Economics Questions
The advent of web sites like Netflix and Hulu has virtually has made business difficult for movie theater owners. This is an example of: A. competition B. derived demand C. capital accumulation D. the difference between normal and economic profits
A
The process by which new firms and new products replace existing dominant firms and products is called: A. creative destruction. B. mergers and acquisitions. C. monopolistic competition. D. process innovation.
A
A competitive firm will maximize profits at that output at which: A. total revenue and total cost are equal. B. total revenue exceeds total cost by the greatest amount. C. price exceeds average total cost by the largest amount. D. the difference between marginal revenue and price is at a maximum.
B
In his podcast, Dr. Schwartz seems to be in favor of limiting choice for consumers. What type of economic system would that best describe? A. market system B. command system C. traditional system D. none because he is only concerned with psychological well-being
B
A decrease in the price of digital cameras would lead to a: A. decrease in the price and an increase in quantity sold of memory cards B. decrease in the price and quantity sold of memory cards C. increase in the price and decrease in quantity sold of memory cards D. increase in the price and quantity sold of memory cards
D
Entrepreneurs in purely competitive industries: A. have no incentive to innovate because in the long run they will earn no economic profits. B. innovate to lower operating costs and generate short-run economic profits. C. utilize pricing strategies to generate short-run economic profits. D. rarely try to innovate because of a lack of financial resources.
B
A purely competitive seller is: A. both a "price maker" and a "price taker." B. neither a "price maker" nor a "price taker." C. a "price taker." D. a "price maker."
C
According to behavioral economists, the human brain frequently employs heuristics because A. people have consciously trained their brains to do so. B. they produce more optimal outcomes than do rational calculations of benefits and costs. C. they save energy and time in decision making. D. these shortcuts minimize errors in decision making.
C
From an economic perspective, when a consumer decides to buy more life insurance, the consumer has most likely concluded that the A. marginal costs of more insurance coverage are negative B. marginal benefits of more insurance coverage are greater than zero C. marginal benefits of more insurance coverage are greater than the marginal costs D. marginal costs of more insurance coverage are equal to the payment for the extra coverage
C
The term productive efficiency refers to: A. any short-run equilibrium position of a competitive firm. B. the production of the product-mix most desired by consumers. C. the production of a good at the lowest average total cost. D. fulfilling the condition P = MC.
C
According to behavioral economists, self-control problems A. can be easily overcome by providing decision makers with better information. B. occur frequently but have no impact on the ability of neoclassical models to predict economic outcomes. C. are a rare aberration from rational decision making. D. are often caused by time inconsistency.
D
Marginal revenue is the: A. change in total revenue associated with the sale of one more unit of output. B. change in average revenue associated with the sale of one more unit of output. C. change in product price associated with the sale of one more unit of output. D. difference between product price and average total cost.
A
A relationship illustrated by an upsloping graph like a supply curve means than a A. decrease in the value of one variable causes the value of the other to increase B. decrease in the value of one variable causes the value of the other to decrease C. the variables have no relationship to each other D. the relationship between the variables is weaker as prices fluctuate
B
In the long run, an oligopoly A. will produce less than a monopoly. B. may be able to earn positive economic profits. C. will always produce in the range of decreasing returns to scale. D. will produce on the portion of the demand curve where demand is price-inelastic.
B
Mutual interdependence means that each oligopolistic firm: A. faces a perfectly elastic demand for its product. B. must consider the reactions of its rivals when it determines its price policy. C. produces a product identical to those of its rivals. D. produces a product similar but not identical to the products of its rivals.
B
Which of the following is true concerning purely competitive industries? A. Economic profits will persist in the long run if consumer demand is strong and stable. B. In the short run, firms may incur economic losses or earn economic profits, but in the long run they earn normal profits. C. There will be economic losses in the long run because of cut-throat competition. D. There are economic profits in the long run but not in the short run.
