Refer to the table shown. Marginal product declines when which worker is hired?
A. The fifth
B. The sixth
C. The seventh
D. The ninth
Answer:
In which of the following models of firm behavior do firms make strategic pricing
decisions and also charge a perfectly competitive price?
A. Cartel model of oligopoly.
B. Contestable market model of oligopoly.
C. Perfectly competitive model.
D. Monopoly model.
Answer:
Refer to the following graph.
Elasticity is greatest at point:
A. A.
B. B.
C. C.
D. It is the same everywhere along this supply curve.
Answer:
The deliberate imposition of structure in an environment to induce people to make
better choices (for example, etching flies in a urinal) is called:
A. economic engineering.
B. choice architecture.
C. push policy.
D. enlightened self-interest.
Answer:
To decide what is meant by enlightened self-interest, behavioral economists will:
A. make their models more mathematically rigorous.
B. use the ceteris paribus assumption repeatedly.
C. use laboratory and field experiments.
D. base their models on induction.
Answer:
A good that if supplied to one person is supplied to all and whose consumption by one
individual does not prevent its consumption by another individual is known as:
A. a private good.
B. a public good.
C. an external good.
D. an internal good.
Answer:
Suppose there are no barriers to entry in the market for facial tissue, where two brands
(Kleenex and Puffs) dominate the industry. According to the theory of contestable
markets, the price charged for facial tissue will be:
A. far below the cost of producing a box of facial tissue.
B. far above the cost of producing a box of facial tissue.
C. roughly equal to the cost of producing a box of facial tissue.
D. much higher for the number-one-selling brand than it is for the number-two-selling
brand.
Answer:
According to the law of one price,
A. it is illegal to pay different people different amounts for the same work.
B. it is illegal to charge different people different amounts for the same product.
C. competition, combined with transferable goods and resources, drives the prices of
similar goods toward equality.
D. there is a tendency for wages to equalize wages across institutionally similar
countries.
Answer:
Natural monopoly exists when:
A. one firm can supply the entire quantity demanded at higher cost than two or more
firms.
B. one firm can supply the entire quantity demanded at lower cost than two or more
firms.
C. one firm can supply the entire quantity demanded at the same cost as two or more
firms.
D. the long-run average cost curve exhibits constant returns to scale.
Answer:
The U.S. imposes substantial taxes on cigarettes but not on loose tobacco. When the tax
on cigarettes went into effect, the demand for home cigarette rolling machines most
likely:
A. decreased, causing the price of cigarette rolling machines to fall and the quantity of
machines purchased to fall.
B. decreased, causing the price of cigarette rolling machines to rise and the quantity of
machines purchased to fall.
C. increased, causing the price of cigarette rolling machines to rise and the quantity of
machines purchased to rise.
D. increased, causing the price of cigarette rolling machines to rise and the quantity of
machines purchased to fall.
Answer:
Refer to the graph shown of a payoff matrix for a duopoly. Both A and B would be
better off if:
A. A cheated but B did not.
B. B cheated but A did not.
C. Both A and B cheated.
D. Neither A nor B cheated.
Answer:
Some economists believe that the market will not solve all problems. They are referring
to:
A. market failure.
B. market incentive plans.
C. optional policy.
D. the need to balance the good of the individual with the good of society as a whole.
Answer:
If the quantity demanded at a price of $10 is 2,000 and the quantity demanded at a price
of $8 is 2,400, a price-discriminating monopolist would want to:
A. charge all consumers the higher price of $10 and sell 2,000 units.
B. charge all consumers $8 in order to increase quantity sold to 2,400.
C. sell 2,000 units for $8 each and then sell an additional 400 units for $10 each.
D. sell 2,000 units for $10 each and then sell an additional 400 units for $8 each.
Answer:
Refer to the graph shown. Destruction of some of the resources necessary to produce
both guns and butter would result in what movement?
A. From A to B to C to D in diagram a.
B. From C to D to A to B in diagram a.
C. From X to Y to X to Z in diagram b.
D. From X to Z to X to Y in diagram b.
Answer:
The effect of a change in the wage rate on the number of hours people are willing and
able to work is stronger when the:
A. demand for labor is elastic.
B. demand for labor is inelastic.
C. supply of labor is elastic.
D. supply of labor is inelastic.
Answer:
The Honolulu tourism commission recently proposed a 7 percent tax on hotel rooms to
pay for an outdoor amphitheater. A Purdue University economist estimates that the tax
would result in a 6 percent increase in the price of hotel rooms. If the elasticity of
demand is 1.33, what is the expected change in quantity demanded?
