Archives: Quiz

Monopolistic competition differs from oligopoly in that in monopolistic competition firms act independently while in oligopoly firms act interdependently. Answer: A decrease in the price of inputs will cause the supply curve for a product to shift to the right. […]

Expansionary monetary policy enacted during a recession will cause the inflation rate to increase. Answer: Early adopters are consumers who will pay a high price to be among the first to own new products. Answer: TRUE An increase in the […]

The Clayton Act of 1936 outlawed price discrimination that reduced competition. Answer: The “rational expectations” school of economists, including Robert Lucas and Thomas Sargent, argue that changes in monetary policy cannot affect unemployment rates in the short run or long […]

Market power in the United States causes a huge loss of economic efficiency. Answer: Examining the conditions that could lead to inflation in an economy is an example of microeconomics topic. Answer: FALSE An increase in the inflation rate increases […]

Increases in population shift the market supply curve for labor to the right. Answer: Transfer payments are subtracted from national income to get to personal income. Answer: FALSE The GDP deflator is a measure of the price level which is […]

When firms exit a perfectly competitive industry, the market supply curve shifts to the left. Answer: The total amount of consumer surplus in a market is equal to the area below the demand curve. Answer: FALSE When a firm experiences […]

One reason a country does not specialize completely in production is that production of most goods involves increasing opportunity costs. Answer: Empirical evidence shows that the short-run Phillips curve was vertical during the 1950s and 1960s. Answer: FALSE Paying efficiency […]

If the long-run average total cost curve is downward-sloping, then the firm is experiencing decreasing returns to scale. Answer: If consumers paid the full price of medical services instead of using health insurance and third-party payers to cover part of […]

The FOMC no longer sets targets for M1 and M2 to meet its goals of price stability and high employment. Answer: Increases in population shift the market supply curve for labor to the right. Answer: TRUE A law requiring the […]

For the purchasing power of money to increase, the price level has to fall. Answer: If income is unequally distributed in an economy, increases in GDP may not raise well-being in an economy. Answer: TRUE A tariff is a tax […]

If purchasing power parity tells us that if the exchange rate is a pound for a dollar, then price of a haircut in London should cost the same as a haircut in New York. Answer: A decrease in disposable income […]

The GDP deflator is the best measure that reflects the prices of goods and services purchased by the typical household. Answer: The signaling hypothesis of education states that education is a costly activity that enhances a worker’s productivity. Answer: FALSE […]

Foreign portfolio investment in the United States has continually declined since 1995. Answer: Expansionary monetary policy enacted during a recession will cause the inflation rate to increase. Answer: TRUE If the rate of growth in real GDP exceeds the rate […]

Productive efficiency does not hold for a profit-maximizing, monopolistically competitive firm in the long-run equilibrium because the firm operates along the diseconomies-of-scale region of its average total cost curve. Answer: Increases in capital per hour worked cannot sustain high rates […]

The government of Silverado raises revenue to operate the city’s hospital, open to all residents, through a general income tax paid by its residents. This method of raising revenue is consistent with the benefits-received principle. Answer: If a perfectly competitive […]

In market economies, income distribution is always going to be completely equitable. Answer: The median voter theorem states that the outcome of a majority vote is likely to represent the preferences of the voter who is in the political middle. […]

Exempting food purchases from sales tax is consistent with the ability-to-pay principle, although not necessarily consistent with vertical equity. Answer: An increase in expected inflation will shift the short-run Phillips Curve. Answer: TRUE An inferior good is a good for […]

Deadweight loss refers to the reduction in economic surplus resulting from a market not being in competitive equilibrium. Answer: A decrease in disposable income will shift the aggregate demand curve to the left. Answer: TRUE If the multiplier is 10, […]

In the short-run, even if a monopoly’s total revenue does not cover its variable costs, it should continue to produce because ultimately in the long run, the monopoly will start earning profits. Today, the United States charges an average tariff […]

A series of bank runs in a country should have no effect on M1 as money simply moves from checking deposits to currency. A price ceiling is a legally determined maximum price that sellers may charge. Answer: TRUE An increase […]

Recent rapid economic growth in India and China has reduced the amount of “brain drain” in those countries. A monopolist currently sells 18 units of a good. If marginal revenue on the last unit sold is $117, then the price […]

An increase in the supply of capital, which is a substitute to labor, will lead to a decrease in the demand for labor. The demand for most farm products is relatively inelastic. A drought that reduces the supply of farm […]

In the long run the relevant cost is total cost. If it costs Vijay $150 to design 5 websites and $175 to design 6 websites, then $175 is the marginal cost of producing the 6th website. Answer: FALSE Marginal benefit […]

Which of the following is a capability? a) Patents and trademarks b) Brand-name reputation c) Installed base d) Organizational culture e) Sourcing skills Which of the following statements best describes a characteristic of geographic specialization focus strategies? a) Offers a […]

For what critical aspect of drug development has research (Azoulay & Henderson) shown that major drug houses have chosen tapered integration? a) Clinical Research b) Drug Development c) Marketing d) Sales e) Manufacturing Which of the following best describes the […]

