ECON-221 Midterm 1-3 multiple choice questions

A firm's long run average total costs of producing custom wooden dining tables is $1500 when it produces 1000 tables and $1600 when it produces 1100 tables. For this range of output, the firm is experiencing a.diseconomies of scale. b.economies of scale. c.specialization. d.constant returns to scale.

A

Consider a production possibilities frontier that is bowed outward. The opportunity cost of producing an additional unit of a good a.increases as more of the good is produced. b.does not change as more of the good is produced. c.may increase, decrease, or not change as more of the good is produced. d.decreases as more of the good is produced.

A

Suppose that a market is at its equilibrium. Which of the following statements is not true? a.The price determines which buyers and which sellers participate in the market. b.Those buyers who value the good more than the price choose to buy the good. c.Consumer surplus will be equal to producer surplus. d.Those sellers whose costs are less than the price choose to produce and sell the good.

C

In a competitive market, no individual seller can affect the market price by increasing or decreasing his output because a.sellers usually agree to set a common price that will allow each seller to earn a comfortable profit. b.other sellers are offering similar products. c.these markets are highly regulated by the government. d.buyers exert more control over the price than do sellers.

B

James specializes in making wedding cakes in a competitive market. James sells 20 wedding cakes per month. James' monthly total revenue is $2,000. The marginal cost of making a wedding cake is $200. In order to maximize profits, James should (Hint: P = MR in a competitive market) a.continue to make 20 wedding cakes per month. b.make fewer than 20 wedding cakes per month. c.make more than 20 wedding cakes per month. d.We do not have enough information to answer the question.

B

Which of the following can cause market failure? a.low consumer demand. b.externalities. c.scarcity. d.too much competition.

B

Which of the following is not shown by demand curve? a.highest price buyers are willing to pay for each quantity. b.ability of buyers to obtain the quantity they desire. c.willingness to pay of all buyers in the market. d.value each buyer in the market places on the good.

B

Which of the following is true when the allocation of resources is efficient? a.consumer surplus is maximized. b.total surplus is maximized. c.consumer surplus equals producer surplus d.producer surplus is maximized.

B

Which of the following would lead to a decrease in price? a.a shortage of the good b.a surplus of the good c.a decrease in supply d.an increase in demand

B

Suppose that workers in Canada are less productive than workers in the United States in all areas of production, a.then neither nation can benefit from trade. b.then the United States will have a comparative advantage relative to Canada in the production of all goods. c.then both Canada and the United States still can benefit from trade. d.then Canada can benefit from trade but the United States cannot. Feedback

C

Suppose that you are selling a good and you increased the price. If the total revenue decreased after the price change, this implies that the demand is a.unit elastic. b.either inelastic or unit elastic c.elastic. d.inelastic.

C

Suppose that a tax is imposed on a market with inelastic demand and elastic supply. Which of the following is correct about the burden of the tax? a.the burden of the tax will be shared equally between buyers and sellers. b.sellers will bear most of the burden of the tax. c.it is impossible to determine how the burden of the tax will be shared. d.buyers will bear most of the burden of the tax.

D

Suppose that an economy is operating inside its production possibilities frontier. This implies that a.all of the economy's resources are fully employed. b.in order to produce more of one good, the economy would have to give up some of the other good. c.economic growth would have to occur in order for the economy to move to a point on the frontier. d.there are unused resources or inefficiencies in the economy.

D

Suppose that government imposes a price ceiling that is not binding, then a.the market will be less efficient than it would be without the price ceiling. b.There will be a surplus in the market c.there will be a shortage in the market. d.there will be no effect on the market price or quantity sold.

D

Suppose there are two goods A and B. They are substitutes if a decrease in the price of good A a.decreases the quantity demanded of good B b.increases the quantity demanded of good B c.increases the demand for good B d.decreases the demand for good B

D

The graph shows the average total cost curve of a firm. Considering the relationship between average total cost and marginal cost, the marginal cost curve for this firm a.must be flat. b.must be upward sloping. c.must lie entirely above the average total cost curve. d.must lie entirely below the average total cost curve.

D

When government provides public goods, it generates a. negative externality, as does the use of a common resource. b. positive externality, as does the use of a common resource. c. negative externality and the use of a common resource generates a positive externality. d. positive externality and the use of a common resource generates a negative externality.

D

Which of the following is not an example of a barrier to entry? a.A company owns a unique plot of land in Tanzania, under which lies the only large deposit of Tanzanite in the world. b.A musician obtains a copyright for her original song. c.A pharmaceutical company obtains a patent for a specific high blood pressure medication. d.An entrepreneur opens a popular new restaurant.

D

Which of the following most accurately describes the marginal buyer in a market? a. the one whose willingness to pay is higher than that of all other buyers and potential buyers. b. the one whose willingness to pay is lower than that of all other buyers and potential buyers. c. the one who is willing to buy exactly one unit of the good. d. the one who would be the first to leave the market if the price were any higher.

D

Which of the following statements is correct? a.Accounting profit is usually smaller than economic profit. b.Economists consider opportunity costs to be included in a firm's costs of production. c.Opportunity costs equal explicit minus implicit costs. d.Economists consider opportunity costs to be included in a firm's total revenues.

D

Consider an industry that is composed of a large number of small firms. Assume that these firms recently have suffered economic losses, and many sellers have left the industry. Economic theory on the long-run equilibrium in a competitive market suggests that these conditions will a.cause the market supply to decline and the price of textiles to rise. b.shift the demand curve outward so that price will rise to the level of production cost. c.cause firms in the textile industry to suffer long-run economic losses. d.cause the remaining firms to collude so that they can produce more efficiently

A

Considering the definition of the externality, which of the following statements about a well-maintained yard is correct? a.A well-maintained yard conveys a positive externality because it increases the value of adjacent properties in the neighborhood. b.A well-maintained yard cannot provide any type of externality. c.A well-maintained yard conveys a positive externality because it increases the home's market value. d.A well-maintained yard conveys a negative externality because it increases the property tax liability of the owner.

A

Consider a demand curve. Which of the following is represented by a movement downward and to the right along the curve? a.decrease in demand. b.increase in demand. c.increase in quantity demanded. d.decrease in quantity demanded.

C

If we see the tragedy of the commons, then the resources are a.neither rival in consumption nor excludable. b.excludable and not rival in consumption. c.rival in consumption and not excludable. d.both rival in consumption and excludable.

C

Pharmaceutical companies are allowed to be monopolists in the drugs they discover in order to a.allow the government to earn patent revenue. b.allow drug companies to charge a price that is equal to their marginal cost. c.encourage research. d.discourage new firms from entering the drug market.

C

Economists make assumptions to a.mimic the methodologies employed by other scientists. b.minimize the likelihood that some aspect of the problem at hand is being overlooked. c.minimize the number of experiments that yield no useful data. d.simplify the world and focus their thinking on the essence of the problem at hand.

D