Dynamic pricing allows a website to use the personal information collected on a
customer, such as income or location, to individualize the price of a product for each
customer. Economists consider this type of pricing an example of:
A. consumer sovereignty.
B. producer sovereignty.
C. price discrimination.
D. price gouging.
Answer:
If there are economies of scale, advertising for a monopolistic competitor will cause its
average total cost curve to shift:
A. upward in the short run and increase per-unit costs in the long run as sales change.
B. upward in the short run but decrease per-unit costs in the long run as sales change.
C. downward in the short run and decrease per-unit costs in the long run as sales
change.
D. downward in the short run but increase per-unit costs in the long run as sales change.
Answer:
The use of expensive cars and yachts to impress others rather than just as transportation
is an example of what economists call:
A. conspicuous consumption.
B. focal point equilibrium.
C. bounded rationality.
D. rules of thumb.
Answer:
Economics professors often use Starbucks as an example of a company whose product
seems to have little price elasticity. What does this imply?
A. When Starbucks raises prices, its revenue increases.
B. When Starbucks raises prices, it loses many customers.
C. When the price of coffee sold by Starbucks’ competitors changes, there is little effect
on Starbucks’ sales.
D. When the price of coffee sold by Starbucks’ competitors changes, there is a big effect
on Starbucks’ sales.
Answer:
In the long run, a firm that does not benefit from economies of scope has complete
control over all of the following variables except:
A. production technology.
B. plant size.
C. the supply of inputs.
D. the demand for inputs.
Answer:
Which of the following groups would be most likely to benefit from a tariff on
Japanese-manufactured light trucks (i.e., pickup trucks)?
A. U.S. domestic pickup truck manufacturers
B. Japanese auto workers
C. U.S. consumers of pickup trucks
D. U.S. firms that export products to Japan
Answer:
If demand is highly elastic and supply shifts to the right:
A. price will fall significantly; quantity hardly changes at all.
B. price will hardly change at all; quantity will rise significantly.
C. price will rise significantly as will quantity.
D. price and quantity will hardly change at all.
Answer:
Refer to the graph shown. If the price of shekels is $1.10, the quantity of shekels
supplied is:
A. greater than the quantity demanded. This causes the shekel to gain value.
B. less than the quantity demanded. This causes the shekel to gain value.
C. greater than the quantity demanded. This causes the shekel to lose value.
D. less than the quantity demanded. This causes the shekel to lose value.
Answer:
The resolution of the AT&T antitrust case of the 1980s was:
A. AT&T agreed to split up into three operating divisions.
B. AT&T agreed to split up and allow the Baby Bells to be independent.
C. AT&T was combined with MCI and Sprint.
D. MCI and Sprint were broken off from AT&T and developed as competitors to AT&T.
Answer:
One reason economists began to look at more effective coordination mechanisms is that
they began to:
A. use advanced calculus in their models.
B. rely more heavily on deductive reasoning.
C. focus more on people’s predictably irrational behavior.
D. focus more on the assumption that people are rational.
Answer:
Refer to the following graphs.
Which graph depicts a perfectly competitive firm in long-run equilibrium?
A. graph I
B. graph II
C. graph III
D. graph IV
Answer:
Refer to the graph shown. Total surplus is maximized when:
A. the market is in equilibrium at price P1 and quantity Q1.
B. producers are able to charge a price above P1.
C. consumers are able to pay a price below P1.
D. excess demand is maximized.
Answer:
The marginal factor cost curve for a monopsony:
A. lies above the labor supply curve.
B. lies below the labor supply curve.
C. is the labor supply curve.
D. is unrelated to the labor supply curve.
Answer:
One way to raise the money price of throwing a beanball (a pitch aimed at the batter’s
head) is to:
A. institute a fine for beanballs.
B. eliminate designated hitters.
C. add designated hitters to the National League.
D. allow batters hit by balls to walk.
Answer:
The technological lock-in argument suggests that:
A. it is inefficient to try and adapt to new technology.
B. more efficient technologies always immediately replace less efficient technologies.
C. many of our institutions and technologies may be inefficient.
D. existing institutions and technologies are always the most efficient.
Answer:
Rachel left her job as a graphic artist, where she earned $42,000 per year, to open her
own graphic arts firm. Her implicit costs of the new business include:
A. only the expenses incurred for office space, equipment, and supplies.
B. only her forgone salary of $42,000 per year.
C. both the expenses incurred for office space, equipment, and supplies and her forgone
salary of $42,000 per year.
D. neither the expenses incurred for office space, equipment, and supplies nor her
forgone salary of $42,000 per year.
Answer:
Labor productivity is measured using the:
A. marginal output per worker.
B. average output per worker.
C. cost of labor inputs.
D. value of the goods produced by labor.
Answer:
If there are a number of inexpensive substitutes for labor in the production process,
labor:
A. demand will most likely be elastic.
B. demand will most likely be inelastic.
C. supply will most likely be elastic.
D. supply will most likely be inelastic.
Answer:
Pareto optimal policies will improve life for:
A. some people while hurting no one.
B. some people while hurting others.
C. at least 75 percent of the population.
D. at least half the population.
Answer:
Real-world markets:
A. often involve deception, cheating, and inaccurate information.
B. ensure that sellers will always be honest and provide accurate information because
those who are dishonest or provide inaccurate information go out of business.
C. can operate efficiently only if government takes steps to correct informational
problems.
D. provide no mechanism for solving informational problems.
Answer:
The primary criterion governing U.S. antitrust policy until 1945 was:
A. laissez-faire.
B. concentration ratios.
C. judgment by performance.
D. judgment by structure.
Answer:
An example of a negative externality is the:
A. decrease in your real income that results when photographic equipment you purchase
increases in price because of increased demand by others for these items.
B. cost you bear when your neighbor has a noisy party and does not compensate you for
your discomfort.
C. benefit you receive without paying when your neighbor installs a smoke detector.
D. decrease in income to farmers that results from a drought.
Answer:
Refer to the graph shown that depicts a third-party payer market for prescription drugs.
What happens to total expenditures in this market if a $2 co-pay is established
compared to a free-market equilibrium?
A. Expenditures rise to $240
B. Expenditures rise to $270
C. Expenditures fall by $120
D. Expenditures remain at $120
Answer:
More than 10,000 people waited in line for more than two hours to see a titan arum (a
rare flower) at Cambridge’s Botanic Garden. An economist would conclude that:
A. people felt they got great benefit from seeing the flower.
B. people did not know that they should ignore sunk costs in reaching decisions.
C. some things do not have a cost because people do not have to pay for them.
D. social forces are sometimes more important than market forces.
Answer:
Lowest price guarantees:
A. always provide the customer with the lowest possible price.
B. are bad for companies since such guarantees reduce profits.
C. may not lead to the lowest consumer prices.
D. are regarded as false advertising.
Answer:
Faced with a hundred pounds of strawberries, the rational individual will eat:
A. all of the strawberries.
B. strawberries until the satisfaction from the last strawberry is maximized.
C. strawberries until the satisfaction from eating strawberries is maximized.
D. strawberries until the satisfaction from eating the last strawberry begins to fall.
Answer:
Suppose that the firms in the perfectly competitive oat industry currently are receiving a
price of $2 per bushel for their product. The minimum possible average total cost of
producing oats in the long run is $1 per bushel. It follows that:
A. the oat industry is in equilibrium.
B. new firms will enter the oat industry.
C. the price of oats will remain at $2 per bushel in the long run.
D. firms in the oat industry will earn economic profits in both the long run and the short
run.
Answer:
In a contestable market model of oligopoly, prices are determined by:
A. costs and barriers to exit.
B. costs and barriers to entry.
C. costs, barriers to entry, and barriers to exit.
D. costs alone.
Answer:
Wages under a bilateral monopoly are generally:
A. equal to those under monopsony.
B. equal to those under a union monopoly.
C. greater than those under monopsony but less than those under a union monopoly.
D. greater than those under a union monopoly but less than those under monopsony.
Answer:
Becoming better at a task the more often you perform is referred to as:
A. inherent advantage.
B. economies of scope.
C. learning by doing.
D. economies of performance.
Answer:
A person who decides to work less when his or her wage increases:
A. is irrational.
B. has an income effect that dominates the substitution effect.
C. is responding entirely to the substitution effect.
D. has a substitution effect that dominates the income effect.
Answer:
When looking back on past choices, some people feel they should have exercised more
and eaten less. The fact that they could not make that choice at that point in time is an
example of less than -optimal choices resulting from:
A. the complicated nature of the choice.
B. the fact that the benefits and costs of choices are separated by time.
C. the fact that we don’t make food and exercise choices very frequently.
D. the market system within which we make choices.
Answer: