ECO 211 Final Exam
Monopolies misallocate resources because: A. price does not equal marginal cost B. price does not equal average variable cost C. marginal costs does not equal average total cost D. profits are usually positive
a
Monopolistic competition is characterized by: A. relative ease of entry into the market B. a standard, undifferentiated product C. persistent long-run economic profits D. production at minimum average cost in the long run
a
One of the fundamental problems a cartel faces is: A. to determine how much each producer will decrease its output B. to determine how much each producer will increase its output C. to determine how much each producer will lower its price D. to determine how much each producer will lower its profit
a
In which market structures is the firm able to earn long-run economic profits? A. Perfect competition and monopolistic competition B. Monopolistic competition and oligopoly C. Oligopoly and monopoly D. Monopolistic competition, oligopoly, and monopoly
c
Positive economics: A. always gives an optimistic spin to economic news B. is concerned with the economic policies that should be implemented C. is objective D. was not used by nineteenth century economists
c
Scarcity refers to: A. the ability of society to employ all of its resources B. the ability of society to consume all that it produces C. the inability of society to satisfy all human wants because of limited resources D. the inability of society to eliminate poverty
c
If a monopolist raises its price, A. it raises the barriers to entry B. the quantity demanded increases C. the quantity demanded remains the same D. the quantity demanded decreases
d
If a person claims, "I wouldn't eat liver if you paid me," we can assume that his marginal utility of liver is: A. positive B. positive, but decreasing C. zero D. negative
d
The price elasticity of demand along a vertical demand curve is: A. elastic at high prices and inelastic at low prices B. infinite C. one D. zero
d
If the marginal productivity of labor decreases, then: A. the quantity of labor demanded at every possible wage rate will be less. B. the quantity of labor demanded at every possible wage rate will be higher C. the quantity of labor demanded will not be affected D. the demand curve for labor will shift upward and to the right
a
"Wants" as an economic concept includes: A. both material and nonmaterial desires B. only the purchase of necessary basic goods C. only the desire for luxury goods D. only those goods that can be purchased with one's paycheck
a
A cartel is a form of: A. collusion B. vertical merger C. noncooperative competition D. negative sum game
a
A country operates inside its production possibilities curve; this may be caused by: A. unemployed resources B. total efficiency in the industry C. a new resource being discovered D. a lack of modern products being produced
a
A member in a cartel can earn more profits by: A. charging a slightly lower price and raising production B. producing less than the agreed rate C. selling less than the agreed amount D. none of the above
a
A price floor set above a market equilibrium price causes: A. a surplus B. a shortage C. producers to receive lower prices D. consumers to pay lower prices
a
After participating members of a cartel form an agreement on common prices and output quotas, then an individual firm can increase its own profits by: A. increasing production B. increasing prices C. leaving the cartel D. incurring higher input costs
a
All of the following are characteristics of monopolistic competition EXCEPT: A. a few firms dominate the industry B. product differentiation C. many firms in the industry D. advertising
a
An increase in supply will occur when: A. the supply curve shifts downward to the right B. the supply curve shifts upward to the left C. the demand curve shifts downward to the left D. the demand curve shifts upward to the right
a
An increase in the minimum wage will tend to cause which of the following to occur? A. an increase in the size of the surplus of labor B. a leftward shift in the demand for labor C. a rightward shift in the supply of labor D. a reduction in the unemployment rate
a
Cheating in a cartel is more likely to occur if the industry: A. has a large number of firms B. has homogeneous products C. has easily observable prices D. has little variation in prices
a
Economic analysis is a tool that: A. aids all decision making B. helps us understand why people make mistakes C. helps us forgive selfish people D. complicates decision making
a
Economists generally define the short run as being: A. that period of time in which at least one of the firm's inputs, usually plant size, is fixed. B. that period of time in which all inputs are variable C. any period of time less than one year D. any period of time less than six months
a
For a hotdog vendor, the hotdog stand represents his: A. fixed input B. variable input C. diseconomies of scale D. none of the above
a
Government-imposed quantity restrictions: A. generate a higher price for the good than would prevail under freely competitive markets B. generate a lower price for the good than would prevail under freely competitive markets C. does not affect the price of the good because quantity restrictions always ban sale of the good completely D. can cause prices to either be higher or lower, but always cause excess quantities supplied to develop.
