ECON Exam 3

A grocery store should close at night if:

variable costs of staying open are greater than the total revenue due to staying open (Stay open if TR>VC or close if VC>TR)

In the long run, the perfectly competitive firm's supply curve is the:

portion of the MC curve that lies above the ATC curve (in short run P>ATC)

In the short run, the perfectly competitive firm's supply curve is the:

portion of the MC curve that lies above the AVC curve (in short run P>AVC)

Suppose the price of the good increases from 4 to 5 and the quantity demanded decreases from 100 to 60. Using the traditional method for computing percentage change, calculate the price elasticity of demand for this good.

1.6 (Q2-Q1/Q1)

(table shows the demand schedule for tickets to watch an amateur baseball games in a medium sized town. P- 12,11,10,9,8,7,6,5,4,3,2,1,0 Q-0,200,400,600,800,1000,1200,1400,1600,1800,2000,2200,2400) Under competition, the price and quantity in this market would be a. ($8, 800) b. ($6, 1200) c. ($4, 1600) d. ($2, 2000) e. ($0, 2400)

($0, 2400)

(graph) In the long run, the perfectly competitive equilibrium is

(in this case P2,Q2) where ATC and P cross is equilibrium

(graph) In the short run, perfectly competitive firms will temporarily shut down production if the price falls below

(this case) P1 is where AVC (average variable cost) crosses MC, firms shut down when P<AVC

(graph) In the long run, some perfectly competitive firms will exit the market if the price falls below

(this case) P2 is where ATC (average total cost) crosses MC, firms exit industry when P<ATC

Suppose the cross-price elasticity of demand between goods A and B is +2.0. A 6% increase in the price of B would cause a:

12% increase in the demand for A

How many states in US are price controls on rental housing permitted?

3

When an oligopolist individually choose its level of production to maximize its profits, it produces an output that is A) More than the level of produced by a monopoly and less than the level produced by a competitive market B) Less than the level produced by a monopoly and more than the level produced by a competitive market C) More than the level produced by either a monopoly or a competitive market D) Less than the level produced by either a monopoly or a competitive market

A) More than the level of produced by a monopoly and less than the level produced by a competitive market

If oligopolists engage in collusion and successfully form a cartel, the market outcome is A) The same as if it were served by a monopoly B) The same as if it were served by competitive firms C) Efficient because cooperation improves efficiency D) Known as a Nash equilibrium

A) The same as if it were served by a monopoly

If the long-run market supply curve for a good is perfectly elastic, an increase in the demand for that good will, in the long run, cause

An increase in the number of firms in the market but no increase in the price of the good (this is constant cost industry and this is what happens: D increases leading to more firms entering and price increasing, then S increases due to more firms in industry causing price to decrease back to normal therefore the only long run result is more firms in the market)

if cross price-price elasticity of demand is positive (.. Based on the information in the question above) goods A and B could be: long distance travel by plane vs by train two brands of butter Coca Cola and Pepsi or a Chevrolet automobile and a ford automobile

Any of the above

Laws that make it illegal for firms to conspire to raise prices of reduce production are known as A) Pro-competition laws B) Antitrust laws C) Antimonopoly laws D) Anticollusion laws E) All of the above

B) Antitrust laws

When an oligopolist individually choose its level of production to maximize its profits, it charges a price that is A) More than the price charged by a monopoly and less than the price charged by a competitive market B) Less than the price charged by a monopoly and more than the price charged by a competitive market C) More than the price charged by either a monopoly or a competitive market D) Less than the price charged by either a monopoly or a competitive market

B) Less than the price charged by a monopoly and more than the price charged by a competitive market

Suppose an oligopolist individually maximizes its profits. When calculating profits, if the output effects exceeds the price effect on the marginal unit of production then the oligopolist A) Has maximized profits B) Should produce more units C) Should produce fewer units D) Should exit the industry E) Is in a Nash equilibrium

B) Should produce more units

As the number of sellers in an oligopoly grows larger, an oligopolistic market looks more like A) A monopoly B) A duopoly C) A competitive market D) A collusion solution

C) A competitive market

The market for hand tools (such as hammers and screwdrivers) is dominated by Black and Decker, Stanley, and Craftsman. The market is best described as A) Competitive B) A monopoly C) An oligopoly D) A duopoly

C) An oligopoly

Many economists argue that resale price maintenance A) Is price fixing and, therefore, is prohibited by law B) Enhance the market power of the producer C) Has a legitimate purpose of stopping discount retailers from free riding on the services provided by full-service retailers D) Both A and B

