Econ

For years, Amazon.com, an Internet bookseller, had no profits and was incurring annual losses. Still, the stock market valued the company very highly. One reason for this was that investors believed that: A. Amazon.com was in a winner-take-all market. B. Amazon.com faced fierce foreign competition. C. the Internet was a perfectly competitive market. D. on the Internet brand recognition is unimportant.

A. Amazon.com was in a winner-take-all market.

Which of the following is the best example of a long-run decision? A. An automobile manufacturing company is considering whether or not to invest in robotic equipment to develop a more cost-effective production technique. B. An automobile manufacturing company is considering whether or not to expand its existing workforce, while keeping the same factory and equipment. C. A business consulting firm is considering whether or not to hire some interns to assist with research and data-processing. D. A business consulting firm is considering whether or not to add new computers while maintaining the same number of employees.

A. An automobile manufacturing company is considering whether or not to invest in robotic equipment to develop a more cost-effective production technique.

In the fall of 2004 the price of tomatoes dramatically increased. Which of the following could have caused this change? A. Hurricanes during the late summer damaged the Florida crop, shifting supply left. B. A reduction in tariffs of tomatoes from Central American, shifting supply right. C. A news report stating that a pesticide used on tomatoes might cause cancer, shifting the demand to the right. D. Advertising for catsup increased demand for catsup, shifting the demand curve to the left.

A. Hurricanes during the late summer damaged the Florida crop, shifting supply left.

Honus Wagner, a major league baseball player from 1897 to 1917 and one of the first five men inducted into the Baseball Hall of fame, had his baseball card pulled from cigarette packs because he wasn't being paid for their distribution. What best describes the effect of his action on the market for his baseball card? A. Supply shifted to the left, price rose, and quantity demanded fell B. Supply shifted to the left, price rose, and demand shifted to the left. C. Demand shifted to the left, price fell, and quantity supplied fell. D. Demand shifted to the left, price fell, and supply fell.

A. Supply shifted to the left, price rose, and quantity demanded fell

Which of the following is most likely to be an example of economies of scale? A. The per-unit costs on Excel Publishing Company's manuals fall because it adopted a new technology following a large order from the government. B. Alpha-Beta Inc. raised its price 10 percent following a 5 percent increase in production costs. C. Widget Manufacturing doubled its production by opening a new plant that was identical to its old plant. D. The XYZ Co. increased production 25 percent following a 30 percent increase in all inputs.

A. The per-unit costs on Excel Publishing Company's manuals fall because it adopted a new technology following a large order from the government.

A market structure in which one firm makes up the entire market is: A. a monopoly B. perfect competition. C. an oligopoly D. monopolistic competition

A. a monopoly

If demand and supply both increase, this will cause A. an increase in equilibrium quantity, but an uncertain effect on the equilibrium price. B. an increase in the equilibrium price, but an uncertain effect on the equilibrium quantity. C. an increase in the equilibrium price and quantity. D. a decrease in the equilibrium price and quantity.

A. an increase in equilibrium quantity, but an uncertain effect on the equilibrium price.

When applied to labor markets, the law of supply suggests that: A. an increase in the wages earned by nurses will cause the quantity of nurses supplied to increase. B. a decrease in the wages earned by nurses will cause the quantity of nurses supplied to increase. C. an increase in the wages earned by nurses will cause the quantity of nurses demanded to increase. D. a decrease in the wages earned by nurses will cause the quantity of nurses demanded to increase.

A. an increase in the wages earned by nurses will cause the quantity of nurses supplied to increase.

Federal tax and expenditure programs: A. are somewhat effective means of redistributing income in the U.S. B. are not effective means of redistributing income in the U.S. C. have worsened the inequality of income in the U.S. D. have dramatically equalized income in the U.S.

A. are somewhat effective means of redistributing income in the U.S. C. have worsened the inequality of income in the U.S.

If the supply curve is perfectly inelastic the burden of a tax on suppliers is borne: A. entirely by the suppliers. B. entirely by the consumers. C. mostly by the suppliers, and partly by the consumers, if the demand curve is inelastic. D. partly by the suppliers, and mostly by the consumers, if the demand curve is elastic.

A. entirely by the suppliers.

The unwillingness of individuals to share in the cost of a public good is called the: A. free rider problem. B. social conscience problem. C. volunteer problem. D. public choice problem.

A. free rider problem.

One advantage of a partnership over a corporation is: A. greater accountability. B. limited liability. C. increased ability to get funds. D. the ability to share the work and risks of business.

A. greater accountability.

In the long run, the elasticity of demand is generally: A. greater than in the short run. B. smaller than in the short run. C. the same as in the short run. D. unrelated to the elasticity in the short run.

A. greater than in the short run.

Perfectly competitive firms: A. have no incentive to develop new technologies. B. are constantly trying to develop new technologies. C. result in large dead-weight losses. D. lead to greater product variety.

A. have no incentive to develop new technologies.

The labor supply curve is generally considered to be upward sloping because the opportunity cost of leisure: A. increases as wages get higher. B. decreases as wages get higher. C. remains unchanged as wages get higher. D. has nothing to do with wages.

A. increases as wages get higher.

An import quota: A. increases both domestic production and domestic prices. B. increases domestic production and reduces domestic prices. C. reduces domestic production and increases domestic prices. D. reduces both domestic production and domestic prices.

A. increases both domestic production and domestic prices.

A rise in the price of a good has just increased total revenue, other things constant. One would surmise that the demand for the firm's product is: A. inelastic. B. elastic. C. unit elastic. D. none of the above.

A. inelastic.

Capitalism: A. is based on private property and the market. B. does not have a rationing mechanism. C. gives private property rights to government. D. relies on market forces to establish initial property rights.

A. is based on private property and the market.

Conspicuous consumption refers to the consumption of goods and services: A. not for one's direct pleasure, but simply to show off to others. B. not to show off to others, but for one's direct pleasure. C. that do not provide any kind of satisfaction to the consumer. D. that generally provide more satisfaction to the consumer than any other kind of consumption.

A. not for one's direct pleasure, but simply to show off to others.

Concluding that a company is in violation of antitrust laws because it controls over 90 percent of the market is an application of judgment by: A. performance. B. structure. C. design. D. comparative advantage.

A. performance.

A program that maintains prices at a level higher than the long-run trend of prices is called a: A. price support program. B. price stabilization program. C. negative trend program. D. standard price program.

A. price support program.

If markets are perfectly competitive and production of a good results in water pollution, the imposition of a tax on the good will: A. reduce the number of firms producing that good in the long run. B. increase the number of firms producing that good in the long run. C. reduce the number of firms producing that good in the short run. D. increase the number of firms producing that good in the short run.

A. reduce the number of firms producing that good in the long run.

Each firm in perfect competition: A. sets quantity based on market price. B. follows the pricing decisions of other firms. C. follows the output of other firms. D. follows the reactions of competitors.

A. sets quantity based on market price.

The general rule of political economy in a democracy states: A. small groups that are significantly affected by a government policy will lobby more effectively than will large groups who are equally affected by that policy. B. large groups that are significantly affected by a government policy will lobby more effectively than will small groups who are equally affected by that policy. C. large groups will always win in majority rule situations. D. Congress will always be inefficient.

A. small groups that are significantly affected by a government policy will lobby more effectively than will large groups who are equally affected by that policy.

The law of diminishing marginal productivity: A. states that as more and more of a variable input is added to an existing fixed input, after some point the additional output one gets from the additional input will fall. B. states that as more and more of a variable input is added to an existing fixed input, after some point the additional output one gets from the additional input will rise. C. explains why marginal costs of production fall as additional units of output are produced. D. explains why average productivity always rises.

A. states that as more and more of a variable input is added to an existing fixed input, after some point the additional output one gets from the additional input will fall.

The Katrina disaster in New Orleans decreased the ability of oil companies to purify crude oil into gasoline. This caused: A. the supply curve for gasoline to shift inward. B. the supply curve for gasoline to shift outward. C. the quantity of gasoline demanded to move out along the demand curve. D. the quantity of gasoline supplied to move in along the supply curve.

A. the supply curve for gasoline to shift inward.

The U.S. official poverty threshold is: A. three times the U.S. Department of Agriculture's minimum food budget. B. three times the U.S. Department of Housing's minimum housing allowance. C. the level of income earned by a person receiving minimum wage. D. the level of welfare benefits received by an eligible family.

A. three times the U.S. Department of Agriculture's minimum food budget.

If the price of a good goes up by 5% and, in response, the quantity demanded falls by 15%, the price elasticity of demand would be: A. .05. B. 3. C. 0.3333. D. 0.15.

B. 3.

In November 2004, the Environment Ministry in Japan proposed a new carbon tax in order to meet Japan's obligations to reduce carbon dioxide emissions under the Kyoto Treaty. Carbon dioxide emissions are thought to contribute to global warming and there is concern that changes in climate will be costly. Emitting carbon dioxide is an example of: A. a public good. B. a negative externality. C. an adverse selection problem. D. an effluent fee.

B. a negative externality.

In a market economy: A. government owns the means of production so that it can produce what is in society's best interest. B. businesses design their plans to maximize their profit and the market is relied upon to see that individual self-interest is consistent with society's interest. C. workers are directed by a government planning boards to produce what is in society's best interest. D. government sets prices to make necessities affordable because it is in society's best interest to make necessities affordable.

B. businesses design their plans to maximize their profit and the market is relied upon to see that individual self-interest is consistent with society's interest.

Businesses are on the: A. supply side of factor markets and the demand side of goods markets. B. demand side of factor markets and the supply side of goods markets. C. supply side of both factor markets and goods markets. D. demand side of both factor markets and goods markets.

B. demand side of factor markets and the supply side of goods markets.

Suppose that college tuition is higher this year than last year and that more students are enrolled in college this year than last year. Based on this information, we can best conclude that: A. the law of demand is invalid. B. despite the increase in price, quantity demanded rose due to some other factor changing. C. this situation has nothing to do with the law of demand. D. the demand for a college education is positively sloped.

B. despite the increase in price, quantity demanded rose due to some other factor changing.

Implicit and explicit revenues minus implicit and explicit costs equals: A. accounting profit. B. economic profit. C. zero profit. D. implicit profit.

B. economic profit.

Price supports are a form of price: A. floor, and may result in shortages and lower prices to consumers. B. floor, and may result in surpluses and higher prices to consumers. C. ceiling, and may result in surpluses and lower prices to consumers. D. ceiling, and may result in shortages and higher prices to consumers.

B. floor, and may result in surpluses and higher prices to consumers.

A person who decides to work less when his wage increases: A. is irrational. B. has an income effect that dominates the substitution effect. C. is responding entirely to the substitution effect. D. has a substitution effect that dominates the income effect.

B. has an income effect that dominates the substitution effect.

The price mechanism that guides our actions is called the: A. invisible market force. B. invisible hand. C. invisible handshake. D. invisible foot.

B. invisible hand.

Opportunity cost: A. includes only monetary outlays. B. is the net benefit foregone by not undertaking the next best alternative. C. is nonexistent for some choices. D. is the same as sunk cost.

B. is the net benefit foregone by not undertaking the next best alternative.

A monopolistically competitive industry has: A. a few firms producing identical products. B. many firms producing differentiated products. C. many firms producing identical products. D. a few firms producing differentiated products.

B. many firms producing differentiated products.

Monopolies: A. earn the profits needed for research and development and have the strongest incentive to innovate. B. may earn the profits needed for research and development, but they seldom have the incentive to innovate. C. seldom earn the profits needed for research and development, but they have the strongest incentive to innovate. D. seldom earn the profits needed for research and development and they have no incentive to innovate.

B. may earn the profits needed for research and development, but they seldom have the incentive to innovate.

The more a good is a necessity the: A. more elastic its demand curve. B. more inelastic its demand curve. C. more unit elastic its demand curve. D. flatter the demand curve.

B. more inelastic its demand curve.

Natural monopoly exists when: A. one firm can supply the entire quantity demanded at higher cost than two or more firms. B. one firm can supply the entire quantity demanded at lower cost than two or more firms. C. one firm can supply the entire quantity demanded at the same cost as two or more firms. D. the long-run average cost curve exhibits constant returns to scale.

B. one firm can supply the entire quantity demanded at lower cost than two or more firms.

When most people talk about believing in equality of income, they mean they believe in equality of: A. effort for comparably endowed individuals. B. opportunity for comparably endowed individuals. C. after-tax income for comparably endowed individuals. D. before-tax income for comparably endowed individuals.

B. opportunity for comparably endowed individuals.

Government is lobbied to institute price controls because: A. they tend to increase total producer and consumer surplus. B. people care more about their own surplus than they do about total surplus. C. people care more about total surplus than they do about their own surplus. D. they reduce producer surplus, but they raise consumer surplus more than enough to compensate.

B. people care more about their own surplus than they do about total surplus.

Cross-price elasticity of demand is defined as the: A. percentage change in quantity demanded divided by percentage change in the price of the same good. B. percentage change in demand divided by percentage change in the price of another good. C. change in the price of another good divided by the change in quantity demanded. D. percentage change the price of another good divided by the percentage change in quantity demanded.

B. percentage change in demand divided by percentage change in the price of another good.

Demand is said to be elastic when the: A. percentage change in quantity demanded is less than the percentage change in price. B. percentage change in quantity demanded is greater than the percentage change in price. C. change in quantity demanded is less than the change in price. D. change in quantity demanded is greater than the change in price.

B. percentage change in quantity demanded is greater than the percentage change in price.

The concentration ratio is defined as the: A. percentage of industry output produced by a specific firm. B. percentage of total industry output produced by the top firms. C. squared value of the market shares of all the firms in an industry. D. squared value of the market shares of the largest four firms in the industry.

B. percentage of total industry output produced by the top firms.

The short run is a period during which: A. some inputs are variable and no inputs are fixed. B. some inputs are variable and some inputs are fixed. C. no inputs are variable and all inputs are fixed. D. no inputs are variable and some inputs are fixed.

B. some inputs are variable and some inputs are fixed.

If the price of movies on VHS rises while the price of movies on DVD remains the same, the law of demand predicts that consumers will: A. substitute movies on VHS for movies on DVD. B. substitute movies on DVD for movies on VHS. C. buy only movies on VHS. D. buy only movies on DVD.

B. substitute movies on DVD for movies on VHS.

In a standard highest sealed-bid auction, a bidder's best strategy: A. is to bid what he or she would be willing to pay. B. to bid slightly more than what he or she expects the second highest bidder to bid. C. always ensures that the person who wants it the most will get the bid. D. requires the bidder to understand game theory to bid properly.

B. to bid slightly more than what he or she expects the second highest bidder to bid.

The law of demand states that the quantity demanded of a good is inversely related to the price of that good. Therefore, as the price of a good goes: A. up, the quantity demanded also goes up. B. up, the quantity demanded goes down. C. down, the quantity demanded goes down. D. down, the quantity demanded stays the same.

B. up, the quantity demanded goes down.

One reason trade restrictions exist is that: A. workers can be easily shifted from one industry to another. B. workers cannot be easily shifted from one industry to another. C. the long-run gains from free trade are small relative to the short-run costs. D. the short-run gains from free trade are small relative to the long-run costs.

B. workers cannot be easily shifted from one industry to another.

A business owner makes 50 items by hand in 6 hours. She could have earned $10 an hour working for someone else. If each item sells for $5 and the explicit costs total $14, economic profit equals: A. $0. B. $64. C. $176. D. $236.

C. $176.

Suppose a market has an excess demand and price starts to rise. What will the rise in price cause? A. A fall in both quantity supplied and quantity demanded. B. A rise in both quantity supplied and quantity demanded. C. A rise in quantity supplied and a fall in quantity demanded. D. A fall in quantity supplied and a rise in quantity demanded.

C. A rise in quantity supplied and a fall in quantity demanded.

Which of the following is the best example of an excise tax? A. A tax on all capital gains (the amount by which the value of an asset has risen between the time it was purchased and the time it was sold). B. A tax paid by employers on income paid to workers. C. A tax collected on each gallon of gasoline sold. D. A tax that is levied on the value of land and buildings.

C. A tax collected on each gallon of gasoline sold.

Cigarette taxes cause dead-weight loss because? A. Because they are regressive. B. Because they are progressive. C. Because they change people's behavior. D. Because they yield no revenue.

C. Because they change people's behavior.

Which of the following provides the best explanation for diseconomies of scale? A. The presence of fixed inputs. B. Reduced monitoring costs. C. Loss of team spirit. D. Indivisible set-up costs.

C. Loss of team spirit.

In the U.S. economy, who is in charge of organizing and coordinating overall economic activities? A. Government. B. Corporations. C. No one. D. Consumers.

C. No one.

The profit-maximizing condition for a perfectly competitive firm is: A. MR = P. B. MR = AVC. C. P = MC. D. P = AVC.

C. P = MC.

The primary cause(s) of the economic problems faced by farmers is: A. a relatively elastic demand for farm products combined with significant increases in agricultural productivity. B. a decline in the productivity of farm laborers due to increased competition for laborers as a result of the growth of the industrial sector of the economy. C. a relatively inelastic demand for farm products combined with significant increases in agricultural productivity. D. the continuous decline in the demand for agricultural products as a result of low-cost foreign competition.

C. a relatively inelastic demand for farm products combined with significant increases in agricultural productivity.

Since Fidel Castro assumed power in Cuba, the U.S. has not allowed U.S. citizens to trade with Cuba. This is an example of: A. a quota. B. a tariff. C. an embargo. D. a regulatory trade restriction.

C. an embargo.

The government's antitrust suit against Microsoft charged Microsoft with: A. using price discrimination to earn higher profits. B. being a monopoly, although there was no evidence of unfair business practices. C. being a monopoly and using that monopoly power in a predatory way. D. bribing government officials to drop the antitrust lawsuit.

C. being a monopoly and using that monopoly power in a predatory way.

Total consumer surplus is measured as the area: A. between the demand curve and the supply curve. B. above the demand curve. C. between the vertical axis, the demand curve and a horizontal line through the market price. D. between the demand curve and the horizontal axis.

C. between the vertical axis, the demand curve and a horizontal line through the market price.

In the goods market: A. households supply factors of production to business and are paid by business for doing so. B. households supply goods to business and are paid by businesses for doing so. C. business produces goods and services and sells them to households and government. D. government produces goods and services and supplies them to households and business.

C. business produces goods and services and sells them to households and government.

Cartels are organizations that: A. keep markets contestable. B. encourage price wars. C. coordinate the output and pricing decisions of a group of firms. D. use predatory pricing to monopolize industries.