A. 12.5 percent
B. -12.5 percent
C. 8 percent
D. -8 percent
Answer:
In standard game theory, cheap talk:
A. will fool all the players into cooperating.
B. doesn’t affect the outcome of the game.
C. benefits only trustworthy people.
D. changes the payoffs.
Answer:
Which of the following is one of the reasons economists sometimes differ in their views
on social policy?
A. Economists’ subjective value judgments tend to be very similar.
B. Most so-called economists have received no formal training.
C. Different models focus on different aspects of a problem.
D. Empirical evidence is so precise that there is little room for different interpretations.
Answer:
In choosing between two products, a rational consumer will choose the product that
gives her the:
A. greatest total utility regardless of cost.
B. least marginal utility per dollar.
C. highest cost per additional unit of utility.
D. lowest cost per additional unit of utility.
Answer:
The voluntary export restraints on autos by Japan in the early 1980s were:
A. prohibited under the NAFTA treaty.
B. unlike a quota and did not affect the price of cars imported.
C. unlike a tariff and did not affect the price of imports.
D. approved of by the U.S. automobile unions, since it allowed them to preserve union
jobs.
Answer:
In a perfectly competitive market, firms set:
A. prices and quantities.
B. prices but not quantities.
C. quantities but not prices.
D. neither prices nor quantities.
Answer:
When a government intervenes in an economy in a way that influences the relationship
between households and businesses, it is:
A. serving as an economic actor.
B. serving as an economic referee.
C. serving the public good.
D. reducing social welfare by interfering with the invisible hand.
Answer:
The only variable input used in producing bicycles in a small factory is labor. Currently
four workers are employed; each works 40 hours per week and is paid $10 per hour. If
fixed cost is $2,000 per week and total output is 10 bicycles per week, average cost is:
A. $160.
B. $260.
C. $200.
D. $360.
Answer:
Money prices are:
A. essential to a coordinating mechanism.
B. not essential to a coordinating mechanism.
C. always the best way to solve economic problems.
D. unfair ways of coordinating individual actions.
Answer:
Refer to the graph shown. Assuming that the monopoly maximizes profit, it will earn
profits of:
A. $8,000 per day.
B. $20,000 per day.
C. $40,000 per day.
D. $160,000 per day.
Answer:
If the productivity of labor diminishes only slowly as output increases, labor:
A. demand will most likely be inelastic.
B. demand will most likely be elastic.
C. supply will most likely be elastic.
D. supply will most likely be inelastic.
Answer:
Which of the following will shift the labor demand curve to the right?
A. An increase in the price of a competing, substitute input
B. A reduction in the demand for the output produced by labor
C. A reduction in the wage rate
D. An increase in the use of factory automation
Answer:
If a monopolist had no production costs, it would produce the output where marginal
revenue intersects the quantity axis. At this point, the price elasticity of demand would
be:
A. 1.
B. relatively elastic.
C. zero.
D. perfectly elastic.
Answer:
Which of the following topics is most appropriately studied in a microeconomics
course?
A. The decision by a nurse to change professions
B. When the next recession will arrive
C. Why unemployment is so low and inflation has not accelerated
D. How the presidential candidates’ tax plans might affect economic growth
Answer:
As you move down an isoquant:
A. more of all inputs must be used to keep output constant.
B. production remains technically efficient.
C. production remains economically efficient.
D. the marginal rate of substitution does not change.
Answer:
Predatory pricing:
A. will always work if markets are contestable.
B. is always successful because it produces profits in the long run.
C. is never successful because it produces losses in the short run.
D. is likely to be successful only if firms cannot enter an industry easily.
Answer:
Refer to the graph shown for a small country that is a price taker internationally.
Assume the foreign supply of this product is perfectly elastic at a price of $4 per unit. If
there are no trade restrictions, this country will produce:
A. 2,400 units domestically and import 5,000 units.
B. 7,400 units domestically and export 5,000 units.
C. 4,800 units domestically and consume 4,800 units.
D. 4,800 units domestically and import 2,600 units.
Answer:
A market has the following characteristics: There is strategic decision making, output is
somewhat restricted, there are few firms, and some long-run economic profits are
possible. This market is:
A. a monopoly.
B. an oligopoly.
C. monopolistically competitive.
D. perfectly competitive.
Answer:
The depreciation of a currency will:
A. balance a trade surplus.
B. have no impact on a country’s comparative advantages.
C. worsen a country’s comparative advantages.
D. improve a country’s comparative advantages.
Answer: