ECO2002201 Part 2
The sole proprietor of the Milwaukee Machine Company receives all accounting profits earned by her firm and a $28,000-a-year salary. She has a standing salary offer of $35,000 a year working for a large corporation. If she had invested her capital outside her own company, she estimates that would have returned $22,000 this year. If accounting profits for the year were $50,000, economic profits were:
$21,000
If Domʹs Barber Shop is maximizing profit, its total costs are
$240
he marginal cost of producing the sixth unit of output is:
$25
The marginal cost of the fifth unit of output is
$3.
The total cost of four units of output is:
$310
. If this firm is producing the profit-maximizing quantity and selling it at the profit-maximizing price, the firmʹs profit will be
$88.
A monopsonist is
) a single buyer
Employer-provided private health insurance in the United States has resulted in:
) incentives that encourage the overuse of health care.
The profit-maximizing price for a haircut is
16
Refer to Figure 15.1. From societyʹs point of view, the efficient level (MC pricing) of output is
25 haircuts
Which of the following is not a social insurance program?
TANF (Temporary Assistance for Needy Families).
Restrictions on imports
eventually reduce exports too
A monopolist is ______ likely to advertise than a monopolistically competitive firm.
less
In a perfectly competitive market, the price of the product is
set by market supply and demand
The following is cost information for the Creamy Crisp Donut Company:Entrepreneur's potential earnings as a salaried worker = $50,000Annual lease on building = $22,000Annual revenue from operations = $380,000Payments to workers = $120,000Utilities (electricity, water, disposal) costs = $8,000Value of entrepreneur's talent in the next best entrepreneurial activity = $80,000Entrepreneur's forgone interest on personal funds used to finance the business = $6,000Refer to the data. Creamy Crisp's explicit costs are
$150,000.
Harvey quit his job at State University where he earned $45,000 a year. He figures his entrepreneurial talent or foregone entrepreneurial income to be $5,000 a year. To start the business, he cashed in $100,000 in bonds that earned 10 percent interest annually to buy a software company, Extreme Gaming. In the first year, the firm sold 11,000 units of software at $75 for each unit. Of the $75 per unit, $55 goes for the costs of production, packaging, marketing, employee wages and benefits, and rent on a building. economic profits of Harvey's firm in the first year were:
$160,000
Billy Bob runs a seafood restaurant. Last year he earned $50,000 in revenue. He had explicit costs of $20,000. Billy Bob could have made $30,000 working for the county and could have received an additional $20,000 if he rented out his building and equipment. Calculate Billy Bob's accounting profit.
$30,000
. If Domʹs Barber Shop is maximizing profit, its total revenue equals
$320.
f this farmer is maximizing profits, his profit will be
$48.
Harvey quit his job at State University where he earned $45,000 a year. He figures his entrepreneurial talent or foregone entrepreneurial income to be $5,000 a year. To start the business, he cashed in $100,000 in bonds that earned 10 percent interest annually to buy a software company, Extreme Gaming. In the first year, the firm sold 11,000 units of software at $75 for each unit. Of the $75 per unit, $55 goes for the costs of production, packaging, marketing, employee wages and benefits, and rent on a building.Refer to the above information. The normal profits for Harvey in the first year were
$5,000
At the market price of $8 per bushel, if this farmer produces the profit maximizing level of soybeans, the total revenue would be
$5,600.
It shows the cost curves for a competitive firm. If the market price falls to $0.55, the optimal output rate is:
0
Refer to the above graph for a monopolist in short-run equilibrium. This monopolist has total cost equal to area:
0ADQ
Refer to the diagram. At the profit-maximizing level of output, total revenue will be:
0AJE
Refer to the diagram for a monopolistically competitive firm in short-run equilibrium. The profit-maximizing output for this firm will be:
160
Concentration ratios measure the:
3) percentage of total industry sales accounted for by the largest firms in the industry.
If the market price of soybeans falls to $8, then to maximize profits this farmer should produce
700 bushels of soybeans.
If Domʹs Barber Shop is maximizing profit, it is earning a profit of
80
Which of the following is the best explanation for why the actual outcome is different from the outcome we predicted using game theory?
The computer system allowed the two airlines to be in communication with each other, and they could therefore coordinate their strategies and cooperate.
At the profit-maximizing output, the firm will realize:
an economic profit of ABGH.
Refer to the diagram. At the profit-maximizing level of output, the firm will realize:
an economic profit of ABHJ.
Specialization and international trade lead to
an enhanced level of consumption
Refer to the diagram. Equilibrium price is:
d
One condition of wage equality is that
each worker must have the same skills, ability, and productivity.
Firms producing an identical product in a competitive market are producing at a level of output that maximizes profit. The current market price is $4.50 per unit and the firms are producing at a long-run average cost of $3.50 per unit. Over the long-run one should expect
entry of new firms into this market
A trade deficit refers to a situation where:
exports are less than imports
The four-firm sales concentration ratio for an industry measures the:
extent to which the four largest firms dominate the production of a good.
Refer to the diagram for a pure monopolist. Monopoly output will be:
f
Compared to perfect competition, monopoly results in
fewer units produced and sold.
