Micro2314 review questions
A 25 percent decrease in the price of breakfast cereal leads to a 20 percent increase in the quantity of cereal demanded. As a result: A total revenue will decrease. B total revenue will increase. C total revenue will remain constant. D the elasticity of demand will increase.
A
A firm that holds a monopoly position in the market place is A a price maker B a price taker C monopolistically competitive D subject to infinite market forces
A
A prisoners' dilemma is a game with all of the following characteristics except one. Which one is not present in a prisoners' dilemma? A Players cooperate as their strategy. B Both players have a dominant strategy. C Both players would be better off if neither chose their dominant strategy. D The payoff from a strategy depends on the choice made by the other player.
A
Individual preference of a product A stays constant along a demand curve B decreases along a demand curve C increases along a demand curve D either decreases or increases along a demand curve
A
Individual preferences of a product A stays the same along a demand curve. B increases along a demand curve. C decreases along a demand curve. D fluctuates along a demand curve.
A
As an individual consumes ( ) of a product within a given period of time, it is likely that each additional unit consumed will yield ( ) satisfaction. A more; successively more B more; successively less C more; no additional D less; negative
B
f this lecture is free and open to the public, would there be any opportunity cost of attending it? A)Yes B)No
A)yes
The shape of the perceived demand curve for a perfectly competitive firm reflects that firm's ability to A sell any quantity it wishes at the prevailing market price. B raise its price without losing all of its customers. C choose any combination of price and quantity. D lose fewer customers than a monopoly that raised its prices.
A
Total revenue equals to A total output sold multiplied by price per unit of output B total output divided by profit C total output multiplied by sales price minus total cost of production D total output multiplied by sales price minus inventory surplus
A
True or false: When the government provides a tax or a subsidy to the market, the economic surplus (ES) can be calculated using the following formulas: ES = CS + PS + gov. tax revenue; ES = CS + PS - gov. subsidy cost. A True B False
A
When the price of a product goes up, what happens to a seller's marginal willingness to sell? A It goes up. B It goes down. C It stays constant. D It fluctuates around a reference point.
A
A change in price of a good or service typically causes ___________________________ for that specific good or service. A a new equilibrium price B a change along the supply curve C the supply curve to shift D a decreased demand
B
A differentiated product has A many perfect substitutes. B close but not perfect substitutes. C no close substitutes. D no substitutes of any kind.
B
A monopolist is able to maximize its profits by A setting the price at the level that will maximize its per-unit profit. B producing output where MR = MC and charging a price along the demand curve. C setting output at MR = MC and setting price at the demand curve's highest point. D producing maximum output where price is equal to its marginal cost.
B
A price ceiling A should be set above the equilibrium price level and will reduce the quantity transacted B should be set below the equilibrium price level and will reduce the quantity transacted C should be set above the equilibrium price level and will increase the quantity transacted D should be set below the equilibrium price level and will increase the quantity transacted
B
A supply curve is a graphical illustration of the relationship between price, shown on the vertical axis, and ____________ , shown on the horizontal axis. A demand B quantity C total revenue D marginal cost
B
Patents create monopolies by restricting A prices. B profit. C entry. D demand.
C
For a monopoly, the industry demand curve is the firm's ____. A profit function. B marginal revenue curve. C supply curve. D demand curve.
D
When economists talk about supply, they are referring to a relationship between price received for each unit sold and the _________________. A demand schedule B market price C quantity supplied D demand curve
c
A severe freeze has once again damaged the Florida orange crop. The impact on the market for orange juice will be a leftward shift of: A the supply curve. B the demand curve, as consumers try to economize because of the shortage. C both the supply and demand curves. D the supply curve and a rightward shift of the demand curve, resulting in a higher equilibrium price.
A
A tax on the consumer side A shifts the demand curve up and to the left B shifts the demand curve down and to the right C shifts the supply curve up and to the left D shifts the supply curve down and to the right
A
According to the law of supply: A there is a direct relationship between price and the quantity supplied. B there is an inverse relationship between price and the quantity supplied. C there is a direct relationship between price and quantity demanded. D there is an inverse relationship between price and quantity demanded.
A
As a group, oligopolists would always be better off collectively if they would A limit production. B increase production. C decrease prices. D operate according to their own self-interest.
A
Demand is said to be ___________ when the quantity demanded is very responsive to changes in price. A elastic B unit elastic C inelastic D independent
A
Employees' wage rate is ___ when moving along a supply curve. A held constant B increasing C decreasing D increasing and then decreasing
A
Following the assumption that firms maximize profits, how will the price and output policy of an unregulated monopolist compare with ideal market efficiency? A output will be too small and its price too high. B output will be too large and its price too high. C output will be too small and its price too low. D output will be too large and its price too low.
A
Government ______________ regulations specify that inventors will maintain exclusive legal rights to their respective inventions for ______________. A patent; a limited time B trademark; an unlimited time C copyright; a limited time D trade secret; an unlimited time
A
Homer and Teddy are stranded on a desert island. To feed themselves each day they can either catch fish or pick fruit. In a day, Teddy could pick 60 pieces of fruit or catch 20 fish. Homer could pick 100 pieces of fruit or catch 150 fish. Which of the following is CORRECT? A Homer has a comparative advantage in catching fish and Teddy has a comparative advantage in picking fruit. B Homer has a comparative advantage in picking fruit and Teddy has a comparative advantage in catching fish. C Homer has a comparative advantage in both catching fish and picking fruit. D Teddy has a comparative advantage in both catching fish and picking fruit.