C) Has a legitimate purpose of stopping discount retailers from free riding on the services provided by full-service retailers

A situation in which oligopolists interacting with one another each choose their best strategy given the strategies that all the other oligopolists have chosen is known as a A) Collusion solution B) Cartel C) Nash equilibrium D) Dominant strategy

C) Nash equilibrium

Collusion is difficult for an oligopoly to maintain A) Because antitrust laws make collusion illegal B) Because in the case of oligopoly, self-interest is in conflict with cooperation C) If additional firms enter of the oligopoly D) For all of the above reasons

D) For all of the above reasons

A market structure in which many firms sell products that are similar but not identical is known as A) Perfect market B) Monopoly C) Oligopoly D) None of the above

D) None of the above

As the number of sellers in an oligopoly increases A) Collusion is more likely to occur because a larger number of firms can place pressure on any firm that defects B) Output in the market tends to fall because each firm must cut back on production C) The price in the market moves further from marginal cost D) The price in the market moves closer to marginal cost

D) The price in the market moves closer to marginal cost

(table shows the demand schedule for tickets to watch an amateur baseball games in a medium sized town. P- 12,11,10,9,8,7,6,5,4,3,2,1,0 Q-0,200,400,600,800,1000,1200,1400,1600,1800,2000,2200,2400) if the duopolist in this baseball market collude and successfully form a cartel, how much profit will each earn? a. $2700 b. $3200 c. $3500 D. $3600 e. $7200

D. $3600 (6x1200/2 = 3600)

(graph question) The firm will earn profits equal to the area

P2 (where MC and P cross) - P1 (point of ATC under the point where MC and P cross) X that quantity

If all firms in a market have identical cost structures and if inputs used in the production of the good in that market are readily available, then the long-run market supply curve for that good should be

Perfectly elastic (horizontal line because this is an example of a constant cost industry)

Metro Lines increased its bus fare by %15 and the average number of people riding the bus decreased by 10%. What effect did this increase in bus fare have on the company's total revenue?

Total revenue increased because demand is relatively inelastic.

If an input necessary for production is in limited supply so that an expansion of the industry raises costs for all existing firms in the market, then the long-run market supply curve for a good could be

Upward sloping (this is an example of increasing cost graph so the LRS has an increasing cost which means the line is upward sloping)

For a monopolistically competitive firm, if ATC and D cross above where MR and MC cross this depicts

a firm generating zero profits in the long run

Which of the following would cause a decrease in the quantity demanded of personal computers: a. An increase in price b. an increase in income c. a decrease in the price of tablets d. expectations that in the future the price of a good will be lower e. all of the above

a. An increase in price

In economics, the marginal benefit that a person expects from a good is measured by the: a. Most the individual would pay for the good b. implicit costs of the good c. price of the good d. marginal cost of the good e. average cost of good

a. Most the individual would pay for the good

Suppose both buyers and sellers of a good expect the price of the good to increase in the near future. What would we expect to happen to the equilibrium price and quantity in the market for the good today? a. Price will increase, quantity is ambiguous b. price will increase, quantity will increase c. price will increase, quantity will decrease d. price will decrease, quantity is ambiguous e. price will decrease, quantity will increase

a. Price will increase, quantity is ambiguous

Which of the following is true in both Perfect Competition and Monopolistic Competition? a. There are many firms in the industry b. The products of firms in the industry are homogeneous or identical c. There are barriers to the entry of new firms d. All firms charge the same price and that price is set by market demand and supply e. All of the above

a. There are many firms in the industry

If the current price of a good is below the equilibrium price: a. There is a shortage and the price will rise b. there is a shortage and the price will fall c. there is a surplus in the price will rise d. there is a surplus in the price will fall

a. There is a shortage and the price will rise

Which of the following short-run cost curves are parallel at every level of output? a. Total Cost and Total Variable Cost b. Total Cost and Total Fixed Cost c. Average Cost and Average Variable Cost d. Average Cost and Average Fixed Cost e. Marginal Cost and Average Variable Cost

a. Total Cost and Total Variable Cost

What causes deadweight loss in any industry whose individual firms face downward-sloping demand curves? a. Under-production of goods, that is, additional units of a good have more value to buyers than their cost to sellers b. Under-production of goods, that is, additional units of a good have less value to buyers than their cost to sellers c. Over-production of goods, that is, additional units of a good have more value to buyers than their cost to sellers d. Over-production of goods, that is, additional units of a good have less value to buyers than their cost to sellers

a. Under-production of goods, that is, additional units of a good have more value to buyers than their cost to sellers

Which of the following is a variable cost in the short run? a. Wages paid to factory labor b. Payment on the lease for factory equipment c. Rent on the factory d. Interest payments on borrowed financial capital e. Salaries paid to upper management

a. Wages paid to factory labor

The use of the word "monopoly" in the name of the market structure called "monopolistic competition" refers to the fact that a. a monopolistically competitive firm faces a downward sloping demand curve for its differenciated product and so does a monopolist b. monopolistically competitive markets have free entry and exit just like a monopolistic market c. monopolistically competitive firms charge prices equal to their marginal costs just like monopolists d. monopolistically competitive firms produce beyond their efficient scale and so do monopolists

a. a monopolistically competitive firm faces a downward sloping demand curve for its differenciated product and so does a monopolist

(using the prisoners dilemma game in a diagram possible profits 4 sides, upper left = both open many hours and make $70,000, lower right = both open few hours and make $80,000) The dominant strategy for sue and Joe is for a. both to be open for many hours b. both to be open for few hours c. sue for many hours and Joe for few hours d. Joe for many hours and sure for few hours e. no dominant strategy

a. both to be open for many hours

For a perfectly competitive firm, marginal revenue is: a. equal to the price of the good sold b. average revenue divided by quantity sold c. total revenue divided by price d. equal to the quantity sold of the good

a. equal to the price of the good sold because in perfectly competitive market demand curve is horizontal so D=MR=P

Accounting profit is equal to total revenue minus: a. explicit costs b. implicit costs c. marginal costs d. variable costs e. the sum of explicit and implicit costs

a. explicit costs

Which of the following would most closely satisfy the requirements for a perfectly competitive market? a. gold bullion b. electricity c. cable television d. soda e. all of the above

a. gold bullion

If marginal revenue exceeds marginal cost, a monopolist should a. increase output b. decrease output c. keep output the same because profits are maximized when marginal revenue exceeds marginal cost. d. raise the price.

a. increase output

If a competitive firm is producing a level of output where marginal revenue exceeds marginal cost, the firm could increase profits if it: a. increased production b. decreased production c. maintained production at current level d. temporarily shut down

a. increased production since marginal cost is less than marginal revenue

A monopolist maximizes profit by producing the quantity at which a. marginal revenue equals marginal cost b. marginal revenue equals price c. marginal cost equals price d. marginal cost equals demand e. none of the above occurs.

a. marginal revenue equals marginal cost

The cross-price elasticity of demand between any two products of within an industry is: a. positive b. negative c. zero d. positive if the goods are normal goods and negative if they are inferior goods e. zero if the goods are normal goods and negative if they are inferior goods

a. positive

For a monopolistically competitive firms graph, if ATC curve is above demand/price then the level of output is

generating losses (loss minimizing)

Public ownership of natural monopolies a. tends to be inefficient b. usually lowers the cost of production dramatically c. creates synergies between the newly acquired firm and other government-owned companies d. does none of the above

a. tends to be inefficient

When firms enter a monopolistically competitive market and the business-stealing externality is larger than the product-variety externality, then a. there are too many firms in the market and market efficiency could be increased if firms exited the market. b. there are too few firms in the market and market efficiency could be increase with additional entry. c. the number of firms in the market is optimal and the market is efficient. d. the only way to improve efficiency in this market is for the government to regulate it like a natural monopoly

a. there are too many firms in the market and market efficiency could be increased if firms exited the market.

Which of the following would not be a result of an increase in the minimum wage?

an increase in fringe benefits offered by employers

(graph question) A perfectly competitive firm will maximize profits if it produces

at the quantity at the point where MC and P/D/MR cross

in the long-run, some firms will exit the market if the price of the good offered for sale is less than

average total cost (if P<ATC firms will exit industry)

(table shows the demand schedule for tickets to watch an amateur baseball games in a medium sized town. P- 12,11,10,9,8,7,6,5,4,3,2,1,0 Q-0,200,400,600,800,1000,1200,1400,1600,1800,2000,2200,2400) Suppose that the duopolist are unable to collide. How much profit will each earn when the market reaches a Nash equilibrium? a. $2700 b. $3200 c. $3500 D. $3600 e. $7200

b. $3200 idk why though

(Bob willing to pay 120 for text and 25 for study guide, Mary willing to pay 100 for text and 35 for study guide, both w 0 marginal cost of production) If ABC publishing charges separate prices for both products, its best strategy is to charge prices that, when combined, total a. 120 b. 125 c. 130 d. 135 e. 140

b. 125 (because this is the least amount for both people, Bob at 25 for study guide and Mary and 100 for textbook which combined is 125)