C. coordinate the output and pricing decisions of a group of firms.

Taxes: A. cause market shortages. B. cause the equilibrium quantity to increase. C. create a wedge between the price consumers pay and the price suppliers receive. D. cause the price consumers pay to equal the price suppliers receive.

C. create a wedge between the price consumers pay and the price suppliers receive.

Lazy monopolists are characterized by the tendency to: A. maximize profits at the cost of losing market share. B. pay too much to protect their monopoly positions. C. earn enough profits to keep their shareholders happy without unduly trying to hold costs down. D. minimize losses.

C. earn enough profits to keep their shareholders happy without unduly trying to hold costs down.

The reason for the merger of two businesses that sell unrelated goods but can share business practices and sales forces might best be explained by: A. indivisible costs. B. learning by doing. C. economies of scope. D. economies of scale.

C. economies of scope.

A perfectly competitive firm's marginal revenue is: A. less than the selling price. B. greater than the selling price. C. equal to the selling price. D. sometimes below and sometimes above the selling price.

C. equal to the selling price.

Specialization according to comparative advantage means that a country is producing the goods: A. that it wants to consume. B. for which it has a relatively high opportunity cost. C. for which it has a relatively low opportunity cost. D. that it can produce at zero cost.

C. for which it has a relatively low opportunity cost.

Since the short-run demand for corn is very price inelastic: A. good harvests do not significantly change the price of corn. B. good harvests cause the price of corn to rise significantly. C. good harvests cause the price of corn to fall significantly. D. bad harvests cause the price of corn to fall significantly.

C. good harvests cause the price of corn to fall significantly.

Government failure occurs when: A. government fails to implement policy designed to correct a market failure. B. government intervention in the market to improve a market failure succeeds. C. government intervention in the market to correct a market failure actually makes things worse. D. there is no need for government intervention into the market because there is no market failure.

C. government intervention in the market to correct a market failure actually makes things worse.

The more the current price exceeds the equilibrium price, the: A. greater the resulting shortage will be. B. smaller the resulting shortage will be. C. greater the resulting surplus will be. D. smaller the resulting surplus will be.

C. greater the resulting surplus will be.

According to the text, economics is the study of how: A. governments allocate resources in the face of constraints. B. government policies can be used to meet individuals' wants and desires. C. human beings coordinate their wants and desires in the face of constraints. D. scarce resources are allocated to their most productive uses.

C. human beings coordinate their wants and desires in the face of constraints.

Mexico has a comparative advantage in producing corn: A. if its opportunity cost of producing corn is higher than the opportunity cost in other countries. B. if its opportunity cost of producing corn is the same as the opportunity cost in other countries. C. if its opportunity cost of producing corn is lower than the opportunity cost in other countries. D. regardless of the opportunity cost in other countries.

C. if its opportunity cost of producing corn is lower than the opportunity cost in other countries.

Other things equal, an increase in the number of single-parent families would be expected to: A. increase income inequality, causing the Lorenz curve to shift toward the diagonal line. B. decrease income inequality, causing the Lorenz curve to shift toward the diagonal line. C. increase income inequality, causing the Lorenz curve to shift away from the diagonal line. D. decrease income inequality, causing the Lorenz curve to shift away from the diagonal line.

C. increase income inequality, causing the Lorenz curve to shift away from the diagonal line.

Other things equal, tax cuts favoring the rich and reductions in funding for government programs favoring the poor would be expected to: A. increase income inequality, causing the Lorenz curve to shift toward the diagonal line. B. decrease income inequality, causing the Lorenz curve to shift toward the diagonal line. C. increase income inequality, causing the Lorenz curve to shift away from the diagonal line. D. decrease income inequality, causing the Lorenz curve to shift away from the diagonal line.

C. increase income inequality, causing the Lorenz curve to shift away from the diagonal line.

A basic difference between microeconomics and macroeconomics is: A. microeconomics focuses on the choices of individual consumers, while macroeconomics considers the behavior of large businesses. B. microeconomics focuses on financial reporting by individuals, while macroeconomics focuses on financial reporting by large firms. C. microeconomics examines the choices made by individual participants in an economy, while macroeconomics considers the economy's overall performance. D. microeconomics focuses on national markets while macroeconomics concentrates on international markets.

C. microeconomics examines the choices made by individual participants in an economy, while macroeconomics considers the economy's overall performance.

In a perfectly competitive market the demand curve faced by an individual firm is: A. perfectly inelastic. B. relatively inelastic. C. perfectly elastic. D. relatively elastic.

C. perfectly elastic.

iTunes charges British customers 20 percent more than customers in France and Germany. Apple defended the price differential, saying that the "underlying economic model in each country has an impact on how we price our track downloads." An economist would say that Apple is engaged in: A. collusion. B. monopolistic competition. C. price discrimination. D. reverse engineering.

C. price discrimination.

Barriers to entry: A. do not affect the number of firms in an industry. B. exist only in perfectly competitive markets. C. restrict the number of firms in an industry. D. limit output in an industry.

C. restrict the number of firms in an industry.

Normal profits are: A. approximately 6 percent of costs. B. approximately 8 percent of costs. C. returns to the owners of business for the opportunity cost of their implicit inputs. D. generally larger than accounting profits.

C. returns to the owners of business for the opportunity cost of their implicit inputs.

In the linear equation y = mx + b, m is the: A. variable on the horizontal axis. B. variable on the vertical axis. C. slope. D. vertical intercept.

C. slope.

Taking explicit account of a rival's expected response to a decision you are making is called: A. economic decision making. B. monopolistic decision making. C. strategic decision making. D. competitive decision making.

C. strategic decision making.

The effect that explains why workers tend to supply more hours when wages increase is called the: A. income effect. B. social effect. C. substitution effect. D. work effect.

C. substitution effect.

Assume that in Canada the opportunity cost of producing 1 television set is 2 bushels of wheat. Assume that in the U.S. the opportunity cost of producing 1 bushel of wheat is 2 television sets. If these two countries specialize according to comparative advantage and then trade with one another, then: A. Canada will import both televisions and wheat. B. Canada will import wheat and export televisions. C. the U.S. will import wheat and export televisions. D. the U.S. will import both televisions and wheat.