Assume that the government imposes a 30% tax on your income and deducts $8,000 from those taxes. Under a negative income tax scheme, if you earn $30,000 a year, you will
have a tax liability of $1,000
The problem of asymmetric information is that:
health care providers are well-informed, but buyers are not.
Medicaid:
helps finance medical expenses for those participating in the TANF and Supplemental Security Income programs.
What is a benefit of international trade?
higher standards of living
Because of barriers to entry, the wages of physicians and nurses are ______ and quantity demanded is ______ than they would be without barriers to entry.
higher; lower
A monopolistically competitive firm has a:
highly elastic demand curve
In a perfectly competitive market, the long-run market supply curve is
horizontal at the market price
Under which of the following situations would a monopolist increase profits by lowering price (and increasing output):
if it discovered that it was producing where MC < MR.
Which of the following causes difficulty when measuring income inequality?
in-kind transfers
The Gini ratio:
is a numerical measure of the overall dispersion of income in a nation.
Game theory is best suited to analyze the pricing behavior of:
oligopolists
he demand schedule or curve confronted by the individual, purely competitive firm is:
perfectly elastic.
The Lorenz curve:
plots graphically the distribution of income.
The major purpose of Medicare is to:
provide health care services to people on Social Security.
The major objective of Medicaid is to:
provide health care services to those receiving public assistance.
The primary purpose of Social Security is to:
provide income for retired and disabled workers.
Authoritative estimates suggest that currently union workers on the average:
realize a 15 percent wage advantage over nonunion workers in the same occupation.
Since its inception in 1996, the Temporary Assistance for Needy Families (TANF) program has:
reduced the number of people on welfare by more than one-half.
Unions can increase labor productivity by
reducing conflicts between workers and management.
The price elasticity of demand for health care is:
relatively inelastic.
A monopolistic firm face the follow cost and revenue positions: ATC=$18 Price=$20,MR=$12. MC=$12. What should they do
remain at position
Census data indicate that, as of 2011, the top fifth of all households receive about ________ times as much income as the bottom fifth.
sixteen
The total cost including private costs and external costs is
social cost.
If the four-firm concentration ratio for industry X is 80:
the four largest firms account for 80 percent of total sales.
t the market price of $8 per bushel, if this farmer produces the profit maximizing level of soybeans, the profit would be
$0
It shows the cost curves for a competitive firm. What is the lowest price at which the firm will start producing output in the short run?
$0.60
The table below lists costs for producing Big Macs, a product of McDonald's. Based on the table, what are total fixed costs associated with Big Mac production?
$100
If this farmer is maximizing his profits, his TVC is
$108.
Converse, an apparel company, has been fairly successful selling denim-colored college sportswear. Lydia sees an opportunity for profit and enters the market. After producing her profit maximizing level of output, she finds that her average total cost per unit is $40, her average variable cost per unit is $30, and the market price is $35. In the short run, Lydia should
stay in business even though she is suffering a loss
Profits and losses are determined by
subtracting total costs from total revenue.
Which country has the higher obesity rate?
the United States
Absolute advantage is defined as
the ability to produce more output from given inputs of resources than others can
The most powerful tool unions have at their disposal when bargaining with management is
the ability to strike.
What is a trade deficit?
the amount by which a country's imports exceed its exports
Marginal private cost is the
the amount that a consumer pays to consumer pays to consume an additional unit of a particular good.
he vertical distance between ATC and AVC reflects:
the average fixed cost at each level of output.
Refer to the diagram for a purely competitive producer. The firm's short-run supply curve is:
the bcd segment and above on the MC curve
In saying that the present system of floating exchange rates is managed, we mean that:
the central banks of various countries sometimes buy and sell foreign exchange to alter undesirable trends in exchange rates.
The belief that women should receive the same wages as men if the levels of skill and responsibility in their jobs are equivalent is known as
the comparable worth doctrine.
If both Pepsi and Coca Cola increase their advertising, it can be said that
the costs of production will increase for both companies
The Lorenz curve is a geometric representation of
the distribution of income.
The Lorenz curve portrays:
the personal distribution of income.
Governments sometimes subsidize domestic industries. When this occurs,
the subsidized industries have an advantage on international markets relative to non-subsidized industries
In comparing a tariff and an import quota, we find that:
the tariff generates revenue for the U.S. Treasury, but the quota does not.
Buffalo in the United States almost became extinct while cattle have never been close to extinctinon. The difference is due to
the use of private property rights on cattle and common property rights on buffalo.
When the balance of trade is in balance, then
the value of the exports of goods equals the value of imports of goods
A duopoly is a market in which
there are two producers of a product
When unions exist in markets,
there no longer is a perfectly competitive labor supply.
The MR = MC rule applies:
to firms in all types of industries.
Accounting profits equal total revenue minus:
total explicit costs.
There must always be a balance of a nation's:
total international payments.
A firm reaches a break-even point (normal profit position) where:
total revenue and total cost are equal.
A right-to-work law makes it illegal for
union membership to be a requirement for continued employment in any establishment.
In the long run, costs are
variable only.
The Supplemental Nutrition Assistance Program (SNAP):
was previously known as the food-stamp program.
For a pure monopolist, marginal revenue is less than price because:
when a monopolist lowers price to sell more output, the lower price applies to all units sold.
Which of the following is an explicit cost for a business owner?
worker's salary
The monopsonistic exploitation of labor refers to
workers being paid less than their marginal revenue product.
ou are the owner and only employee of a company that sets odds for sporting events. Last year you earned a total revenue of $100,000. Your costs for rent and supplies were $50,000. To start this business you invested an amount of your own capital that could pay you a return of $20,000 a year.Refer to Scenario 7.2. Your accounting profit last year was
$50,000.
If the firm closed down in the short run and produced zero units of output, its total cost would be:
$50.
Total fixed cost is
$50.00
Billy Bob runs a seafood restaurant. Last year he earned $50,000 in revenue. He had explicit costs of $20,000. Billy Bob could have made $30,000 working for the county and could have received an additional $20,000 if he rented out his building and equipment. Calculate Billy Bob's economic profit.
-$20,000
The maximum profit level for the Memory Company is
-800
At the profit-maximizing output, total revenue will be:
0AHE.
Refer to the above graph for a profit-maximizing monopolist. The firm will produce the quantity:
0V
At P1, this firm will produce:
47 units and realize an economic profit.
Assume The Hand Made Shirt Shop has fixed costs of $150 and is a monopolistically competitive firm. To maximize profits in the short run, this firm should produce ________ personalized sweatshirts.
50
Refer to Figure 15.6. If Trollioʹs T-shirts is in long-run equilibrium it is producing ________ silk-screened T-shirts and selling each T-shirt at a price of ________.
50;16
In 2011, the highest quintile of households in the U.S. income distribution received about:
51 percent of total income.
Which of the following is a noncash transfer?
51 percent of total income.
In the example presented by this graph, what is total output when the fifth worker is added?
52 meals served per hour
Which of the following would move the Lorenz curve closer to the diagonal?
A 20 percent boost in Social Security retirement benefits.
Refer to the diagram. If this labor market is monopsonistic, the wage rate and level of employment respectively will be:
A and F.
Which of the following statements is true?
A high income inequality ratio can occur if the income of high-income earners is much greater than the income of others.
One feature of pure monopoly is that the firm is:
A price maker
A competitive firm maximizes profit at an output level of 500 units, market price is $24, and ATC is $24.50. At what range of AVC values for an output level of 500 would the firm choose not to shut down?
AVC < $24
Antitrust laws are essentially:
Anti-monopoly
Which of the following is the best example of oligopoly?
Automobile manufacturing.
At output level Q total fixed cost is:
BCDE.
At the profit-maximizing output, total fixed cost is equal to:
BCFG.
Refer to the above graph. It shows the cost curves for a competitive firm. If the market price of the product is $1.05 per unit, then the firm will produce how many units in the short run?
Between 15 and 20
Who lives longer, Canadians or Americans?
Canadians
The legislation which prohibits the acquisition of assets of another company if the transaction would significantly reduce competition, thereby closing a loophole in the Clayton Act is the:
Celler-Kefauver Act
In 2011, with which country did the United States run the largest trade deficit?
China
Economic profits are:
Equal to the difference between accounting profits and implicit costs
Which of the following groups has the highest poverty rate?
Female-headed households.
Based on the two graphs, which of the firms is facing greater market competition?
Firm B
The Bretton Woods Agreement established the
International Monetary Fund
The basic purpose of antitrust laws is to:
Limit monopoly power in industry
All but which one of the following are cash transfer programs?
Low-rent public housing.
1, 2, 3, and 4 represent the:
MC, ATC, AVC, and AFC curves respectively.
The profit-maximizing level for all firms, regardless of industry structure, is the output level where
MC=MR
To maximize profits, firms expand output until
MR = MC
The monopsonist would employ workers where
MRP=MFC
The president of the United States can obtain a court injunction that will stop a strike for an 80-day "cooling off" period if the strike is expected to imperil national safety or health. This power is granted in the
Taft-Hartley Act.
How are quotas and tariffs typically applied to restrict international trade?
Tariffs are taxes on imported goods and services, and quotas limit the number of imported goods and services.
Which of the following gave the Federal Trade Commission and the U.S. Justice Department the responsibility to enforce antitrust laws?
The Federal Trade Commission Act
Refer to payoff matrix provided below. In this game between Delta Airlines and American Airlines, what is the Nash equilibrium?
The Nash equilibrium occurs where both firms offer a discount.
Which of the following declared monopoly and trade restraints illegal?
The Sherman Act
Which organization meets regularly to establish rules and settle disputes related to international trade?
The World Trade Organization
Based on the picture, which of the following is true?
The commercials on television tend to give the impression that the goods are high quality.
Rachel and Joey are playing racquetball. They are of equal ability, and each point comes down to whether the players guess correctly about the direction the other player will hit. Look at the payoff matrix provided below. The Nash equilibrium for Rachel and Joey is
There is no Nash equilibrium.