A
If - given consumer preferences - a certain good has few close substitutes available, then: A The demand for that good will be relatively inelastic, compared to goods for which there are many close substitutes. B The supply of that good will be relatively inelastic, compared to goods for which there are many close substitutes. C The demand for that good will be relatively elastic, compared to goods for which there are many close substitutes. D The supply of that good will be relatively elastic, compared to goods for which there are many close substitutes.
A
If a profit‐maximizing competitive firm does not have to compensate society for a negative externality, the firm will choose to produce where A price equals marginal private cost B price equals marginal social cost C marginal private cost equals marginal social cost D marginal revenue equals marginal social cost
A
If a subsidy is introduced in a market, then which of the following statement is TRUE? A Consumer and producer surplus increase but economic surplus decreases. B Consumer and producer surplus decrease but economic surplus increases. C Consumer surplus, producer surplus, and economic surplus all increase. D Consumer surplus, producer surplus, and economic surplus all decrease
A
If the demand for its product is inelastic, a monopoly's A marginal revenue is negative. B total revenue is unchanged when the firm lowers its price. C total revenue increases when the firm lowers its price. D marginal revenue is equal to zero.
A
If the market for blue tooth headsets is unregulated and is presently characterized by excess demand, you can accurately predict that price will A increase, the quantity demanded will fall, and the quantity supplied will rise. B increase, the quantity demanded will rise, and the quantity supplied will fall. C decrease, the quantity demanded will rise, and the quantity supplied will fall. D decrease, the quantity demanded will fall, and the quantity supplied will rise.
A
If the most someone is willing to pay for an airline ticket to Las Vegas is $300 and the market price of the ticket is $200, then this buyer will get consumer surplus of A $100 B $200 C $300 D $500
A
In one day, Sue can change the oil on 20 cars or change the tires on 20 cars. In one day, Fred can change the oil on 20 cars or change the tires on 10 cars. Sue's opportunity cost of changing oil is ____ than Fred's and her opportunity cost for changing tires is ____ than Fred's. A greater; less B less; greater C less; less D greater; greater
A
Interpret the following statement: "An increase in the price of wheat will encourage farmers to increase the quantity of wheat supplied to the market." A The statement is correct. B The statement would be correct if "quantity of wheat demanded" were substituted for "quantity of wheat supplied." C The statement is incorrect because it confuses a change in quantity supplied with a change in supply. D The statement would be correct if it read that a "decrease in the price of wheat will encourage farmers to increase the quantity of wheat supplied to the market."
A
Julie wants to purchase a burger from Bill. The most Julie would like to pay is $9. Bill would be willing to offer the burger for $5. How large are the potential gains from trade (for both Julie and Bill)? A $4 B $5 C $9 D $14
A
Marginal damages A must always be considered in marginal social costs. B must not be considered in marginal social costs. C must sometimes be considered in marginal social costs. D have nothing to do with marginal social costs.
A
Perfect competition and monopoly stand at ______________ of the spectrum of competition. A opposite ends B the high end C the low end D the mid-way point
A
Price will ____ and output will ____ once government makes a firm internalize a negative externality externality. A increase; decrease B increase; increase C decrease; decrease D decrease; increase
A
Suppose in Italy, 20 percent leather goods are made with high-quality genuine leather. Italian manufactures also export leather products to the US. How much percentage of high-quality genuine leather product would you expect to find in the US market? A)More than 20 percent B)Less than 20 percent C)Exactly 20 percent
A
Suppose professional basketball player LeBron James hires a high school student to mow his yard, even though each can mow it in the same amount of time. Which of the following is most likely TRUE? A The opportunity cost of mowing the yard is higher for LeBron James than for the high school student. B The opportunity cost of mowing the yard is lower for LeBron James than for the high school student. C The opportunity cost of mowing the yard is the same for LeBron James than for the high school student. D The opportunity cost of mowing the yard is zero for LeBron James and negative for the high school student.
A
The demand curve as perceived by a perfectly competitive firm is ______________. A flat B downward sloping C upward sloping D hump shaped
A
The demand curve for a typical good has a(n): A negative slope because some consumers switch to other goods as the price rises. B negative slope because consumer incomes fall as the price of the good rises. C negative slope because the good has less "snob appeal" as its price falls. D inverse slope because as the price goes up, the good has more profitability.
A
Two companies, Alpha and Beta, are trying to choose spending on research and development. They can choose either high spending or low spending. If both companies choose low spending, they will both earn $10 million per year. If both companies choose high spending, they will both earn $5 million per year. If one chooses high and the other low, the company that chooses high spending will earn $20, while the company that chooses low will earn $2 million. Suppose Alpha is the leader of the industry and decide its own spending on R&D first. Beta makes its spending decision after observing Alpha's strategy. In this sequential game, the Nash Equilibrium is: A (High; High) B (Low; Low) C (Low; High) D (High; Low)
A
Two companies, Alpha and Beta, are trying to choose spending on research and development. They can choose either high spending or low spending. If both companies choose low spending, they will both earn $10 million per year. If both companies choose high spending, they will both earn $5 million per year. If one chooses high and the other low, the company that chooses high spending will earn $20, while the company that chooses low will earn $2 million. The companies must make their decision without knowledge of the other's action. The equilibrium in this game is going to be, expressed as (Alpha's strategy; Beta's strategy): A (High; High) B (Low; Low) C (Low; High) D (High; Low)
A
When the price of fresh fish increases 10%, quantity demanded is unchanged. The price elasticity of demand for fresh fish is A perfectly inelastic. B elastic. C inelastic. D unitary elastic.
A
Which of the following CANNOT result in a decrease in the equilibrium quantity sold of an inferior good? A An increase in the price of a substitute for the good. B An increase in consumer incomes. C An increase in wages paid to workers who produce the good. D An increase in the price of a complement for the good.
A
Which of the following statement about market equilibrium is correct? A The competitive market equilibrium maximizes the total gain from trade. B The competitive market equilibrium minimizes total grain from trade C Quantity supplied does not equal to quantity demanded at market equilibrium D Arbitrage could take place at market equilibrium.
A
Which of the following statements about external costs is TRUE? A Economics uses the term "external cost" to describe a spillover effect from market activity that is too small to matter to society. B Economics ignores the environmental impact of market activities by calling such impact an "external cost." C Economics does not provide guidance for environmental policy since its treats any environmental cost as an "external cost". D None of the above statements are true.
A
A wheat farmer sells wheat in a perfectly competitive market and hires labor in a perfectly competitive market. The market price of wheat is $2 a bushel, the wage rate is $10, and the farmer employs five workers. If the farmer is maximizing his profits, then the marginal product of the fifth worker is ____. A 0.2 bushels B 5 bushels C 20 bushels D indeterminate from the given information.
B
All remedies for externalities share the goal of A moving the allocation of resources toward the market equilibrium B moving the allocation of resources toward the social optimum C increasing the allocation of resources D decreasing the allocation of resources
B
An unregulated market produces too _____ of a good with an external cost and too _____ of a good with an external benefit. A much; much B much; little C little; much D little; little
B
As the name monopolistic competition implies, a firm's decisions in this setting will in certain ways resemble ______________ and in other ways resemble ______________ . A monopoly; duopoly B monopoly; perfect competition C duopoly; perfect competition D imperfect competition; oligopoly
B
Assuming the government establishes an effective price floor, which of the following statements is not correct? A The current equilibrium price cannot be achieved. B Price will go down. C Price will go up. D Sellers are motivated to offer a larger quantity to the market.
B
Betty and Ann live on a desert island. With a day's labor, Ann can produce 8 fish or 4 coconuts; Betty can produce 6 fish or 2 coconuts. Ann's opportunity cost of producing 1 coconut is ___ and she should specialize in the production of ___. A 8 fish per coconut; fish B 2 fish per coconut; coconuts C 6 fish per coconut; coconuts D 0 fish per coconut; coconuts
B
Bill has the following marginal value (MV) schedule for milk. Suppose the price of milk if $10/carton, how many cartons of milk will he purchase, and what is his consumer surplus (CS)? answerable question reference MV:$12|$9|$6|$3|$0 Qu: 1. | 2| 3 | 4 | 5 A)Q = 1, CS = $12 B)Q = 1, CS = $2 C)Q = 1, CS = $10 D)Q = 2, CS = $21
B
Billy Bob's Barber Shop knows that a 5 percent increase in the price of their haircuts results in a 15 percent decrease in the number of haircuts purchased. What is the elasticity of demand facing Billy Bob's Barber Shop? A -0.15 B -3.0 C -0.10 D -0.05
B
But nearly all supply curves share a basic similarity: they slope _______________ . A down from left to right B up from left to right C up from right to left D down from right to left
B
Comparative advantage implies that a country will A export goods produced by domestic industries with low wages relative to its trading partners. B export those goods in which the country has a comparative advantage. C find it difficult to conclude free trade agreements with other nations. D import those goods in which the country has a comparative advantage.
B
Demand is said to be __________ when the quantity demanded changes at the same proportion as the price. A elastic B unit elastic C inelastic D independent
B
Demand is said to be _____________ when the quantity demanded is not very responsive to changes in price. A independent B inelastic C unit elastic D elastic
B
Do people buy less gas because the absolute price rises in the past century? A)Yes, the quantity consumed declines as the absolute price rises. B)No, since the price level of all other goods simultaneously rises.
B
Harry produces 2 balloon rides and 4 boat rides an hour. Harry could produce more balloon rides but to do so he must produce fewer boat rides. Harry is his production possibilities frontier. A producing inside B producing on C producing outside D producing either inside or on
B
If a demand curve is VERTICAL, then the price elasticity of demand for this good is equal to: A Infinity. B Zero. C One. D None of the above.
B
If a firm faces ________________________, while the prices for the output the firm produces remain unchanged, a firm's profits will increase. A higher demand B lower costs of production C equilibrium D a shift in demand
B
If a firm holds a pure monopoly in the market and is able to sell 5 units of output at $4.00 per unit and 6 units of output at $3,90 per unit, it will produce and sell the sixth unit if its marginal cost is A $3.90 or less B $3.40 or less C $3.50 or less D $4.00 or less
B
If a perfectly competitive firm raises its price, the quantity demanded of its product ______________. A diminishes temporarily in the short run B falls to zero C stays the same D falls below marginal cost
B
If a perfectly competitive market involves many firms selling identical products, then, in the face of such competition, A each of these firms must act as a price-maker. B each of these firms must act as a price-taker. C collusion amongst them will most often result. D demand curves can become kinked in appearance.