C. the U.S. will import wheat and export televisions.

A firm's profits equal $100 if: A. its total revenue is $100. B. the sum of its total revenue and its total cost is $100. C. the difference between its total revenue and its total cost is $100. D. its total cost is $100.

C. the difference between its total revenue and its total cost is $100.

The values in a payoff matrix show: A. the gains and losses of decisions for each player regardless of the decisions of other players. B. the best possible outcomes of various players in a game. C. the gains and losses of decisions for each player given the decisions of other players. D. the worst possible outcomes of various players in a game.

C. the gains and losses of decisions for each player given the decisions of other players.

Which of the following is not a reason for the subsidies being provided to U.S. farmers? A. the desire to maintain a stable supply of food in the event of a drought. B. an effective farm lobby. C. the large share of total U.S. employment accounted for by the agricultural sector. D. concern for the well-being of farmers.

C. the large share of total U.S. employment accounted for by the agricultural sector.

Under monopolistic competition, a firm's ability to influence the price of the product it sells arises because: A. sellers in the market have large market shares. B. sellers in the market have small market shares. C. the product of each seller is differentiated from that of others. D. each seller sells a standardized product.

C. the product of each seller is differentiated from that of others.

According to economic theory, which of the following types of discrimination is the easiest to eliminate? A. Discrimination based on individual characteristics that affect job performance. B. Discrimination based on correctly perceived statistical characteristics of a group. C. Discrimination that saves the firm money. D. Discrimination based on individual characteristics that do not affect job performance.

D. Discrimination based on individual characteristics that do not affect job performance.

What is necessary for businesses to be profitable? A. They must ignore the principle of consumer sovereignty. B. They must ignore the invisible hand. C. They must equalize their total revenues and total costs. D. Entrepreneurship must be present.

D. Entrepreneurship must be present.

Joan is deciding where to spend her spring break. If she goes to Cancun, Mexico, the trip will give her 9,000 units of utility and will cost her $300. If, instead, she travels to Florida, the trip will give her 8,000 units of utility and will cost her only $200. Joan will do best going to: A. Mexico because her total pleasure will be greater. B. Florida because her total cost will be lower. C. Mexico because her pleasure per dollar will be greater. D. Florida because her pleasure per dollar will be greater.

D. Florida because her pleasure per dollar will be greater.

Informal game theory: A. relies on deductive logic. B. shows how the Nash equilibrium is reached. C. assumes people calculate their optimal strategy. D. considers how people actually think and behave.

D. considers how people actually think and behave.

One advantage of a corporation over a sole proprietorship is: A. greater accountability. B. avoidance of double taxation. C. ease of formation. D. greater ability to obtain funds.

D. greater ability to obtain funds.

Those with more inelastic demands will bear a larger burden of a tax because they: A. have more buying power. B. have more income. C. will switch to other products with a tax. D. have fewer substitutes for that good.

D. have fewer substitutes for that good.

In choosing between two products, a rational consumer will choose the product that gives her the: A. greatest total utility per dollar. B. least marginal utility per dollar. C. highest cost per additional unit of utility. D. lowest cost per additional unit of utility.

D. lowest cost per additional unit of utility.

The consumption of an additional unit of a good provides additional satisfaction, which is called: A. total benefit. B. marginal social benefit. C. average utility. D. marginal utility.

D. marginal utility.

Generally, as the size of a firm increases: A. team spirit increases. B. marginal productivity rises. C. economies of scope fall. D. monitoring costs increase.

D. monitoring costs increase.

EBay.com dominates the on-line auction business because sellers want to go where the buyers are and buyers want to go where the sellers are. Bigger is thus better. Hence, eBay.com illustrates the concept of: A. public goods. B. non-rival goods. C. economies of scope. D. network externality.

D. network externality.

When the FTC investigated whether firms conspired to fix prices of computer memory called dynamic random access memory (DRAM) chips, Samsung, Micron Technology, Hynix Semiconductor, and Infineon controlled more than 75 percent of the market for DRAM chips. The market for these chips is most likely: A. monopolistic. B. perfectly competitive. C. monopolistically competitive. D. oligopolistic.

D. oligopolistic.

Price elasticity of demand is the: A. change in the quantity of a good demanded divided by the change in the price of that good. B. change in the price of a good divided by the change in the quantity of that good demanded. C. percentage change in price of that good divided by the percentage change in the quantity of that good demanded. D. percentage change in quantity of a good demanded divided by the percentage change in the price of that good.

D. percentage change in quantity of a good demanded divided by the percentage change in the price of that good.

The profit-maximization assumption of economic theory does not fit reality because: A. all real firms want to maximize long-term profits rather than short-run profits. B. all real firms want to maximize their share of the market. C. real-world firms have a single goal, but this goal has nothing to do with profits. D. real-world firms have many goals which depend upon the incentive structure embodied in the firm's organization.

D. real-world firms have many goals which depend upon the incentive structure embodied in the firm's organization.

To keep the price of gas from rising quickly after Katrina, the government instituted price ceilings on the price of gasoline in some states. These price ceilings caused ______ in the gasoline market. A. surpluses B. movement of the demand curve C. movement along the demand curve D. shortages

D. shortages

The demand for labor is a derived demand because: A. many workers are self-employed. B. the income workers earn adds to the demand for output. C. the demand for output comes from the demand for labor. D. the demand for labor comes from the demand for output.

D. the demand for labor comes from the demand for output.

Marginal revenue is not equal to price for a monopolist because: A. the monopolist's demand curve is below its marginal revenue curve. B. total revenue increases as output increases. C. the monopolist sets price equal to marginal cost. D. the monopolist must lower the price of all units in order to sell more.

D. the monopolist must lower the price of all units in order to sell more.

Given a fixed level of spending, you will maximize utility when: A. the total satisfaction from both goods is maximized regardless of cost. B. the marginal satisfactions are maximized. C. the ratios of the total utilities to their prices are equal. D. the ratios of the marginal utilities to their prices are equal.

D. the ratios of the marginal utilities to their prices are equal.

The program that redistributes the most money is: A. Aid to Families with Dependent Children. B. the Department of Housing and Urban Development housing programs. C. Supplemental Security Income. D. the social security system.

D. the social security system.

As a consumer moves along an indifference curve: A. prices are held constant, but consumer's budget changes. B. consumer's budget is held constant, but prices change. C. prices and consumer's budget are held constant, but total utility changes. D. total utility is held constant, but prices, quantities, and consumer's budget change.

