.2. At an employment level of 40 hours per week, the difference in
the value of marginal product of high-skilled workers and low-skilled workers is
A) $0.
B) $2 an hour.
C) $6 an hour.
D) $4 an hour.
E) $3 an hour.
Refer to Figure 24.5.2. Which one of the following best describes the response to a
decrease in the market price of bonds?
A) A movement from A to B
B) A movement from A to C
C) A movement from A to F
D) A movement from A to E
E) A movement from E to A
Refer to Table 12.2.3, which gives the total cost schedule for Brenda’s Balloon Shop, a
perfectly competitive firm. The average fixed cost of producing the 4th balloon is
A) $4.30.
B) $4.80.
C) $4.70.
D) $4.50.
E) $1.00.
Use the figure below to answer the following questions.
Figure 3.4.2
The equilibrium price in the market illustrated by Figure 3.4.2 is
A) $2 a unit.
B) $4 a unit.
C) $6 a unit.
D) $8 a unit.
E) $10 a unit.