a
If a firm employ's an extra unit of labor, the additional product generated by employing the extra unit of labor is: A. the marginal physical product of labor B. the diminished marginal product C. the outside edge D. total product
a
If the cross price elasticity of demand between Los Angeles Lakers professional basketball tickets and Los Angeles Dodgers professional baseball tickets is positive, then the two goods are: A. substitutes B. unrelated C. complements D. not related
a
In a market system, _________ provide signals about whether resources are relatively scarce or abundant. A. prices B. economists C. government officials D. scientists and engineers
a
In a perfectly competitive industry, which of the following is a market signal to resource owners? A. Economic profits B. Quality of goods C. The level of exports in the country D. The level of subsidies the industry receives
a
In the short run, average total cost is: A. higher than average variable cost B. equal to average variable cost C. less than average variable cost D. sometimes higher and sometimes lower than average variable cost
a
Minimum wages are examples of: A. a price floor B. a price ceiling C. the rationing function of prices not working D. government increasing the demand for certain products
a
One piece of evidence that possibly supports the bounded-rationality assumption of behavioral economics is that experiments appear to have shown that: A. people make different decisions in calm situations that in situations in which emotions come into play B. people make the same decisions in calm situations than in situations in which emotions come into play C. total utility is maximized when marginal utility is equal to zero D. total utility is declining when marginal utility is negative
a
Other things being equal, a higher price induces: A. buyers to reduce the amount they want to buy and sellers to increase the amount they are willing to sell B. buyers to increase the amount they want to buy and sellers to reduce the amount they are willing to sell C. buyers to reduce the amount the want to buy and sellers to reduce the amount they are willing to sell D. buyers to increase the amount they want to buy and sellers to increase the amount they are willing to sell
a
Price ceilings set below the equilibrium price cause: A. shortages B. surpluses C. a new market equilibrium D. a greater number of exchanges
a
The assumption that people do not intentionally make decisions that would leave them worse off is known as: A. the rationality assumption B. the microeconomic assumption C. the ceteris paribus assumption D. the normative assumption
a
The demand curve for labor will shift whenever: A. the demand for the final product changes B. the wage rate changes C. the supply curve of labor shifts D. the marginal factor cost changes
a
The focus of firm decisions in the short run is primarily on: A. variable inputs B. capital investment C. plant size D. economies of scale
a
The income elasticity of demand is: A. the percentage change in demand divided by the percentage change in income B.the change in income divided by the percentage change in price C. the change in quantity demanded divided by the change in price D. the percentage change in income divided by the percentage change in quantity demanded
a
The main objective of advertising for a monopolistically competitive firm is: A. to differentiate the product and boost demand B. to reduce cost C. to earn long run profits D. none of the above
a
The marginal product of labor may increase rapidly initially as more: A. workers are able to specialize B. total product is decreasing C. the amount of other inputs is held constant D. workers will get crowded in a fixed factory
a
The price elasticity of demand for labor will be greater, the: A. greater is the price elasticity of demand for the final product B. more difficult it is to employ substitute inputs in production C. smaller is the proportion of wage costs in the total cost of production D. shorter is the time period under examination
a
The price elasticity of demand for labor will be smaller, the: A. smaller is the price elasticity of demand for the final product B. easier it is to employ substitute inputs in production C. larger is the proportion of wage costs in the total cost of production D. longer is the time period under examination
a
The price elasticity of demand is a measure of: A. the responsiveness of the quantity demanded of a good to a changes in the price of the good B. the quantity demanded of a good at a given price C. the demand for a product holding prices constant D. the horizontal shift in the demand curve when the price of a good changes
a
To maximize profits, the monopolist should produce at which: A. MR=MC B. MC intersects the demand curve C. total revenue is maximized D. total costs are minimized
a
Total revenue divided by quantity is: A. average revenue B. marginal revenue C. quantity revenue D. prive revenue
a
Utility analysis helps economists understand: A. how people make decisions about what they buy and how much B. how to eliminate opportunity costs C. how to eliminate scarcity D. none of the above
a
We would expect that a fall in labor supply will have a proportionately smaller effect on the market wage rate when: A. workers can easily be replaced by capital goods B. the product produced in the industry has very few substitutes C. the product is produced in a perfectly competitive industry D. labor represents a relatively small portion of total costs
a
What happens at a firm's point of saturation? A. For the first time, hiring an additional worker decreases total product B. Workers cannot take on any additional tasks without working overtime hours C. The market for a firm's output has been saturated and sales fall to zero D. This firm's total costs exceed its revenues
a
When MFC=MRP, a firm in a competitive market will: A. stop hiring B. hire more workers C. earn additional profits D. layoff workers
a
When demand is elastic, A. quantity demanded is very responsive to a change in price B. quantity demanded is not very responsive to a change in price C. the proportional change in quantity demanded is equal to the proportional change in price D.producers react quickly to price changes
a