For the economy as a whole, what percentage of firm revenue is spent on advertising? a. 1% b. 2% c. 4% d. 6% e. 10%

b. 2%

James has just completed his first year as a full-time student at SMU. For the year, he paid $42,000 in tuition and fees. He spent $1600 on books and supplies. Had he chosen to work full-time during the year instead of attending SMU he would have earned $28,000. James' explicit cost for the year was: a. 71,600 b. 43,600 c. 42,000 d. 29,600 e. 28,000

b. 43,600

Which of the following is not put forth as a criticism of advertising and brand names? a. Advertising manipulates peoples tastes to create a desire that otherwise would not exist. b. Advertising increases competition, which causes unnecessary bankruptcies and layoffs c. Advertising increases brand loyalty, causes demand to be more inelastic, and thus, increases markup over marginal cost d. Brand names cause consumers to perceive differences that do not exist between goods e. all of the above are criticisms of advertising and brand names

b. Advertising increases competition, which causes unnecessary bankruptcies and layoffs

Which of the following is not an argument put forth by economists in support of the use of advertising? a. Advertising provides information to customers about prices, new products, and location of retail outlets b. Advertising provides a creative outlet for artists and writers. c. Advertising increases competition. d. Advertising provides new firms with the means to attract customers from existing firms.

b. Advertising provides a creative outlet for artists and writers.

Which of the following statements is false? a. Total Fixed Cost plus Total Variable Cost equals Total Cost b. Fixed Costs are avoidable in the short run but sunk in the long run c. When Marginal Cost is below Average Variable Cost, Average Variable Cost must be decreasing d. The Marginal Cost curve crosses the Average Variable Cost curve at the minimum Average Variable Cost e. In the long run, as a firm expands its production facilities, it generally first experiences economies of scale, then constant returns to scale, and then diseconomies of scale

b. Fixed Costs are avoidable in the short run but sunk in the long run

The table below presents information about the productivity of digital cameras and personal computers in the United States and South Korea. The data are presented in units of output per hour of work period use this information to respond to the question. Digital Cameras Personal Computers South Korea. 6 3 United States 8 2 Which of the following statements is true: a. South Korea has a comparative advantage in the production of digital cameras and the United States has a comparative advantage in the production of personal computers b. The United States has a comparative advantage in digital cameras and South Korea has a comparative advantage in personal computers c. South Korea has a comparative advantage in both goods d. The United States has a comparative advantage in both goods e. neither country has comparative advantage

b. The United States has a comparative advantage in digital cameras and South Korea has a comparative advantage in personal computers

Which of the following is true regarding the similarities and differences in monopolistic competition and monopoly? a. The monopolist faces a downward sloping demand curve while the monopolistic competitor faces and elastic demand curve. b. The monopolist makes economic profits in the long run while the monopolistic competitor makes zero economic profits in the long run. c. Both the monopolist and the monopolistic competitor operate at the efficient scale. d. The monopolist charges a price above marginal cost while the monopolistic competitor charges a price equal to marginal cost.

b. The monopolist makes economic profits in the long run while the monopolistic competitor makes zero economic profits in the long run.

One source of inefficiency in monopolistic competition is that a. because price is above marginal cost, surplus is redistributed from buyers to sellers. b. because price is above marginal cost, some units are not produced that buyers value in excess of the cost of production and this causes a deadweight loss. c. monopolistically competitive firms produce beyond their efficient scale. d. monopolistically competitive firms earn economic profits in the long run.

b. because price is above marginal cost, some units are not produced that buyers value in excess of the cost of production and this causes a deadweight loss.

(using the prisoners dilemma game in a diagram possible profits 4 sides, upper left = both open many hours and make $70,000, lower right = both open few hours and make $80,000) Suppose they both agree to collude and jointly maximize their profits. if sue and Joe were to be able .... what is the likely outcome of the game? a. both to be open for many hours b. both to be open for few hours c. sue for many hours and Joe for few hours d. Joe for many hours and sure for few hours

b. both to be open for few hours

If a (perfectly) competitive firm doubles its output, its total revenue a. more than doubles b. doubles c. less than doubles d. cannot be determined

b. doubles because TR=PxQ

Compared to a perfectly competitive market, a monopoly market will usually generate a. higher prices and higher output b. higher prices and lower output c. lower prices and lower output d. lower prices and higher output

b. higher prices and lower output

The purpose of antitrust laws is to a. regulate the prices charged by a monopoly b. increase competition in an industry by preventing mergers and breaking up large firms c. increase merger activity to help generate synergies that reduce costs and raise efficiency d. create public ownership of natural monopolies e. do all of the above

b. increase competition in an industry by preventing mergers and breaking up large firms

