ECON CHAPTERS 16,17,11,12,13,15,14,18

Which of the following are used to provide public goods? I. voluntary contributions II. taxes III. self-interested business firms

I, II, and III.

Budweiser is a widely recognized brand name. During the Super Bowl each year, this beer company has many of the most successful ads. Which of the following is TRUE about advertising for Budweiser?

It is designed to increase the demand for Budweiser.

What is difficult about using cost-benefit analysis to estimate the level of a public good that will maximize social welfare?

It is difficult to estimate the marginal social benefits of supplying a public good.

(Figure: Short-Run Monopoly) Look at the figure Short-Run Monopoly. The profit-maximizing rule is satisfied by the intersection at point:

L.

The U.S. government health insurance program for people aged 65 years and older is:

Medicare

_____ firms have the most market power.

Monopoly

(Figure: Short-Run Monopoly) Look at the figure Short-Run Monopoly. The profit-maximizing price is price:

N.

A Pigouvian tax can lead to the efficient level of production and consumption of:

a common resource.

The best example of a public good is:

a court of law.

The term diminishing returns refers to:

a decrease in the extra output due to the use of an additional unit of a variable input when all other inputs are held constant.

An industry that consists of two firms is:

a duopoly

In a monopolistically competitive industry:

a firm maximizes profits when MR = MC yet P > MC

Which of the following goods is most likely a common resource?

a public park

A monopoly is a market characterized by:

a single seller.

To be called an oligopoly, an industry must have:

a small number of interdependent firms

A firm that is in an oligopoly knows that its _____ affect its _____ and that the _____ of its rivals will affect it.

actions; rivals; reactions

Suppose ABC Health is a private health insurance company that offers an identical policy to all customers. Each customer pays a premium equal to the average consumer's annual medical expenses. This is a system that has the potential to fail because of the _____ problem.

adverse selection

Which of the following is most likely to be observed when firms engage mainly in nonprice competition?

advertising and product differentiation

If external costs exist, the competitive free market:

allocates resources inefficiently.

The best example of a private good is:

an automobile.

Which of the following goods BEST fits the characteristics of a private good?

an ice-cream cone

If a nation's Gini coefficient is rising over time, it is an indicator of:

an increase in income inequality.

If all firms in an industry are price takers:

an individual firm cannot alter the market price even if it doubles its output.

Attempts by the federal government to prevent the exercise of monopoly power in the United States are known as _____ policy.

antitrust

Conditions that keep new firms out of a monopoly market are:

barriers to entry.

In the classic prisoners' dilemma with two accomplices in crime, the Nash equilibrium is for:

both to confess

The best example of an artificially scarce good is:

cable television programming.

If a perfectly competitive firm is producing a quantity where MC > MR, then profit:

can be increased by decreasing production

The marginal social benefit of pollution:

can be measured as the additional gain to society from one additional unit of pollution

Large barriers to entry in the gas station business explain why the two only gas stations in a small town:

can earn an economic profit in the long run.

In the long run, monopolistically competitive firms:

cannot earn an economic profit

Price discrimination is the practice of:

charging different prices to buyers of the same good.

The best example of a common resource is:

clean water.

If a good is subject to the free-rider problem and an inefficiently high level of consumption, the good must be a(n):

common resource.

Some economists think that advertising is a waste of resources because:

consumers may buy things they do not need

Zoe's Bakery determines that P < ATC and P > AVC. In the short run, Zoe should:

continue to operate even though she is taking an economic loss.

Think about running a restaurant. Probably:

cooks and hosts are variable resources.

An inefficient allocation of resources will occur when:

decision makers are not faced with the full benefits and costs of their choices.

Suppose the dry-cleaning market is monopolistically competitive and economically profitable this year. In the long run, the demand for any one firm's dry-cleaning services will _____ as more firms enter the industry, causing economic profits to _____.

decrease; fall to zero

The marginal benefit of pollution emissions _____ as the quantity of pollution emissions _____.

decreases; increases

The difference between total revenue and total cost is:

economic profit or loss

The most important source of oligopoly in an industry is:

economies of scale.

Becky works for a large grocery store that provides a health insurance program to all workers. This is an example of:

employment-based health insurance.

In the short run, a monopolistically competitive firm produces at the optimal level of output and is earning positive economic profits. In the long run, the _____ of firms shifts the firm's demand and marginal revenue curves _____ the firm's level of output and _____ the price it can charge until price equals average total cost.

entry; leftward, decreasing; decreasing

The slope of the total revenue curve is:

equal to marginal revenue and is constant under perfect competition.

Marginal revenue:

equals the market price in perfect competition.

If firms are taking economic losses in the short run, firms will leave the industry, industry output will _____, and economic losses will _____ in the long run.

fall; fall

In 2012, which of the following demographic groups had the HIGHEST poverty rate?

female-headed families with no husband present

A _____ is an organization that produces goods or services for sale.

firm

Overt collusion exists if:

firms agree openly on price and output and they jointly make other decisions aimed at achieving monopoly profits

In monopolistic competition:

firms are aware of their strategic interdependence.

When economic profits in an industry are zero:

firms are doing as well as they could do in other markets.

The marginal social benefit received from pollution is equal to its marginal social cost in the market for highly polished glass. In this situation:

firms in the market produce the socially optimal level of pollution.

If firms are making positive economic profits in the short run, then in the long run:

firms will enter the industry.

A natural monopoly exists whenever a single firm:

has economies of scale over the entire range of production that is relevant to its market.

In monopolistic competition, each firm:

has some ability to set the price of its differentiated good.

Children raised in poverty are more likely to live in poverty as adults than are other children, because low income is highly correlated with higher:

high school dropout rates, risk of mental problems and behavioral disorders, and rates of illness and hospitalization

Food stamps, Medicaid, and housing subsidies are all:

in-kind transfers

Perfectly competitive firms will:

increase output up to the point that the marginal benefit of an additional unit of output is equal to the marginal cost

Progress in medical science has contributed to _____ health care costs.

increasing

Suppose that you build a high-speed, magnetically powered transportation system from New York to Los Angeles, and you are the only firm providing this service. High fixed costs resulting from the enormous quantity of capital used in this system enable decreasing average cost for any conceivable level of demand. Your monopoly would result from:

increasing returns to scale.

No individual is willing to pay to provide the efficient level of a public good, since the:

individual's marginal benefit is less than the marginal social benefit

Community rating is a regulation that requires:

insurance companies to offer the same policies for the same premium to everyone, regardless of medical history.

The negative income tax :

is a program in which low-income working families receive income supplements rather than having to pay taxes

A negative externality:

is an uncompensated cost imposed by an individual or firm on others.

If a perfectly competitive firm is producing a quantity where MC = MR, then profit:

is maximized.

A good is most likely to be artificially scarce if:

it is excludable but nonrival.

If a monopolist can engage in perfect price discrimination:

it produces at the socially efficient level.

An industry with production that generates external costs produces a quantity of output that is:

larger than the socially optimal quantity.

Compared to a generation ago, benefits from public aid programs, adjusted for inflation, are:

less

Price-discriminating firms will impose a price structure that offers customers with a _____ demand a _____ price and offers customers with a(n) _____ demand a _____ price.

less elastic; higher; more elastic; lower

A community college charges lower tuition fees to town residents than to nonresidents. This pricing strategy increases the profits of the community college. Using this information, we can conclude that nonresidents must have a _____ demand for attending the community college than residents.

less price-elastic

A monopolist is likely to produce _____ and charge _____ than a comparable perfectly competitive firm.

less; more

In many cities you can stay at a Holiday Inn in the downtown area, in a suburban community, or near the airport. These Holiday Inn establishments are examples of product differentiation by:

location

In perfect competition, the assumption of easy entry and exit implies that in the _____ run all firms in the industry will earn _____ economic profits.

long; zero

One characteristic of a perfectly competitive market is that there are _____ sellers of the good or service.

many

Studies of family income over time reveal that:

many people who start out at the bottom of the income ladder when they are young move up the income ladder as they age and move down again when they retire.

