Econ 2001.03H Final Review
f marginal cost is above average total cost, average total cost must be: a. rising; b. declining; c. below average fixed cost; d. below average variable cost.
A.
Which of the following transactions takes place in the markets for the factors of production in the circular-flow diagram? a)Dylan receives a salary for his work as a financial analyst for an investment firm. b)Kristin buys two business suits to wear to her job as a Chief Information Officer. c)Jim receives clean water in his home in exchange for paying his water bill. d)Caroline owns a nail salon and receives payments from clients for her services.
A
A deadweight loss results from a tax on a good because the tax: a)reduces the total quantity of the good exchanged. b)transfers some consumer surplus to the government; c)transfers some producer surplus to the government; d)causes some producer surplus to be converted to consumer surplus;
A.
Hurricane Katrina damaged a large portion of oil refining and pipeline capacity in the Gulf coast states. In the market for gasoline, a) supply curve shifted to the left leading to increase in the equilibrium price. b) supply curve shifted to the right leading to an increase in the equilibrium price. c) demand curve shifted to the left resulting in a decrease in the equilibrium price. d) demand curve shifted to the right resulting in a n increase in the equilibrium price.
A.
If the demand curve facing a particular firm is horizontal we can assume that: a. it is engaged in perfect competition b. it produced a product that is slightly different from those of its competitors c. it must pay close attention to the prices and quantites set by its rivals d. it has a monopoly in its market and should raise price
A.
In perfect competition, firms will choose an output level at which marginal cost: a. equals the market price; b. is at its minimum level; c. is well above market price; d. is equal to average variable cost.
A.
In the Prisoner's Dilemma game, which feature of the game setup causes players to achieve a less-than optimal result? a. The advantage gained by defecting regardless of the choice made by the rival b. The potential for different outcomes in a repeated strateic game c. The ability of the two players to coordinate their actions d. all of the above
A.
Joey Bosa would be willing to pay $100 to attend an Ohio State football game, but he buys a ticket for $60. Joey Bosa's consumer surplus is: a)$40; b)$60; c)$80; d)$100.
A.
Suppose there is a decrease in the price of corn. If corn is an input into the production of ethanol, we would expect the supply curve for ethanol to: a)shift rightward. b)shift leftward. c)become flatter. d)remain unchanged.
A.
The HHI was developed to: a. measure the level of concentration in a market b. prevent companies from engaging in price0cutting behavior c. measure the profitability of perfectly competitive market d. confuse students in Principles of Microeconomics classes
A.
The legislation passed by Congress in 1890 that outlawed contracts, combinations, and conspiracies in restraint of trade was the: a. Sherman Act; b. Morgan Act; c. Clayton Act; d. 17th Amendment.
A.
The substitution effect of a(n): a) price increase works to reduce the quantity of the good demanded; b) price increase works to increase the quantity of the good demanded; c) price decrease works to reduce the quantity of the good demanded; d) income increase works to shift the supply curve to the right
A.
The supply curve for building houses would probably shift leftward if: a) construction workers' wages increased with no increase in productivity b) cheaper methods for building homes were developed c) the demand for houses showed a significant decrease d) the average market price of homes were to decrease
A.
Unintended consequences of the 1990 tax on luxury goods included: a)severe financial hardship for producers of luxury goods. b)severe financial hardship for consumers of luxury goods. c) an embarrassing large amount of tax collected by the federal government. d) All of the above were unintended consequences of the tax.
A.
Voluntary exchange increases economic efficiency a) because neither buyers nor sellers would agree to trade unless they both benefit b) because voluntary exchange only takes place with government permission c) because it is free and consequently does not cost anything d) because it allows wealthy individuals to act altuistically and give to the poor
A.
When a society cannot produce all the goods and services people wish to have, it is said that the economy is experiencing: a)scarcity. b)surpluses. c)inefficiencies. d)inequalities
A.
When average variable cost is increasing, marginal cost must be: a. above average variable cost b. above average total cost c. constant d. below average fixed cost
A.
When the government imposes price floors or ceilings: a) some people win, some people lose, and there is a decrease in economic efficiency. b) some people win, some people lose, and there is an increase in economic efficiency. c) everyone gains surplus, allocation of goods and services is more fair, and there is an increase in economic efficiency d) everyone loses surplus, but allocation of goods and services is more fair, and the gain in equity balances out the loss of efficiency
A.
Which answer best describes what happens in the market for hotel rooms at a ski report in the winter? a) Demand should shift to the right as more people will need accommodations. b) Supply should shift to the left as more hotels offer rooms. c) Demand should shift to the right as fewer people will need accommodations d) supply should shift to the left as fewer hotels offer rooms
A.
Which of the following would most likely be considered a Clayton Act violation? a. John D. Rockefeller buying out his competitors in the petroleum industry b. manufacturers of harvesting equipment forming a cartel to keep prices high c. Samsung cutting cell phone prices to take market share away from Apple d. a dairy from Marysville entering the profitable Columbus milk market
A.
Which of the following would not shift the demand curve for smart watches? a) a decrease in the price of smart watches. b) a fad that makes smart watches more popular among 12-25 year olds. c) an increase in the price of activity trackers, a substitute for smart watches. d) an increase in unemployment, which reduces income for smart watch buyers.
A.
Which of these is an algebraically correct statement of the equal marginal principle? a. MUA / PA = MUB / PB. b. -MUA / MUB = -PA / PB. c. MUA / PB = MUB / PA. d. MUA / MUB = PA / PB.
A.
Which of these markets displays aspects of first degree price discrimination? a. the market for college tuition b. the market for restaurant meals c. the market for prescription drugs d. all of the above
A.
Tim mows neighborhood lawns for money. Suppose he would be willing to mow one lawn for $14, a second for $19, and a third for $25. THree of his neighbors are willing to pay to have their lawns mowed: one will pay $33, the second $27, and the third $25. If Tim charges $25, what is his total producer surplus? a) $11 b) $17 c) $85 d) $58
B
Which of the following statements about the circular-flow diagram is correct? a)One must imagine that the economy operates without money in order to make sense of the diagram. b)The diagram leaves out details that are not essential for understanding the economic transactions that occur between households and firms. c)The government cannot be excluded as a decision maker in a circular-flow diagram. d)All of the above are correct.
B
Accounting profits are generally greater than economic profits because: a. both implicit and explicit costs are considered in calculating accounting profits; b. implicit costs are not considered in calculating accounting profits; c. explicit costs are not considered in calculating accounting profits; d. accountants have a different measure of revenue than economists
B.
Economists normally assume that the goal of a firm is to: a. maximize its total revenue b. maximize its total profit c. maximize its total cost d. minimize its explicit costs
B.
Firms engaged in monopolistic competition face a demand curve that is: a. more elastic than would be the case if all firms produced identical products b. highly elastic due to the ease of substitution among similar products c. horizontal because they have no ability to charge a price above their marginal cost d. more steeply sloping than their marginal revenue curve
B.
Free entry and exit means that the number of firms in the market adjusts until: a. products are free; b. economic profits are driven to zero; c. the market grows to a profitable level; d. producers continuously enter the market freely.
B.
Governments achieve a 'regulatory compromise' in controlling prices of natural monopoly firms by: a. forcing natural monopolies to set prices at their marginal cost; b. forcing natural monopolies to set prices at their average total cost; c. forcing natural monopolies to allow competition from rival firms; d. allowing natural monopolies to choose quantities at which marginal revenue equals marginal cost.
B.
How does the government's treatment of price floors differ between agricultural price support and minimum wages? a) The government keeps farm price supports low so that surpluses do not result. b) With minimum wages, the government doesn't buy any surpluses. c) In the case of minimum wages, no sellers (of labor) are harmed. d) In the case of farm price supports, the efficient level of output is produced
B.
If Mrs. Howell can produce coconuts at a lower resource cost than Mr. Howell: a) we say she has a comparative advantage in coconut production b) we say she has an absolute advantage in producing coconuts d) a) and c) are both correct
B.