Which of the following is true regarding monopolies?
They engage in rent seeking.
We have antitrust laws
To protect the competitiveness of U.S. markets.
If the firm is producing at Q1, the area BADE represents:
Total fixed costs
If the firm is producing at Q1, the area 0BEQ1 represents
Total variable costs
In the U.S. balance of payments, U.S. purchases of assets abroad are a(n):
U.S. dollar outflow.
Which country has the better healthcare system?
We cannot tell without more information.
Refer to the diagram for a monopolistically competitive firm. Long-run equilibrium price will be:
a
A purely competitive seller is:
a "price taker."
In a Lorenz curve, perfect income equality is given by
a 45-degree line originating from the origin.
The term oligopoly indicates:
a few firms producing either a differentiated or homogenous product
An explicit cost is:
a money payment made for resources not owned by the firm itself.
Air pollution generated by a steel mill is an example of
a negative production externality.
Suppose there was only one producer of an expensive heart medication. The source of that producer's monopoly would most likely come from
a patent to produce the drug.
Pure monopoly refers to:
a single firm producing a product for which there are no close substitutes.
An oligopoly is an industry market structure with
a small number of firms each large enough to impact the market price of its output and are strategically dependent on each other.
The balance of payments is
a summary record of a country's economic transactions with foreign residents and governments
For a purely competitive seller, price equals:
average revenue. 2) marginal revenue. 3) total revenue divided by output. 4) ------all of these.
Refer to the graph above. What is the profit-maximizing level of output for this pure monopolist?
b
The demand curve in a purely competitive industry is ______, while the demand curve to a single firm in that industry is ______.
downsloping; perfectly elastic
Employer-provided private health insurance began in the United States because:
during World War II, wage and price controls forced employers to use nonwage forms of compensation to attract workers.
perfectly competitive firm faces the following cost and revenue positions: ATC=$10, AVC=$8,MR=$10. MC=$9. What should they do
increase output
A protective tariff will:
increase the price and sales of domestic producers.
Depreciation of the dollar will:
increase the prices of U.S. imports, but decrease the prices to foreigners of U.S. exports.
The marginal revenue curve of a purely competitive firm:
is horizontal at the market price.
In equilibrium the firm:
is realizing an economic profit of ad per unit.
If a pure monopolist is producing at that output where P = ATC, then:
its economic profits will be zero.
A natural monopoly exists when a single seller experiences ____________ average total costs than any potential competitor.
lower
Other things equal, the monopsonistic employer will pay a:
lower wage rate and hire fewer workers than will a purely competitive employer.
The current system of exchange rates can best be described as:
managed floating exchange rates.
Monopolistic competition is an industry market structure with
many firms each able to differentiate their product.
Monopolistic competition means:
many firms producing differentiated products.
The monopsonist will employ labor at the point where the
marginal factor cost equals the marginal revenue product of labor.
A competitive firm in the short run can determine the profit-maximizing (or loss-minimizing) output by equating:
marginal revenue and marginal cost
The monopolistically competitive seller maximizes profit by producing at the point where:
marginal revenue equals marginal cost
Wealth in the United States is:
more unequally distributed than is income.
Explicit costs are called _____ costs and implicit costs are _____ costs.
out-of-pocket; opportunity
Monopolies choose their profit maximizing
output level and price.
The lowest price at which the firm should produce (as opposed to shutting down) is:
p2
The Clayton Act of 1914 is an antitrust law. Which of the following was not added to the list of activities that were deemed socially detrimental?
price fixing
Because the monopolist's demand curve is downsloping:
price must be lowered to sell more output.
An industry comprised of a very large number of sellers producing a standardized product is known as:
pure competition.
The twin problems of the U.S. health care industry are:
rapidly rising costs and unequal access to health care.
The contributive standard of income distribution is met by
setting wages according to marginal productivity.
The TANF program is designed to:
shift people from welfare to employment.
A craft union attempts to increase wage rates by:
shifting the labor supply curve to the left.
A perfectly competitive firm faces the following cost and revenue positions: ATC=$14, AVC=$10,MR=$6. MC=$6. What should they do
shut down
Refer to the diagram. At P4, this firm will:
shut down in the short run.
In this industry in the long run
firms will enter until all firms earn a normal profit.
Featherbedding is the term for
any practice that forces employers to use more labor than they would otherwise.
The MR = MC rule:
applies both to pure monopoly and pure competition.
At its equilibrium level of output, this monopolist earns:
Positive economic profits
Refer to the above graph for a profit-maximizing monopolist. At equilibrium, the firm will be earning:
Positive profits
Which of the following is not a characteristic of pure competition?
Price strategies by firms.
The total variable cost of producing 5 units is
$63
This farmer would earn a zero economic profit if price was
10
The Memory Companyʹs operating profit is
1000
Tariffs and import quotas would benefit the following groups, except:
Consumers of the product
Refer to the above graph for a monopolist in short-run equilibrium. This monopolist:
Has a loss per unit equal to DE
A(n) ________ occurs if all players in a game play their best strategies given what their competitors do.