B
In the article "What Do We Want Less Of?" the author mentioned the removal of subsidies for Tesla electric vehicles. What would be the result of the removal of subsidies to the Tesla Corporation for the production of these vehicles? A. a shift to the right of the demand curve resulting in higher prices B. a shift to the left of the demand curve resulting from higher prices C. a shift to the left of the supply curve resulting in higher prices D. movement along the supply curve indicating greater quantity supplied at higher prices
C
In the circular flow model of an economy, firms earn their incomes in the: A. capitalist markets B. money markets C. product markets D. resource markets
C
Monopolistic competition resembles pure competition because: A. both industries emphasize nonprice competition. B. both industries entail the production of differentiated products. curves. C. barriers to entry are either weak or nonexistent. D. in both instances firms will operate at the minimum point on their long-run average total cost
C
Suppose that RMC receives a $1 million dollar gift from an alumnus. The college could expand the library, upgrade the wireless network in the dorms, or expand the parking near the athletic facilities. This example illustrates A. distorted priorities B. opportunity cost C. scarcity D. productie efficiency
C
The larger the number of firms and the smaller the degree of product differentiation the: A. greater the divergence between the demand and the marginal revenue curves of the monopolistically competitive firm. B. larger will be the monopolistically competitive firm's fixed costs. C. less elastic is the monopolistically competitive firm's demand curve. D. more elastic is the monopolistically competitive firm's demand curve.
D
Cross-price elasticity of demand measures how sensitive purchases of a specific product are to changes in: A. the price of some other product B. the price of that same product relative to close substitutes C. income D. the general price level
A
A firm sells a product in a purely competitive market. The marginal cost of the product at the current output of 1,000 units is $2.50. The minimum possible average variable cost is $2.00. The market price of the product is $2.50. To maximize profits or minimize losses, the firm should A. continue producing 1,000 units. B. continue production, but produce less than 1,000 units. C. increase production to more than 1,000 units. D. shut down.
A
A fundamental difference between the command system and the market system is that, in command systems: A. the division of output is decided by central planning rather than by individuals operating freely through markets. B. money is not used, whereas it is in a market system. C. all economic decisions are made by the government, whereas there is no government in a market system. D. scarcity does not exist, whereas it does in a market system.
A
Assume a purely competitive increasing-cost industry is initially in long-run equilibrium and that an increase in consumer demand occurs. After all economic adjustments have been completed, product price will be A. higher, and total output will be larger than originally. B. higher, but total output will be smaller than originally. C. lower, and total output will be smaller than originally. D. lower, but total output will be larger than originally.
A
Assume the XYZ Corporation is producing 20 units of output. It is selling this output in a purely competitive market at $10 per unit. Its total fixed costs are $100 and its average variable cost is $3 at 20 units of output. This corporation A. is realizing an economic profit of $40. B. is realizing a loss of $60. C. is maximizing its profits. D. should close down in the short run.
A
Ben says that "An increase in the tax on beer will raise its price." Holly argues that "Taxes should be increased on beer because college students drink too much." We can conclude that: A. Holly's statement is normative, but Ben's is positive. B. Ben's statement is normative, but Holly's is positive. C. Both statements are normative. D. Both statements are positive.
A
Colin is purchasing products L and M in utility-maximizing amounts. If the price of C is $3 and the price of M is $3, then A. the marginal utility of M is the same as that of L. B. the marginal utility of L is four times that of M. C. the marginal utility of L is twice that of M. D. the marginal utility of M is twice that of L.
A
Consumers express self-interest when they: A. seek the lowest price for a product B. reduce business losses C. collect economic profits D. all of the above
A
Homogeneous oligopoly exists where a small number of firms are A. producing virtually identical products. B. setting price and output independently. C. setting price and output collusively. D. producing differentiated products.
A
If a firm in a purely competitive industry is confronted with an equilibrium price of $5, its marginal revenue: A. will also be $5. B. will be greater than $5. C. will be less than $5. D. may be either greater or less than $5.
A
If a monopolist engages in price discrimination, it will: A. charge a higher price where individual demand is inelastic and a lower price where individual demand is elastic B. charge a competitive price to all its customers. C. produce a smaller output than when it did not discriminate. D. realize a smaller profit.
A
In a market economy, A. self interest of individuals prices decisions and actions B. the head of each family decides and commands what to do with the family's resources C. a small group of leaders makes production and distribution decisions D. decisions are made in many ways, some by individuals and some by small groups.
A
In the short run: A. Total Variable Costs will increase for a time at a diminishing rate, but then beyond some point will increase at an increasing rate. B. Total Variable Costs will increase for a time at an increasing rate, but then beyond some point will increase at a diminishing rate. C. Total Variable Costs will increase by the same absolute amount for each additional unit of output produced. D. one cannot generalize concerning the behavior of Total Variable Costs as output increases.