If a tax is levied on the buyers of a good: a)the price received by sellers will increase. b)the price paid by buyers will increase. c)consumer surplus will increase. d)producer surplus will increase.
B.
If demand is inelastic and supply is elastic, the burden of a tax: a) will fall primarily on producers b) will fall primarily on consumers c) affects producers and consumers equally d) will be borne by the government
B.
If five firms each have a 20% market share in a concentrated industry: a. the Herfindahl-Hirschman Index is 20; b. the Herfindahl-Hirschman Index is 2000; c. the 4-firm concentration ratio is 100%; d. the 4-firm concentration ratio is 20%.
B.
If the cost of producing Under Armour clothing increases due to higher prices for cotton, consumer surplus in the Under Armour clothing market: a)increases; b)decreases; c)increases for some buyers and decreases for other buyers; d)cannot be determined without knowing the demand elasticity for Under Armour clothing.
B.
In a modern market economy, workers are generally expected to: a) be able to perform effectively all jobs in the firm that employs them b) specialize in certain aspects of the production process c) work independently of others in the production process d) share or barter their surpluses with others
B.
In perfect competition, an individual firm's short-run supply curve is the same as: a. the short-run market supply curve: b. its marginal cost curve above minimum AVC; c. its marginal cost curve above minimum ATC; d. its average variable cost curve above minimum AFC.
B.
The burden of a tax: a)is always shared equally by buyers and sellers; b)is heaviest on buyers if supply is more elastic than demand; c)is heaviest on sellers if supply is more elastic than demand; d)always falls entirely on the economic actor who actually pays the tax.
B.
The demand for Milky War bars is likely: a)inelastic because there are many close substitutes Milky Way bars. b)elastic because there are many close substitutes Milky Way bars. c)inelastic because the market is broadly defined. d)elastic because the market is broadly defined.
B.
The principle of ______ is that the economic cost of using a factor of production is the alternative use of that factor that is given up. a) marginal cost b) opportunity cost c) normative economics d) entrepreneurship
B.
When a society requires that firms reduce pollution, there is: a)a tradeoff only if some firms are forced to close. b)a tradeoff due to reduced incomes to the firms' owners and workers. c)no tradeoffs, since the costs of reducing pollution fall only on firms affected by the requirements d)no tradeoff, since everyone benefits from reduced pollution.
B.
When an economy is operating at a point on its production possibilities frontier: a)consumers are content with the mix of goods and services that is being produced. b)there is no way to produce more of one good without producing less of the other. c)equal amounts of the two goods are being produced. d)All of the above are correct.
B.
When demand is elastic: a)price and total revenue will move in the same direction. b)price and total revenue will move in opposite directions. c)total revenue does not change with small increases in price. d)total revenue does not change with small decreases in price.
B.
Which feature of first degree price discrimination improves economic efficiency? a. elimination of consumer surplus b. elimination of dead-weight loss c. reduction in total revenue received by the seller d. elimination of producer surplus
B.
Which of the following is a characteristic of monopolistic competition? a. Ownership of a key resource by a single firm. b. Free entry and exit. c. Identical products. d. Patents and trademarks.
B.
Which of the following is an example of spending on goods and services in the circular flow model? a) Wendy purchases a new wrench for her auto repair business b) Kenny buys a ticket from Atlanta to London for his long awaited vacation c) Kyle buys a new lawn mower to use in his lawn care business d) Stan purchases a new message table for use in his therapy center
B.
Which of these markets is most likely to involve monopolistic competition? a. a market for soybeans b. a market for cellphones c. a market for cigarettes d. a market for fast food meals
B.
If price is greater than average total cost: a. all firms in the industry are experiencing losses b. average total cost must be declining c. new entrants are likely to be attracted to the market d. marginal costs must be declining
C
When a firm has a natural monopoly, the firm's: a. marginal cost always exceeds its average total cost b. total cost curve is horizontal c. average total cost curve is downward sloping d. marginal cost curve must lie above its average total cost curve
C.
"There is no such thing as a free lunch" illustrates the principle that: a)goods are scarce. b)income must be earned. c)people face tradeoffs. d)households face many decisions.