B
If the firm is producing at a quantity of output where marginal revenue exceeds marginal cost, then, A the firm's perceived demand will shift to the left. B the firm should keep expanding production. C each marginal unit adds profit by bringing in less revenue than its cost. D the firm is now earning zero for profit.
B
In economics, the demand for a good refers to the amount of the good that people: A would like to have if the good were free. B will buy at various prices. C need to achieve a minimum standard of living. D will buy at alternative income levels.
B
In the event that Only1Corp. obtains control of all the natural gas producers in the US, it would most likely A have a patent giving it exclusive legal rights to make, use, and sell for a limited time. B raise prices, cut production, and realize positive economic profits. C have legal protection to prevent copying its methods of production for commercial use. D acquire rights for its investors to produce and sell their product.
B
John goes to a Lego store to find a present for his son. He is willing to pay up to $400 for a Hogwarts Castle, which is equal to the original price of the item. When he arrives, he finds that the store is currently offering a 20% discount on all products, including the Hogwarts Castle. What decision would John make and what would be his consumer surplus? A John will purchase the Hogwarts Castle and the consumer surplus is $400. B John will purchase the Hogwarts Castle and the consumer surplus is $80. C John will purchase the Hogwarts Castle and the consumer surplus is $320. D John does not purchase the item since he can spend the $400 on other goods and services.
B
Markets with only a few sellers, each offering a product similar or identical to the others, are typically referred to as A monopolistically competitive markets. B oligopoly markets. C monopoly markets. D competitive markets.
B
Michael is an economist. He loves being an economist so much that he would do it for a living even if he only earned $30,000 per year. Instead, he earns $80,000 per year. How much producer surplus does Michael enjoy? A $30,000 B $50,000 C $80,000 D $110,000
B
Pollution permits A impose regulations on firms that they must achieve. B set a quantity of pollution that will exist. C cannot be traded between firms in order to make sure that the worst offenders must clean up their production processes. D are efficient because they eliminate all pollution.
B
Suppose that in an hour Joe can prepare 10 sandwiches or 5 pizzas. The opportunity cost of Joe producing one sandwich is A 2 pizzas B 1/2 pizza C 5 pizzas D 1 pizza
B
Suppose the original price of HP Officejet multi-function printer was $50. The manufacture currently adjusts the price to $49. How much percentage does the price change? A The price drops by 1%. B The price drops by 2%. C The price drops by 5%. D The price drops by 10%.
B
The ____________ is the quantity where quantity demanded and quantity supplied are equal at a certain price. A quantity demanded B equilibrium quantity C demand schedule D supply schedule
B
The marginal revenue curve for a monopolist ______________ the market demand curve. A always rises above B always lies beneath C always runs parallel D always is the same
B
The market price of a bowling ball is $125 and the full cost of producing it is $35, then a bowling ball producing firm gets producer surplus of A $35 B $90 C $125 D $160
B
The two primary factors determining monopoly market power are the firm's A size and location B demand curve and its cost structure C advertising strategy and participation in charity D accuracy in predicting the market trend and the level of wealth within its market
B
The unit price of Cheerios is $3.5 per bag. A local HEB store offers a 30% discount on each bag if a customer buys more than 3 bags. Customer A and B buys 2 and 5 bags, respectively. Then, A A pays $4.9, B pays $12.25. B A pays $7, B pays $12.25. C A pays $4.9, B pays $5.25. D A pays $7, B pays $17.5.
B
To ensure the market reaches the social optimum in presence of a technology spillover, the government should subsidize producers by A use of a Pigovian tax. B an amount equal to the value of the technology spillover. C helping those companies that are adversely affected by the new technology. D transferring income to the low income portion of the population.
B
Total expenditure is obtained by A summing up the marginal values up to a certain quantity B multiplying the unit price and the chosen quantity C summing up the net benefit a consumer obtains by purchasing each product D using the total value divided by the chosen quantity
B
Two companies, Alpha and Beta, are trying to choose spending on research and development. They can choose either high spending or low spending. If both companies choose low spending, they will both earn $10 million per year. If both companies choose high spending, they will both earn $5 million per year. If one chooses high and the other low, the company that chooses high spending will earn $20, while the company that chooses low will earn $2 million. The companies must make their decision without knowledge of the other's action. A dominant strategy for firm Alpha would be: A Always choose a low level of R&D. B Always choose a high level of R&D. C Choose low if Beta chooses low and high if Alpha chooses high. D There is no dominant strategy for Alpha.
B
When Vanessa, a U.S. citizen, purchases a designer dress from Barneys of New York that was made in Milan, Italy, the purchase is: A both a U.S. and an Italian import. B a U.S. import and an Italian export. C a U.S. export and an Italian import. D neither an export nor an import for either country.
B
When both demand and supply are normally shaped (i.e., demand is downward sloping and supply is upward sloping), A there is a deadweight loss at market equilibrium. B there is no deadweight loss if the quantity transacted is at the equilibrium level. C there is no deadweight loss if there is an effective price control. D None of the above is correct.
B
When demand is inelastic: A price elasticity of demand is less than -1. B consumers are not very responsive to changes in price. C the percentage change in quantity demanded resulting from a price change is greater than the percentage change in price. D demand curves appear to be fairly flat.
