Archives: Quiz

Opening an industry to international competition tends to: A. increase X-inefficiency. B. force lazy monopolists to increase efficiency. C. increase the incidence of lazy monopolists. D. raise a monopolist’s profit as the price is driven up. Answer: If the law […]

Paternalism describes a situation in which: A. the government passes laws that require citizens to change their behavior. B. people are likely to make bad decisions over and over. C. there is no role for firms to influence people’s behavior. […]

An agreement in which the incentives of both parties match their goals as closely as possible is: A. an X-inefficiency contract. B. a public good. C. an incentive-compatible contract. D. a corporate takeover contract. Answer: Refer to the table above. […]

What percent of all jobs in the United States are in manufacturing? A. 10 percent. B. 30 percent. C. 50 percent. D. 70 percent. Answer: The Industrial Revolution was important to the history of economic systems because it: A. changed […]

An import quota does which of the following? A. Decreases the price of the imported good for the consumer B. Increases the price of the domestic good for the consumer C. Redistributes income from domestic producers to domestic consumers D. […]

Capitalism: A. is based on private property and the market. B. does not have a rationing mechanism. C. gives private property rights to government. D. relies on market forces to establish initial property rights. Answer: Which of the following statements […]

Relying on experiments and statistical analysis of real-world observations is the premise behind: A. heuristic economics. B. traditional economics. C. modern economics. D. Keynesian economics. Answer: The central characteristic of oligopolistic industries is: A. interdependent pricing decisions. B. flexible prices. […]

Refer to the graph shown. The profit-maximizing monopolist would sell its output at price: A. P1. B. P2. C. P3. D. P4. Answer: B. This is the price that corresponds with the profit-maximizing output level, Q2. Refer to the graph […]

The statement, “Assuming that if it is rational for one person to stand at a football game to get a better view then it is rational for everyone to stand at a football game to get a better view” is […]

In Minnesota, tax collectors found that threatening late filers with warnings and fines does not increase tax compliance. Instead, they publicized the fact that most Minnesotans had already filled in their returns. What type of nudge is this? A. an […]

Assume that in Canada the opportunity cost of producing one television set is two bushels of wheat. Assume that in the United States the opportunity cost of producing one bushel of wheat is two television sets. If these two countries […]

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 […]

“People are at war with themselves. Part of them says that they want to quit smoking, but another part says they need a cigarette right now. Or part of them says they want to be healthy, and another part says […]

Refer to the graph shown. According to the graph, this monopolistically competitive industry is currently: A. not in long-run equilibrium, and we would expect more firms to enter this industry. B. not in long-run equilibrium, and we would expect some […]

Refer to the graph shown. If the firm is attempting to maximize profit, it will: A. earn just normal profits, that is, zero economic profits. B. earn economic profits. C. incur a loss. D. make enough to cover its variable […]

A system in which power plants buy and sell the right to pollute in the form of emission credits is known as: A. a voluntary program. B. direct regulation. C. a tax incentive program. D. a market incentive program. Answer: […]

John Rawls’s views on income distribution and fairness can best be described by the statement: A. The lesser individuals’ duty should be to work for the well-being of the brightest individuals. B. A high level of income inequality is necessary […]

With the resources available, you can make the combinations of Ums and Umies (trinkets from a place called Bandarban) shown in the table. The opportunity cost of producing 60 Umies instead of 30 Umies is: A. 10 Ums. B. 20 […]

The discovery of a significant new source of oil that can be exported will lead to: A. depreciation of the currency and a loss of comparative advantage in other sectors. B. depreciation of the currency and a gain of comparative […]

Increasing marginal opportunity cost means that the production possibility curve is: A. bowed in so that for every additional unit of one good given up, you get fewer and fewer units of the other good. B. bowed in so that […]

Susan’s price elasticity of restaurant meals is 2.27. If the price of a restaurant meal falls by 2 percent, the quantity of restaurant meals Susan demands will: A. increase by 2.27 percent. B. fall by 2.27 percent. C. increase by […]

Several firms are operating in a market where they take the other firms’ response to their actions into account. This market is: A. a competitive market. B. a monopolistically competitive market. C. an oligopolistic market. D. a monopoly. Answer: Total […]

The statistical analysis of economic data is referred to as: A. microeconomics. B. econometrics. C. deductive reasoning. D. calculus. Answer: Demand for single occupancy apartments is Qd = 400,000 – 250 P. Supply is given by Qs = 200,000 + […]

If a country has a comparative advantage in the production of a good, its resources are better suited to the production of that good than are the resources of other countries. Answer: In the short run when the number of […]

According to economic theory, a monopolist would hire a lobbyist only if the expected marginal benefit of lobbying exceeded the marginal cost. Answer: If the price of corn goes up by $1 a bushel and the quantity supplied rises by […]

According to the contestable market model, the higher an industry’s concentration ratio, the more profitable the industry. Answer: Domestic producers prefer quotas to tariffs because quotas raise the price of imports and tariffs do not. Answer: FALSE Both quotas and […]

