Tacit collusion occurs in industries that
a. are monopolistically competitive
b. contain price leaders
c. experience rapid technological change
d. are regulated
e. produce very differentiated products
Which of the following would be considered a secondary effect of rent control.
a. a reduction if the number of rental units that are available to rent
b. an increase in the number of rental units that people would like to rent
c. a shortage of rental units in the market
d. the deterioration in the quality of rental units
e. an increase in the difficulty of finding a rental unit at the rent control price
Economists often focus on average behavior because it is easier to predict.
a. True
b. False
Some companies and celebrities are using a variant of pollution rights to become
“carbon neutral.”
a. True
b. False
In recent years, the number of farms has fallen while the average farm size has
increased. What concept may explain this phenomenon?
a. diminishing marginal returns
b. declining productivity
c. diseconomies of scale
d. economies of scale
e. good weather in midwestern states
If marginal utility is negative, total utility is negative.
a. True
b. False
A perfectly inelastic demand curve is
a. a vertical straight line
b. a horizontal straight line
c. a downward-sloping straight line
d. an upward-sloping straight line
e. not a straight line
Exhibit 6-27
The rotation of the budget line in Exhibit 6-27 from AC to AB represents a(n)
a. increase in the price of clams
b. increase in the price of mussels
c. decrease in the price of clams
d. decrease in the price of mussels
e. increase in the amount the consumer can spend
Exhibit 17-1
If technology is fixed, the discrepancy between the private equilibrium and the efficient
level of output in Exhibit 17-1 is best eliminated by
a. subsidizing the production of the good by $10 per unit
b. taxing the firm producing the good by $10 per unit
c. using a quota system to encourage production of at least 160 units of the good
d. using a quota system to restrict production of the good to no more than 160 units
e. letting the private market operate freely to determine output at equilibrium
Nonmarket work includes time spent
a. producing goods and services for your employer
b. pursuing hobbies and crafts
c. engaging in strenuous physical exercise to reduce your weight
d. producing your own goods and services
e. managing your own firm
Antitrust policy has no relationship to socially desirable market performance.
a. True
b. False
A monopolist earning short-run economic profit determines that at its present level of
output, marginal revenue is $23 and marginal cost is $30. Which of the following
should the firm do to increase profit?
a. Raise price and lower output.
b. Lower price and lower output.
c. Raise price and raise output.
d. Lower price and raise output.
e. Lower output but leave price unchanged.
Which of the following is unique to perfect competition?
a. The individual firm cannot earn economic profit in the long run.
b. It is easy for new firms to enter the industry.
c. The market demand curve slopes downward.
d. The demand curve facing an individual firm is perfectly elastic.
e. The firms in the industry produce a homogeneous product.
The absolute value of the price elasticity of demand at the midpoint of a linear demand
curve is always
a. greater than one
b. less than one
c. one
d. zero
e. infinity
For a monopolist that does not price discriminate, economic profit is maximized in the
short run at a price of $140. Marginal revenue at that output level is
a. equal to $140
b. greater than $140
c. less than $140
d. less than marginal cost
e. greater than average revenue
Pollution taxes are paid out of the EPA Superfund in order to reduce automobile
emissions.
a. True
b. False
A college dean has a __________ opportunity cost of __________ than a college
student working in a minimum-wage job.
a. lower; leisure
b. lower; nonmarket work
c. lower; market work
d. higher; nonmarket work
e. higher; market work
Helen gives up the opportunity to bake 40 cakes for each room she paints; Josh can
paint one room in the time it takes him to bake 60 cakes. The opportunity cost of a cake
for Helen is
a. painting one room
b. painting 1/40 of a room
c. painting 1/60 of a room
d. painting 2/3 of a room
e. painting 3/2 of a room
The income effect of a decrease in the wage rate causes the quantity of labor supplied to
a. increase
b. increase only if the individual desires more leisure time
c. increase only if the substitution effect outweighs the income effect
d. decrease
e. decrease only if the substitution effect is weaker than the income effect
As price falls along a given demand curve for pretzels,
a. quantity demanded, total utility, marginal utility, and consumer surplus increase;
consumer expenditure decreases
b. quantity demanded, total utility, and consumer surplus increase; marginal utility and
consumer surplus decrease
c. quantity demanded, total utility, consumer surplus, and consumer expenditure
increase; marginal utility decreases
d. quantity demanded, total utility, and consumer surplus increase; marginal utility
decreases; consumer expenditure might increase, decrease, or remain constant
e. quantity demanded, total utility, marginal utility, consumer surplus, and consumer
expenditure all increase
Exhibit 8-9
In Exhibit 8-9, price equals
a. $28
b. $12
c. $40
d. $20
e. $24
Exhibit 4-2
Consider Exhibit 4-2 which shows 3 supply curves for milk. Which of the following
would shift the supply curve for milk from S1 to S2?
a. an increase in the price cattle feed
b. the expectation of a lower price in the near future
c. an increase in the price of milk
d. an increase in the price of beef
e. a new and improved cattle food that increases the yield per dairy cow
Marginal utility is negative only when quantity demanded is negative.
a. True
b. False
If a monopolistically competitive firm raises its price, it
a. loses all of its customers (sales drop to zero)
b. loses some, but not all, of its customers
c. loses very few customers
d. loses no customers at all
e. gains customers (sales increase)
Utopia would be a debtor nation
a. if consumers in other countries bought goods and services from Utopia
b. only if it had a deficit in its current account
c. only if it had a deficit in its balance of goods and services
d. if it had a deficit in its balance of trade
e. if it had a deficit after adding together the balances in both its current account and its
capital account
A good that is rival but nonexclusive is called
a. a private good
b. a public good
c. a quasi-private good
d. an external good
e. an open access good
At the point of tangency between an isoquant and an isocost line,
a. the firm is minimizing the cost of producing a given amount of output
b. the firm is maximizing the cost of producing a given amount of output
c. the household is maximizing its total utility given its income
d. the society is maximizing the social value of output, given its resources and
technology
e. none of the above
A normative economic statement
a. is a hypothesis used to test economic theory
b. is a statement of fact
c. is a statement of what ought to be, not what is
d. indicates what will occur if certain assumptions are true
e. enables economists to test hypotheses
A good that takes up a very large percentage of the consumer’s budget will tend to have
a. an elastic demand
b. a perfectly elastic demand
c. an inelastic demand
d. an upward-sloping demand curve
e. very many substitutes
Under a gold standard,
a. a nation’s currency can be traded for gold at a fixed rate
b. a nation’s central bank or monetary authority has absolute control over its money
supply
c. new discoveries of gold have no effect on money supply or prices
d. prices are constant (there is no inflation and no deflation)
e. all international transactions are financed with gold
In order to derive a demand curve for cheese, we would change
a. income and hold other things constant
b. tastes and hold other things constant
c. the price of other goods and hold everything else constant
d. the price of cheese and hold other things constant
e. the price of all goods, including cheese and hold other things constant
An example of a positive economic statement is, “An increase in the price of a product
causes consumers to purchase more of that product.”
a. True
b. False
As a firm expands into overseas markets, information problems and the complexity of
operating within many varied cultures and economies may result in
a. constant returns to scale
b. diminishing marginal returns
c. declining long-run marginal cost
d. diseconomies of scale
e. economies of scale