Econ Final Exam
Monopolistic competition is characterized by
A large number of sellers with similar products
An increase in oil prices may cause
A reduction in the quantity of oil demanded
Higher income for buyers usually means
A rightward shift of the demand curve
The number of markets is
Always changing
Refer to the figure. In the market for medium cheese pizzas, the equilibrium price is
$5
Which of the following is part of the U.S. economy's safety net?
Social security
Which of the following is NOT part of an economy's financial markets?
Politician action committees
In perfect competition, P = MC means
Price equals marginal cost
Which of the following is most likely to be sold in a perfectly competitive market?
Wheat
The profit-maximizing rule says that any seller will expand output up to the point
Where marginal revenue equals marginal cost
What caused the decline in demand for red delicious apples?
Consumers found them to be tasteless
Profit is the difference between revenue and
Cost
The most consistent force for economic growth and progress is
Economic competition
Government action can cause a shift in
Either supply or demand
To determine whether a particular good is a normal good, a luxury good, or an inferior good, you would want to observe what happens to demand for the good when __________ changes.
Income
One strategy for long-term profit maximization is
Innovation
In a simple grass-mowing business, the lawn mower and the labor would be
Inputs
What word describes the goods and services that are used to produce outputs for a business?
Inputs
The goods or services purchased by a business for immediate use in the production process are known as
Intermediate inputs
What is the difference between revenue and cost?
Profit
In 2015 the gross domestic product of the United States was
17.9 trillion
The top _____% of U.S. households earn more than half of the country's income.
20
Inputs to production do NOT include
Average product
Output divided by the number of hours worked or by the number of workers is called
Average product
The long-lived physical equipment and structures that a business uses in its production process are called
Capital
Due to the existence of financial markets, which of the following does NOT represent a constraint on businesses that limits what they can produce?
Cash reserves
What phrase do economists use to describe the assumption that everything else about a situation stays the same, allowing only one variable, such as price, to change?
Ceteris paribus
The hours of work supplied by various types of workers are referred to by economists as
Labor
An example of a barrier to entry is
Lack of a key resource
In perfect competition, all businesses in a market produce at the point where ________ equals ________.
Market price; marginal cost
Economists generally assume that the main goal of most businesses in the economy is to
Maximize profits
Which of the following is an example of a product that is sold primarily in a local market?
Milk
In recent years, China and India have prospered economically by introducing
More competition through markets
A profit-maximizing monopolist will always charge _______ a perfect competitor would.
More than
What word describes the money that customers pay for the output of a business?
Revenue
One of the biggest benefits of a market-based economy is
The ability to adapt quickly to change
Market power is
The ability to raise prices above perfectly competitive prices
Fixed costs are also known as __________ costs because they are much harder for a business to change.
Long-term
Inferior goods are characterized by _____ demand as a result of increased income.
Lower
Which of the following is NOT an example of a barrier to entry?
Lower costs
Compared to businesses with market power, businesses in perfect competition will charge __________ prices and sell __________ output.
Lower; more
The demand schedule reports the quantity demanded at
Many different prices
After Hurricane Katrina, the supply curve for oil shifted to the left, and as a result
A new equilibrium price was reached
As one is beginning to learn economics, one should expect to learn
A new way of thinking about the world
For which pair of goods below would an increase in income have the same effect on both goods?
A normal good and a luxury good
Because of global warming, countries that are cooler may see ________ in the supply of grain and agricultural products.
A shift to the right
Who makes decisions and trade-offs in the face of scarce resources?
All of these are correct
Ceteris paribus, when used by economists, means
All other things equal
The average sale price of a home in the United States increased from $207,000 to $297,000 from 2000 to 2005. All else equal, we would expect that during the same time the quantity of new homes supplied
Also increased
What word describes the money that a business pays for its inputs?
Cost
The technology or knowledge necessary for a production process is called
Business know-how
The difference between long-term and short-term profit maximization is that, in the short term,
Businesses focus on achieving as much profit as they can, given that fixed costs cannot be changed
The individual quantity demanded is the amount the ________ is willing to ________ at a given price.
Buyer, purchase
The demand schedule is a description of the behavior of ________ in a market.
Buyers
Who competes with whom in a market?
Buyers compete with other buyers and sellers compete with other sellers
A demand shift affects
Buyers' willingness to purchase at various prices
How might a government cause a demand shift to the right?
By requiring consumers to purchase certain products
If two bodegas in a market agree verbally that they will both sell Fritos at a higher price, and neither will undercut the other, this is called
Collusion
If two or more oligopolistic companies work together to keep their prices high and split the market between them, this is called
Collusion
If June can earn $1,500 in revenue from painting two houses, how much can she earn in revenue from painting three houses? (Assume she is just one housepainter in a large market of housepainters, and that she can easily find a third customer.)
Exactly $2250
The selling prices of houses from 2003 to 2006 reflected which market condition?
Excess demand
Refer to the table. If the current price in this market is $2 then there is
Excess demand and pressure on the price to rise
In a market, buyers and sellers
Exchange goods and services for money
If the supply of a good increases, the equilibrium price of that good
Falls while quantity demanded rises
Nuclear power in the United States turned out to be
Far more expensive and troublesome than expected
Poorer countries started to develop economically when they
Figured out what the rest of the world wanted, and responded
By total economic output (gross domestic product), the United States ranks as the ______ largest economy in the world.
First
The short-term cost function assumes that
Fixed costs can't be changed
When necessary, a higher price will simultaneously ________ the quantity supplied and ________ the quantity demanded, thus reducing the amount of excess ________.
Increase; decrease; demand
The income and wealth gap in the United States has
Increased in recent years
In the short run, the quantity of available hotel rooms is not particularly responsive to changes in price because hotels take time to build and to destroy. This implies that the short-run supply of hotel rooms is
Inelastic
Deregulation in the United States began with what industry in the 1970s?
Interstate trucking
AT&T is an example of a business that used market power to
Invest in important research benefiting society
Refer to the table. In this market, the equilibrium price
Is between $2 and $3
________ is the amount of money a company receives for selling its product or service.
Revenue
When a business expands production and increases sales, what generally happens to revenue?
Revenue rises because the business is selling more output
In a market where businesses are earning high profits, new entrants will cause the supply curve to shift to the _________ and thus cause the market price to _________.
Right; fall
An increase in supply is shown graphically as a ________ shift of the supply curve, and as a result of an increase in supply, equilibrium price will ________.
Rightward; decrease
A luxury good is one whose demand ______ as income increases.
Rises sharply
Marginal cost generally ________ quantity produced.
Rises with
The market for automobiles in China has experienced tremendous growth primarily because of
Rising incomes in China
The market price can sometimes be difficult to identify due to which of the following?
Sale prices and negotiated prices
The way that economists explain it, the worker is a ________ in the________ market.
Seller; labour
If a town begins requiring builders to build on one-acre lots, instead of on smaller quarter-acre lots, the supply curve for new homes will
Shift to the left
After Hurricane Katrina, the supply curve for gasoline
Shifted to the left
In short-run profit maximization, businesses focus on the ______, holding fixed costs constant.
Short-term cost function
Variable costs are also known as
Short-term costs
Variable costs are relevant for
Short-term everyday decision making
If all of the restaurants in a small town colluded and agreed to raise dinner prices, this would lead to a loss to society because
Some dinners that could be served would not be served
What might happen if the market price for haircuts increased?
Some hair salons might hire more stylists
______ shows the potential cost for each level of output.
The cost function
The textbook says that which of the following is among the key forces shaping today's economy?
The evolution of financial markets
One measurement of economic prosperity is
The gross domestic product
A market demand schedule for hamburgers would NOT include which of the following?
The labor market
If the quantity of a good that buyers are willing to buy rises sharply when the price falls, this illustrates what principle?
The law of demand
Natural monopolies include
The local water company
In the process of long-term profit maximization, the business makes decisions under the assumption that it can
Vary all the inputs
A laissez-faire economy has
Very little government regulation of the economy
Technological change is generally
Very uneven
Financial markets do NOT include which of the following?
Nonprofit organizations
A market supply schedule
Combines the quantities supplied by all businesses in a market
An example of an oligopoly is the
Airline industry
An example of variable costs is
Hourly labor
The law of demand
Is a general tendency
The main objective of a business in a market economy is
Profit maximization
Refer to Table 5.1, which gives Farmer McColl's marginal cost function for barley. If Farmer McColl is currently producing 20 bushels of barley, which of the following is the market price for a bushel of barley?
$0.60
Refer to Table 5.1, which gives Farmer McColl's marginal cost function for barley. If Farmer McColl is currently producing 25 bushels of barley, which of the following could be the market price for a bushel of barley?
$0.75
If a local car dealership can sell 8 cars per day at a price of $25,000 each, but must reduce the price to $24,000 to sell one more car, what is the marginal revenue of the 9th car?
$16,000
If a local diner can sell 50 burgers per day at a price of $5 each, but must reduce the menu price to $4.95 to sell one more burger, what is the marginal revenue of the 51st burger?
$2.45
If Sara can produce 25 muffins for a total cost of $15, but her production process is subject to increasing marginal costs, which of the following could be the total cost of producing 100 muffins?
$80
__________ is paid communication with potential customers in a public medium, such as newspapers and television.
Advertising
Refer to Table 5.1, which gives Farmer McColl's marginal cost function for barley. Suppose Farmer McColl is one of 20 farmers in the barley market, and all of the farmers have identical marginal cost functions. If the market price of barley is $1.00 per bushel, which of the following could be the total amount of barley produced in the market?
700
Renewable energy sources provided _____ of U.S. energy needs as of 2013.
9.4 percent
Hurricane Katrina caused refineries and oil rigs in New Orleans and in the Gulf of Mexico to close down. In the market for gasoline, Hurricane Katrina caused
A decrease in supply
Movies delivered over the Internet might have what effect on the market for movies in movie theaters?
A demand shift to the left
Stricter loan standards in the mortgage lending sector could cause
A demand shift to the left in the housing market
How does a lower price alleviate the problem of excess supply?
A lower price decreases the number of potential sellers and increases the number of potential buyers
A market where there is only one seller, and buyers have no good alternative, is called
A monopoly
The local department store might have been considered ________ before technological change.
A monopoly
It could be argued that Microsoft's two main products, Windows and Office, are examples of
A natural monopoly
For the United States, one important benefit of foreign trade is
Access to cheaper goods and services
Which of the following is an example of a profit-maximizing business?
An accountant who makes her living preparing tax returns for other people
In contrast to the law of supply, sometimes ______ can reduce the quantity supplied.
An increased price
Besides the gross domestic product, another measure of how well an economy is doing is
Annual household income
Global markets consist of buyers and sellers
Anywhere in the world
An oligopoly occurs when there
Are only a few sellers in a market
Monopolies generally ________ technology and globalization
Are reduced in number by
Refer to the figure. Which of the following is true?
At a price of $5, there would be neither excess demand for nor excess supply of pizza
In 2004, the worldwide demand curve for cement moved to the right. What does this mean?
At any price, the quantity demanded was higher
In a simple lawn-mowing business where you have a push mower and labor as input, what would be the impact of adding an additional input in the form of a gas self-propelled mower (capital)?
Average product would rise, and marginal product would rise
A __________ is anything that might make it more difficult for a competitor to enter a market.
Barrier to entry
A ___________ makes it more difficult for a competitor to enter a market.
Barrier to entry
Government regulations, such as zoning laws, can act as
Barriers to entry
Refer to Table 5.1, which gives Farmer McColl's marginal cost function for barley. If the current market price for barley is $1.00 per bushel, how much barley should Farmer McColl produce?
Between 30 and 40 bushels
If supply is inelastic, then a demand shift will have a ____ effect on _______ than on quantity.
Bigger; price
Which is NOT an example of inelastic supply?
Bottled water
If the interest rates on new car loans increase, the quantity of new cars supplied will
Decrease
In the long run,hotel room prices that are falling as a result of excess supply will ______ the quantity of hotel rooms supplied in a market.
Decrease
When a demand curve shifts to the right
Demand has increased, so equilibrium price increases, and equilibrium quantity increases
A table showing how much lemonade consumers are willing to buy at different prices would be best described as a
Demand schedule
The demand curve is the graphical counterpart to the
Demand schedule
Higher interest rates can cause the ________ curve for new cars to ________.
Demand; shift to the left
Suppose the government decides to eliminate some, but not all, of the rules that govern how investment banks conduct their business. This would be an example of
Deregulation
A supply schedule illustrates the quantity supplied at
Different selling prices
If you add too many inputs, your business may experience
Diminishing marginal product
Which of the following is generally NOT an example of a zero price?
Downloading another MP3 from iTunes
The law of demand suggests that most demand curves will be
Downward-sloping
Many times, technology is ________the equipment a company buys.
Embodied in
Most markets, if left alone, will tend toward
Equilibrium price
The price at which the quantity supplied equals quantity demanded is the
Equilibrium price
The price at which the quantity supplied equals the quantity demanded is the
Equilibrium price
On the basic supply-demand graph, the point at which the demand curve and the supply curve intersect is located at
Equilibrium price and equilibrium quantity
In economics, satiation means
Eventually the marginal value of the good consumed decreases
Which of the following countries have safety nets that offer better retirement benefits and more job security than does the U.S. safety net?
France and Germany
Natural resources, such as crude oil and fish, are often sold in ________markets.
Global
The textbook says that which of the following is among the key forces shaping today's economy?
Globalization
Globalization is the exchange of ________________ among countries.
Goods, ideas, services, and people
Refer to the table. In this market, the equilibrium price occurs where quantity demanded and quantity supplied are both
Greater than 80 but less than 100
When businesses have market power, they are able to charge a price higher than the price charged by a business in perfect competition. Thus,the market power equilibrium on a diagram will be
Higher and to the left of the perfect competition equilibrium
A demand shift to the right generally leads to
Higher prices and higher quantities
Which of the following is NOT mentioned in the textbook as a constraint that affects the economy?
Households are limited in what they can purchase by government regulations
_________ collusion can occur even when oligopolistic businesses do not directly communicate with each other.
Implicit
The influx of inexpensive, reliable cars from Japan in the 1980s forced domestic producers to
Improve the reliability and cost of their cars
The law of supply says that higher prices tend to ________ the quantity of a good or service supplied, assuming no other changes.
Increase
Economics competition can have which of the following negative effects on a domestic economy?
It drives down wages and profits
Theodore can make 6 pizzas in one hour. If Theodore's labor has a diminishing marginal product, what must be true about the number of pizzas that Theodore can make in three hours?
It must be less than 18
If the market price of $10 per lawn leads to the quantity supplied of 15 mowed lawns, and the market price of $15 per lawn leads to 25 lawns mowed, what does the supply curve look like?
It slopes up and to the right
Households are generally buyers in the markets for products and sellers in ________ markets.
Labor
Inputs used by a business in the production process include
Labor
The price of labor per unit times the amount of labor used is called
Labor cost
The total cost of production is determined by adding the costs of which of the following?
Labor, capital, land, intermediate inputs, and business know-how
Between 2000 and 2007, many Americans borrowed more money than they could afford to pay back. What was the impact of this borrowing on the economy?
Large losses at financial institutions
Top-down management of an economy by the government has consistently
Led to low rates of economic growth
Over the past 30 years, most countries have moved toward
Less government regulation of the economy
Buying a used textbook from a fellow student is an example of what type of market?
Local
The textbook provides examples of markets that are
Local, national, and global
Marginal revenue is generally __________ for businesses that do not operate under conditions of perfect competition.
Lower than the price
Suppose a tenant sues his landlord in court. Does this count as a market transaction?
No, because there are no voluntary exchanges taking place
Governments generally take responsibility for
Making sure the economy remains healthy
If the average market price for haircuts increases, all else equal, which of the following is LEAST likely to occur as a result?
Many salons will go out of business
In perfect competition, a profit-maximizing business will expand production until its _________ equals the market price.
Marginal cost
The added expense of producing one more unit of output is called the
Marginal cost
_________ is the added cost to produce one more unit of output.
Marginal cost
The extra amount of output a business can generate by adding one more hour of labor is called
Marginal product
The additional money a business gets from producing and selling one more unit of output is
Marginal revenue
A profit-maximizing business will increase production as long as
Marginal revenue exceeds marginal cost
As the market price of a good rises, businesses will respond by producing more of that good because
Marginal revenue exceeds marginal cost after the price increase
The gap between quantity supplied and quantity demanded is usually closed over time by the
Market mechanism
From World War II to the early 1970s, GM, Ford, and Chrysler enjoyed
Market power
________ is the ability to raise prices above the level that perfect competition would produce by restricting the quantity supplied
Market power
What happens to the marginal product of labor if more capital is added to a production process?
More capital generally causes the marginal product of labor to rise
A _______ monopoly is an industry in which it makes economic sense to have only one provider.
Natural
A good example of monopolistic competition is
Neighborhood restaurants
A profitable business will attract
New competitors
Opportunity cost is defined as the value or benefit of the
Next best alternative
When you have to give up one opportunity in order to choose another, the value of the opportunity that is not chosen is called the
Opportunity cost
In a simple lawn-mowing business where you have a push mower and labor as input, what would be the impact on output of adding an additional input in the form of a gas self-propelled mower (capital)?
Output would increase
Businesses can raise their average product by investing in new equipment, by reorganizing work to be more efficient, or by
Outsourcing labor
Refer to the table, which shows the number of MP3 downloads demanded per month for the students at a certain university. Which of the following statements does NOT explain why the quantity demanded was not higher for a price of $0?
People would rather pay for the downloads
In the long run, monopolistic competition starts to look like
Perfect competition
The four main types of market structure are
Perfect competition, monopolistic competition, oligopoly, and monopoly
If the music industry was perfectly competitive, then all performers would
Play the same music and charge the same price for concerts
What name is given to the economic process of turning inputs into outputs that a business will sell to customers?