The slope of the total cost curve is:

marginal cost

The profit-maximizing level of output for a perfectly competitive firm in the short run occurs where _____ equals _____.

marginal cost; price

The _____ is the increase in output that is produced when a firm hires an additional worker.

marginal product

The change in total output resulting from a one-unit increase in the quantity of an input used, holding the quantities of all other inputs constant, is:

marginal product

At a monopoly's profit-maximizing level of output:

marginal revenue equals marginal cost.

When the allocation of resources is such that a different allocation would increase society's welfare, economists say:

market failure has occurred.

The problem with community rating is that it:

may cause adverse selection.

A _____ program is one for which the recipient qualifies on the basis of _____.

means-tested; income

When a perfectly competitive firm is in long-run equilibrium, the firm is producing at _____ cost.

minimum long-run average total

Which of the following is an example of a nonexcludable good?

national defense

The best example of a public good is:

national defense.

Most electric, gas, and water companies are examples of:

natural monopolies

Microsoft and its operating system are often cited as an example of a company that grew into a monopolist through:

network externalities.

An industry with a few interdependent firms is best described as an example of:

oligopoly.

The long run is a planning period:

over which a firm can consider all inputs as variable.

A cartel is an example of:

overt collusion

Price discrimination can occur in all of the following market structures EXCEPT:

perfect competition.

Which of the following is NOT a source of product differentiation?

price

External benefits are associated with the production of batteries . Without government regulation, the market will:

price batteries at less than the marginal social benefit.

Microsoft sets prices for its new line of computers, and Dell and HP follow. This practice is known as:

price leadership.

Volunteer fire departments are good examples of the _____ provision of _____.

private; public goods

In contrast to perfect competition, a monopoly:

produces less at a higher price.

In the short run, if P = ATC, a perfectly competitive firm:

produces output and earns zero economic profit.

Collusive agreements are typically difficult for cartels to maintain because each firm can increase profits by:

producing more than the quantity that maximizes joint profits

The downward-sloping demand curve for a monopolistically competitive firm:

reflects product differentiation.

In the United States, the mobility between income groups is:

relatively high.

Those who are critical of advertising argue that it:

results in higher prices to consumers.

Suppose a perfectly competitive market is suddenly transformed into one that operates as a monopoly market. We would expect price to _____, output to _____, consumer surplus to _____, producer surplus to _____, and deadweight loss to _____.

rise; fall; fall; rise; rise

As the quantity of pollution rises, its marginal social cost:

rises.

One way the government of Alaska could prevent an inefficiently large production of crab fishing would be to:

sell exclusive licenses for the right to fish.

Suppose that some firms in a perfectly competitive industry earn negative economic profits. In the long run, the:

short-run industry supply curve will shift to the left

In the short run:

some inputs are fixed and some inputs are variable.

Nonprice competition is more prevalent in an oligopoly when there is (are):

tacit collusion

An unwritten, unspoken agreement through which firms limit competition among themselves is called:

tacit collusion.

If a California avocado stand operates in a perfectly competitive market, that stand owner will be a price:

taker

Taxes are a more effective method of controlling pollution than environmental standards because:

taxes encourage reducing pollution at minimum cost.

A monopoly is most likely to be temporary if the monopoly power is derived from:

technological change.

Health care in the United States is DIFFERENT FROM that of other wealthy countries in all of the following ways EXCEPT that:

the United States is the only country that provides government health care.

Automobile emissions generate pollution, have costs, and cause discomfort to residents of a city. In this case:

the externality can be internalized by imposing a specific tax on drivers.

The free-rider problem is a direct result of:

the inability to exclude nonpayers.