A
Joe sold gold coins for $1000 that he bought a year ago for $1000. He says, "At least I didn't lose any money on my financial investment." His economist friend points out that in effect he did lose money, because he could have received a 3 percent return on the $1000 if he had bought a bank certificate of deposit instead of the coins. The economist's analysis in this case incorporates the idea of A. Opportunity costs B. Marginal benefits that exceed marginal costs C. Normative economics D. Imperfect information
A
A constant-cost industry is one in which: A. resource prices fall as output is increased. B. resource prices rise as output is increased. C. resource prices remain unchanged as output is increased. D. small and large levels of output entail the same total costs.
C
A monopolistic firm has a sales schedule such that it can sell 16 prefabricated garages per week at $100,000 each, but if it restricts its output to 15 per week it can sell these at $110,000 each. The marginal revenue of the tenth unit of sales per week is: A. $1,000. B. $9,000. C. $10,000. D. -$1,000.
C
Alex decides to buy a $25 ticket to a performance of the Richmond Symphony at Randolph-Macon rather than a $15 ticket for a Yellowjackets football game. We can conclude that Alex: A. is relatively unappreciative of sports. B. obtains more marginal utility from the football game than from the symphony. C. has a higher "marginal utility to price ratio" for the symphony than for the football game. D. has recently attended several other Yellowjacket football games.
C
Because the monopolist's demand curve is downsloping: A. the elasticity coefficient will increase as price is lowered. B. MR will equal price. C. price must be lowered to sell more output. D. its supply curve will also be downsloping.
C
Concentration ratios A. may overstate the degree of competition because they ignore imported products. B. may overstate the degree of competition because interindustry competition is ignored. C. may understate the degree of competition because they ignore imported products. D. provide detailed insights as to the price and output behavior of firms that compose the various industries.
C
In a market system which of the following is not true? A. self-interest leads individuals to pursue actions that help them achieve their goals B. the head of each family decides what to do with the family's resources C. then government makes production and allocation decisions D. market traders decide what outputs are produced and how they are allocated
C
Which of the following represents a long-run adjustment? A. an aluminum manufacturer cuts back on its purchases of bauxite, needed to make aluminum B. a beef processing plant reduces the number of workers as Americans switch to chicken as a result of an advertising campaign C. a farmer uses an extra dose of fertilizer on his corn crop D. unable to meet foreign competition, a U.S. computer manufacturer sells one of its branch plants
D
Which of the following supermarket strategies to increase sales would be most consistent with a neoclassical economics (versus behavioral economics) approach? A. positioning high-profit kids cereals on the lower shelves of the cereal aisle. B. placing the most frequently purchased items at the back of the store C. holding posted prices constant but reducing package sizes D. providing discounts for buying in bulk
D
The acronym TANSTAAFL means A. all of these can explain the acronym. B. all choices involve giving something up. C. every decision has a cost, even if it doesn't involve a price. D. there ain't no such thing as a free lunch.
A
The theory of consumer behavior assumes that A. consumers behave rationally, attempting to maximize their satisfaction. B. marginal utility is constant. C. consumers do not know how much marginal utility they obtain from successive units of various products. D. consumers have unlimited money incomes
A
The two main characteristics of a private good are A. rivalry and excludability B. rivalry and non excludability C. non rivalry and non excludability D. non rivalry and non excludability
A
What do neoclassical economics and behavioral economics believe about giving people options? A. Neoclassical economics focuses on providing more options; behavioral economics focuses on helping people make better decisions with the options available. B. Both believe that people make better decisions when they are given a greater set of options. C. Behavioral economics focuses on providing more options; neoclassical economics focuses on helping people make more rational decisions with the options available. D. Both believe that people are better off with fewer options, allowing them to spend more time calculating the benefits and costs of each available option.