Production
Economists think of a business as a machine, where you put inputs in one end and get outputs from the other end. This metaphor is called the
Production function
The __________ summarizes the output of the business, given the level of inputs.
Production function
Market equilibrium is the point where quantity supplied and ________ are reasonably in balance.
Quantity demanded
What would it mean if a demand curve sloped upward and to the right?
Quantity demanded increases as the price increases
If a frost suddenly destroyed a big portion of this year's crop of oranges, a good with highly elastic demand, what would be the impact on quantity demanded and price?
Quantity demanded would decrease a lot, and price would remain stable or rise slightly
Deregulation is the process of _________ government control over industries.
Reducing
Which of the following goods is NOT an example of a good that carries an advance purchase discount?
Refrigerated milk
Companies will often spend considerable amounts of money to create a ________with respect to their brand name.
Reputation effect
Marginal ________ is the added revenue from producing and selling one more unit of output.
Revenue
A business with market power may
Sometimes use high profits to research new technologies
In a movement along the demand curve, the demand schedule
Stays the same, but the price changes
Movement along the demand curve means that the demand schedule ________ and the price ________.
Stays the same; changes
Technological change has always been the most critical factor in raising living standards, even going as far back as the development of the
Steam Engine
Which of the following is LEAST likely to be an example of a normal good?
Store-branded breakfast cereal
Between 2000 and 2007, many more furniture companies started producing furniture more cheaply in China. As a result, the
Supply curve for furniture shifted to the right
If a new major oil field is discovered in Africa, the world __________ curve for oil would shift to the __________.
Supply; right
Which of the following is NOT mentioned in the textbook as one of its three goals?
Teaching how to successfully invest money in the stock market
Natural monopolies have been slowly eroded by
Technological change
The textbook says that which of the following is among the key forces shaping today's economy?
Technological change
Which of the following can help explain why countries are becoming more and more interconnected?
Technological change
Sale prices mean that a good's price is
Temporarily reduced
In perfect competition, higher-cost businesses
Tend to go out of business if unable to adjust
An example of a company that uses financial markets to raise money is
The Ford Motor Company
Which is NOT an example of government intervention in the economy?
The Great Recession
Which of the following is NOT an example of a good or service provided by a market?
The air we breathe
Which of the following is an example of technological change?
The personal computer
A vertical supply curve would mean that
The price does not affect the quantity supplied
Demand is inelastic if
The quantity demanded does not change very much even if the price changes dramatically
Based on the law of demand, what would you expect to happen if the price of gasoline were to rise to $8.00 per gallon?
The quantity demanded would decrease
Refer to the table, which shows the number of MP3 downloads demanded per month for the students at a certain university. What would happen to the quantity of MP3s demanded at a price of $2 if the university's enrollment were to increase significantly?
The quantity demanded would increase above 200 because the market demand schedule is the sum of individual demand schedules, and more students means more individual demand schedules for MP3s
According to the law of demand, when the price of a good falls
The quantity of the good demanded tends to rise
If federal financial aid were severely reduced, what would happen to the equilibrium quantity of education supplied by educational institutions?
The quantity supplied would fall
The supply schedule is a description of
The relationship between quantity supplied and market price
The market for smartphones did not exist 30 years ago because
The technology did not exist to produce smartphones
The market price is
The typical price at which a good or service sells
What is the name given to the price in a labor market?
The wage rate
Federal taxes have which of the following effects on the economy?
There is no definitive agreement on the effect
Most people justifiably have mixed feelings about the financial markets because
They can experience violent swings
The easiest way to have a monopoly today is
To have the government protect you
In a centrally planned economy, decisions are made by
Top-level government officials
Supply curves are generally
Upward-sloping
The gross domestic product is calculated by adding up the
Value of all goods and services produced within the nation
Can economic competition be viewed as a positive force for growth and progress?
Yes, as long as it is conducted within a fair set of rules
Refer to the table, which shows the number of MP3 downloads demanded per month for the students at a certain university. Does this demand schedule conform to the law of demand?
Yes, because as the price falls, the quantity demanded rises
Does the law of supply apply to labor markets?
Yes, because some workers who are less committed to the labor force will decide to work if wages increase
Suppose Kyra purchases and downloads an eBook from Amazon.com. Does this count as a market transaction?
Yes, because there is a voluntary exchange of money for a good or service
Does the stock market resemble a perfectly competitive market?
Yes, the stock market does resemble a perfectly competitive market