Nash equilibrium
Refer to the payoff matrix provided below. In this game between Delta Airlines and American Airlines, what is American's dominant strategy?
Offering a discount
n the short run, a purely competitive firm will always make an economic profit if:
P > ATC.
Refer to the diagram. If this industry is purely monopolistic, the profit-maximizing price and quantity will be:
P3 and Q3.
Refer to the above graph for an industry. If the industry were served by a pure monopoly, the price and output quantity would be:
P3, Q1
Fixed cost is:
any cost that does not change when the firm changes its output
Dasenbrock and Gauss farms are able to achieve huge cost savings as they increase their acreage. This would be referred to in economics as
achieving economies of scale.
Under the Social Security program currently in existence,
benefits are determined by whether one contributed to the system or not.
The firm will produce at a loss at all price
between P2 and P3.
On the upward sloping portion of a firm's long run average cost curve, it is experiencing
diseconomies of scale
Over the long run, a monopolist
can continue to make economic profits if it can maintain a monopoly and keep competitors from entering the market.
Marginal cost is the:
change in total cost that results from producing one more unit of output.
If competitive firms experience a loss, over the long run there will be a(n)
decrease in market supply to increase the market price
A monopolistic firm face the follow cost and revenue positions: ATC=$15 Price=$20,MR=$10. MC=$12. What should they do
decrease output and increase price
The cost of a firm's inputs increased by 40%. As a result, output increased by 25%. This firm experienced
diseconomies of scale.
Refer to the diagram for a purely competitive producer. If product price is P3:
economic profits will be zero.
Microsoft likely has to spend billions of dollars building and developing an operating system, but once it is produced, the cost to get the software to each customer is almost zero. When Microsoft sells more units, their average total costs decrease. This means Microsoft is said to have ____________________.
economies of scale
On the downward sloping portion of a firm's long run average cost curve, it is experiencing
economies of scale
Labor unions may attempt to raise wage rates by:
forcing employers, under the threat of a strike, to pay above-equilibrium wage rates.
The earned-income tax credit:
provides a cash payment to low-income working families if their tax credit exceeds their tax liability.
The poverty _______________is defined as the percentage of the population whose income is below the poverty threshold.
rate
Special drawing rights (SDRs) are
a reserve asset created by the International Monetary Fund that countries can use to settle international payments
or a perfectly competitive firm, marginal revenue is
equal to price
Refer to the diagram. This firm's demand and marginal revenue curves are based on the assumption that:
rivals will ignore a price increase but match a price decrease.
Dumping is defined as
selling a good abroad at prices below its cost of production or below the price charged in the home market
where does a monopoly operate to maximize profits?
where MR = MC
The kinked-demand curve of an oligopolist is based on the assumption that:
competitors will follow a price cut but ignore a price increase.
Profits when a competitive firm shuts down are -$7,250 and profits are -$250 when the firm continues to produce. This firm will minimize losses by
continuing to produce
The distribution of wealth in the United States is such that it:
contributes to income inequality.
The average fixed cost of producing 3 units of output is:
$8
Refer to Figure 15.4. Assume The Hand Made Shirt Shop has fixed costs of $150 and is a monopolistically competitive firm. If this firm is producing the profit-maximizing level of output and selling it at the profit-maximizing price, the firmʹs profit is
-100
This farmerʹs profit-maximizing level of output is ________ units of output.
1000
Firms form a cartel that maximizes profits. The profits are
1080
For this farmer to maximize profits he should produce ________ bushels of wheat.
12
Refer to Figure 14.7. Six firms that produce chewing gum form a cartel. The cartel faces the market demand curve given by D. To maximize profits, the cartel should produce ________ packs of chewing gum and the price should be ________.
12,000; .40
This large business has 127 employees, 19 of whom are managers or supervisors; its reduced productivity is 19 ÷ 127 = 14.9%. Suppose the executive manager realizes that the business can accomplish the same amount of work with only 3 line managers and 9 supervisors, and lays off the others. Calculate their new reduced productivity level. (Calculate to nearest tenth of a percent.) ______________________%
12.2%
If this farmer is maximizing profits, his total costs will be
132
Approximately what percentage of the operating system market did Android devices control in 2010?
15%
Refer to the diagram for a monopolistically competitive firm in short-run equilibrium. This firm's profit-maximizing price will be:
16
The earliest unions in the United States were
craft unions
The profit-maximizing number of haircuts for Domʹs Barber Shop is ________.
20
Refer to Figure 13.7. The profit-maximizing level of output for the Memory Company is ________ high school yearbooks.
200
The profit-maximizing level of output for this monopolist is ________ units of output.
22
Assume The Hand Made Shirt Shop has fixed costs of $150 and is a monopolistically competitive firm. To maximize profits in the short run, this firm should set a price of
23
What is the trade balance between the United States and Muffinville?
3 billion
If this farmer is producing the profit-maximizing level of output, her profit is
3,000
Assume that a monopolist faces the demand schedule given in the table below and a constant marginal cost of $50 for each unit of output. To maximize profits, the monopolist would produce ____ units of output at a price of ____ per unit.
