Archives: Quiz

Natural resource cartels such as OPEC are inherently unstable because their members operate with excess capacity and have an incentive to cheat on their output quotas. The marginal cost curve is U-shaped because of the law of increasing opportunity costs. […]

International firms tend to support reasonable labor and environmental laws to expand future local markets for their businesses. Due to adverse selection,very few lemons will be sold in the market for used cars. Answer: FALSE Research shows that pollution-intensive U.S. […]

An increase in income results in an outward shift of an indifference curve. Network externalities refer to the situation where the usefulness of a product increases with the number of consumers who use it. Answer: TRUE A market failure arises […]

If the demand for a product decreases and the supply of the same product decreases, the equilibrium price will decrease. One reason why McDonald’s charges a single price for its products is that it is difficult and costly for the […]

Being a price-taker, a perfectly competitive firm cannot receive a producer surplus in the short run. The application of economic analysis to human resources issues is called personnel economics. Answer: TRUE If firms are protected by substantial barriers to entry, […]

In a sequential game, one firm will act first and then other firms will respond. The marginal product of labor curve is the demand curve for labor. Answer: FALSE A public franchise gives the exclusive right to produce a product […]

A profit-maximizing firm should hire workers up to the point where labor’s marginal revenue product equals the wage rate. Maximizing average profit is equivalent to maximizing total profit. Answer: FALSE Merger guidelines developed by the Antitrust Division of the U.S. […]

The rules of the international monetary system are enforced by the World Bank. The substitution effect of a wage decrease examines the effect of the decrease in wage income on a worker’s ability to consume goods and services. Answer: FALSE […]

The basis for trade is comparative advantage, not absolute advantage. Even if the population declines, scarcity will still exist. Answer: TRUE Higher wages that compensate workers for unpleasant aspects of a job are called compensating differentials. Answer: TRUE An economic […]

Health insurance companies impose deductibles on policies and co-payments on claims to reduce the problem of adverse selection. An increase in the supply of capital, which is a substitute to labor, will lead to a decrease in the demand for […]

In the market for factors of production, firms earn income by selling factors of production to households. In economics, technology only refers to the development of new products. Answer: FALSE Those who favor changes in the market for health care […]

For which of the following products is social influence likely to have the greatest impact? A) toothpaste B) restaurants C) high-blood pressure medication D) school textbook In 1930, the U.S. government attempted to help domestic firms that were harmed by […]

Figure 11-11 Figure 11-11 illustrates the long-run average cost curve for a firm that produces picture frames. The graph also includes short-run average cost curves for three firm sizes: ATCa, ATCb and ATCc. Refer to Figure 11-11. In the short […]

Consider a public good such as fire protection services. Rich people may benefit more than the poor from such a service because rich people stand to lose more from a fire that destroys property. In this case A) the ability-to-pay […]

In discussions of barriers to entry, what is meant by the term “virtuous cycle”? A) A virtuous cycle refers to successful research and development that leads to information that is used to develop other new products. B) A virtuous cycle […]

A perfectly competitive firm will maximize its profit at the rate of output where the vertical distance between its total revenue curve and total cost curve is the largest. This is the same rate of output where A) average total […]

If the market for a product is broadly defined, then A) the good has many complements. B) there are few substitutes for the product and the demand for the product is relatively inelastic. C) there are many substitutes for the […]

Sequential games are often used to analyze which two types of business strategies? A) whether to invest in research and development and whether to offer employees an early retirement package B) deciding to merge with another firm and deciding how […]

Table 16-3 Julie plans to start a pet-sitting service. She surveyed her neighborhood to determine the demand for this service. Assume that each person surveyed demands only one hour of pet sitting services per period. Table 16-3 above shows a […]

If firms in a monopolistically competitive industry are making profits in the short run A) barriers to entry will be erected to keep out rivals. B) some firms will ultimately exit the industry. C) they will resort to advertising wars […]

Figure 16-5 Refer to Figure 16-5. Suppose the firm represented in the diagram decides to practice perfect price discrimination. What is the total revenue collected by the firm? A) $6,720 B) $7,680 C) $10,240 D) $13,440 Baxter International, a manufacturer […]

Because the monopolistically competitive firm faces a ________ demand curve for its product, it ________ the price of its output. A) downward-sloping; cannot influence B) horizontal; can influence C) horizontal; cannot influence D) downward-sloping; can influence The marginal rate of […]

The wage rate is the opportunity cost of A) working. B) working overtime. C) leisure. D) consumption. Jake sells Star Wars memorabilia on eBay. His annual revenue is $42,000 per year, the explicit costs of his business are $10,000, and […]

Farah has $100 to spend each month on bread and chicken. Suppose the price of bread is $4 a loaf and the price of chicken is $5 per pound. a. Draw her budget constraint and label it BC0. Put bread […]

If, when you consume another piece of candy, your marginal utility is zero, then A) you want more candy. B) you have maximized your total utility from consuming candy. C) you have not yet reached the point of diminishing marginal […]