B
Which of the following is most likely to be a monopoly? A local fast-food restaurant B local electricity distributor C local bathroom fixtures shop D local television broadcaster
B
Which of the following statements about tax incidence and relative elasticities is TRUE? I. If demand is relatively inelastic and supply is relatively elastic, then consumers bear more of the burden of a tax. II. If supply is perfectly inelastic, then producers bear none of the burden of a tax, no matter what the value of own-price elasticity of demand. III. If the relative elasticities of demand and supply are the same, the tax burden is shared equally across consumers and producers. A II only. B I and III only. C I, II, and III. D III only.
B
Which of the following statements about the relationship between the price elasticity of demand and revenue is TRUE? A If demand is price inelastic, then increasing price will decrease revenue. B If demand is price elastic, then decreasing price will increase revenue. C If demand is perfectly inelastic, then revenue is the same at any price. D Elasticity is constant along a linear demand curve and so too is revenue.
B
Which of the following statements is always true? A A firm that has absolute advantage in a good will also have comparative advantage in that good. B A firm can have comparative advantage in a good without having absolute advantage in that good. C In order for a firm to have absolute advantage in a good, they must also have comparative advantage in that good. D In order for a firm to have comparative advantage in a good, they must also have absolute advantage in that good.
B
Which of the following statements is correct? A Economics is a natural science. B In large measure, economics is the study of how people make choices. C If poverty was eliminated there would be no reason to study economics. D Economic analysis can be used to explain how societies, but not individuals, make decisions.
B
Your friend Jane recently received a tax refund of $650 and she decided to purchase a new smartphone. She was deciding between an iPhone 8 and a Samsung Galaxy S9, both of which were priced at $650. If you observe that Jane finally chose an iPhone 8, you can safely conclude that A Jane has made an irrational decision. B Jane's marginal value of iPhone 8 should be higher than her marginal value of Samsung Galaxy S9. C Jane should be indifferent between choosing an iPhone 8 and a Samsung Galaxy S9 because they are equally priced. D Jane's consumer surplus of purchasing an iPhone 8 should be lower than her consumer surplus of purchasing a Samsung Galaxy S9.
B
When the price > marginal value (MV) of a product, what is a rational person's behavior? A)Purchase the product B)Not purchase the product
B)not purchase the product
A drought decreases the supply of agricultural products, which means that at any given price a lower quantity will be supplied; conversely, especially good weather would shift the __________________ . A demand curve to the right B supply curve to the left C supply curve to the right D demand curve to the left
C
A technological company is selling 30 outputs at a market price of $200. The marginal cost of the 31st output is $198 and the marginal cost of the 32nd output is $201. The company would be better off by ___ A keeping the current level of production B scaling down C increasing output by 1 unit D increasing output by 2 units
C
An unregulated monopoly finds that its marginal cost exceeds its marginal revenue. In order to increase its profit, the firm will A lower its price and increase its output. B raise its price and increase its output. C raise its price and decrease its output. D continue to produce this level of output because any change will lower its profit.
C
Economists refer to the relationship that a higher price leads to a lower quantity demanded as the _____________ . A income gap B market equilibrium C law of demand D price model
C
If I have to drop out of college, it will cost me all of the tuition I have paid and the income I could have earned during those years while I was in college. True or false. A True. These were opportunity costs of staying in college. B False. I did not pay these costs. C False. I did pay these costs, but they are sunk and thus not relevant to the decision.
C
If a monopoly or a monopolistic competitor raises their prices, the quantity demanded ______________ . A will expand B stays the same C will decline D will either expand or decline
C
If the most someone is willing to pay for an airline ticket to Las Vegas is $300 and the market price of the ticket is $200. Now the government decides to impose a tax of $50 per ticket, driving up the price to $250. This buyer will get consumer surplus of A $150 B $100 C $50 D The buyer will not purchase the ticket, and consumer surplus would be zero.
C
If the opportunity cost of clothing in Mexico is lower than in the US, and the opportunity cost of wheat in the US is lower than in Mexico, then: A trade cannot benefit either country. B only one country can be made better off by trade. C mutually beneficial trade is possible. D trade will only benefit both countries if one can lower its opportunity costs.
C
If the price elasticity of demand for college textbooks is -0.1, and the price of textbooks increases by 20%, how much will the quantity demanded change, and in what direction? A The quantity demanded increases by 2% B The quantity demanded decreases by 20% C The quantity demanded decreases by 2% D The quantity demanded remains the same
C
If the price in a market is below the equilibrium price, this creates _{\math} A a shortage in demand B a surplus in supply C a shortage in supply D neither a shortage nor a surplus
C
In a sequential game with two players that we learned in class, A the leader understands that the follower is rational. B the follower understands that the leader is rational. C both players behave rationally and they understand the other player is also rational. D no player behaves rationally and neither assumes the other is rational.
C
In a sequential game with two players that we learned in class, A only the leader (first mover) knows the payoff structure. B only the follower (second mover) knows the payoff structure. C both the leader and the follower knows the payoff structure. D neither the leader and the follower knows the payoff structure.
C
Internalizing a positive production externality through a government subsidy will cause the industry's supply curve to A remain unchanged B shift down by an amount less than the subsidy C shift down by an amount equal to the subsidy D shift up by an amount equal to the subsidy
C
Shopping malls typically lease retail space to a large number of clothing stores. When this group of retailers competes to sell similar but not identical products, they engage in what economists call ______________. A a monopoly B collusion C monopolistic competition D perfect competition
C
Suppose a seller has the following supply function for his apples: Q = -9 + 5 * P (Q: lb of apples; P: price of apples in $) On a discrete scale, at what price level would the seller be willing to offer the first lb. of apple for sale? A $0 B $1 C $2 D $3
C
Suppose consumers view goods X and Y as substitutes. Which of the following is TRUE? A An increase in the price of X will result in a decrease in the equilibrium price of Y. B An decrease in the price of X will result in an increase in the equilibrium quantity of Y. C An increase in the price of X will result in an increase in the equilibrium quantity of Y. D More than one of the above is true.