3,000; $70
This farmerʹs shutdown point is at a price of
4
The marginal cost curve would intersect the average variable cost curve at about:
4 units of output.
To maximize profits or minimize losses, this firm should produce:
E units and charge price A.
o maximize profit or minimize losses, this firm will produce:
E units at price A.
In the balance of payments of the United States, U.S. goods imports are recorded as a
current account entry
The Clayton Act prohibits the acquisition of ____________ of competing corporations when the acquisition would lessen competition; the Celler-Kefauver Act prohibits the acquisition of ____________ of one firm by another firm when the acquisition would lessen competition.
Stocks; assets
Which of the following provides public assistance to those who are blind and otherwise disabled?
Supplemental Security Income (SSI).
Unions might support a higher minimum wage because:
a higher minimum wage makes less-skilled workers less substitutable for union workers.
Compared to perfect competition, monopolies charge
a higher price.
Economic cost can best be defined as:
a payment that must be made to obtain and retain the services of a resource.
A monopoly is an industry with
a single firm in which the entry of new firms is blocked.
Which of the following sets of firms is best described as an oligopoly?
automobile industry
A market in which the money of one nation is exchanged for the money of another nation is a
bond market
Marginal revenue is the:
change in total revenue associated with the sale of one more unit of output
The U.S. poverty rate for:
children under 18 years of age is higher than for the overall population.
Suppose that Boeing and Rolls-Royce Holdings are the sole producers of a particular jet engine. The two firms currently charge the same price for their products. If neither firm reduces the price of its engine, each firm earns $36 million in profit. If both firms reduce their prices, then each firm will earn $10 million in profit. If one firm reduces its price and the other does not, then the firm that reduces price will earn a profit of $50 million while the other firm will earn a profit of $5 million. If the firms can operate as a cartel, then
each firm will maintain its current price.
Which of the following is considered a natural barrier?
economies of scale
At the profit-maximizing output, total profit is:
efbc.
a closed shop is a business enterprise in which
employees must belong to the union before they can be employed.
Wage discrimination exists when individuals of __________ are paid different wage rates.
equal ability and productivity
Suppose there are two breakfast restaurants in your college town, Waffle Kingdom and Flip's Flapjacks, and they decide to operate collusively as a cartel. If both restaurants abide by the cartel's agreement, then each will earn $100,000 in profit. If both restaurants cheat on the cartel's agreement, then each will earn $25,000 in profit. If one restaurant cheats and the other abides by the agreement, then the cheater will earn a profit of $150,000 while the firm that abides will have a loss of $12,500. The most profitable combined outcome for the two restaurants would be
for both restaurants to abide by the cartel's agreement.
In the U.S. balance of payments, foreign purchases of assets in the United States are a:
foreign currency inflow.
A significant difference between a monopolistically competitive firm and a purely competitive firm is that the:
former sells similar, although not identical, products.
In the example presented by this graph, at what number of workers does the point of diminishing marginal product occur
fourth worker
The exchange rate system in use since the early 1970s is best described as a
freely floating or managed "dirty" floating exchange rate system
The infant mortality rate in the United States is _________________ the infant mortality rate in Canada.
greater than
For a consumer with insurance, the incentive to obtain more medical care is _____ compared to the those without insurance as the marginal cost of additional care with insurance is _____ relative to the marginal cost of additional care without insurance.
high; low
Tim Taylor is very reckless, but he neglected to tell his insurance provider about his risky behavior when buying his insurance policy. Over the last year, he used his insurance to pay for two broken arms, stitches, and a broken leg. When renewing Tim's policy, his insurance provider should require ____________ due to the _______________.
higher copayments; moral hazard problem
In order to sell more units, a monopolist must lower its prices. As shown in the table below, total revenue will initially ____________ and then ______________.
increase, decrease
As a percentage of GDP, health care spending in the United States has:
increased substantially since 1960.
The network effect arises when a buyer's preference for a product ____________ as the number of people buying it ______________.
increases, increases
Diminishing marginal product refers to marginal product that often initially _____ but eventually ______.
increases; decreases
Whenever average output produced per worker during a specific time period increases, then
labor productivity increases
The greater the area between the Lorenz curve and the diagonal in the Lorenz curve diagram, the:
larger is the Gini ratio and the greater is the degree of income inequality.
The more bowed out the Lorenz curve, the
less equal the income distribution.
The United States is likely to get increasingly ________ marginal health benefits as it increases its quantity and spending of health care because of ______________.
less; diminishing returns
The TANF program:
limits total lifetime welfare benefits to 5 years and requires able-bodied adults to work after receiving benefits for 2 years.
People with health insurance are __________ their quantity of doctor's office visits demanded during a flu epidemic compared to those without health insurance.
more likely to increase
In a single-payer system, the government covers the cost of
most health care through taxes.
The profit-maximizing output:
n
Which of the following are common reasons for trade being restricted?
national defense
Before deciding on a pricing strategy, Wallmart consults with a strategy team to understand what discounts the Doormart is offering. The model that BEST fits this industry is:
oligopoly
Defensive medicine refers to the idea that:
physicians may require unnecessary testing as a means of protecting themselves against malpractice suits.