Which of the following is true regarding the production and pricing decisions of monopolistically competitive firms? Monopolistically competitive firms choose the quantity at which marginal cost equals a. ATC and then use the demand curve to determine the price consistent with this quantity b. marginal revenue and then use the demand curve to determine the price consistent with this quantity c. ATC and then use the supply curve to determine the price consistent with this quantity d. marginal revenue and then use the supply curve to determine the price consistent with this quantity.

b. marginal revenue and then use the demand curve to determine the price consistent with this quantity

A firm whose average total cost (ATC) continually declines at least to the quantity that could supply the entire market is known as a a. perfect competitor b. natural monopoly c. government monopoly d. regulated monopoly

b. natural monopoly

A monopoly is able to continue to generate economic profits in the long run because a. potential competitors sometimes don't notice the profits. b. there is some barrier to entry to that market. c. the monopolist is financially powerful. d. antitrust laws eliminate competitors for a specified number of years. e. of all of the above

b. there is some barrier to entry to that market.

If regulators break up a natural monopoly into many smaller firms, the cost of production a. will fall b. will rise c. will remain the same d. could either rise or fall depending on the elasticity of the monopolist's supply curve

b. will rise

The surplus (in quantity) caused by a binding price floor will be the smallest if:

both supply and demand are inelastic

(table shows the demand schedule for tickets to watch an amateur baseball games in a medium sized town. P- 12,11,10,9,8,7,6,5,4,3,2,1,0 Q-0,200,400,600,800,1000,1200,1400,1600,1800,2000,2200,2400) if the duopolist in this baseball market collude and successfully form a cartel, what is the price that each should charge in order to maximize profits? a. $8 b. $7 c. $6 d. $5 e. $4

c. $6

Which of the following statements about price and marginal cost in perfectly competitive and monopolized markets is true? a. In perfectly competitive markets, price equals marginal cost; in monopolized markets price equals marginal cost b. In perfectly competitive markets, price exceeds marginal cost; in monopolized markets, price exceeds marginal cost c. In perfectly competitive markets, price equals marginal cost; in monopolized markets, price exceeds marginal cost d. In perfectly competitive markets, price exceeds marginal cost; in monopolized markets, price equals marginal cost.

c. In perfectly competitive markets, price equals marginal cost; in monopolized markets, price exceeds marginal cost

Which of the following is not an example of price discrimination? a. CVS charges a senior citizen less for Liptor than it charges a non-senior citizen b. SMU charges a student on a scholarship less tuition than a student not on scholarship c. Kroger charges less for a gallon of Kroger brand milk than it charges for a gallon of Broden Milk d. A theater charges less for children to see a movie than adults e. A customer with a coupon pays less than a customer without a coupon

c. Kroger charges less for a gallon of Kroger brand milk than it charges for a gallon of Broden Milk

In this industry, there is an emphasis on non-price competition, such as advertising, brand names, and trademarks, and entry into the industry is relatively easy. What type of industry is this? a. Perfect Competition b. Monopoly c. Monopolistic Competition d. Oligopoly e. c or d

c. Monopolistic Competition

Which of the following statements about price discrimination is not true? a. Price discrimination can raise economic welfare b. Price discrimination requires that the seller be able to separate buyers according to their willingness to pay c. Perfect price discrimination generates a deadweight loss. d. Price discrimination increases a monopolist's profits e. For a monopolist to engage in price discrimination, buyers must be unable to engage in arbitrage.

c. Perfect price discrimination generates a deadweight loss.

Which of the following firms has the least incentive to advertise a. a manufacturer or home heating and air conditioning b. a manufacturer of breakfast cereal c. a wholesaler of crude oil d. a restaurant

c. a wholesaler of crude oil

Suppose James spends more on housing and food during the school year than he would have spent had he chosen to work full time. The difference between what he spends on housing and food as a student and what he would have spent had he chosen to work full time is: a. A benefit of working full time b. a benefit of being a student c. an explicit cost of being a student d. an implicit cost of being a student e. neither a benefit nor cost of being a student

c. an explicit cost of being a student

Which of the following is not a natural monopoly? a. tap water b. sewerage c. cell phones d. natural gas delivery e. electricity delivery

c. cell phones

14. Point X: a. Is not possible and is unattainable b. is possible an efficient c. is possible but not efficient d. has no opportunity cost e. requires no tradeoffs

c. is possible but not efficient

Which of the following is not a characteristic of a monopolistic competitive market? a. many sellers b. differentiated products c. long-run economic profits d. free entry and exit

c. long-run economic profits.

