The demand curve facing a firm will be more elastic,
a. the fewer the number of competing firms
b. the more differentiated the product
c. the more substitutes there are for its product
d. the greater the firm’s ability to control price
e. the larger the profit the firm can make
Figure 8-21
Consider Figure 8-21. If the market price is P2, which of the following best describes
the long-run implications for the industry?
a. Profit will attract new resources to the industry and drive the market price down.
b. Profit will attract new resources to the industry and drive prices up.
c. The lack of profit will lead to the maintenance of the status quo.
d. Losses will drive resources from the industry and drive market price down.
e. Losses will drive resources from the industry and drive market prices up.
Exhibit 11-7
In Exhibit 11-7, if the rental price of each machine is $6, this firm should employ
__________ machine(s).
a. one
b. two
c. three
d. four
e. five
If a consumer purchases only one good, she must be on either the vertical or the
horizontal intercept of her budget line.
The present value of receiving M dollars in year t when the prevailing interest rate is i is
equal to
a. M – it
b. M x (1 – i)t
c. M/(1 + i)t
d. M x it
e. M/it
According to William Shepherd, the total assets of the top 100 firms in the United
States have been declining, mostly in response to increased imports.
a. True
b. False
If all six suppliers of cement to Metropolis all agree to establishes a price of $45 per
ton, this would be
a. a legal contract
b. price discrimination
c. cost-plus pricing
d. a cartel
e. beneficial to consumers
Economic theory assumes that the goal of firms is to maximize
a. sales
b. total revenue
c. profit
d. price
e. utility
It may be that unions increase worker productivity by
a. minimizing conflicts, resolving differences, and reducing job turnover
b. using seniority rules to keep the most experienced workers employed
c. increasing job turnover so that the least experienced workers quit
d. allowing workers to goof off, which improves morale
e. increasing the number of workers required to perform each task
Exhibit 9-11
If the monopolist in Exhibit 9-11 engages in perfect price discrimination, price would
be
a. $120 for the 884th unit
b. $212 on all units
c. $120 on all units
d. $136 on all units
e. $104 on all units
In long-run equilibrium,
a. perfectly competitive firms in a decreasing-cost industry can earn economic profits
b. perfectly competitive firms in an increasing-cost industry can earn economic profits
c. perfectly competitive firms in a constant-cost industry can earn economic profits
d. perfectly competitive firms can earn only normal profits
e. no entry occurs in an increasing-cost perfectly competitive industry
Generally, people are more satisfied with private market outcomes than with public
voting outcomes because
a. each consumer in the private market can choose the quantity he or she desires
b. most people are near the median
c. the prices are lower
d. markets are involuntary
e. there are too many choices to make in the public sector
Suppose that a monopolistically competitive firm is in long-run equilibrium. The firm’s
demand curve is tangent to its average cost curve at Q = 25. Average cost is minimized
at Q = 35, where average cost is $50. Which of the following is true?
a. This firm charges $50 for the good.
b. This firm charges more than $50 for the good.
c. This firm charges less than $50 for the good.
d. The firm has excess capacity at all output levels greater than 35 units.
e. Average cost is $50 at the profit-maximizing output level.
A rational decision maker will engage in more of an activity only if the marginal benefit
ot the additional activity
a. is positive
b. is at its maximum level
c. is greater than or equal to the expected marginal cost
d. is less than the expected marginal cost
e. exactly equals the expected marginal cost
Elasticity is always
a. measured in dollars
b. measured in dollars per unit of quantity
c. measured in units of quantity
d. measured in units of quantity per dollar
e. independent of the units of measurement
Adam Smith’s term, “the invisible hand,” refers to
a. the hidden role of government in setting regulations that govern trading in markets
b. the most capable entrepreneurs in the economy
c. market forces
d. the unseen work of the financial markets that facilitates trade
e. the role of technological change and random events in the economy
Consumers derive consumer surplus whenever
a. the monetary value of total utility equals total expenditure
b. the monetary value of total utility is greater than total expenditure
c. the monetary value of total utility is less than total expenditure
d. marginal utility is greater than total utility
e. marginal utility is less than total utility
Consider a system in which a person earning $10,000 pays $1,000 in taxes, a person
earning $25,000 pays $2,000, and someone earning $60,000 pays $4,000. What type of
tax is this?