When grocery stores issue special discount membership cards for shoppers effectively offering different prices based on quantities consumed, this is an example of: A. price discrimination B. price differentiation C. product differentiation D. patent protection
a
When quantity supplied is very responsive to a change in price, supply is: A. elastic B. unit-elastic C. inelastic D. income sensitive
a
Opportunity cost is: A. the cost of producing all goods and services in the United States B. the value of the next-best alternative that must be sacrificed to satisfy a want C. the fixed cost of production D. the value of the most useful alternative that must be sacrificed to obtain something or satisfy a want
b
In a perfectly competitive labor market, the industry demand curve is ______ and the industry supply curve is ______. A. perfectly elastic; upward sloping B. downward sloping; upward sloping C. upward sloping; downward sloping D. vertical; perfectly elastic
b
In order to be effective, a price floor: A. must be set below equilibrium price B. must be set above equilibrium price C. must be set at equilibrium price D. must be a zero price
b
Normative economic statements: A. violate the law of ceteris paribus B. contain value judgements C. are usually irrational D. are easily testable
b
Suppose that the cross price elasticity of demand between good X and good Y is -1.55. This indicates that the two goods are: A. substitutes B. complements C. both inferior D. completely unrelated in the minds of consumers
b
Suppose the absolute price elasticity of demand for newsletter subscriptions is 1.3. In order to increase the total revenues from subscriptions, the publishers should: A. increase the price of the newsletters B. reduce the price of the newsletters C. sell the newsletters on the inelastic portion of its demand curve D. keep the price the same
b
The additional revenue earned from hiring one more worker is known as the: A. marginal physical product of labor B. marginal revenue product of labor C. marginal factor cost of labor D. marginal utility of labor
b
The contribution to total revenues coming from the next worker hired is: A. marginal product B. marginal revenue product C. total product D. total revenues
b
The demand for DVD's increases. As a result, A. the wage rate in the DVD industry increases and the quantity demanded of workers increases B. the wage rate in the DVD industry in creases and the quantity supplied of workers increases c. the demand for labor increases and the supply of labor also increases, leaving wages unchanged d. the demand for labor increases, but since the supply curve of labor is perfectly elastic, the wage rate does not change
b
The demand for diet soft drinks (as a group) is relatively inelastic because: A. there are many of them on the market B. there are few substitutes C. the purchase of a soft drink represents a large portion of a person's budget D. none of the above
b
The demand for labor is: A. derived from the satisfaction that hiring the inputs provides the owner or manager of the firm more money B. derived from the demand for the final product being produced C. derived from a utility maximizing process similar to that used to derive the demand curve for goods and services. D. totally unrelated to the demand curve for the final product
b
The distinguishing of products by brand name, color, and other attributes: A. is known as interdependence B. is known as product differentiation C. leads to many firms in the market D. leads to collusion
b
The equilibrium wage rate in an industry is determined by: A. finding where the market supply curve indicates that the substitution effect and income effect of a wage increase are offsetting B. the intersection of the market demand curve for labor and the market supply curve for labor C. the strength of the substitution effect relative to the elasticity of demand for labor D. whether workers or management are better at negotiating
b
The goal of a cartel is to: A. increase competition among members B. maximize industry profits C. increase industry production D. all of the above
b
The marginal revenue product represents: A. the marginal physical product of labor divided by the price of the good produced B. the worker's contribution to the firm's total revenues C. the worker's contribution to the firm's output D. the value of each additional unit of output
b
The monopolist will choose the price and output combination at which: A. MC equals AR B. MC equals MR C. MC equals price D. MR equals AR
b
The monopolistically competitive firm maximizes profit by producing to the point at which: A. ATC=AVC B. MC=MR C. MR=AR D. MC=AR
b
The point of saturation occurs when a firm: A. has total returns equal to zero B. first encounters negative marginal product C. first experiences positive marginal product D. maximizes its total returns
b
The price elasticity of demand for labor will be greater, the: A. smaller is the price elasticity of demand for the final product B. easier it is to employ substitute inputs in production C. smaller is the proportion of wage costs in the total cost of production D. shorter is the time period under examination
b
The price elasticity of demand for labor will depend upon all but the: A. price elasticity of demand for the final product B. price elasticity of supply for the final product C. time period being considered D. availability of substitutes for inputs
b
The price elasticity of demand would most likely be the lowest for: A. a McDonald's hamburger B. salt C. a Toyota sport utility vehicle D. Shell gasoline
b
The supply of labor to the individual firm in a perfectly competitive market is: A. perfectly inelastic at the current equilibrium employment level B. perfectly elastic at the current market clearing wage rate C. downward sloping D. equal to the marginal revenue of output
b
Typically, the greater the specialization of resources, A. the less production that takes place B. the greater the bow of the production possibilities curve C. the poorer the country becomes D. the greater the unemployment in the country
b
Which of the following statements is FALSE? A. Included in the firm's short-run production function are both fixed and variable inputs B. An efficient firm can obtain more output than the production function shows C. The production function shows the technical relationship between a firm's inputs and outputs D. The production function presents the technically efficient methods of combining inputs to produce output