In the graph below, which point represents quantity sold by monopolistically competitive firms in the long run, after advertising?
point 3
Economic profit in the long run is:
possible for a pure monopoly but not for a pure competitor.
Monopoly power measures the ability to set the ________ for a good.
price
At P3, this firm will:
produce 40 units and incur a loss.
The U.S. income-maintenance program consists of two kinds of programs. They are:
social insurance and public assistance, or "welfare."
The following table contains hypothetical data for the 2012 U.S. balance of payments. Answer the question on the basis of this information. All figures are in billions of dollars.
surplus of $20 billion.
Flexible exchange rates are determined by
the forces of supply and demand
If a firm in a purely competitive industry is confronted with an equilibrium price of $5, its marginal revenue:
will also be $5.
Chile should specialize in and export ________, and Germany should specialize in and export ________.
wine; beer
f this farmer is maximizing profit, his operating profit (or loss) is
$72
The profit-maximizing price for this firm is
$11.
Refer to Figure 13.8. If the government regulates Armstrong Cable so they can earn only a normal return (ATC pricing), the price would be set at
$13.00.
Entrepreneur's potential earnings as a salaried worker = $50,000Annual lease on building = $22,000Annual revenue from operations = $380,000Payments to workers = $120,000Utilities (electricity, water, disposal) costs = $8,000Value of entrepreneur's talent in the next best entrepreneurial activity = $80,000Entrepreneur's forgone interest on personal funds used to finance the business = $6,000Refer to the data. Creamy Crisp's implicit costs, including a normal profit, are
$136,000.
The average total cost of producing 3 units of output is
$16
The profit-maximizing price for the Memory Companyʹs high school yearbook is
$16.
This farmerʹs fixed costs are
$24.
Harvey quit his job at State University where he earned $45,000 a year. He figures his entrepreneurial talent or foregone entrepreneurial income to be $5,000 a year. To start the business, he cashed in $100,000 in bonds that earned 10 percent interest annually to buy a software company, Extreme Gaming. In the first year, the firm sold 11,000 units of software at $75 for each unit. Of the $75 per unit, $55 goes for the costs of production, packaging, marketing, employee wages and benefits, and rent on a building.
$825,000
What is the total cost of producing the profit maximizing level of output?
$9,000
The average variable cost of producing 3 units of output is:
$9.33
If you know that when a firm produces 10 units of output, total costs are $1,030 and average fixed costs are $10, then total variable costs are:
$930
The following is cost information for the Creamy Crisp Donut Company:Entrepreneur's potential earnings as a salaried worker = $50,000Annual lease on building = $22,000Annual revenue from operations = $380,000Payments to workers = $120,000Utilities (electricity, water, disposal) costs = $8,000Value of entrepreneur's talent in the next best entrepreneurial activity = $80,000Entrepreneur's forgone interest on personal funds used to finance the business = $6,000Refer to the data. Creamy Crisp's economic profit is
$94,000.
Under a flexible exchange rate system, an increase in the value of a domestic currency int terms of other currencies is referred to as
) an appreciation
Rapidly rising U.S. health care costs have:
) forced the growth of wages to keep pace. 2) encouraged outsourcing. 3) caused some employers to use more part-time and temporary workers. 4) done all of these.
You are the owner and only employee of a company that writes computer software that is used by gamblers to collect sports data. Last year you earned a total revenue of $90,000. Your costs for equipment, rent, and supplies were $60,000. To start this business you invested an amount of your own capital that could pay you a return of $40,000 a year.Refer to Scenario 7.1. Your economic profit last year was
-$10,000.
Refer to the above graph for a monopolist in short-run equilibrium. This monopolist will charge a price:
0B
At output level Q total cost is:
0BEQ + BCDE.
At output level Q total variable cost is:
0BEQ.
Which of the following would likely reduce income inequality?
A reduction in the number of high school dropouts.
Which of the following statements best describes the trends in the United States and the world regarding international trade?
As a percentage of GDP, the United States has been trading more internationally, and the rest of the world has also been trading more.
In the figure below, which demand curve represents the firm that has run the more successful advertising campaign?
Db
The Sherman Act of 1890 outlawed:
Restraint of trade and monopolization
Which of the following is a noncash transfer?
SNAP (food stamps).
The cornerstone of antitrust legislation in the U.S. is the:
Sherman Act
One feature of pure monopoly is that the demand curve:
Slopes downward
For which of the following income-maintenance programs is aggregate spending the greatest?
Social Security.
Economists argue that in treating patients:
both benefits and costs should be taken into account by physicians.
Refer to the diagrams, which pertain to monopolistically competitive firms. Short-run equilibrium entailing economic loss is shown by:
diagram c only
Under monopolistic competition, there are
no long-run barriers to entry of new firms.
A firm finds that at its MR = MC output, its TC = $1,000, TVC = $800, TFC = $200, and total revenue is $900. This firm should:
produce because the resulting loss is less than its TFC.