C.
14.The price elasticity of demand measures: a)the extent to which demand increases as additional buyers enter the market. b)how much more of a good consumers will demand when incomes rise. c)buyers' responsiveness to a change in the price of a good. d)the movement along a supply curve when there is a change in demand.
C.
A competitive firm will choose to cease operating in the long run if: a. price rises above total average cost b. too many firms enter once profitable business c. price falls below average total cost d. price falls below average variable cost but remains above average total cost
C.
A concentration ratio: a. measures the percentage of total sales of the largest firm in the market; b. is inversely related to the pricing power of the top firms in the market; c. reflects the level of competition in a market; d. all of the above are correct.
C.
A fixed cost is one that: a. changes as the level of output changes; b. has the most impact on choosing the profit-maximizing output level; c. is independent of the level of output produced; d. choices a) and b) are both correct.
C.
A production possibilities frontier with a ______ ship indicates increasing opportunity costs as more and more of one good is produced. a) linnear b) bowed inward c) bowed outward d) perfectly horizontal
C.
Consumer welfare is decreased after imposition of sales tax because: a) some consumer surplus is shifted to produce surplus; b) some producer surplus is shifted to government revenue; c) some consumer surplus becomes dead-weight-loss d) all of the above
C.
Every society faces economic trade-offs. This means a) some people live better than other so b) not everyone can have enough goods to survive c) producing more of one good means less of another good can be produced d) society's output cannot be made available to all
C.
Farm incomes in the United States have been falling since the 1920s. Among the reasons for this behavior are: a)a low price elasticity of supply for farm products. b)a high price elasticity of demand for farm products. c)a low price elasticity of demand for farm products. d)government price support systems that have created surpluses.
C.
Governments attempt to discourage or eliminate monopolies in most industries: a. because they charge a price that is too low versus the competitive equilibrium b. in order to increase the size of the dead-weight loss produced by monopolies c. because they produce a quantity that is too low versus the competitive equilibrium d. all of the above
C.
In an oligopoly, each firm knows that its profits: a. depend only on how much output it produces; b. depend only on how much output its rival firms produce; c. depend on how much output both it and its rival firms produce; d. will be zero in the long run due to free entry and exit.
C.
Producer surplus equals the: a)value to buyers minus the amount paid by the buyers. b)value to buyers minus the cost to sellers. c)amount received by sellers minus the cost to sellers. d)amount received by sellers minus the amount paid by buyers.
C.
Profitable operation in the long run is possible only for: a. firms engaged in perfect competition; b. firms engaged in monopolistic competition; c. firms that are monopolies; d. choices b) and c) are both correct.
C.
Suppose hot dogs and mustard are complements. What would cause an increase in the demand for mustard? a)an increase in the price of hot dogs. b) a decrease in the price of mustard. c) a decrease in the price of hot dogs. d) a news report that hot dogs may cause cancer in laboratory animals.
C.
The bowed-out shape of the production possibilities frontier can be explained by the fact that: a)all resources are scarce. b)economic growth is always occurring. c)the opportunity cost of one good in terms of the other depends on how much of each good the economy is producing. d)the only way to get more of one good is to get less of the other.
C.
The government's benefit from a tax can be measured by: a) consumer surplus b) producer surplus c) tax revenue d) all of the above
C.
The term market in economics refers to a) a place where money changes hands b) a legal institution where exchange can take place c) a group of buyers and sellers who come together to trade d) an organization which sells goods and services
C.
Tim mows neighborhood lawns for money. Suppose he would be willing to mow one lawn for $14, a second for $19, and a third for $25. THree of his neighbors are willing to pay to have their lawns mowed: one will pay $33, the second $27, and the third $25. What is the total consumer surplus earned by Tim's neighbors if he charges them $25 each? a) $2 b) $8 c) $10 d) $58
C.
What signal do your authors believe was most important in convincing Kenyan flower growers that they could profitably ship flowers to the United States? a) newspaper articles about the increasing popularity of sending flowers as a gift. b) increases in foreign aid to Kenya from the US and several European countries. c) increases in winter-time rose prices in the US d) increasing prices across the world for petroleum products
C.
Which of the following could cause the market demand curve for hot dogs to shift to the left: a) an increase in the price of hamburgers; b) an increase in the size of the population c) an increase in the price of hot dog buns d) a news story about the miraculous healing powers of hot dogs
C.
Which of the following is a result of imposing rent controls? a) Some consumer surplus is converted to producer surplus. b) There is an increase in the quantity of apartments supplied. c) There is an increase in the quantity of apartments demanded. d) The marginal benefit of the last apartment rented is less than the marginal cost of supplying it
C.
Which of the following would be most likely to have violated the Sherman Act? a. Sony and Microsoft charging the same price for video games as Nintendo, which acts as a price leader b. Henry Ford cutting the price for Model T automobiles and thus driving his competitors out of business c. Executives of Archer Daniels Midland and four Asian companies holding secret meetings to set lysine prices d. Owens-Illinois buying Brockway Glass and thus becoming the only producer of glass bottles in the US
C.
Which scenario would cause a speculator to "buy low and sell high"? a) Farmers experiencing drought-related losses this year expect to have a bumber harvest of corn next year. b) imports of corn begin to flood the country, due to the governments lowering of tariffs (import taxes). c) The government is expected to pass legislation making it mandatory for all vehicles to use corn-based ethanol within one year. d) The government is expected to subsidize corn production for farmers.
C.
With respect to how economists study the economy, which of the following statements is most accurate? a)Economists study the past, but they do not try to predict the future. b)Economists use "rules of thumb" to predict the future. c)Economists devise theories, collect data, and analyze the data to test the theories. d)Economists use controlled experiments in much the same way that biologists and physicists do.
C.
Olivia bakes cakes and Andrew grows corn. Olivia and Andrew both like to eat cake and eat corn. In which of the following cases is it impossible for both Olivia and Andrew to benefit from trade? a)Olivia cannot grow corn and Andrew cannot bake cakes. b)Olivia is better than Andrew at baking cakes and Andrew is better than Olivia at growing corn. c)Olivia is better than Andrew at baking cakes and at growing corn. d)Both Olivia and Andrew can benefit from trade in all of the above cases.
D
A feature shared by monopoly and monopolistic competition is that, in both of these market structures: a. there is free entry and exit; b. firms choose a quantity at which price equals marginal cost; c. there is a potential for profitable operation in the long-run; d. firms face a downward sloping demand curve.
D,
A circular flow and production possibilities frontier are similar in that: a)neither allows economic analysis to occur. b)neither can be represented visually on a graph. c)both make use of complex equations to arrive at solutions. d)both make use of assumptions.
D.
Accounting profits are higher than economic profits because: a. accounting profits consider both implicit and explicit costs; b. accounting profits consider fixed, but not variable costs. c. economic profits consider variable, but not fixed costs; d. accounting profits consider explicit, but not implicit costs;
D.
Antitrust laws allow the government to: a. promote competition; b. prevent mergers; c. break up monopolies and cartels; d. all of the above.
D.
Ashley buys a new television for $795. She receives consumer surplus of $355 from the purchase. How much does Ashley value her television? a) $355 b) $440 c) $795 d) $1,150
D.
Economic profits are zero at the level of output at which: a. price equals average variable cost; b. price is greater than marginal cost, but less than average total cost; c. price is equal to marginal cost and also equal to average variable cost; d. price equals average total cost.
D.
If a government regulator forced a natural monopoly firm to charge a price equal to its marginal cost: a. the firm would not be able to make a profit b. the firm's average total cost would exceed its average revenue c. the firm would most likely choose to shut down all of the above are true
D.
If a minimum wage is imposed in the labor market, low-skill workers can expect: a)lower wages and more employment opportunities; b)lower wages and fewer employment opportunities; c)higher wages and more employment opportunities; d)higher wages and fewer employment opportunities.
D.
If a perfectly competitive firm is earning profits in the short run: a. it should assume it will be able to earn those same profits in the long run; b. its average total cost must be above the market price; c. its marginal cost must be below the market price; d. it should prepare for entry from additional firms.