What term best describes assets that are more valuable when used together than when separated? a) Isolating b) Value-creating c) Imperfectly mobile d) Scarce e) Cospecialized What term describes the situation when a firm earns a higher rate of economic […]

Why are the current health care systems on the rise being built around the integration of clinical information technology and disease management systems? a) They both have high costs b) They both are new trends in health care c) They […]

Which of the following did not contribute to the high transaction related risks for U.S. potato sales in 1840? a) Infrequency of transactions b) Changing transaction partners c) Lack of availability of sales and prices for comparable goods d) Competition […]

Which of the following terms is a concept, developed by Michael Porter, which describes the activities within firms and across firms that add value along the way to the ultimate transacted good or service? a) Five forces b) Value creation […]

What was the cause of Walmart’s exit from the German market? a) Loss of a predatory pricing lawsuit b) High tariffs on imported goods c) Total revenue that failed to cover sunk costs d) German regulations against foreign owned firms […]

Which of the following is not a method to protect intellectual property? a) Patents that are specific and complete b) Complete contracts regarding IP with all suppliers c) Non-disclosure agreements for employees d) Limiting access to IP to a few […]

What group/type of preferences describes when tastes differ markedly from one person to the next and result in horizontal differentiation? a) Search preferences b) Horizontal preferences c) Consumer preferences d) Spatial preferences e) Idiosyncratic preferences What term describes the situation […]

Which of the following serves as a voluntary signal of quality? a) Warrantee b) Independent reviews c) Truth in Advertising d) Free product financing e) Public claims In what special situation might the law of demand not hold? a) In […]

Suppose we have two firms (Firm 1 & Firm 2) enter into a transaction where Firm 1 is upstream of firm 2 in a vertical chain. What term best describes the organization of the transaction where Firm 1 owns the […]

Which of the following is a true argument regarding the make-or-buy decision process? a) Firms should make an asset, rather than buy it, if that asset is a source of competitive advantage for the firm b) Firms should buy, rather […]

Which of the following is true with regard to the difference in production costs between an item produced in a vertically integrated firm and an item exchanged through an arm’s length market transaction as the level of asset specificity increases? […]

Which of the following terms describes a nation’s position with regard to the elements (e.g. human resources, infrastructure) of production that are necessary to compete in a particular industry? a) Factor conditions b) Demand conditions c) Supply conditions d) Related […]

Why are suppliers in a competitive upstream market said to have “indirect power”? a) They can sell their services to the lowest bidder b) They are always concentrated c) Their customers are always locked into relationships with them d) The […]

Which of the following cost line items would be a fixed cost? a) Commissions to Salespeople b) Rent c) Raw Materials d) Packaging e) Shipping/Delivery Charges According to the GHM Theory, the choice between an in-house sales force versus independent […]

What term best describes the characteristic of a process if past circumstances could exclude certain evolutions in the future? a) Path dependence b) Correlated research strategies c) Evolutionary economics d) Dynamic efficiency e) Dynamic capabilities What term best defines a […]

Which of the following is not a result of the holdup problem? a) More difficult contract negotiations and more frequent renegotiations b) Investments to improve ex post bargaining positions c) Reduction in the transaction costs of arm’s length market exchanges […]

What term best describes a firm informing customers about a product’s benefits? a) Advertising b) Certification c) Disclosure d) Notice e) Broadcasting Why do price-sensitive buyers tend to harm cooperative pricing in a market? a) They cause an increase in […]

What term best refers to interrelated beliefs, values, material practices, and norms of behavior that exist in an industry at any given time? a) Institutional elements b) Institutional standards c) Institutional influences d) Institutional logics e) Institutional ideas Conflicts of […]

Which of the following would not be a characteristic of a good with an elastic demand? a) The product lacks unique features that differentiate it from competing products b) The product is a high percentage of a consumer’s total expenditures […]

How have late 20th and 21st century communications technologies directly created global markets from products and services? a) Created paperless communications b) Created seamless and instantaneous communications c) Decreased coordination for interfirm alliances d) Increased worker productivity e) Unflattened the […]

What is a key issue facing managers of the 2000s with respect to production technology? a) Using the technology while maintaining an adequate level of complexity vs. simplicity b) Balancing price of the technology with the benefits of its use […]

Which of the following is a characteristic of economies of scale? a) The average cost declines as output increases b) The average cost increases as output increases c) The average cost remains constant as output increases d) The average costs […]

Which of the following terms best describes a transfer between two or more parties or resources, or rights to control resources, which occurs outside the terms of a market context? a) Power exchange b) Social exchange c) Authority exchange d) […]

Which of the following is a characteristic of an implicit contract? a) It is an understanding between parties in a business relationship b) It is generally enforceable in court c) The threat of losing future business makes implicit contracts not […]

Which of the following is an example of a market where barometric price leadership occurs? a) Breakfast cereal b) Prime-rate loan c) Tobacco d) Steel until 1960s e) Fast food hamburger Which of the following is least likely a characteristic […]