The demand curve for a monopoly is:

the industry demand curve.

Tacit collusion is difficult to achieve in practice:

the larger the number of firms in the industry

The efficient quantity of pollution emissions occurs where:

the marginal social benefit of pollution is equal to the marginal social cost of pollution.

The additional cost imposed on society as a whole by an additional unit of pollution is:

the marginal social cost of pollution.

Market structures are categorized by:

the number of firms and whether products are differentiated.

The socially optimal quantity of pollution is:

the quantity whose marginal social cost is equal to the marginal social benefit.

Public goods should be produced up to the point at which the marginal cost of production equals:

the sum of the individual marginal benefits from all consumers of that unit.

Which of the following is NOT a leading cause of poverty in the United States?

the welfare system

A monopolistically competitive industry, such as corn snack chips, and a perfectly competitive industry, like wheat farming, are alike in that:

there are many firms in each industry.

If government officials set an emissions tax too high:

there will be too little pollution.

Because monopoly firms are price setters:

they can sell more only by lowering price.

When individuals take external costs and benefits into account:

they internalize the externality.

Among the drawbacks of brand names is the fact that:

they may encourage the consumption of expensive substitutes for generic items.

An advantage of tradable emissions permits is that:

they provide incentives for firms to develop technologies that are less polluting.

When a firm responds to a rival's cheating by cheating and to a rival's cooperation by cooperating, that firm is practicing a _____ strategy.

tit-for-tat

A copper mining operation discharges waste products into a river and causes higher costs and discomfort to downstream users of the water for which they are not compensated. In this case:

too much of society's resources is being used to produce copper.

A market economy will produce _____ without any government regulation.

too much pollution

Total revenue is a firm's:

total output times the price of that output.

The licenses that are exchangeable and that enable the holder to pollute up to a specified amount during a given period are called:

tradable emissions permits

If two firms are identical in all respects except that one has more of the fixed input capital than another, the total product curve for the firm with more capital:

will lie above the total product curve for the firm with less capital.

Suppose the elasticity of demand for tickets to Broadway shows is 2.0 for men and 0.3 for women. To use price discrimination to increase profits, the producers should charge higher prices to _____ because their demand is _____.

women; inelastic

(Table: Production Function for Soybeans) Look at the table Production Function for Soybeans. Assume that the fixed input, capital, is 10 acres of land and a tractor, which have a combined cost of $150 per day. The cost of labor is $100 per worker per day. The total cost of producing 75 bushels of soybeans is:

$650

(Figure: Payoff Matrix for Ajinomoto and ADM) Look at the figure Payoff Matrix for Ajinomoto and ADM. The optimal combination for maximum combined profit occurs when ADM produces _____ million pounds and Ajinomoto produces _____ million pounds.

30; 30

(Table: Labor and Output) Look at the table Labor and Output. The marginal product of the fifth worker is:

4.

(Figure: Payoff Matrix for Ajinomoto and ADM) Look at the figure Payoff Matrix for Ajinomoto and ADM. The Nash equilibrium combination occurs when ADM produces _____ million pounds and Ajinomoto produces _____ million pounds.

40; 40

The Herfindahl-Hirschman index equals _____ when _____ have (has) _____ of the market.

5,000; two firms each; 50%

(Table: Labor and Output) Look at the table Labor and Output. The marginal product of the fourth worker is:

6.

In most wealthy countries excluding the United States, the government pays _____ of medical costs.

70% to 80%

Which of the following transactions is a transfer payment?

A senior citizen receives a Social Security payment

Which of the following cost concepts is correctly defined?

ATC = AVC + AFC

The proposition that if bargaining is costless, the market can achieve an efficient outcome is the:

Coase theorem.