D. total utility is held constant, but prices, quantities, and consumer's budget change.

Whenever the invisible hand pushes agricultural prices down: A. consumer demand increases enough to push prices back up. B. market supply decreases enough to push prices back up. C. they remain down, causing an increase in consumer surplus. D. various coalitions of political forces generally work to push prices back up.

D. various coalitions of political forces generally work to push prices back up.

Demand for single occupancy apartments is Qd = 400,000 - 250 P. Supply is given by Qs = 200,000 + 250 P. Price of an apartment is measured in hundreds of dollars and quantity is measured in thousands of apartments. What is equilibrium rent and quantity of apartments rented? A. $400 and 300,000 apartments respectively. B. $800 and 200,000 apartments respectively. C. $800 and 400,000 apartments respectively. D. $1,200 and 500,000 apartments respectively.

A. $400 and 300,000 apartments respectively.

A firm can use 5 workers and 10 machines, 7 workers and 9 machines, or 8 workers and 9 machines to produce 4 cars. If each worker costs $200 and each machine is rented for $50, the economically efficient input combination is: A. 5 workers and 10 machines. B. 7 workers and 9 machines. C. 8 workers and 9 machines. D. none of these input combinations would be economically efficient.

A. 5 workers and 10 machines.

The supply and demand equations for Nantucket Nectar's Kiwi-berry juice are given by Qs = -4 + 5P and Qd = 18 - 6P respectively, where price is dollars per quart and quantity is thousands of quarts. The equilibrium market price and quantity is A. P = $2, Q = 6 thousand quarts. B. P = $3, Q = 6 thousand quarts. C. P = $14, Q = 66 thousand quarts. D. P = $22, Q = 106 thousand quarts.

A. P = $2, Q = 6 thousand quarts.

Which of the following is consistent with diseconomies of scale? A. Producing 1,000 lawn mowers costs $100,000 while producing 2,000 lawn mowers costs $220,000. B. 50 workers and 5 machines produce 1,000 units of output while 100 workers and 10 machines produce 2,500 units of output. C. 50 workers and 5 machines produce 1,000 units of output while 60 workers and 5 machines produce 1,200 units of output. D. Producing 1,000 lawn mowers costs $100,000 while producing 2,000 lawn mowers costs $150,000.

A. Producing 1,000 lawn mowers costs $100,000 while producing 2,000 lawn mowers costs $220,000.

In a market there are many firms selling differentiated products. This market is: A. a competitive market. B. a monopolistically competitive market. C. an oligopolistic market. D. a monopoly.

A. a competitive market.

Two countries that specialize their production along the lines of comparative advantage and then trade with one another will be able to: A. both produce and consume more. B. produce more and consume less. C. produce less and consume more. D. both produce and consume less.

A. both produce and consume more.

If a positive externality is to be taken full advantage of the: A. consumer of the good should receive a subsidy equal to the marginal external benefit resulting from production (or consumption) of the good. B. producers' marginal costs should be increased by an amount equal to the marginal external benefit resulting from production of the good. C. consumer of the good should pay a tax equal to the marginal external benefit resulting from production (or consumption) of the good. D. producers' marginal costs should be decreased by an amount equal to the marginal external cost resulting from production of the good.

A. consumer of the good should receive a subsidy equal to the marginal external benefit resulting from production (or consumption) of the good.

The prisoner's dilemma is a well-known game in which: A. cooperation is always the best independent action. B. noncooperation is not the best joint action but is the best independent action. C. players always cheat. D. players never cheat.

A. cooperation is always the best independent action.

A decrease in quantity and price are consistent with a: A. leftward shift in demand keeping supply constant. B. leftward shift in supply keeping demand constant. C. rightward shift in supply and demand D. rightward shift in demand and a leftward shift in supply.

A. leftward shift in demand keeping supply constant.

Monopolistic competition is similar to perfect competition in that: A. long-run profits tend to zero in both. B. output is at minimum average total cost in both. C. both entail the production of differentiated products. D. firms advertise in both cases.

A. long-run profits tend to zero in both.

As network externalities broaden the use of a product the: A. need for a single standard becomes more important and eventually one standard wins out. B. need for a single standard becomes less important, so many different standards are likely to coexist. C. benefits of that product to everyone are diminished D. incentive to replace that product with something new grows stronger.

A. need for a single standard becomes more important and eventually one standard wins out.

Alexandra has determined that studying an hour for her economics quiz will improve her grade on the quiz from 75 to 100. She also determines that this improvement is worth $20. In order to study for an hour for her economics quiz, however, she will have to work one less hour at her part-time job. Alexandra should: A. study for the quiz as long as her hourly wage rate is less than $20. B. study for the quiz as long as her hourly wage rate is more than $20. C. study for the quiz only if her hourly wage rate is exactly $20. D. not study for the quiz because earning a higher grade cannot have a dollar value.

A. study for the quiz as long as her hourly wage rate is less than $20.

In the early 2000s the U.S. government imposed import duties on Chinese frozen and canned shrimp. These duties are an example of: A. tariffs. B. quotas. C. voluntary restrictions. D. regulatory trade restrictions.

A. tariffs.

The text largely attributes the growth of economies over the last 2000 years to: A. the development of markets. B. the discovery of additional resources. C. a decrease in the size of the world population. D. laissez-faire policies.

A. the development of markets.

When negative externalities are present, market failure often occurs because: A. the marginal external cost resulting from the activity is not reflected in the market price. B. the marginal external cost resulting from the activity is reflected in the market price. C. the existence of imports from foreign countries takes jobs (and income) away from U.S. citizens. D. consumers will consume the good at a level where their individual marginal benefits exceed the marginal costs borne by the firm producing the good.

A. the marginal external cost resulting from the activity is not reflected in the market price.

Which of the following games has a first-mover advantage? A. tic-tac-toe B. prisoner's dilemma C. rock, paper, scissors D. Vickrey auction

A. tic-tac-toe

The resolution of the AT&T antitrust case of the 1980s was: A. AT&T agreed to split up into three operating divisions. B. AT&T agreed to split up and allow the Baby Bells to be independent. C. AT&T was combined with MCI and Sprint. D. MCI and Sprint were broken off from AT&T and developed as competitors to AT&T.