b
Which of the following would NOT affect a good's price elasticity of demand? A. The ease of substitution between goods B. The cost of producing the good C. The number of substitute goods available D. The proportion of one's budget spent on an item
b
Which of the following would cause the labor demand curve to shift to the right? A. A decrease in the demand for the product of labor is used to produce B. An increase in labor productivity C. A decrease in the price of a complimentary resource D. All of the above
b
In a monopolistically competitive market, the consumer receives the benefit of: A. production at a minimum average cost B. production where price equals marginal cost C. product diversity D. allocative efficiency
c
In a perfectly competitive industry, an individual firm faces: A. a perfectly inelastic labor supply curve B. a perfectly vertical labor supply curve C. a perfectly elastic labor supply curve D. none of the above
c
In a perfectly competitive labor market, the labor supply curve facing the firm will be: A. upward sloping B. downward sloping C. horizontal D. vertical
c
What is the type of economic system that relies on one central authority to make economic decisions? A. Free market B. Price system C. Command and control D. Mixed economic system
c
Which of the following statements about a perfectly competitive market are true? I. The perfectly competitive industry faces an upward sloping labor supply curve. II. The individual firm in a perfectly competitive industry faces a perfectly elastic labor supply curve. A. I only B. II only C. Both I and II D. Neither I nor II
c
Which of the following statements is true? A. A firm cannot increase quantity demand for labor when the wage rate falls without causing the product price to decline B. A movement along the market demand curve for labor does not require a change in the product price C. A firm can increase quantity demanded for labor when the wage rate falls without affecting the product price but the industry cannot hire more workers without causing the product price to fall D. Both a firm and the industry can move down their demand curves for labor without causing product price to change
c
Which of the following will lead to a decrease in the firm's short-run demand for labor? A. An increase in the price of the final product B. An increase in price of the final product's substitute good C. A decline in labor productivity D. An increase in the number of buyers for the final product
c
A basic distinction between the long run and the short run is that: A. if a firm produces no output in the long run, it still incurs a cost B. the opportunity costs of production are lower in the short run than in the long run C. in the long run, some inputs are fixed, while in the short run, all inputs are variable D. in the short run, complete adjustment of all inputs is impossible, while in the long run all inputs can be adjusted
d
A change in the price of a good causes: A. an increase in supply B. a decrease in supply C. an increase in demand and a decrease in supply D. a change in quantity supplied
d
A firm can be the sole supplier of a good and is still not a monopolist if: A. the firm is not large B. the good produced is not important to the economy C. the firm is not making excessive profits D. there are very close substitutes for the good
d
A firm's marginal factor cost describes: A. the increase in the firm's total revenue as one more unit of output is sold B. the change in total fixed cost that results from hiring one more unit of input C. the change in total variable cost that results from the production of an extra unit of output D. the change in total cost that results from using one more unit of an input
d
A monopolist will earn economic profits when: A. AVC is a minimum B. ATC intersects the demand curve C. ATC lies above the demand curve D. ATC lies below the demand curve
d
A movement along a supply curve is induced by a change in: A. input prices B. taxes and subsidies C. price expectations D. the product's own price
d
A rational individual will never consume a unit of a good if its: A. marginal utility is diminishing B. marginal utility is less than average utility. C. marginal utility is increasing D. marginal utility is negative
d
A representative unit that measures the want-satisfying power of a good is: A. a margin B. purchasing power C. income D. a util
d
A shortage will occur when: A. the price equals the market clearing level B. the price is above the market clearing level C. there is an excess quantity supplied D. the price is below the market clearing level
d
An association of producers in an industry that agree to set common prices and output quotas to prevent competition is: A. an oligopolist B. a monopolistic competitor C. a constrained monopoly D. a cartel
d
An economic system in which relative prices change to reflect changes in supply and demand for different commodities is known as a: A. socialist system B. communist system C. queuing system D. market system
d
An import quota is an example of: A. a price ceiling B. a price floor C. a queuing device D. a quantity restriction
d
An industry's equilibrium wage rate is established: A. by the industry supply curve for labor alone B. by the slope of the industry demand curve for labor alone C. by the Labor Department and based on the cost of living in the area D. by the intersection of the industry supply and demand curves for labor
d
As the wage rate rises, other things constant, perfectly competitive firms will employ: A. more workers B. less capital C. the same number of workers D. fewer workers
d
Average fixed costs will: A. rise as output rises B. fall then rise as output rises C. rise then fall as output rises D. fall as output rises
d
Changes in production functions are associated with changes in: A. the level of output B. demand C. the levels of costs D. technology
d
Economic analysis is used: A. only in economics classrooms B. only by business people C. only by policy makers D. in all decision making
d