D.
If labor in Mexico is less productive than labor in the United States in all areas of production, a)then neither nation can benefit from trade. b)then Mexico can benefit from trade but the United States cannot. c)then the United States will have a comparative advantage relative to Mexico in the production of all goods. d)then both Mexico and the United States still can benefit from trade.
D.
If, in a competitive market, marginal benefit is greater than marginal cost, the: a) net benefit to consumers from participating in the market is greater than the net benefit to producers. b) government must force producers to lower price to achieve economic efficiency. c) quantity sold is greater than the equilibrium quantity. d) the quantity sold is less than the equilibrium quantity.
D.
In January, buyers of gold expect that the price of gold will fall in February. What happens in the gold market in January, holding everything else constant? a) The demand curve shifts to the right. b) The quantity demanded increases. c) The quantity demanded decreases. d) the demand curve shifts to the left.
D.
In response to a shortage caused by the imposition of a binding price ceiling: a) price will no longer be the mechanism that rations scarce resources; b) long lines of buyer may develop; c) sellers could ration the good or service according to their personal biases; d) all of the above
D.
In simple two-good consumption models, a consumer's budget line represents: a. all the combinations of the two goods that will make him/her equally well off. b. a straight line connecting the points I/PB on the B axis and I/PA on the A axis. c. all the combinations of the two goods that the consumer can afford, given his/her income. d. b) and c) are both correct.
D.
In which of the following markets is strategic interaction among firms most likely? a. Markets in which firms own patents and copyrights. b. Markets in which many small firms compete with identical product. c. Markets in which many firms compete with differentiated products. d. Markets dominated by two or three large firms.
D.
The phrase "demand has increased" means that a) a demand curve has shifted to the left b) there has been an upward movement along the demand curve c) there has been a downward movement along a demand curve d) a demand curve has shifted to the right
D.
The supply of rent controlled apartments is likely to be: a)inelastic in both the short and long run. b)elastic in both the short and long run. c)elastic in the short run and inelastic in the long run. d)inelastic in the short run and elastic in the long run.
D.
When economists speak of a shortage, they mean a situation in which: a) the market price is below the equilibrium price. b) some potential buyers are unable to make a purchase at the current price. c) the quantity demanded exceeds the quantity supplied. d) all of the above.
D.
When firms in a competitive market have different costs, it is likely that: a. the assumption of free entry and exit in the market will be violated b. the assumption of identical products in the market c. long-run market supply will be downward sloping d. some firms may earn positive profits in the long run
D.
Which of the following is not a result of rent control? a)fewer new apartments offered for rent. b)less maintenance provided by landlords. c)bribery. d)higher quality housing.
D.
Which of the following would be considered implicit costs? a. Rental value of land by the business and used in production b. Salary forgone by an entrepreneur starting a new business c. equipment purchased for use by the business d. A) and B) are both correct
D.
Which of the following would not be considered fixed costs? a. salaries of top executives b. production equipment c. property and casualty insurance d. raw materials
D.
Which of the following would shift the supply curve for smartphones to the left? a) an improvement in smartphone technology. b) a decrease in consumer income (assuming that all smartphones are normal goods). c) an increase in the number of firms that produce smartphones d) an increase in the price of an input used to produce smartphonnes.
D.
Which of these tax policies creates the best results for consumers, by minimizing their loss of consumer surplus: a)imposing a $1.00 tax on the sellers of the product (like excise taxes). b)imposing a $1.00 tax on the buyers of the product (like sales taxes). c)imposing a $1.00 tax that is split between buyers and sellers (like payroll taxes). d)All of these policies will produce the same loss of consumer surplus for buyers.
D.
Which statement is true about absolute and comparative advantage? a)Whichever country has an absolute advantage in producing a commodity also has a comparative advantage in producing that same commodity; b)Whichever country has a comparative advantage in producing a commodity also has an absolute advantage in producing that same commodity; c)In a bilateral trading situation, each country has an absolute advantage in one commodity; d)In a bilateral trading situation, each country has a comparative advantage in one commodity.
D.