The perfectly competitive firm maximizes profit when it produces output up to the point where a. marginal cost equals total revenue b. marginal revenue equals average revenue c. marginal cost equals marginal revenue d. price equals average variable cost

c. marginal cost equals marginal revenue (MC=MR)

Expensive television commercials that appear to provide no specific information about the product being advertised a. are most likely used by firms that are perfect competitors b. should be banned by regulators because they add to the cost of the product without providing the consumer with any useful information about the product. c. may be useful because they provide a signal to the consumer about the quality of the product d. only affect the buying habits of irrational consumers

c. may be useful because they provide a signal to the consumer about the quality of the product

Suppose there is an increase in both the supply and demand for a good. Furthermore, suppose the supply of the good increases more than the demand of the good. In the market for the good, we would expect the equilibrium: a. Price to rise and equilibrium quantity to rise b. price to fall and equilibrium quantity to be ambiguous c. price to fall and equilibrium quantity to rise d. price to remain constant an equilibrium quantity to rise e. price to be ambiguous and equilibrium quantity to rise

c. price to fall and equilibrium quantity to rise

In the short run, if the price is above average total cost in a monopolistically competitive market, the firm makes a. losses and firms enter the market b. losses and firms exit the market c. profits and firms enter the market d. profits and firms exit the market

c. profits and firms enter the market

Econ is the study of how: a. to reduce our wants until we are satisfied b. to avoid having to make tradeoffs c. society manages its scarce recourses d. to fully satisfy our unlimited wants e. to avoid incurring opportunity costs

c. society manages its scarce recourses

Cengage Learning is a monopolist in the production of your textbook because a. Cengage Learning owns a key resource in the production of textbooks b. Cengage Learning is a natural monopoly c. the government has granted Cengage Learning exclusive rights to produce this text book. d. Cengage Learning is a very large company

c. the government has granted Cengage Learning exclusive rights to produce this text book.

For a monopolistically competitive firms graph, if ATC curve is above demand/price then in the long run it will

cause producers to exit the market, which will shift demand faced by incumbent firms to the right

(Bob willing to pay 120 for text and 25 for study guide, Mary willing to pay 100 for text and 35 for study guide, both w 0 marginal cost of production) If ABC publishing a. 120 b. 125 c. 130 d. 135 e. 140

d. 135 (because this is the lest amount when totaled each person (Bob totaled is 145 and Mary totaled is 135, least is Mary at 135)

For a firm in Perfect Competition, several variables converge and re equal at long-run equilibrium. Which of thee following is not one of those variables? a. Marginal revenue b. Average revenue c. Average total cost d. Average variable cost e. Marginal cost

d. Average variable cost

"Mutual interdependence" exists among firms in this industry leading to the potential for collusion and cartels. What type of industry is this? a. Perfect Competition b. Monopoly c. Monopolistic Competition d. Oligopoly e. c or d

d. Oligopoly

Which of the following is what Adam Smith meant by the" invisible hand" ? a. The Property of distributing economic prosperity equitably among the members of a society b. A situation in which the market process fails to allocate resources efficiently c. The case in which there is only one seller in a market d. The principle that self-interested market participants may unknowingly maximize the well-being of society as a whole e. The property of it society getting the most again from its scarce resources

d. The principle that self-interested market participants may unknowingly maximize the well-being of society as a whole

Which of the following explains why a firm would shut down in the short run rather than continue operating at a loss? a. Total Variable Cost > Total Fixed Cost b. Total Variable Cost < Total Fixed Cost c. Marginal Cost < Average Total Cost d. Total Revenue < Total Variable Cost e. Total Revenue < Total Fixed Cost

d. Total Revenue < Total Variable Cost

13. From which point on the graph is it possible to produce product B without reducing the quantity of product a that is also produced? a. A b. B c. C d. X e. Y

d. X

Which of the following is not a barrier to entry in a monopolized market? a. the government gives a single firm the exclusive right to produce some good. b. The costs of production make a single producer more efficient than a large number of producers. c. A key resource is owned by a single firm d. A single firm is very large

d. a single firm is very large

Which of the following is used to explain the "law of demand": a. An increase in the price of a good will cause buyers to substitute another good for the good whose price has increased b. a decrease in the price of a good will increase the real income or purchasing power of buyers c. the more of a good that buyers are consuming during a specific period of time, the less they are willing to pay for additional units of the good d. all of the above e. none of the above

d. all of the above

Which of the following statements is true? a. If Japan has an absolute advantage in the production of an item, it must also have a comparative advantage in the production of that item b. if trade benefits Japan, its trading partner must be worse off due to trade c. it is possible for Japan to have a comparative advantage in the production of everything d. as a result of trade with Japan based on comparative advantage, a trading partners consumption possibilities curve will be to the right of the trading partners production possibilities curve e. If japan's workers can produce five hamburgers per hour or 10 bags of French fries per hour, absent trade, the price of one bag of fries is 2 hamburgers

d. as a result of trade with Japan based on comparative advantage, a trading partners consumption possibilities curve will be to the right of the trading partners production possibilities curve

When a monopolist produces an additional unit, the marginal revenue grenerated by that unit must be a. above the price because the output effect outweighs the price effect. b. above the price because the price effect outweighs the output effect. c. below the price because the output effect outweighs the price effect d. below the price because the price effect outweighs the output effect

d. below the price because the price effect outweighs the output effect

Using government regulations to force a natural monopoly to charge a price equal to its marginal cost will a. improve efficiency b. raise the price of the good c. attract additional firms to enter the market d. cause the monopolist to exit the market

d. cause the monopolist to exit the market

Which of the following products is least likely to be sold in a monopolistically competitive market? a. video games b. breakfast cereal c. beer d. cotton

d. cotton

Defenders of the use of brand names argue that brand names a. provide information about the quality of the product b. gives firms incentive to maintain high quality c. are useful even in socialist economies such as the former Soviet Union d. do all of the above.

d. do all of the above.

Which of the following is not a characteristic of perfectly competitive market? a. many buyers and sellers b. good offered are largely the same c. firms can freely enter or exit the market d. firms generate small but positive economic profits in the long run e. all of the above

d. firms generate small but positive economic profits in the long run (break even in long run)

Which of the following characteristics describes "normative" economics: a. Describes current economic events b. predictions are made about changes to the economy following specific events c. an economic decision will affect all people, regardless of how they feel or what they believe about why that decision was made d. solutions about what should be are influenced by an individual's beliefs and values e. describes the effect of a decrease in taxes on the total output or gross domestic product of a nation

d. solutions about what should be are influenced by an individual's beliefs and values

Which of the following firms is most likely to spend a large percentage of their revenue on advertising? a. the manufacturer of an undifferentiated commodity b. a perfect competitor c. the manufacturer of an industrial product d. the producer of a highly differentiated consumer product e. the producer of a low-quality product that costs the same to produce as a similar high-quality product

d. the producer of a highly differentiated consumer product

The use of the word "competition" in the name of the market structure called "monopolistic competition" refers to the fact that a. monopolistically competitive firms charge prices equal to the minimum of their average total cost just like competitive firms. b. monopolistcally competitive firms face a downward sloping demand curve just like competitive firms c. the products are differenciated in a monopolistically competitive market just like a competitive market. d. there are many sellers in a monopolistically competitive market and there is free entry and exit in the market just like a competitve market.

d. there are many sellers in a monopolistically competitive market and there is free entry and exit in the market just like a competitve market.

Which of the following statements is true: a. There are no transactions costs in a money economy b. there are no transactions costs in a barter economy c. transactions costs are higher in a money economy than in a barter economy d. transactions costs are higher in a barter economy than in a money economy e. Transactions costs are the same in a money economy and a barter economy

d. transactions costs are higher in a barter economy than in a money economy

The inefficiency associated with monopoly is due to a. the monopoly's profits b. the monopoly's losses c. overproduction of the good d. underproduction of the good

d. underproduction of the good

Which of the following is ture with regard to monopolistically competitive firms' scale of production and pricing decisions? Monopolistically competitive firms produce a. at the efficient scale and charge a price equal to marginal cost. b. at the efficient scale and charge a price above the marginal cost. c. with excess capacity and charge a price equal to marginal cost. d. with excess capacity and charge a price above marginal cost.

d. with excess capacity and charge a price above marginal cost.

A large increase in the supply of an agricultural food product due to unusually good weather would ______ total revenue from the sale of the good because demand for food tends to be price _____.

decrease; inelastic

Suppose you find $20 while you are on your way from a restaurant to take a bus to go to a baseball game. You purchase a $20 ticket to the game at the box office. Your opportunity cost of going to the game is: a. 0, because you found the money b. the value of your time spent at the c. game $20 plus the $15 you spent on dinner prior to going to the game d. $20, because you could have used the money to buy other things e. $20, because you could have used the money to buy other things, plus the amount you spent on bus fare to and from the game, plus the value of your time spent at the game

e. $20, because you could have used the money to buy other things, plus the amount you spent on bus fare to and from the game, plus the value of your time spent at the game