Barbara, the consummate hostess, proudly announced as she served dessert, “A port is often the perfect end to a meal, sipped with a piece of my scrumptious chocolate cake.” Evidently, Barbara views port and chocolate cake as A) luxury items. […]

A curve that shows all the combinations of two inputs, such as labor and capital, that will produce the same level of output is called A) an isoquant. B) an isocost line C) a budget line. D) an optimal input […]

In economics, the term “free rider” refers to A) a person who evades taxes. B) a supervisor who delegates menial time-consuming activities to others. C) one who volunteers her services. D) one who waits for others to produce a good […]

Table 6-7 Refer to Table 6-7. a. Using the information in the table, calculate the income elasticity of demand for good X and characterize the good. Use the midpoint formula. b. Can you calculate the income elasticity of demand for […]

Table 2-12 Refer to Table 2-12. This table shows the number of labor hours required to produce a digital camera and a bushel of wheat in China and South Korea. a. Assume each country has a total of 9,000 labor […]

The Organization of Petroleum Exporting Countries (OPEC) controls about 75 percent of the world’s proven oil reserves. Economists refer to OPEC as a cartel because A) OPEC is a monopoly, but it is located outside of the boundaries of any […]

Most people would prefer to drive a luxury car that has all the options, but more people buy less expensive cars even though they could afford the luxury car because A) car buyers are irrational. B) the total utility of […]

Figure 4-3 Figure 4-3 shows the market for tiger shrimp. The market is initially in equilibrium at a price of $15 and a quantity of 80. Now suppose producers decide to cut output to 40in order to raise the price […]

Table 17-2 Refer to Table 17-2. The marginal profit from hiring the second unit of labor is A) $4,200. B) $1,960. C) $1,800. D) $1,450. The value you give today to money you will receive in the future is called […]

An agreement among firms to charge the same price or otherwise not to compete is called A) a payoff matrix. B) a subgame-perfect equilibrium. C) a Nash equilibrium. D) collusion. An expansion path shows A) the level of sales necessary […]

Figure 15-11 In 2011, Verizon was granted permission to enter the market for cable TV in Upstate New York, ending the virtual monopoly that Time Warner Cable had in most local communities in the region. Figure 15-11 shows the cable […]

Airlines often engage in last-minute price cutting to fill remaining empty seats on a flight because this practice will generally A) prevent rival airlines from competing in that market. B) increase marginal revenue more than marginal cost. C) maximize marginal […]

In which market structure is it not possible to practice price discrimination? A) perfect competition B) monopolistic competition C) oligopoly D) monopoly Consider an industry that is made up of nine firms each with a market share (percent of sales) […]

Table 11-3 Refer to Table 11-3. The table above refers to the relationship between the quantity of workers employed and the number of cardboard boxes produced per day by Manny’s House of Boxes. The capital used to produce the boxes […]

Table 2-9 Table 2-9 shows the number of labor hours required to produce a canoe and a sailboat in Guatemala and Honduras. Refer to Table 2-9. Does either Guatemala or Honduras have an absolute advantage and if so, in what […]

Suppose the consumer’s income increases while the prices of the goods remain constant. Then the A) budget constraint shifts inward parallel to the original budget constraint. B) budget constraint shifts outward parallel to the original budget constraint. C) indifference curves […]

If the number of employees who quit, are fired, or retire increases while the hiring of new employees declines, this indicates that the A) labor demand curve is shifting to the right. B) labor supply curve is shifting to the […]

Table 17-1 Refer to Table 17-1. Suppose the output price is $3. If the wage rate is $90, what is the profit-maximizing quantity of labor that the firm should hire? A) 7 units B) 5 units C) 4 units D) […]

Compare two situations. (A) A firm is not legally responsible for damages that result from air pollution caused by its production of steel. (B) A firm is legally responsible for damages that result from its production of steel. Ronald Coase […]

Harvey Miller owns a baseball that was hit for a home run by Ted Williams. Harvey, a long-time Boston Red Sox fan, recently refused to sell his baseball for $75,000 even though he would not have paid someone more than […]

Figure 13-11 Refer to Figure 13-11. The diagram depicts a firm A) in a constant-cost industry. B) in an increasing-cost industry. C) in long-run equilibrium. D) that is making short-run losses. When someone takes out a mortgage loan to buy […]

According to a study of the U.S. demand for alcoholic beverages, the price elasticity of demand for beer is -0.30. Which of the following could explain why the price elasticity of demand for beer is low? A) Beer is an […]

The popularity of digital cameras has enticed large discount stores like Wal-Mart and Costco to offer digital photo printing services. How does this affect the digital photo printing market? A) The demand curve for digital photo printing services shifts to […]

Figure 9-2 Suppose the U.S. government imposes a $0.40 per pound tariff on rice imports. Figure 9-2 shows the impact of this tariff. Refer to Figure 9-2. The increase in domestic producer surplus as a result of the tariff is […]

The United States is a leading exporter of wheat. What explains the comparative advantage of the United States in wheat production? A) positive externalities B) investment by multinational firms such as Archer-Daniels-Midland and Tyson Foods Inc. C) climate and soil […]