Refer to the above graph for a profit-maximizing monopolist. The firm will set its price at:
0J
f this farmer is maximizing profits, his total revenue will be
$180.
If you know that total fixed cost is $200, total variable cost is $600, and total product is 4 units, then average total cost must be:
$200
The following is cost information for the Creamy Crisp Donut Company:Entrepreneur's potential earnings as a salaried worker = $50,000Annual lease on building = $22,000Annual revenue from operations = $380,000Payments to workers = $120,000Utilities (electricity, water, disposal) costs = $8,000Value of entrepreneur's talent in the next best entrepreneurial activity = $80,000Entrepreneur's forgone interest on personal funds used to finance the business = $6,000Refer to the data. Creamy Crisp's total economic costs are:
$286,000.
You are the owner and only employee of a company that sets odds for sporting events. Last year you earned a total revenue of $100,000. Your costs for rent and supplies were $50,000. To start this business you invested an amount of your own capital that could pay you a return of $20,000 a year.
$30,000.
The total variable cost of producing 5 units is:
$37.
Billy Bob runs a seafood restaurant. Last year he earned $50,000 in revenue. He had explicit costs of $20,000. Billy Bob could have made $30,000 working for the county and could have received an additional $20,000 if he rented out his building and equipment. Calculate Billy Bob's implicit costs.
$50,000
This farmer would earn a zero operating profit if price was
$7.
The average total cost of five units of output is
$78
Refer to the data. The marginal cost of producing the sixth unit of output is:
$8
In Chile, the opportunity cost of 1 case of beer is
2 cases of wine.
Assume that a monopolist faces the demand schedule given below, and a constant marginal cost of $2 for each unit of output. To maximize profits, this monopolist would produce ____ units of output and charge a price of ____ per unit.
2 units; $5
Refer to the profits-payoff table for a duopoly. If initially firms X and Y are charging $5 and $4 respectively:
both firms would find it advantageous to collude to raise their prices by $1 each.
When comparing Germany and the United Kingdom to the United States, we could say the United States has a comparative advantage in _______ and _______ could be realized from trade
civilian aircraft;gains
The basic pupose of the Bretton Woods meeting was to
create a new international payment system
Suppose an oligopolistic producer assumes its rivals will ignore a price increase but match a price cut. In this case the firm perceives its:
demand curve as kinked, being steeper below the going price than above.
Compare long-run equilibrium in a market with monopolistic competition and a competitive market. Long-run equilibrium under monopolistic competition results in __________ output and a ________ price than in a perfectly competitive market.
less; higher
A good example of a monopolistically competitive market is
local restaurants
Assume for a competitive firm that MC = AVC at $12, MC = ATC at $20, and MC = MR at $16. This firm will:
minimize its losses by producing in the short run.
The economic term for a firm that is the sole buyer in a market is:
monopsonist.
The Taft-Hartley act
permits states to pass right-to work laws
Refer to Figure 15.4. In the long run in this monopolistically competitive industry
some firms will leave the industry until the remaining firms earn a normal profit.
When economists say that health care services are overconsumed, they mean that:
some resources now used in the health care industry could produce alternative goods and services that society values more highly.
Harvey quit his job at State University where he earned $45,000 a year. He figures his entrepreneurial talent or foregone entrepreneurial income to be $5,000 a year. To start the business, he cashed in $100,000 in bonds that earned 10 percent interest annually to buy a software company, Extreme Gaming. In the first year, the firm sold 11,000 units of software at $75 for each unit. Of the $75 per unit, $55 goes for the costs of production, packaging, marketing, employee wages and benefits, and rent on a building.Refer to the above information. The implicit costs of Harvey's firm in the first year were
$60,000
Harvey quit his job at State University where he earned $45,000 a year. He figures his entrepreneurial talent or foregone entrepreneurial income to be $5,000 a year. To start the business, he cashed in $100,000 in bonds that earned 10 percent interest annually to buy a software company, Extreme Gaming. In the first year, the firm sold 11,000 units of software at $75 for each unit. Of the $75 per unit, $55 goes for the costs of production, packaging, marketing, employee wages and benefits, and rent on a building.Refer to the above information. The explicit costs of Harvey's firm in the first year were
$605,000
The following is cost information for the Creamy Crisp Donut Company:Entrepreneur's potential earnings as a salaried worker = $50,000Annual lease on building = $22,000Annual revenue from operations = $380,000Payments to workers = $120,000Utilities (electricity, water, disposal) costs = $8,000Value of entrepreneur's talent in the next best entrepreneurial activity = $80,000Entrepreneur's forgone interest on personal funds used to finance the business = $6,000Refer to the data. Creamy Crisp's total revenues exceed its total costs, including a normal profit, by:
$94,000.
Refer to the diagram. At the profit-maximizing level of output, total cost will be
0BHE.
At the profit-maximizing output, total variable cost is equal to:
0CFE.
Social Security is financed:
by payroll taxes on employees and employers.
In oligopoly, firms
by virtue of their size, are able to influence price regardless of whether or not the product is differentiated or standardized.
Refer to the diagram for a pure monopolist. Monopoly price will be:
c