Economics is the study of how: A. people make money B. preferences are determined C. psychology influences preferences D. people make choices
d
Economists generally assume that firms attempt to maximize: A. total revenue B. sales C. marginal revenue D. total economic profits
d
Governments may intervene in private markets through: A. rationing by political power B. price floors C. price ceilings D. all of the above
d
If the firm can vary all factors of production, it is operating: A. at a profit B. at a zero economic profit C. in the short run D. in the long run
d
If the marginal product of an input is falling, then: A. average fixed cost is constant B. marginal cost is falling C. average total cost is constant D. marginal cost is rising
d
If the supply curve is vertical, then supply is: A. relatively elastic B. perfectly elastic C. unit elastic D. perfectly inelastic
d
In a market system, the costs associated with exchanging goods are known as: A. voluntary costs B. signaling costs C. wholesale costs D. transaction costs
d
In a perfectly competitive industry, the industry demand curve: A. must be horizontal B. must be vertical C. is upward sloping D. is downward sloping
d
In economics, a fixed cost is a cost that: A. is present only in the short run B. goes up as the level of output goes up C. goes down as the level of output goes up D. does not vary with the level of output
d
In economics, items that are used to produce goods and services are known as: A. wants B. aggregates C. factors of need D. resources
d
In the long run, in a monopolistically competitive market, price will be: A. equal to MR B. equal to MC C. greater ATC D. equal to ATC
d
In the short run, a firm operating as a monopolistic competitor will produce to the point at which: A. MR=ATC B. MC=ATC C. P=MC D. MR=MC
d
In which market structure will a firm choose not to shut down when price is less than average variable cost? A. Perfect competition B. Monopoly C. Monopolistic competition D. None of the above. All firms will shut down when P< AVC
d
In which market structures does a firm have at least some ability to set the market price? A. Perfect competition and monopolistic competition B. Monopolistic competition and oligopoly C. Oligopoly and monopoly D. Monopolistic competition, oligopoly and monopoly
d
Marginal costs will begin to rise at the point where: A. fixed costs increase B. variable costs increase C. average variable costs increase D. diminishing marginal product begins
d
Mass marketing is: A. advertising that permits a consumer to follow up directly by searching for more information and placing direct product orders B. advertising that targets a specific audience and allows the consumer to follow up directly by placing direct product orders usually through television or radio C. advertising targeted at specific consumers D. advertising intended to reach as many consumers as possible
d
Rent controls are: A. when rents are set above the market clearing level to aid landlords B. used to provide incentives to contractors to build new apartments C. used to generate revenue for the local government D. when rents are set below the market clearing level
d
Successive downward movements along the demand curve for the product of a monopolist always generate successive: A. increases in the monopolist's marginal revenue B. increases in the monopolists average total costs C. decreases in the addition per-unit costs incurred by the monopolist D. decreases in the additional per-unit revenues earned by the monopolist
d
The consumer optimum for consuming two goods is achieved when: A. the total utility from each good is equal B. the price of each good is equal C. the price multiplied by the marginal utility is equal for the two goods D. the marginal utility per last dollar spent is equal for the two goods
d
The fact that the price of diamonds is higher than the price of water: A. cannot be explained by behavioral economics or consumer choice theory B. is an outcome of irrational behavior in consumer choice theory C. can be explained only by behavioral economics but not by consumer choice theory D. can be explained as the outcome of a consumer optimum in consumer choice theory
d
The long run is: A. over one year B. over five years C. when all factors of production are fixed D. the time period in which all factors of production can be varied
d
The price elasticity of demand for a variable input will be more elastic in all the following cases EXCEPT: A. the greater the price elasticity of demand for the final product B. the easier it is for a particular variable input to be substituted for by other inputs C. the larger the proportion of total costs accounted for by a particular variable input D. the shorter the time period being considered
d
Which of the following is a TRUE statement about a monopoly? A. a monopoly does not necessarily earn positive economic profits B. a monopoly must earn an above-normal profit to stay in business C. As long as there are barriers to entry, a monopoly can always find some price-output combination that generates positive economic profits D. As long as the demand curve slopes down, a monopoly can always find some price-output combination that generates positive economic profits
a
Which of the following statements indicates the idea of trade-offs? A. "I chose the road less traveled." B. "The devil made me do it." C. "You've got me under your spell." D. "Always give it the best that you can."
a
Which of the following statements is TRUE about the relationship between a firm's demand curve under perfect competition and monopoly? A. Under perfect competition, the demand curve is perfectly elastic; under monopoly, the demand curve has elastic, unit-elastic, and inelastic portions B. Under monopoly, the demand curve is perfectly elastic; under perfect competition, the demand curve has elastic, unit-elastic, and inelastic portions C. The demand curves for monopoly and perfect competition are always inelastic D. We can define a demand curve under perfect competition but not under monopoly
a
Which of the following statements is true? A. No economic model captures every detail that affects a problem. B. Economic models always make accurate predictions about behavior. C. Economic models must fully reflect reality. D. Economic models use economists' opinions with no use of data.
