Which of the following is true of a typical firm in a monopolistically competitive
industry?
A) Product differentiation allows a successful firm to emerge as a market leader in the
industry.
B) All firms have identical cost structures.
C) The more successful firms have an incentive to merge in order to exert greater
market power.
D) Each firm acts independently.
The term “market” in economics refers to
A) a place where money changes hands.
B) a legal institution where exchange can take place.
C) a group of buyers and sellers of a product and the arrangement by which they come
together to trade.
D) an organization which sells goods and services.
Which of the following transactions would be included in Japan’s current account?
A) A Japanese citizen purchases 50 shares of Google stock.
B) An American citizen purchases 50 shares of Toshiba stock.
C) A Japanese citizen purchases a new Toyota made in Japan.
D) An American citizen purchases a new Toyota made in Japan.
Paying a person a lower wage or excluding a person from an occupation on the basis of
an irrelevant characteristic such as race or gender
A) is economic discrimination.
B) violates federal comparable worth laws.
C) can be explained by negative feedback loops.
D) creates differences in wages that economists call “compensating differentials.”
Table 3-1
The table above shows the demand schedules for Kona coffee of two individuals (Luke
and Ravi) and the rest of the market. At a price of $6, the quantity demanded in the
market would be
A) 36 lb.
B) 68 lb.
C) 89 lb.
D) 123 lb.
Prisoner’s dilemma games imply that cooperative behavior between two people or two
firms always breaks down. But reality teaches us that people and firms often cooperate
successfully to achieve their goals. Why do the results from prisoner’s dilemma games
fail to predict real world results?
A) Prisoner’s dilemma games do not permit people or firms from reneging on
agreements, which often occurs in real word situations.
B) The prisoner’s dilemma does not apply to most business situations that are repeated
over and over.
C) Prisoner’s dilemma games predict the behavior of people and firms that engage in
illegal activity; most people and firms do not resort to illegal activity.
D) Most real world situations involve more than two people or firms; the prisoner’s
dilemma is only applicable to situations that involve two parties.
Figure 13-4 Figure 13-4 shows
short-run cost and demand curves for a monopolistically competitive firm in the market
for designer watches. What is the area that represents the total fixed cost of production?
A) 0P1aQa
B) P0adP3
C) P1bdP3
D) That information cannot be determined from the graph.
Article Summary. Administrative overhead costs resulting from insurance
companies handling reimbursement claims is in large part the reason that health
care in the United States is much more expensive than in other countries. An
analysis on the administration costs of health care in the United States found that
roughly 30 percent of the costs of health care are administrative and that more
than 25 percent of health-sector employees work in administration. Health
insurance companies are often paid a fixed percentage of the claims they
administer, which gives them little to no impetus to increase efficiency and keep
costs down.
Source: Jeffrey Pfeffer, “The Reason Health Care Is So Expensive: Insurance
Companies,” Bloomberg Businessweek, April 10, 2013.
Even if insurance companies were more efficient and brought administrative costs
down, consumers would ________ the full cost of medical treatment. This would result
in the market equilibrium price and quantity of medical services being ________ than
the efficient equilibrium price and quantity.
A) pay less than; less than
B) pay more than; less than
C) pay more than; more than
D) pay less than; more than
Scott is a woodworker and charges $125 an hour for his time manufacturing
custom-made wood products. For his wife’s birthday, he designs and creates an intricate
birdseye maple jewelry box that takes him 15 hours to complete. By how much and in
what direction does GDP change as a result of his efforts?
A) GDP rises by $1,875.
B) GDP is not affected by Scott’s production of the jewelry box.
C) GDP rises by $125.
D) GDP falls by $1,875.
Which of the following could explain why the demand for table salt is inelastic?
A) Salt is a luxury good.
B) Salt is a rare commodity.
C) Households devote a very small portion of their income to salt purchases.
D) Salt is a luxury for high income consumers but a necessity for low income
consumers.
If the exchange rate changes from $2.00 = £1 to $2.01 = £1 then
A) the dollar has depreciated.
B) the dollar has appreciated.
C) the British pound has depreciated.
D) the British pound has stayed constant in value.
Suppose an excise tax of $1 is imposed on every case of beer sold and sellers are
responsible for paying this tax. How would the imposition of the tax be illustrated in a
graph?
A) The supply curve for cases of beer would shift to the right by $1.
B) The supply curve for cases of beer would shift to the left by more than $1.
C) The supply curve for cases of beer would shift to the left by less than $1.
D) The supply curve for cases of beer would shift to the left by $1.
The formula for aggregate expenditure is
A) AE = C + I + G.
B) AE = C + I + G – NX.
C) AE = C + I + G + NX.
D) AE = C + I + depreciation – NX.
Figure 2-8 Figure 2-8 above shows the production
possibilities frontier for Vidalia, a nation that produces two goods, roses and orchids.
What is the opportunity cost of one dozen orchids?
A) 0.4 dozen roses
B) 2.5 dozen roses
C) 7.25 dozen roses
D) 16 dozen roses
To offset the effect of households and firms deciding to hold less of their money in
checking account deposits and more in currency, the Federal Reserve could
A) raise the required reserve ratio.
B) buy Treasury securities.
C) raise the discount rate.
D) lower bank taxes.
A firm’s cost of production is determined by all of the following except
A) the technology used to produce its output.
B) the productivity of its workers.
C) the cost of raw material used in production.
D) the amount of corporate taxes it must pay on its profit.
Figure 5-6
Figure 5-6 shows the market for measles vaccinations, a product whose use generates
positive externalities. What does D2 represent?
A) the social welfare curve
B) the demand curve reflecting social benefit
C) the demand curve reflecting private benefit
D) the positive externalities curve
Figure 28-1
Suppose that the economy is currently at point A. If the Federal Reserve engaged in
expansionary monetary policy, where would the economy end up in the short run?
A) It would remain at point A.
B) point B
C) point C
D) point D
E) point E
Which of the following is not a characteristic of a monopolistically competitive market
structure?
A) There is a large number of independently acting small sellers.
B) All sellers sell products that are differentiated.
C) There are low barriers to entry of new firms.
D) Each firm must react to actions of other firms.
Figure 6-9
The data in the diagram indicates that DVDs are
A) luxury goods.
B) inelastic goods.
C) necessities.
D) both luxury goods and inelastic goods.
E) both necessities and inelastic goods.