B. AT&T agreed to split up and allow the Baby Bells to be independent.

Which of the following is an example of a short-run decision? A. An automobile manufacturing company is considering whether or not to invest in robotic equipment to develop a more cost-effective production technique. B. An automobile manufacturing company is considering whether or not to expand its existing workforce. C. A business consulting firm is considering whether or not to open a new office in another city where many of its clients are based. D. A business consulting firm is considering whether or not to hire new consultants, move to a larger space, and purchase additional equipment.

B. An automobile manufacturing company is considering whether or not to expand its existing workforce.

Which of the following statements is true? A. Income distribution became less equal from 1929 to 1970. B. Income distribution became less equal from 1970 to 2001. C. The income of the bottom fifth of families rose 10 percent from 1970 to 2001. D. The income of the bottom fifth of families fell 10 percent from 1929 to 2001.

B. Income distribution became less equal from 1970 to 2001.

Which of the following is one of the necessary conditions for perfect competition? A. Diminishing utility. B. Large number of firms. C. Differentiated products. D. Indivisible set up costs.

B. Large number of firms.

Why are patents important to those who hold them? A. Without patents, there will no longer be economies of scale in production. B. Patents act as a barrier to entry, allowing monopoly profits. C. Without patents, there would be considerably more price discrimination in the market. D. Patents actually do not matter because they do not guarantee that a firm will make a profit.

B. Patents act as a barrier to entry, allowing monopoly profits.

Which of the following factors would most likely explain why a U.S. company would choose to operate in the U.S. despite much lower wages in Mexico? A. The low cost of transportation between the two countries. B. The lower productivity of Mexican workers. C. The absence of significant trade barriers. D. The presence of many Japanese companies in Mexico.

B. The lower productivity of Mexican workers.

A public good is A. any good traded in markets. B. a good that is nonexclusive and nonrival. C. a good provided only to those who pay for it. D. rarely provided by government.

B. a good that is nonexclusive and nonrival.

Any economic system: A. can eliminate scarcity. B. addresses the questions what is produced, how it is produced, and for whom it is produced. C. provides all the goods people want and desire. D. provides equal distribution of well-being among its participants.

B. addresses the questions what is produced, how it is produced, and for whom it is produced.

In the long-run: A. all inputs are fixed. B. all inputs are variable. C. some inputs are not variable. D. per-unit costs are fixed.

B. all inputs are variable.

Economics is primarily: A. a normative science. B. an observational science. C. a laboratory science. D. a natural science.

B. an observational science.

If marginal cost is less than average total cost, then: A. average total cost is increasing with output. B. average total cost is decreasing with output. C. average variable cost is increasing with output. D. average variable cost is decreasing with output.

B. average total cost is decreasing with output.

An increase in the marginal income tax rate is likely to: A. increase the quantity of labor supplied. B. decrease the quantity of labor supplied. C. decrease the quantity of labor demanded. D. increase the quantity of labor demanded.

B. decrease the quantity of labor supplied.

In 1996, Archer Daniels Midland Company was found guilty of fixing the price of lysine. This is an example of: A. judgment by performance. B. judgment by structure. C. judgment by design. D. Such a judgment is not part of U.S. antitrust policy.

B. judgment by structure.

Suppose an oligopolistic firm assumes that its rivals will ignore a price increase but match a price cut. In this case, the firm perceives its demand curve to be: A. kinked, being steeper above the going price than below. B. kinked, being steeper below the going price than above. C. linear, being less elastic at lower prices. D. linear, being more elastic at higher prices.

B. kinked, being steeper below the going price than above.

Most technological advance takes place in: A. the public sector. B. oligopolistic industries. C. monopolistic industries. D. competitive industries.

B. oligopolistic industries.

A program that eliminates short-run price fluctuations but allows prices to follow their long-run trend is called a: A. price support program. B. price stabilization program. C. negative trend program. D. standard price program.

B. price stabilization program.

An example of a market incentive plan is: A. a tax on any activity that causes pollution. B. requiring construction firms to subsidize individuals to reduce existing water usage by a specific amount before building new houses that would increase water usage. C. a limit on the number of new houses built. D. a restriction on the amount of water a household can use.

B. requiring construction firms to subsidize individuals to reduce existing water usage by a specific amount before building new houses that would increase water usage.

A Lorenz curve is a geometric representation of the: A. level of income earned by a given family in a given country at a given time. B. size distribution of income among families in a given country at a given time. C. behavior of income over time. D. behavior of income across countries.

B. size distribution of income among families in a given country at a given time.

A newspaper recently lowered its price from 50 cents to 30 cents, causing the number of newspapers sold to increase from 240,000 to 280,000. Other things equal, the data imply that the elasticity of demand for this newspaper is about: A. 3.25. B. 0.5. C. 0.3. D. 0.15.

C. 0.3.

Suppose a scientific report states that fish contain dangerously high levels of mercury (toxic to humans). At the same time, the price of diesel fuel, used by fishermen to fuel their boats, falls. What is the effect on the market for fish? A. A decrease in demand and a fall in price and quantity sold. B. A decrease in demand and supply; price and quantity sold falls. C. A decrease in demand and an increase in supply; price falls but the change in quantity is ambiguous. D. A decrease in demand and supply; price and quantity sold rises.

C. A decrease in demand and an increase in supply; price falls but the change in quantity is ambiguous.

Which of the following is not an example of an externality? A. Carbon dioxide from energy generation that adds to the worldwide, long-term greenhouse effect. B. Heat from a factory that makes the neighboring tomato patches more productive. C. A defective part that causes an automobile to break down three months after purchase. D. Acidic smoke that produces acid rain.

C. A defective part that causes an automobile to break down three months after purchase.

If the marginal revenue of the last widget the firm produces is $50 and its marginal cost is $35, a firm should: A. reconsider past production decisions. B. decrease production. C. increase production. D. hold production constant.

C. increase production.

Which of the following statements is true about a downward-sloping demand curve that is a straight line? A. The slope and the elasticity are the same at all points. B. The slope remains the same, but elasticity rises as you move down the demand curve. C. The slope remains the same, but elasticity falls as you move down the demand curve. D. The slope and the elasticity fall as you move down the demand curve.