a
A consumer is willing and able to buy 1,000 units of a good at $10, but the consumer's quantity demanded falls to zero if the price rises even a fraction of a cent. The consumer's demand curve is: A. horizontal and is perfectly inelastic B. horizontal and is perfectly elastic C. vertical and is perfectly elastic D. downward sloping from higher prices down to $10 and then horizontal
b
A decrease in supply will occur when: A. the supply curve shifts downward to the right B. the supply curve shifts upward to the left C. the demand curve shifts downward to the left D. the demand curve shifts upward to the right
b
A decrease in total revenue will result if: A. demand is inelastic and price decreases B. demand is elastic and price increases C. demand is elastic and price decreases D. demand is unitary elastic and price decreases
b
A firm will not hire additional workers once: A. it earns accounting profits B. the additional cost of a worker equals the additional revenue from the worker C. total product is rising D. the company reaches its breakeven output level
b
A good's price elasticity of demand can be calculated by using the formula of: A. percentage change in price divided by the percentage change in quantity demanded. B. percentage change in quantity demanded divided by percentage change in price C. percentage change in price divided by percentage change in income D. absolute change in quantity demanded divided by absolute change in price
b
A monopolist finds the price-output combination that maximizes its profits by: A. equating total revenue and total cost B. equating marginal revenue and marginal cost C. finding the combination for which the difference between marginal revenue and marginal cost is the greatest D. equating price and marginal cost
b
A perfectly elastic demand function: A. shows that a consumer is willing to pay any amount for the product B. is characteristic of an individual firm operating in a perfectly competitive market C. shows that the individual firm can increase sales by lowering the price of output D. has a marginal revenue that is always decreasing
b
A short-run increase in the price of a firm's output will typically: A. lead to a movement along the firm's demand for labor curve B. lead to more employment in the competitive firm C. not impact the hiring of labor D. make the demand for labor more inelastic
b
According to the law of demand, other things being equal, A. when the price of a good goes up, then people buy more of that good B. when the price of a good goes up, then people buy less of that good. C. when people's income goes up, then they buy more of a good D. when people's income goes up, then they buy less of a good
b
An increase in demand for DVD machines occurs. Which of the following statements is true for individual firms that produce DVD machines? A. The price of DVD machines will decrease leading to an increase in the demand for labor by the firm B. The price of DVD machines will increase leading to an increase in the demand for labor by the firm C. The price of DVD machines will increase leading to a decrease in demand by customers leading to a decrease in the demand for labor by the firm D. A change in demand at the industry level does not influence an individual firm's demand curve for labor
b
An increase in the supply of labor generates: A. increased unemployment B. lower wages C. an offsetting increase in the demand for labor D. a decrease in the quantity demanded of labor
b
An inferior good is one for which: A. demand increases as income increases B. demand decreases as income increases C. the demand curve is vertical D. the demand curve slopes up
b
During the short run, a firm cannot: A. increase its use of labor B. change its plant size C. purchase more raw materials D. change its variable costs
b
Economics is the study of: A. how to get rich B. how people allocate their limited resources to satisfy their unlimited wants C. how people spend their income why people want certain goods and services rather than other goods and services
b
Fixed costs are: A. costs that never change B. costs that a firm incurs even when output is zero C. not actually costs since they do not affect the decisions of a firm D. costs that increase at a constant rate when output increases
b
For a perfectly competitive firm, the value of the marginal product of labor falls as more workers are hired because of the diminishing: A. output price B. marginal physical product of labor C. price of labor D. marginal cost of production
b
Generally, if a nation produces more consumer goods than capital goods: A. more of all goods may be produced in the future B. less of all goods may be produced in the future C. about the same amount of capital goods may be produced in the future as are being produced today D. society will have to forego future consumption of capital goods
b
If a consumer concludes that the marginal utility of the last dollar spent on vegetables exceeds the marginal utility of the last dollar spent on junk food, he will respond by: A. consuming relatively more junk food and fewer vegetables B. consuming relatively more vegetables and less junk food C. consuming equal amounts of vegetables and junk food D. halting consumption of junk food altogether
b
If the demand of a good is inversely related to income, it must be: A. a bad good B. an inferior good C. a normal good D. an everyday product
b
If the price of labor increases, the typical perfectly competitive firm in the short run will: A. produce more output B. hire less labor C. hire the same labor and produce the same output D. hire more labor
b
In a market system, the what, how and for whom questions in economics are determined by: A. those who are not in the market B. buyers and sellers together C. the central authority D. no one
b
In a monopolistically competitive market there are: A. many firms producing an identical product B. many firms producing similar but not identical products C. many firms producing totally different products D. few firms producing identical products
b
Which of the following would cause the price elasticity of demand for a variable input to be greater? A. The smaller the price elasticity of demand for the final product B. The longer the time period being considered C. The smaller the proportion of total costs accounted for by the variable input D. The harder it is for a variable input to be substituted for by other inputs
b
Which statement most accurately defines economics? A. Economics is the study of how people make money. B. Economics is the study of how people make choices to satisfy their wants. C. Economics is the study of values a society should choose. D. Economics is the study of how to eliminate scarcity.