If a perfectly competitive firm increases production from 10 units to 11 units and the market price is $20 per unit, total revenue for 11 units is:

$200

(Figure: The Average Total Cost Curve) Look at the figure The Average Total Cost Curve. The total cost of producing three pairs of boots is approximately:

$216

(Table: Production Function for Soybeans) Look at the table Production Function for Soybeans. Assume that the fixed input, capital, is 10 acres of land and a tractor, which have a combined cost of $150 per day. The cost of labor is $100 per worker per day. The total cost of producing 25 bushels of soybeans is:

$250

If a perfectly competitive firm sells 10 units of output at $30 per unit, its marginal revenue is:

$30.

(Table: Production Function for Soybeans) Look at the table Production Function for Soybeans. Assume that the fixed input, capital, is 10 acres of land and a tractor, which have a combined cost of $150 per day. The cost of labor is $100 per worker per day. The variable cost of producing 60 bushels of soybeans is:

$300

(Table: Production Function for Soybeans) Look at the table Production Function for Soybeans. Assume that the fixed input, capital, is 10 acres of land and a tractor, which have a combined cost of $150 per day. The cost of labor is $100 per worker per day. The total cost of producing 45 bushels of soybeans is:

$350

When a cherry orchard in Oregon adds a worker, the total cost of production increases by $24,000. Adding the worker increases total cherry output by 600 pounds. Therefore, the marginal cost of the last pound of cherries produced is:

$40.

(Figure: The Average Total Cost Curve) Look at the figure The Average Total Cost Curve. The total cost of producing five pairs of boots is approximately:

$408

(Table: Production Function for Soybeans) Look at the table Production Function for Soybeans. Assume that the fixed input, capital, is 10 acres of land and a tractor, which have a combined cost of $150 per day. The cost of labor is $100 per worker per day. The total cost of producing 60 bushels of soybeans is:

$450

(Table: Total Cost Data) Look at the table Total Cost Data. What is the total fixed cost for this bicycle firm?

$50

Children in low-income families that can't afford insurance but are above the poverty threshold are covered by:

SCHIP (State Children's Insurance Health Program)

The 1890 law intended to prevent the establishment of more monopolies and to break up existing ones in the United States was the:

Sherman Antitrust Act

Which of the following statements is NOT characteristic of perfect competition?

There are many producers; one firm has a 25% market share, and all of the remaining firms have a market share of less than 2% each.

(Table: Production Function for Soybeans) Look at the table Production Function for Soybeans. Assume that the fixed input, capital, is 10 acres of land and a tractor, which have a combined cost of $150 per day. The cost of labor is $100 per worker per day. The fixed cost of producing 25 bushels of soybeans is:

$100

(Table: Production Function for Soybeans) Look at the table Production Function for Soybeans. Assume that the fixed input, capital, is 10 acres of land and a tractor, which have a combined cost of $150 per day. The cost of labor is $100 per worker per day. The variable cost of producing 25 bushels of soybeans is:

$100

(Table: Total Cost Data) Look at the table Total Cost Data. What is the total variable cost for this bicycle firm when the firm produces 5 bicycles?

$190

(Table: Production Function for Soybeans) Look at the table Production Function for Soybeans. Assume that the fixed input, capital, is 10 acres of land and a tractor, which have a combined cost of $150 per day. The cost of labor is $100 per worker per day. The total cost of producing 70 bushels of soybeans is:

$550

(Table: Production Function for Soybeans) Look at the table Production Function for Soybeans. Assume that the fixed input, capital, is 10 acres of land and a tractor, which have a combined cost of $150 per day. The cost of labor is $100 per worker per day. The variable cost of producing 45 bushels of soybeans is:

$200

(Figure: Short-Run Monopoly) Look at the figure Short-Run Monopoly. The marginal cost of producing the profit-maximizing quantity is cost:

P

Provided that there are no external benefits or costs, resources are efficiently allocated when:

P = MC.

In the short run, a perfectly competitive firm produces output and earns an economic profit if:

P > ATC

(Figure: Short-Run Monopoly) Look at the figure Short-Run Monopoly. The profit-maximizing quantity of output is quantity:

R