a. progressive
b. proportional
c. regressive
d. property tax
e. one based on the benefits principle of taxation
Exhibit 17-2
In Exhibit 17-2, the total social gain from producing the socially efficient output rather
than the private equilibrium output is
a. $60
b. $30
c. $6
d. $480
e. $300
Suppose that the city builds a new park that is advertised as being “open to the public,”
and within two months the grass in the park is ruined by overuse. This would be an
example of
a. a nonrenewable resource
b. a private good
c. the common pool problem
d. a positive externality
e. a renewable and excludable resource
In determining the exchange rate between U.S. dollars and Swiss francs, all of the
following are assumed constant along the supply curve for francs except one. Which is
not assumed constant?
a. U.S. interest rates
b. Swiss income
c. expected rates of inflation in the United States
d. expected rates of inflation in Switzerland
e. the price of the Swiss franc
An impartial observer who attempts to settle disagreements by listening to both sides
separately and making suggestions is called a(n)
a. collective bargaining agent
b. arbitrageur
c. mediator
d. binding negotiator
e. judge
The forces that determine the cost of production are largely independent of the forces
that shape demand.
a. True
b. False
Which of the following is a normative statement?
a. The U.S. rate of unemployment was lower in 2004 than it was in 1994.
b. Savings accounts earn interest, whereas checking accounts do not.
c. Congress must recognize that the growing national debt is the most serious problem
that the country faces.
d. The unemployment rate increases when the percentage of the labor force without jobs
increases.
e. The unemployment rate among teenagers is higher than the rate among adults.
Empirical estimates indicate that the annual welfare cost of monopoly in the United
States
a. ranges from less than 1 percent to 5 percent of national income
b. ranges from 10 percent to 20 percent of national income
c. is approximately 10 percent of national income
d. is approximately $1 billion
e. is approximately $1 trillion
Under current guidelines, the U.S. Department of Justice usually challenges
a. all mergers
b. mergers in industries that would have a postmerger Herfindahl index greater than
1,800
c. mergers in industries that would have a postmerger Herfindahl index greater than
1,800 if the Herfindahl index increases by more than 100 points
d. mergers in industries that would have a postmerger Herfindahl index greater than
1,000
e. mergers in industries that would have a postmerger Herfindahl index greater than
1,000 if the Herfindahl index increases by more than 100 points
A family on a trip budgets $200 for restaurant meals and fast food. The family can buy
20 restaurant meals if they don’t buy any fast-food meals. What is the vertical intercept
of the budget line when fast food is measured on the horizontal axis?
a. 1/20
b. 200
c. 10
d. 20
e. $400
A family on a trip budgets $200 for restaurant meals and fast food. If the price of a
fast-food meal for the whole family is $20, what is the horizontal intercept of the
budget line when fast food is measured on the horizontal axis?
a. 100
b. 10
c. 20
d. 400
e. it is impossible to tell from the information given
Which of the following could be true of perfect competition but notof monopoly?
a. The government licenses production of the good to a few firms.
b. The government grants a patent for the good.
c. A firm can earn economic profit in the long run.
d. If price falls below average variable cost, it pays to shut down.
e. There are no barriers to entry.
Fast food is faster and cheaper than a similar meal you could prepare for yourself.
Which of the following does not explain that fact?
a. meal preparation has been divided into many separate tasks
b. larger-scale production allows the introduction of more efficient machines
c. workers gain productivity at a task over time
d. there is less time lost moving from one task to another
e. workers are more productive when they are being paid
Which of the following is nota condition required for a monopolist to price
discriminate?
a. the demand curve facing the firm must be downward-sloping
b. the firm must exhibit strong economies of scale
c. there must be different groups of buyers with different price elasticities of demand
d. the firm must be able to prevent reselling of the product
e. the firm must have some market power
A reliable system of property rights and enforceable contracts are prerequisites for
creating incentives that support a healthy market economy.
a. True
b. False
Goods and services produced by the government are sold at prices that are set to
recover production costs.
a. True
b. False
Rent is the payment received by resource owners for the use of their natural resources.
a. True
b. False