b
Which will NOT affect the elasticity of demand for labor? A. the labor intensity of the production process B. the elasticity of supply for labor C. the elasticity of demand for the good D. the substitutability of capital for labor
b
A demand curve represents a(n): A. direct relationship between price and quantity demanded B. direct relationship between price and demand C. indirect or inverse relationship between price and quantity demanded D. indirect relationship between price and supply
c
A direct or positive relationship between price and quantity supplied is: A. the market clearing price B. a change in demand C. a supply curve D. a demand curve
c
A merger between firms in which one firm purchases an input from the other is called a: A. conglomerate merger B. horizontal merger C. vertical merger D. none of the above
c
A monopolist is defined as: A. a firm with annual sales ver $10 million B. a large firm, making substantial profits, that is able to make other firms do what it wants C. a single supplier of a good or service for which there is no close substitute D. a producer of a good or service that is expensive to produce, requiring large amounts of capital equipment
c
A noncooperative game is: A. companies colluding in order to make higher than competitive rates of return B. the manner in which one oligopolist reacts to a change in price made by another oligopolist in the industry C. a game in which firms will not negotiate in any way D. when plans made by firms are known as game strategies
c
A perfectly competitive firm will maximize profits when: A. average cost is greater than marginal revenue B. marginal cost is greater than marginal revenue C. marginal cost is equal to marginal revenue D. average cost is equal to average revenue
c
A straight-line production possibilities curve has: A. an increasing opportunity cost between the two goods. B. a decreasing opportunity cost between the two goods. C. a constant opportunity cost between the two goods. D. no opportunity cost between the two goods.
c
All of the following would cause the production possibilities curve to shift outward EXCEPT: A. an improvement in technology B. an increase in the amount of labor available C. a decline in the unemployment rate D. an increase in the level of capital stock
c
At the output rate at which diminishing marginal product begins, a firm will experience: A. constant average total costs B. increasing average fixed costs C. increasing marginal costs D. decreasing average variable costs
c
Economics can be describes as the study of how people use ______ resources to satisfy _______ wants. A. unlimited; unlimited B. unlimited; limited C. limited; unlimited D. limited; limited
c
Efficiency can correctly be defined as: A. producing outside the production possibilities boundary B. minimizing opportunity cost C. producing the maximum output with given technology and resources D. providing for the immediate needs of the greatest proportion of the population
c
Government intervention in agriculture usually involves: A. price ceilings in order to keep food prices low B. price ceilings in order to subsidize U.S. exports C. price supports in order to keep farm incomes high D. price supports in order to keep agricultural imports low
c
If a firm is a perfectly competitive purchaser of factor inputs and the wage rate is $5, the marginal factor cost for labor is: A. greater than $5 B. less than $5 C. $5 D. indeterminate
c
If it is not profitable for more than one firm to be in an industry, we have an example of: A. monopoly due to ownership of key resources B. monopoly due to governmental entry restrictions C. monopoly due to economies of scale D. pure competition
c
If the government sets a minimum price at which a good or service can be sold, it thereby creates: A. a price ceiling B. a black market price C. a price floor D. an illegal price control
c
In a perfectly competitive market in which all firms are maximizing their economic profits, the demand and supply curves intersect at a price of $8. From this we know that each: A. firm's average total cost of producing the good is $8. B. firm's average variable cost of producing the good is $8 C. firm's marginal cost of producing the good is $8 D. firm is earning positive economic profits at a price of $8 or more
c
In economics, another term for satisfaction is: A. income elasticity B. price elasticity C. utility D. marginal productivity
c
In long-run equilibrium in a monopolistically competitive industry, a firm will: A. always earn an economic profit B. produce an output rate at which P=MC C. produce at a point to the left of the minimum point on its average total cost curve D. have a perfectly elastic demand curve
c
In order to increase the supply of a good, producers must: A. convince consumers to reduce the quantity demanded B. see an increase in quantity supplied by competitiors C. reduce their per-unit costs of producing the good D. cut back on labor to reduce production costs
c
Suppose the market for autoworkers is initially in equilibrium, but then the automakers purchase capital goods that are a substitute for workers. What happens in the market for autoworkers? A. The equilibrium wage rate will increase and the equilibrium quantity of labor will decrease B. The equilibrium wage rate and the equilibrium quantity of labor will both increase C. The equilibrium wage rate and the equilibrium quantity of labor will both decrease D. The equilibrium wage rate will decrease and the equilibrium quantity of labor will increase
c
Suppose the market for pizza makers is initially in equilibrium, but then the equilibrium wage rate increased and the equilibrium quantity of labor decreased. What happened in the market for pizza makers? A. The demand for pizza makers increased B. The demand for pizza makers decreased C. The supply for pizza makers decreased D. the supply for pizza makers increased
c
The additional cost associated with the hiring on one more unit of labor is known as the: A. marginal physical product of labor B. marginal revenue product of labor C. marginal factor cost of labor D. marginal utility of labor
c
The difference between price and average total cost is: A. total costs B. marginal costs C. average profit D. an irrelevant quantity