C. The slope remains the same, but elasticity falls as you move down the demand curve.

Which of the following is most likely an example of constant returns to scale? A. The per-unit costs on Excel Publishing Company's manuals fell following a large order from the government. B. Alpha-Beta Inc. raised its price 10 percent following a 5 percent increase in production costs. C. Widget Manufacturing doubled its production by opening a new plant that was identical to its old plant. D. The XYZ Co. increased production 25 percent and experienced a 30 percent increase in its total cost.

C. Widget Manufacturing doubled its production by opening a new plant that was identical to its old plant.

Can accounting profit be positive, while economic profits are negative? A. No. The two concepts are identical. B. Yes, if total revenue covers opportunity costs but not explicit costs. C. Yes, if total revenue covers explicit costs but not opportunity costs. D. No. Economic profits must always be larger than accounting profits.

C. Yes, if total revenue covers explicit costs but not opportunity costs.

Labor demand is less elastic when: Incorrect Response A. there are many substitutes for labor in the production process. B. the inputs that could be substituted for labor are relatively inexpensive. C. a large amount of labor is essential to the production process. D. the demand for output is more elastic.

C. a large amount of labor is essential to the production process.

The demand curve for a monopolist differs from the demand curve faced by a competitive firm because the demand curve for: A. a competitive firm lies above its marginal revenue curve. B. a competitive firm is inelastic. C. a monopolist is the market demand curve. D. a monopolist lies below its marginal revenue curve.

C. a monopolist is the market demand curve.

One way in which firms protect their monopoly is: A. raising prices. B. producing items that can be easily copied. C. advertising. D. taking advantage of short-run profits.

C. advertising.

Increasing marginal opportunity cost means that the production possibility curve is: A. bowed in so that for every additional unit of one good given up you get less and less units of the other good. B. bowed in so that for every additional unit of one good given up you get , more and more units of the other good. C. bowed out so that for every additional unit of a good given up, you gain fewer and fewer units of the other good. D. bowed out so that for every additional unit of one good given up you get , more and more units of the other good.

C. bowed out so that for every additional unit of a good given up, you gain fewer and fewer units of the other good.

Loss aversion in behavioral economics refers to how people are averse to: A. losses in a game of chance such as poker. B. stock market losses. C. losing something a person already has. D.the loss of something of high value.

C. losing something a person already has.

The technological lock-in argument suggests that: A. it is inefficient to try and adapt to new technology. B. more efficient technologies always replace less efficient technologies immediately. C. many of our institutions and technologies may be inefficient. D. existing institutions and technologies are always the most efficient.

C. many of our institutions and technologies may be inefficient.

Institutional discrimination exists when: A. discrimination is based on individual characteristics related to job performance. B. discrimination is based on individual characteristics not related to job performance. C. the structure of a job makes it difficult for certain groups of individuals to succeed. D. discrimination is based on correctly perceived statistical characteristics of a group.

C. the structure of a job makes it difficult for certain groups of individuals to succeed.

The opportunity cost for a student of attending college for a year is best measured by the: A. benefit received by the student. B. tuition paid for the year. C. value of the next-best activity forgone by attending college. D. total money expenses associated with attending college.

C. value of the next-best activity forgone by attending college.

In the long-run competitive equilibrium the average firm: A. will be going out of business. B. will be expanding. C. will be making only a normal profit. D. won't even be making normal profit.

C. will be making only a normal profit.

The text mentions ten sources of U.S. comparative advantage. Which of the following is NOT one of them? A. Wealth from past production B. English is the international language of business C. U. S. natural resources D. Weak environmental protection laws

D. Weak environmental protection laws

A group of countries that allows free trade among its members and puts up common barriers against all other countries' goods is called: A. a tariff-free zone. B. a Most Favored Nation Agreement. C. an autarky. D. a free trade association.

D. a free trade association.

The voluntary export restraints on autos by Japan in the early 1980s were A. prohibited under the GATT treaty. B. unlike a quota and do not affect the price of cars imported . C. unlike a tariff, and do not affect the price of imports. D. approved by the U.S. car companies since it allows them to increase their profits .

D. approved by the U.S. car companies since it allows them to increase their profits .

Economies of scale: A. account for the upward-sloping portion of the long-run average total cost curve. B. exist because of the difficulties in coordinating and managing a large business enterprise. C. imply an increase in per-unit costs of production associated with an increase in output. D. arise because large indivisible setup costs are spread out among a larger level of output and because of the efficiencies of greater labor and management specialization.

D. arise because large indivisible setup costs are spread out among a larger level of output and because of the efficiencies of greater labor and management specialization.

When government imposes a per unit tax on a product, the net price producers actually receive for the product typically: A. increases by the amount of the per unit tax. B. increases by less than the amount of the per unit tax. C. decreases by the amount of the per unit tax. D. decreases by less than the amount of the per unit tax.

D. decreases by less than the amount of the per unit tax.

In the United States, government performs all of the following functions except: A. redistributing income. B. purchasing goods and services. C. regulating the economy. D. determining production levels.

D. determining production levels.

The formal game theory model assumes that: A. markets are contestable when no barriers to entry exist. B. the dominant firm in the industry will set product price and other firms will follow. C. each player tries to anticipate the reaction of his or her rivals when making a decision. D. each player ignores the possible reaction of his or her rivals when making a decision.

D. each player ignores the possible reaction of his or her rivals when making a decision.

The principle of diminishing marginal utility says that marginal utility: A. is negative. C. is always falling. D. falls after some point.

D. falls after some point.

In the mercantilist system, A. markets rather than political forces make the central economic decisions. B. serfs make the central economic decisions. C. governments let the market decide what to produce. D. governments distributed the rights to produce.

D. governments distributed the rights to produce.

A Nash equilibrium assumes that a player follows his or her best strategy: A. given that the other players follow a random strategy. B. given that the other players follow their worst strategy. C. given that the other players follow their best strategy. D. regardless of what other players do.

D. regardless of what other players do.

An excise tax is imposed on CDs. If the elasticity of demand is 2 and the elasticity of supply is 1, then we can predict that: A. consumers will bear the full tax burden. B. sellers will bear the full tax burden. C. consumers will bear 2/3 of the tax burden. D. sellers will bear 2/3 of the tax burden.

D. sellers will bear 2/3 of the tax burden.

If there is a direct relationship between two variables, then the graph relating these two variables will be: A. upward sloping. B. downward sloping. C. vertical. D. horizontal.

upward sloping.