James has just completed his first year as a full-time student at SMU. For the year, he paid $42,000 in tuition and fees. He spent $1600 on books and supplies. Had he chosen to work full-time during the year instead of attending SMU he would have earned $28,000. James' implicit cost for the year was a. 71,600 b. 43,600 c. 42,000 d. 29,600 e. 28,000

e. 28,000

Suppose that you own and operate your own business. Then suppose another firm offers you a job paying twice what you thought you were worth in the labor market. What has happened to your accounting profit and your economic profit? a. Both accounting profit and economic profit have decreased b. Both accounting profit and economic profit have increased c. Accounting profit has increased and economic profit has decreased d. Accounting profit has decreased and economic profit has increased e. Accounting profit has not changed and economic profit has decreased

e. Accounting profit has not changed and economic profit has decreased

Which of the following statements is false regarding "normal profit"? a. It is the minimum amount of profit that is necessary for a farm to keep investors and thus stay in business b. It varies with the kind of business due to variations in risk c. It is a type of implicit cost d. It is a part of a firm's cost of production e. It is equal to total revenue minus explicit cost

e. It is equal to total revenue minus explicit cost

In the long run equilibrium in a perfectly competitive market, firms are operating at a. the minimum of their average-total-cost curves b. the intersection of MC and MR c. their efficient scale d. zero economic profit e. all of the above

e. all of the above

Which of the following is a cost of exchange: a. Price paid for good b. taxes added at the point of sale c. payment to have the good delivered d. transaction costs e. all of the above

e. all of the above

Which of the following would increase the supply of a good: a. An advanced in technology used to manufacture the good b. a decrease in the price of a major resource used to manufacture the good c. an increase in the number of sellers d. sellers' expectations that the future price of the good will be lower than the current price e. all of the above

e. all of the above

Which of the following meets the definition of "capital" as used in economics: a. Machinery, tools, equipment b. education, training c. health care d. money, other liquid assets e. all the above

e. all the above

15. What would have to occur in order to make the combination of products at point Y attainable in the future? a. Producing more A and less B b. producing more B and less A c. moving from point X to point B d. a reduction unemployment and under employment of resources e. an increase in the quantity and quality of resources

e. an increase in the quantity and quality of resources

The monopolist's supply curve a. is the marginal cost curve above the AVC b. is the marginal cost curve above the ATC c. is the upward sloping portion of the ATC curve d. is the upward sloping portion of the AVC e. does not exist

e. does not exist

The economic goal of "equity" refers to: a. Productive efficiency b. allocative efficiency c. full employment of the economys resources d. economic freedom e. fairness in the distribution of economic prosperity

e. fairness in the distribution of economic prosperity

Doctor Bill Anderson of veterinarian. He earns $120. per hour providing medical care for animals. He can type 10,000 characters per hour into a spreadsheet. He can hire an assistant who types 2500 characters per hour into a spreadsheet. If doctor Anderson is rational, he should: a. Not hire an assistant because the assistant cannot type as fast as he can b. hire the assistant as long as he pays the assistant less than $120 per hour c. hire the assistant as long as he pays the assistant less than $60 per hour d. Hire the assistant as long as he pays the assistant less than $40 per hour e. hire the assistant as long as he pays the assistant less than $30 per hour

e. hire the assistant as long as he pays the assistant less than $30 per hour

Economic profit is equal to total revenue minus: a. explicit costs b. implicit costs c. marginal costs d. variable costs e. the sum of explicit and implicit costs

e. the sum of explicit and implicit costs

16. Which point on the graph is both productively and allocatively efficient? a. A b. B c. C d. Y e. there is not enough information to answer the question

e. there is not enough information to answer the question

The long run market supply curve:

is always more elastic than the short-run supply curve (elastic means more horizontal, the LRS is horizontal line while the S is a upward sloping (more inelastic) line

(test 2) Which of the following is not a price ceiling: gas price controls in 70's, rent controls on housing, price controls on building supplies before and after natural disaster, or minimum wage law

min wage laws

Anna sugar raises goats. when she can sell her goats for $200 per goat, she will sell any or all of her goats. She never asks for more than $200 per goat and she never sells her goats for less than $200 per goat. This is an example of:

perfectly elastic supply

Which of the following statements is false?

minimum wage laws address the cause of low wages

Which of the following statements is true (answer choices too long to type out sorry)

the further that the price ceiling is below the equilibrium price, the greater is the shortage of the good

unintended consequences of price ceilings

tie in sales, higher transaction costs, decreased quality, and black markets (all of the above)