c
The elasticity of demand for labor will be less the: A. longer the time period B. easier it is to substitute one input for another C. less the demand elasticity for the final product D. larger the share of total costs accounted for by labor
c
The equilibrium wage rate in an industry is found by: A. the intersection of the market demand curve for labor and the marginal revenue product curve of labor B. the intersection of the firm's demand curve for labor and the firm's supply curve of labor C. the intersection of the market demand curve for labor and the market supply curve of labor D. negotiations between the union leadership and the managers of the firms
c
The law of diminishing marginal utility implies that the marginal utility for a particular product: A. remains constant, regardless of how much of the product is consumed B. remains constant as long as the product is still considered useful C. decreases as more of the product is consumed D. increases as more of the product is consumed
c
The perfectly competitive firm faces: A. a downward sloping demand curve B. a horizontal supply function C. perfectly elastic demand D. constant marginal costs
c
The price elasticity of demand for labor will be smaller, the: A. greater is the price elasticity of demand for the final product B. easier it is to employ substitute inputs in production C. smaller is the proportion of wage costs in the total cost of production D. longer is the time period under examination
c
The price per unit times the total quantity sold is: A. average revenue B. marginal revenue C. total revenue D. price revenue
c
The principle that "as more of a good is consumed, its extra benefit declines" is known as: A. the law of demand B. the law of diminishing marginal product C. the law of diminishing marginal utility D. the law of comparative advantage
c
The real-income effect of a price change is most significant when: A. the substitution effect is insignificant B. the substitution effect is significant too C. the good under consideration constitutes a major portion of the consumer's budget D. the marginal utility per dollar spent on the last unit is high
c
The total revenue of a perfectly competitive firm is calculated by: A. multiplying average revenue by price B. dividing price by quantity C. multiplying price by quantity D. multiplying quantity by average total cost
c
The total utility of water is: A. lower than the total and marginal utility of diamonds B. lower than the total utility of diamonds, but the marginal utility is higher C. higher than the total utility of diamonds, but the marginal utility of diamonds is higher D. the same as the total utility of diamonds, but the marginal utilities are the same
c
We assume that when a firm hires additional workers, the marginal physical product of labor will: A. increase because more workers can always get more work done B. decrease because the new workers are likely to be less able than the previously hired ones C. decrease because each worker now has less capital and other resources to work with D. increase because large firms are more efficient
c
We would expect unions to have a more difficult time negotiating higher wages for their members when: A. labor represents a small portion of total costs B. the product produced makes up a small portion of families' budget C. the product produced has several close substitutes D. there are not good substitutes for labor in the production process
c
What has been the impact of the widespread adoption of automated teller machines (ATMs) on the demand for bank tellers? A. The demand for tellers has increased B. The demand for bank tellers has become more inelastic C. The demand for bank tellers has become more elastic D. There has been no change because the ATMs and the employees provide completely different services
c
The price elasticity of demand for labor equals: A. the percentage change in the price of labor divided by the percentage change in the supply of labor B. the change in the quantity demanded of labor divided by the change in the price of labor C. the slope of the demand curve for labor D. the percentage change in the quantity demanded of labor divided by the percentage change in the price of labor
d
The real-income and the substitution effects reinforce each other by: A. increasing the consumption of good y when the price of x falls B. increasing the consumption of both goods x and y when income increases C. decreasing the consumption of good x when the price of good y falls D. decreasing the consumption of good x when the price of good x increases
d
Under the perfectly competitive market structure, the demand curve of an individual firm is: A. perfectly inelastic B. downward sloping C. relatively inelastic D. perfectly elastic
d
What is true of the price elasticity of demand faced by a monopoly firm? A. Demand is inelastic B. Demand is more elastic at lower prices and more inelastic at higher prices C. Demand is perfectly elastic because the monopolist has no competition D. Demand becomes more elastic as the range of imperfect substitutes expands
d
When MFC>MRP, a firm in a competitive market will: A. stop hiring B. hire more workers C. earn additional profits D. layoff workers
d
When the price of a product decreases, the marginal revenue product curve in a perfectly competitive market: A. does not change B. becomes flatter C. shifts to the right D. shifts to the left
d
When two goods are substitutes for each other, the cross price elasticity of demand: A. will be negative B. will be zero C. may be either positive or negative D. will be positive
d
Which of the following will cause a shift in the demand curve of labor? A. An increase or decrease in the productivity of labor B. An increase or decrease in the demand for the product labor produces C. A decline in the price of a complementary unit D. All of the above
d
Why is it that all of our wants cannot be satisfied? A. Because of shortages B. Because we cannot seem to decide what we really want C. Because other people try to change your mind about what you want D. Because limited resources mean all the goods we want cannot be obtained
d