A
Which is an example of a positive externality? A. an increase in the value of land you own when a nearby development is completed B. the costs paid by a company to build an automated factory C. decreased property values in a neighborhood where a disreputable nightclub is operating D. the higher the price you pay when you buy a heavily advertised product
A
Which of the economists we discussed in this unit used a scissors analogy to describe the efficiency of the price mechanism? A. Alfred Marshall B. Robert McKenzie C. Adam Smith D. None of these
A
Which of the following statements is true, all other things remained unchanged? A. If supply shifts to the right, then prices will decrease B. if supply shifts to the left, then price will decrease C. if price increases, then the supply curve will shift to the left D. if price decreases, then the supply curve will shift to the left
A
From an economic perspective, when consumers leave a fast-food restaurant because the lines to be served are too long they have concluded that the: A. cost of waiting is less than the benefit of being served B. cost of waiting is greater than the benefit of being served C. management is exhibiting irrational behavior by not maximizing profits D. management is making an assumption that other things are equal
B
If a 7% increase in the price of a product causes the quantity demanded to fall by 5%, the demand is: A. elastic B. inelastic C. unit elastic D. perfectly elastic
B
Other things equal, a decrease in the price of product A will A. decrease the marginal utility per dollar spent on A. B. increase the marginal utility per dollar spent on A. C. cause utility-maximizing consumers to buy less of A. D. not affect the marginal utility per dollar spent on A.
B
Specialization-the division of labor-enhances productivity and efficiency by: A. allowing workers to take advantage of existing differences in their abilities and skills. B. all of the means identified in the other answers. C. avoiding the time loss involved in shifting from one production task to another. D. allowing workers to develop skills by working on one, or a limited number, of tasks.
B
The incentive to cheat within a cartel increases with an increase in the following factors, except A. the number of firms in the cartel. B. economic performance and industry sales. C. the number of potential entrants into the industry. D. the cost differences among firms.
B
The law of diminishing marginal utility explains why A. people will only consume their favorite goods and not try new things. B. demand curves slope downward. C. supply curves slope upward.
B
The monopolistic competition model assumes that: A. allocative efficiency will be achieved. B. firms will engage in nonprice competition. C. firms will realize economic profits in the long run. D. productive efficiency will be achieved.
B
The threat of rejection in market transactions A. does all of these. B. leads to better products and lower prices for consumers. C. leads to higher prices, as sellers try to cover possible losses. D. leads to less cooperation between buyers and sellers.
B
Under pure competition, in the long run A.allocative efficiency is achieved, but productive efficiency is not. B. both allocative efficiency and productive efficiency are achieved. C. neither allocative efficiency nor productive efficiency is achieved. D. productive efficiency is achieved, but allocative efficiency is not.
B
Which of the following factors will make the demand for a product relatively inelastic? A. there are many substitutes B. the need for the product is immediate C. the good is considered a luxury D. purchases of the good require a large portion of consumers' budgets
B
Which of the following is an example of creative destruction? A. An economic recession forces firms out of business. B. Automobile production causes the wagon industry to shut down. C. Apple earns more economic profits than other manufacturers of MP3 players. D. Starbucks shuts down stores to create greater demand for its remaining outlets.
B
Which of the following are examples of significant barriers to entry? A. economies of scale B. ownership of essential raw materials C. patents D. all of these can represent significant barriers to entry
D
When total product is increasing at a decreasing rate, marginal product is: A. constant. B. negative. C. positive and decreasing. D. positive and increasing.
C
Susie buys two goods: rounds of golf and massages. Suppose that the price of a round of golf is $20 and the price of a massage is $30. In a typical week, Susie will play two rounds of golf, getting 20 utils of satisfaction from the second round. She normally buys three massages each week, with the third giving her 30 utils of satisfaction. If she were to buy a fourth massage in a week, it would give her 20 utils of satisfaction. If the price of massages is reduced to $15, which of the following outcomes might we expect to occur? A. Susie would leave her consumption choices unchanged because of diminishing marginal utility in the consumption of massages. B. Susie would buy more massages and more rounds of golf, as predicted by the substitution effect. C. Susie would buy more massages and fewer rounds of golf, as predicted by the substitution effect. D. Susie would buy more massages and fewer rounds of golf, as predicted by the income effect.
