Monopolistic competition differs from perfect competition only in the number of firms
participating in the market.
a. True
b. False
A certain machine will last one year, will produce $120 in income (received one year
later), and will cost $100 The lowest interest rate at which this investment will be
unprofitable is
a. 10 percent.
b. 11 percent.
c. 19 percent.
d. 22 percent.
Figure 10-5
In Figure 10-5, points which lie on the firm’s short-run supply curve are
a. A, B, C.
b. C, D, H.
c. F, E, G.
d. A, C, H.
In fiscal year 2014, the U.S. federal budget deficit amounted to about:
a. 1,2% of GDP
b. 3,7% of GDP
c. 4,5% of GDP
d. 10% of GDP
Which of the following is not potentially a barrier to entry into the widget market?
a. patent protection on the design of widgets
b. high prices for widgets
c. government licensing of widget producers
d. massive advertising by existing widget producers
A useful economic model
a. deals only with possibilities that actually occurred.
b. makes only realistic assumptions.
c. may make some unrealistic assumptions in order to simplify a complex reality.
d. should avoid drawing conclusions that have public policy implications, since
economics is not equipped to make value judgments.
In the short run, a perfectly competitive firm can make a profit, a loss, or go out of
business.
a. True
b. False
Governments can deal with externalities through the use of
a. subsidies.
b. taxes.
c. price controls.
d. All of the above are correct.
Opportunity cost always arises when a trade-off decision is made.
a. True
b. False
One reason regulators push for higher prices in an industry is to
a. prevent excess profits in the industry.
b. protect the public from excessively low prices.
c. encourage usage of the good or service.
d. protect against the demise of existing firms.
Major firms charged with predatory pricing defend by saying that their prices are low
because of superior efficiency.
a. True
b. False
In many regulated industries, marginal cost will be
a. below average cost.
b. above total cost.
c. above marginal fixed cost.
d. below incremental cost.
The elasticity of supply is calculated by
a. determining the slope of the supply curve.
b. dividing the absolute change in quantity supplied by the absolute change in price.
c. dividing the percentage change in quantity supplied by the percentage change in
price.
d. dividing the percentage change in price by the percentage change in quantity
demanded.
Antitrust laws prohibit undesirable business practices by firms holding monopoly
power.
a. True
b. False
The fundamental goal of economics is to
a. allow everyone to have five yachts and two automobiles.
b. redistribute income and eliminate poverty.
c. reduce unemployment so that lower welfare payments are necessary.
d. learn to cope with the scarcity of virtually all resources.
Which of the following is most likely to affect the supply of labor in any particular
industry?
a. the size of the available working population
b. the nonmonetary attractiveness of the job
c. the amount of ability and training necessary to enter the job
d. all of the above
Figure 4-15
Recycling of newspapers has been undermined by its success. The supply of old papers,
gathered diligently by those concerned with the environment, has increased
dramatically, as has the number of firms that convert the material into recycled
newsprint. The quantity demanded has remained relatively stable despite falling prices
because newspapers consider recycled newsprint an inferior substitute for regular
newsprint. Consequently, the price of recycled newsprint has fallen below the cost of
production; recycling firms are going out of business; mountains of old newspapers are
left behind. Which graph in Figure 4-15 best illustrates this situation?
a. 1
b. 2
c. 3
d. 4
Recessions are periods of declining economic activity.
a. True
b. False
Input choices in the present are often affected by past decisions.
a. True
b. False
If the demand curve is vertical, the elasticity is
a. 1.0.
b. 0.0.
c. 0.5.
d. infinite.
What would the Herfindahl-Hirschman Index equal for an industry consisting of six
firms with market shares of 40%, 30%, 20%, 5%, 3%, and 2%?
a. 0.95
b. 2.934
c. 2,938
d. 10,000
For the monopolistic competitor, MR = P.
a. True
b. False
Regulators often raise prices instead of lowering them. This is designed to
a. prevent the exit of competitors.
b. protect the consumer from cheap products.
c. ensure high-quality products.
d. ensure workers are adequately paid.
If the price of oil, a close substitute for coal, increases then the
a. supply curve for coal will shift to the right.
b. demand curve for coal will shift to the right.
c. equilibrium price and quantity of coal will not change.
d. demand curve for coal will shift to the left.
e. supply curve of coal will shift to the left.