Refer to the following graph. A lazy monopolist is best described by earning area A and B in profits. Answer: The goal of socialist economies is to distribute what is produced according to the needs of individuals. Market economies tend […]

In the long run all inputs are variable; in the short run some inputs are fixed. Answer: The distinction between capitalism and socialism is less relevant in the real world today than it was 30 years ago. Answer: TRUE The […]

If marginal utility is declining but still positive, total utility is increasing. Answer: Deciding what the distribution of income should be is an example of normative economics. Answer: TRUE This statement questions what the goals of the economy should be […]

One issue with using lifetime earnings as a proxy for human life is that it treats upper-income jobs and hence individuals in those jobs as more valuable than lower-income individuals. Answer: When some people do not act rationally, others can […]

The higher is an industry’s concentration ratio, the more competitive is the industry. Answer: Revenue remains unchanged along a straight-line demand curve. Answer: FALSE Revenue is greatest at the midpoint of a straight-line demand curve (where elasticity of demand equals […]

Many states have laws requiring that health insurance policies cover the treatment of diabetes. One study found that diabetics became fatter after the passage of these laws, which complicates the treatment of diabetes. This study’s finding is an example of: […]

Consider the following production functions along with its corresponding marginal product of labor function. I.Q = 15KL, where MPL = 15K II.Q = 2K0.4L0.6, where MPL = III.Q = 8K + L, where MPL = 1 a.In all three cases, […]

Table 16.5 (Table 16.5) Suppose that each firm is emitting 10 units of pollution, for a total of 20 units. The government would like to decrease total pollution to 10 units by giving each firm five tradable pollution permits. a. […]

The inverse demand curve for a monopolist changes from P = 100 ” 2Q to P = 120 ” 2Q, while the marginal cost of production remains unchanged at a constant $20. What happens to the profit-maximizing price and quantity […]

The demand and supply of movie tickets are given by QD = 30 ” 3P and QS = 4P ” 19, where P is the price per ticket and Q measures thousands of tickets. If the government places a $1 […]

The inverse demand curve for a firm with market power is P = 60 ” Q, and its marginal cost is given by MC = 2Q. If the firm decides to practice first-degree price discrimination, the deadweight loss will: A) […]

A firm practicing third-degree price discrimination may: I. segment its customers by age, such as offering senior citizen discounts. II. charge customers living in certain zip codes a higher price than customers living in other locations. III. initially charge high […]

Consider the following questions on elasticity. a. If a 3% increase in income leads to a 1% increase in the quantity purchased, what is the income elasticity of demand? Is the good an inferior good? b. The price of good […]

Figure 5.14 (Figure 5.14) What is the size of the income effect associated with the decrease in the price of good X? A) The quantity of good X purchased increases from 3 to 4. B) The quantity of good X […]

Suppose the market for sprouts is in long-run equilibrium. In the short run, what will happen if there is an E.coli outbreak that causes a decrease in the demand for sprouts? A) The marginal cost curve will shift downward for […]

Carfax offers a report on used cars for $39.99 that details the ownership type and history, vehicle mileage, accident reports, and other information. Carfax is an example of how markets try to: A) increase adverse selection. B) lessen the lemons […]

Suppose a firm’s inverse demand curve is given by P = 160 ” 4Q. Which of the following statements is TRUE? I. The firm’s marginal revenue curve is given by MR = 160 ” 8Q. II. The firm’s marginal revenue […]

Suppose that Mystic Energy and E-Storm are the only two producers of hydrogen fuel cells. The market inverse demand curve for hydrogen fuel cells is P = 1,300 ” 0.08Q, where Q is the number of fuels cells per month […]

The ______ model is an example of a simultaneous game, while the______ model is an example of a sequential game. A) Cournot; Stackelberg B) Cournot; Bertrand C) Bertrand; Cournot D) Stackelberg; Bertrand Figure 5.30 (Figure 5.30) The price of good […]

The production function for a firm is Q = min(2K, L), and the price per unit of capital is $40 and the price per unit of labor is $60. a.What is the minimum cost of producing 10 units of output? […]

The production process is an extremely complicated task, so economists make a number of simplifying assumptions. Which of the following assumptions do economists make in their basic model of producer behavior? I. Multiproduct firms: All firms produce at least two […]

In an experiment, each subject observed a random spin of a wheel that had values on it from 0 to 100. The subjects were then asked to guess the number of African countries in the United Nations. If the subjects […]

In Bertrand competition with differentiated products and zero marginal costs, Firm Afaces the demand curve qA= 80 ” 2PA+ 50PB. If Firm Aexpects Firm B to charge a price of $20, what price should Firm A charge? A) $14.25 B) […]

The additional utility obtained from consuming an extra unit of a good is called: A) marginal utility. B) marginal rate of substitution. C) disutility. D) population-averaged utility. Which of the following are forms of framing bias? I. nominal loss aversion […]