ECON FINAL
Overt collusion exists if:
firms agree openly on price, output, and other decisions aimed at achieving monopoly profits.
A market price support policy establishes price ________ the market equilibrium.
floors above
A sunk-cost monopoly is most likely to result if a single firm:
has made extensive investments in advertising to establish brand-name recognition among consumers.
A cost that farm subsidies and price floors imposes on the rest of the economy is:
higher consumer commodity prices.
Labor is best considered as:
human effort.
Assume that an industry that was perfectly competitive suddenly becomes monopolized. Which of the following best completes the statement? A monopoly will _______ the competitive firms, taken collectively.
sell less output than
A supply curve that is upward sloping means that:
suppliers will want to sell more at higher prices.
Factor prices, returns from alternative activities, technology, number of firms, producer expectations, and natural events are often termed:
supply shifters.
The excess capacity in monopolistic competition may be viewed as:
the cost of product diversity.
Variable costs include:
the cost of raw materials.
The relationship between the value and price of a stock suggests that:
the equilibrium price of a stock strikes a balance between those who think the stock is worth more and those who think it's worth less at the current price.; it is the market's best guess regarding the expected value of the company's future profits.; both A and B are true.
Reaching the incorrect conclusion that one event causes another because of the proximity in which the events occurred is called
the fallacy of false cause
In the long run:
the firm considers all factors as variable.
Michael Kawamura, a careful maximizer of utility, consumes only two goods, peanut butter and ice cream. He had just achieved the utility-maximizing solution in his consumption of the two goods when the price of peanut butter fell. As he adjusts to this event:
the marginal utility of peanut butter will fall, and the marginal utility of ice cream will rise.
The demand curve facing a monopolist is always:
the same as the industry's demand curve.
It's certain that the equilibrium price will fall when:
the supply curve shifts to the right and the demand curve shifts to the left.
Defenders of advertising argue that it:
encourages competition through new-product advertising.
Those who make economic policy concerning price controls often do so in order to:
establish a more equitable result based on normative judgements.
To be effective, property rights must be:
exclusive and transferable.
Charges that must be paid for the use of factors of production such as labor and capital, together with estimated depreciation costs, are:
explicit costs.
When a total product curve is increasing at a decreasing rate, its corresponding marginal product curve is:
falling.
When one firm responds to a rival's cheating by cheating and to a rival's cooperation by cooperating, that firm is practicing a:
tit-for-tat strategy.
Which of the following is true? Since there are few firms that match the conditions assumed in perfect competition, the model is not very useful. The model of perfect competition is a good example of the old adage, "That's O.K. in theory, but not in practice." Although few world markets meet the assumptions of perfect competition, the model is useful in analyzing real world forces that affect prices and outputs. The model of perfect competition comes very close to describing the real world.
Although few world markets meet the assumptions of perfect competition, the model is useful in analyzing real world forces that affect prices and outputs.
A decrease in price will lead to an increase in demand. (T/F)
False
A monopoly's marginal revenue is the same as its price. (T/F)
False
Accounting costs include both explicit and implicit costs. (T/F)
False
An attempt should always be made to maximize opportunity cost (T/F)
False
Consumers will maximize utility whenever the total benefits of consumption of the good exceed the total cost of the good. (T/F)
False
Diminishing marginal returns occurs when marginal product is falling and below zero. (T/F)
False
If a demand curve has a constant slope, price elasticity will also be constant. (T/F)
False
If price falls below the minimum of ATC, the firm will shut down in the short run. (T/f)
False
The 3 fundamental economic questions are what, how, and why. (T/F)
False
The consumption of normal goods will increase because of the income effect when their prices increase. (T/F)
False
If a good has a price inelastic demand, then which of the following is NOT likely to be characteristic of this good? The good is a necessity and is relatively unimportant in the household budget.; There are many substitutes for the good. ; Consumers spend a small percentage of their income on the good.; Consumers do not have much time to adjust to market changes.
There are many substitutes for the good.
Free riders consume a public good without paying for it. (T/F)
True
Margin suggests additional or incremental (T/F)
True
Marginal utility of a good eventually decreases as the level of consumption increases. (T/F)
True
Monopoly firms may have economic profits in the long run. (T/F)
True
The slope of the total revenue curve is marginal revenue. (T/F)
True
A boundary that limits the range of choices an individual or a firm can make is:
a constraint
The difference between iron ore deposits and the steel produced from these deposits that is later used to make factory equipment illustrates the difference between:
a natural resource and capital.
A monopoly is a market characterized by:
a single seller.
Ceteris paribus means
all other things unchanged
An example of a positive statement is
an increase in investment spending tends to reduce employment
Which of the following would result in a movement along the demand curve?
an increase in the number of suppliers
Economists in general agree that rent controls are:
an inefficient and ineffective way to help low-income families.
The law of increasing opportunity cost says that:
as output increases for one good on its production possibilities curve, the opportunity cost of additional units of the other good will be greater and greater.
If marginal cost is less than average total cost, then:
average total cost is decreasing.
Economic models are
built using assumptions
If a monopolist is producing a quantity that generates MC < MR, then profit:
can be increased by increasing production.