C
Suppose the equilibrium price of good X is $10 and the equilibrium quantity is 60 units. If the price of good X is $4: A The quantity demanded will be less than 60 units. B The quantity supplied will be more than 60 units. C There will be an excess demand for good X. D There will be an excess supply of good X.
C
Thailand has a comparative advantage in rice and an absolute advantage in cell phones. Indonesia has a comparative advantage in cell phones and an absolute advantage in rice. According to this scenario A Indonesia should export both cell phones and rice. B Thailand should import both cell phones and rice. C Thailand should export rice and import cell phones. D Indonesia should export rice and import cell phones.
C
The Coase theorem will apply only if A the courts can be used to determine the amount of compensation that must be made to the damaged party B the amount of compensation to the damaged party is small C the number of people involved is small D an individual who is not affected by the externality can negotiate a settlement between the parties imposing the externality and the parties harmed by the externality
C
The demand curve perceived by a perfectly competitive firm A shows that such a firm is a price-maker B shows economies of scale over a large range of output C is horizontal D all of the above
C
The difference between the amount the consumer would be willing to pay and the amount the consumer actually paid for a certain amount of good/service is A opportunity cost of buying the good B marginal value of the good C consumer surplus of buying the good D price of the good
C
The downward slope of the demand curve again illustrates the pattern that as _________________ rises, _________________ decreases. A quantity demanded, price B quantity supplied, quantity demanded C price, quantity demanded D price, quantity supplied
C
The market demand for Haagen-Dazs ice cream is given by Q = 120 - 10 * P. Which of the following statements is not correct? A)No consumer is willing to pay more than $12 for a Haagen-Dazs ice cream. B)Only 60 ice creams will be demanded at a price of $6. C)At maximum, 100 ice creams will be sold.
C
The market price of a bowling ball is $125 and the full cost of producing it is $35. Now the government provides a subsidy of $30 per bowling ball to the sellers. Assuming that the market price remains at $125, what is the producer surplus a bowling ball producing firm gets? A $90 B $65 C $120 D $125
C
The price elasticity of demand for Stork ice cream is -4. Suppose you're told that following a price increase, quantity demanded fell by 10 percent. What was the percentage change in price that brought about this change in quantity demanded? A 40% B 25% C 2.5% D 0.4%
C
The price elasticity of demand measures the: A responsiveness of quantity demanded to a change in quantity supplied. B responsiveness of price to a change in quantity demanded. C responsiveness of quantity demanded to a change in price. D responsiveness of quantity demanded to a change in income.
C
The production possibilities frontier is the boundary between A those combinations of goods and services that can be produced and those that can be consumed. B those resources that are limited and those that are unlimited. C those combinations of goods and services that can be produced and those that cannot. D those wants that are limited and those that are unlimited.
C
When J.K. Rowling exerts copyright ownership of her literary works, she creates a monopoly by restricting A the number of inventors. B unit production costs. C entry into the market. D demand for the product.
C
When the marginal cost of production is constant and the marginal value is diminishing, A suppliers would always pay all of the tax. B suppliers would always receive all of the subsidy C consumers would always pay all of the tax. D suppliers and consumers will share the tax burden.
C
Which of the following does not constitute the fundamental questions that every economic system must answer? A What goods and services will be produced? B How will they be produced? C When will they be produced? D For whom will they be produced?
C
Which of the following is likely to have the most elastic demand? A A good with a vertical demand curve B Cigarettes C Sprite D Life-sustaining pills
C
Which of the following statements about a Nash Equilibrium is correct? A All the players are choosing their dominant strategies in a Nash Equilibrium. B All the players are choosing their dominated strategies in a Nash Equilibrium. C There could be multiple Nash Equilibria in a simultaneous game. D A Nash Equilibrium always gives the best outcome for all players.
C
Which of the following will present the least amount of concern to a firm that has a monopoly over a particular industry? A whether consumers will purchase its product B whether consumers will spend on different products C the competitive actions of other business firms D barriers to entry and competitors' patent protection
C
Which one of the following is not part of every game theory model? A Players B Payoffs C Probabilities D Strategies
C
Which one of the following is the most accurate description of a monopolist? A a sole producer of a narrowly defined product class, such as brown, Grade A eggs produced in Eagle County, Colorado B a firm that is very large relative to all its competitors within a narrow product class C a sole producer of a product for which good substitutes are lacking in a market with high barriers to entry D a large, multinational firm that produces a single product in a narrow product class
C
You own The Wedding Crasher on DVD. The opportunity cost of watching this DVD for the fourth time A is zero, since you own it. B is one-fourth the cost of the DVD, as this is the fourth time you have watched it. C is the value of the alternative use of the time you spend watching the DVD. D must be the same as the opportunity cost of watching it the first time.
C
______________ are enacted when discontented sellers, feeling that prices are too low, appeal to legislators to keep prices from falling. A Rent controls B Price ceilings C Price floors D Subsidies
C
______________ occurs when circumstances have allowed several large firms to have all or most of the sales in an industry. A Collusion B A monopoly C An oligopoly D A perfect competition
C
according to marginal analysis, optimal decision-making involves: A Taking actions whenever the marginal benefit is positive. B Taking actions only if the marginal cost is zero. C Taking actions whenever the marginal benefit exceeds the marginal cost. D All of the above.
C
How would you expect the marginal value (MV) to trend when a person consumes more and more of a good? A)Stay constant B)Increase C)Decrease D)Fluctuate erratically
C) Decrease
A Pigouvian (or corrective) subsidy A cannot exist with externalities. B is the same thing as a Pigouvian tax. C moves production away from the socially optimal level of output. D moves production to the socially optimal level of output.
D
A country that has a comparative advantage in producing capital goods will ____ a country that has a comparative advantage in consumption goods. A reap all of the gains from trade when it trades with B grow slower than C reap fewer of the gains from trade when it trades with D specialize in producing capital goods and trade with
D
A government subsidy provided to the suppliers of a product A shifts the demand curve up and to the left B shifts the demand curve down and to the right C shifts the supply curve up and to the left D shifts the supply curve down and to the right
D
A monopolist's marginal revenue will always be less than market price. This is because: A There are substantial startup costs and other barriers to entry. B The firm is able to practice perfect price discrimination. C monopolist always have higher production costs than other types of firms or industries. D The monopolist must reduce the price of all units of output, not just an additional unit, in order to increase sales.
D
A price cut will increase the total revenue a firm receives if the demand for its product is: A unit inelastic. B unit elastic. C inelastic. D elastic.
D
All else equal, a decrease in the marginal cost of producing a good will result in: A A lower equilibrium quantity and a higher equilibrium price. B A lower equilibrium quantity and a lower equilibrium price. C A higher equilibrium quantity and a higher equilibrium price. D A higher equilibrium quantity and a lower equilibrium price.
D
Andy views beer and pizza as complements to one another. If the price of pizza decreases, economists would expect: A Andy's demand for pizza to increase. B Andy's demand for pizza to decrease. C Andy's quantity of pizza demanded to decrease. D Andy's demand for beer to increase.
D
Costs that cannot be avoided, because they have already been incurred are known as A marginal costs B implicit costs C opportunity costs D sunk costs
D
Crying babies on airplane impose a negative externality on those sitting around them. Which of the following policies would help to internalize the externality? A Provide discount tickets for babies and young children B Evenly disperse the babies and young children throughout the plane so as to minimize the impact of their crying on a any one passenger C Impose a minimum flying age of 5 years old D Charge a higher ticket fee for babies and young children than for all other passengers
D
Flu shots are associated with a positive externality. (Those who come in contact with people who are inoculated are helped as well.) Given perfect competition with no government intervention in the vaccination market, which of the following holds? A At the current output level, the marginal social benefit exceeds the marginal private benefit. B The current output level is inefficiently low. C A per-shot subsidy could turn an inefficient situation into an efficient one. D All of the above are correct.
D
For the Law of Demand to work, which of the following needs to be fixed as constant? A Consumers' income level B Number of consumers C Price of other goods and services D All of the above
D
Four firms are concentrating in an industry and their joint market share is x%. Which of the following values would x likely take if the industry is characterized as an oligopoly? A 0.25 B 8 C 20 D 85
D
If cookies are a normal good and incomes increase, we would expect: A An increase in equilibrium price and a decrease in equilibrium quantity. B A decrease in equilibrium price and an increase in equilibrium quantity. C A decrease in equilibrium price and equilibrium quantity. D An increase in equilibrium price and equilibrium quantity.
D
If the North American newsprint paper market has barriers to entry, then A abnormally high profits will attract the entry of new firms. B the entry of new firms will eventually cause price to decline. C surviving firms earn only a normal level of profit in the long run. D entry will be blocked even if firms are earning high profits.
D
In a perfectly competitive market, A every trader has the power to negotiate on the price. B only a small group of consumers have the power to negotiate on the price. C only a small group of sellers have the power to negotiate on the price. D no one has any power to negotiate on the price.
D
Jane produces only corn and cloth. Taking account of her preferences for corn and cloth (assuming corn is on the vertical axis) A makes her production possibilities frontier straighter. B makes her production possibilities frontier steeper. C makes her production possibilities frontier flatter. D does not affect her production possibilities frontier.
D
John goes to a Lego store to find a present for his son. He is willing to pay up to $400 for a Hogwarts Castle, which is equal to the original price of the item. When he arrives, he notices that Lego has adjusted the prices of all the products due to inflation, and the current price of Hogwarts Castle is $420. What decision would John make? A John would increase his maximum willingness to pay for Hogwarts Castle by $20 as well. B John would negotiate with the store manager to be able to purchase the product at the original price. C John would be willing to bribe the store manager up to $20 in order to buy the product at $400. D John would not purchase the Hogwarts Castle.
D
Julie wants to purchase a burger from Bill. The most Julie would like to pay is $9. Bill would be willing to offer the burger for $5. If trade takes place at $6.5, how much does each person gain? A $1.5 goes to Julie and $2.5 goes to Bill B $6.5 goes to Julie and $6.5 goes to Bill C $9 goes to Julie and $5 goes to Bill D $2.5 goes to Julie and $1.5 goes to Bill
D
Peter's Pencils is a perfectly competitive company producing pencils. Suppose Peter is producing 1,000 pencils an hour. If the total cost of 1,000 pencils is $500, the market price per pencil is $2, and the marginal cost is $2, then Peter A should decrease his output to increase his profit. B is not maximizing his profit but is earning a normal profit anyway. C should increase his output to increase his profit. D is maximizing his profit and is earning an economic profit.
D
Price elasticity of demand is defined as: A the slope of the demand curve. B the slope of the demand curve divided by the price. C the percentage change in price divided by the percentage change in quantity demanded. D the percentage change in quantity demanded divided by the percentage change in price.
D
Suppose a tax is levied in a market in which demand is downward sloping and supply is perfectly elastic. Which of the following statements is/are TRUE? I. Producer surplus decreases. II. The deadweight loss is zero. III. Consumers bear all the burden of the tax. A II only. B I and II only. C I, II, and III. D III only.
D
Suppose that a 2% increase in price results in a 6% increase in quantity supplied. The price elasticity of supply is equal to: A 1/3. B 6. C 2 D 3.
D
The economic incentive for price discrimination depends on: A prejudices of business managers. B differences among sellers' costs. C differences among sellers' sizes. D differences among buyers' demand elasticities.
D
The marginal product of the 14th worker is 8 and the firm sells its output for $4 per unit. The value of the 14th worker's marginal product is A $2 B $4 C $12 D $32
D
The market demand for candy bar is given by Q = 200 - 5 * P. What can you infer from this demand function? A Price and quantity demanded are positively correlated. B When price increases by $1, quantity demanded will drop by 40. C When price is $4, quantity demanded would fall to zero. D None of the above is correct.
D
The production possibilities frontier itself shows A the maximum amount of resources available at any given time. B combinations of goods and services that do not fully use available resources. C the maximum rate of growth of output possible for an economy. D the maximum levels of production that can be attained.
D
The slope of the demand curve for a monopoly firm is A horizontal, parallel to the x-axis B vertical, parallel to the y-axis C upward sloping D downward sloping
D
The supply function of instant pot is given by Q = -120 + 5 * P. Which of the following statements is correct? A The price elasticity of supply is 5 at every point on the supply curve. B When price is $20, 20 instant pots would be produced. C When price increases from $30 to $35, 5 more instant pots will be produced. D When price is $24, no instant pot would be produced.
D
What economic argument suggests that if transactions costs are sufficiently low, the equilibrium is economically efficient regardless of how property rights are distributed? A The Law of Comparative Advantage B The Law of Supply C The Law of Demand D The Coase Theorem
D
When the absolute price of beef increases, so as the wage and the general price level, then A people will consume less beef because it is becoming more expensive. B people will consume more beef since the wage is higher. C people will consume less beef if the relative price of beef declines. D people will consume less beef if the relative price of beef increases.
D
Which method can help in obtaining a welfare improvement if externalites exist? A Pigouvian taxes B direct regulations C assigning property rights and permitting bargaining D all of the above
D
Which of the following best defines the opportunity cost of producing a good? A It is the cost of labor and capital in the production process. B It is the cost of technology used in the production process. C It is the cost of the input mix that will lead to the greatest growth rate of the company. D It is the amount of other products that must be given up in order to product a good.
D
Which of the following correctly describes the equilibrium effects of a per unit subsidy? A Consumer price rises, producer price falls, and quantity increases. B Consumer price falls, producer price falls, and quantity increases. C Consumer price rises, producer price rises, and quantity increases. D Consumer price falls, producer price rises, and quantity increases.
D
Which of the following correctly describes the equilibrium effects of a per-unit tax in a perfectly competitive market? A Consumer and producer surplus increase but social surplus decreases. B Consumer and producer surplus decrease but social surplus increases. C Consumer surplus, producer surplus, and social surplus all increase. D Consumer surplus, producer surplus, and social surplus all decrease.
D
Which of the following is NOT illustrated by a production possibilities frontier? A scarcity B opportunity cost C necessity for choice D who gets the goods
D
Which of the following is NOT true concerning a society's production possibilities frontier (PPF)? A It reveals the maximum amount of any two goods that can be produced from a given quantity of resources. B Tradeoffs occur when moving along a PPF. C Production efficiency occurs when production is on the frontier itself. D Consumers will receive equal benefits from the two goods illustrated in the PPF.
D
Which of the following statement is correct? A The only way that a game can ever have a Nash Equilibrium is if every player has a dominant strategy. B Every game with a finite number of players, each with a finite number of available pure strategies, has at least one (pure strategy) Nash Equilibrium C The sequential game and its simultaneous move game counterpart always share the same set of Nash Equilibrium. D None of the above.
D
Which of the following statements about consumer surplus and producer surplus is TRUE? A Consumer surplus is equal to the area under the demand curve. B Producer surplus is equal to the area under the supply curve. C Both producer and consumer surplus are equal to price multiplied by quantity. D None of the above statements is true.
D
Which of the following statements is true? A Although some individuals are made better off as a result of international trade, both countries may be worse off overall. B All individuals in both countries are made better off as a result of international trade. C Within each country, some individuals are made better off as a result of international trade, but one of the countries will be worse off overall. D Each country as a whole is made better off as a result of international trade, but individuals within each country may be worse off.
D
Which would definitely not be an example of price discrimination? A A theater charges children less than adults for a movie. B Universities charge higher tuition for out-of-state residents. C A doctor charges for services according to the income of patients. D An electric power company charges less for electricity used during off-peak hours when production costs are lower.
D
Which of the following is not considered as scarce? A)Water B)Land C)Labor D)Pollution
D) Pollution