C
The idea in economics that "there is no free lunch" means that: A. Business would go bankrupt if they offered free lunches B. The thought of a free lunch is often better than the reality of consuming it C. There are opportunity costs involved when scarce resources are used up for free lunches D. Businesses use free lunches to attract customers but this advertising practice is inefficient
C
Which of the following best approximates a pure monopoly? A. the foreign exchange market B. the Kansas City wheat market C. the only bank in a small town D. the soft drink market
C
Which of the following best describes the invisible-hand concept? A. The market system is the best system for overcoming the scarce resources-unlimited wants problem. B. The inability to substitute resources creates a conflict between private and public interests and calls for government intervention. C. The desires of resource suppliers and producers to further their own self-interest will automatically further the public interest. D. Central direction by the government will improve resource allocation in a capitalistic economy.
C
Which of the following best expresses the law of diminishing returns? A. Because large-scale production allows the realization of economies of scale, the real costs of production vary directly with the level of output. B. Population growth automatically adjusts to that level at which the average product per worker will be at a maximum. C. As successive amounts of one resource (labor) are added to fixed amounts of other resources (capital), beyond some point the resulting extra output will decline. D. Proportionate increases in the inputs of all resources will result in a less-than-proportionate increase in total output.
C
Which of the following companies most closely approximates a differentiated oligopolist in a highly concentrated industry? A. Subway Sandwiches B. Pittsburgh Plate Glass C. Ford Motor Company D. McDonalds
C
Why do people tend to eat more at all-you-can-eat buffet restaurants than at restaurants where each item is purchased separately? A. MU/P is consistently greater at all-you-can-eat restaurants. B. Food at all-you-can-eat restaurants tends to have fewer calories, so consumers feel the need to consume a greater volume of food. C. Once the all-you-can-eat meal is purchased, consumers view additional trips back to the buffet as having a price of zero. D. People who eat at all-you-can-eat restaurants do not experience diminishing marginal utility
C
An unprofitable motel will stay open in the short-run if: A. marginal revenue exceeds price. B. marginal revenue exceeds marginal cost. C. price (average nightly room rate) exceeds average fixed cost. D. price (average nightly room rate) exceeds average variable cost.
D
For a purely competitive firm, total revenue A. is price times quantity sold. B. increases by a constant absolute amount as output expands. C. graphs as a straight upsloping line from the origin. D. has all of these characteristics.
D
From society's point of view the economic function of profits and losses is to: A. achieve full employment and price level stability. B. promote the equal distribution of real assets and wealth. C. contribute to a more equal distribution of income. D. reallocate resources from less desired to more desired uses.
D
In economics, the pleasure, happiness, or satisfaction received from a product is called: A. marginal cost B. rational outcome C. status fulfillment D. utility
D
Other things equal, which of the following might shift the demand curve for gasoline to the right? A. the exhaustion of fields in the middle-east B. the development of a low-cost electric automobile C. a decrease in the price of train and air transportation D. a large decline in the price of automobiles
D
The study of economics is primarily concerned with: A. determining the most equitable distribution of society's output B. keeping private businesses form losing money C. demonstrating that capitalistic economic are superior to socialistic economies D. choices that are made in seeking the best use of resources
D
What is the meaning of the phrase "dilemma of regulation"? A. Natural monopolies achieve economies of scale but charge high prices when there is no government regulation; government regulation reduces prices but results in diseconomies of scale. B. Natural monopolies are profitable, but only if the government permits price discrimination; government regulation to restrict price discrimination reduces monopoly prices, but the regulation also reduces monopoly output. C. The fair-return price achieves allocative efficiency but may produce economic losses; the socially optimal price yields a normal profit but may not be allocatively efficient. D. The socially optimal price achieves allocative efficiency but may produce economic losses; the fair-return price yields a normal profit but may not be allocatively efficient.
D
When LCD televisions first came on the market, they sold for at least $1,000, and some for much more. Now many units can be purchased for under $400 even though more units are sold.. These facts imply that A. the LCD television industry was once competitive but is now monopolistic. B. fewer firms produce LCD televisions than was the case five or ten years ago. C. the demand curve for LCD televisions has shifted leftward. D. the LCD television industry is a decreasing-cost industry.
D
When LCD televisions first came on the market, they sold for at least $1,000, and some for much more. Now many units can be purchased for under $400. These facts imply that: A. the LCD television industry was once competitive, but is now monopolistic. B. fewer firms produce LCD televisions than was the case five or ten years ago. C. the demand curve for LCD televisions has shifted leftward. D. the LCD television industry is a decreasing-cost industry.
D