Price controls:
can result in inequitable outcomes.
If a firm increases the ratio of capital to labor, it becomes more:
capital intensive.
If an economy's factors of production were owned by the government sector and the coordinating activity was done by a government planning board, the economy would be called:
command socialism.
Countries import some goods and export other goods primarily because of:
comparative advantage.
The transfer to monopoly of a portion of _______ is a(n) _______ issue.
consumer surplus; equity
The bulk of the nation's output is produced by:
corporations
Eliminating third-party payer systems is most likely to ________ the quantity of health care ________.
decrease; demanded
If along a given segment of a demand curve price falls and total revenue ____________, then demand is price inelastic along that segment.
decreases
The principle stating that, for virtually all goods and services, there is a negative relationship between price and quantity demanded, all other things unchanged, is the law of:
demand.
A reduction in _______ leads to a _______ , shifting each firm's _______ curve _______ .
demand; fall in price; marginal revenue; downward
An increase in the price of football tickets will cause the ________ for (of) basketball tickets (a substitute) to ________ .
demand; increase
The marginal product of labor is: the change in output resulting from a 1 unit change in labor. the slope of the total product curve. positive at some levels of input and negative at others. described by all of the above.
described by all of the above.
Market demand curves are found by:
determining the quantities demanded by all buyers at each price.
If the United States decides to allocate more resources to capital goods and less to consumer goods, the United States will obtain a greater degree of:
economic growth.
A firm that is able to more efficiently utilize by-products as it increases production in the long run is an example of:
economies of scale.
Many disagreements among economists results because
economists sometimes make normative judgements
When monopolies exist because economies of scale prevail over the entire range of demand:
economists suggest that we may want to regulate their production and pricing, but we may not want to give up their cost advantages.
The production possibilities curve represents the fact that:
if all resources of an economy are being used efficiently, more of one good can be produced only if less of another good is produced.
A variable that induces a change in another variable is a(n)
independent variable
A curve that represents combinations of two goods that yield equal levels of satisfaction is a(n):
indifference curve.
The law of diminishing marginal returns assumes that there:
is at least one variable and one fixed factor of production.
A private good is a good or service for which exclusion:
is possible and for which marginal cost of an additional user is positive.
A location-based monopoly is most likely to result if a single firm:
is the only seller in a small town or community.
Algebraically, the budget constraint (B) for two goods would be PxQx + PyQy is:
less than or equal to B.
In dealing with utility, we assume that the ability of consumers to purchase goods and services is:
limited.
An assumption of the model of perfect competition is:
many buyers and sellers.
A perfectly competitive firm's short-run supply curve is its:
marginal cost curve above the average variable cost curve.
The branch of economics that examines the choices of consumers and firms is
microeconomics
Utility is most closely related to the term:
satisfaction.
The city bus system charges lower fares to senior citizens than to other passengers. Assuming that this pricing strategy increases the profits of the bus system, we can conclude that senior citizens must have a _______ for bus service than other passengers.
more elastic demand
A source of economic growth is:
more factors of production.
The problem of determining how goods and services should be produced exists because
most goods can be produced with different combinations of resources
An efficient allocation of resources implies _______ allocation of goods and services.
neither an equitable nor an inequitable
A feature of monopolistic competition that makes it different from monopoly is the:
number of firms in the industry.
The industry characterized by a few interdependent firms where there are barriers to entry is called:
oligopoly.
The HHI for _______ where _______ have (has) _______ of the market is _______ .
oligopoly; two firms each; 50%; 5,000
The short run is defined as a:
planning period in which some factors of production are considered to be fixed in quantity.
Supply curves tend to be more ________ the greater the time period facing the producer.
price elastic
If the price elasticity of demand is found to be -6, then demand is:
price elastic.
A minimum price set above the equilibrium price is a:
price floor.
Which of the following will lead to a decrease in total revenue? price goes up and demand is perfectly inelastic; price goes up and demand is price inelastic; price declines and demand is price elastic; price increases and demand is price elastic
price increases and demand is price elastic
If the quantity demanded of agricultural output is very unresponsive to a fall in price, the demand for agricultural output is:
price inelastic.
A perfectly competitive firm is a:
price taker.
A good for which exclusion cannot be applied and for which the marginal cost of another user is zero is a _______ good.
public
According to the textbook, which of the following are suggestions to limit health-care spending?
requiring patients to pay a larger share; government regulation; the use of insurance companies that limit spending; all of the above
A decrease in production costs for firms in a perfectly competitive market will cause a(n):
rightward shift in the market supply curve in the long run.
Bev's Bakery, a donut maker, has discovered that the ratio of the marginal product of labor to the price of labor is 6.5, while the ratio of the marginal product of capital to the price of capital is 6.1. The firm has determined that it does not want to change its total costs. Bev's Bakery should:
use more labor and less capital.
A demand curve that is perfectly inelastic:
will be vertical.
When total utility is at a maximum, marginal utility is:
zero
All of the following are examples of external cost EXCEPT: smoke nuisance of a factory. zoning restrictions on your property. land defilement from strip mining. weeds on your next-door neighbor's lawn.
zoning restrictions on your property.
