Economics final

Harvey develops gaming apps from home instead of working as an engineer and earning $50,000 a year. He has invested $20,000 to upgrade to the hardware that he needs and estimates his expenses at $17,000 a year. Downloads generated $130,000 in revenue during the first year. What is his economic profit? a. $37,000 b. $50,000 c. $43,000 d. $93,000 e. $130,000

$43,000

John moved his office from a building he was renting downtown to the carriage house he owns behind his house. How will his profit change? a. Implicit costs will fall. b. Explicit costs will remain unchanged, while implicit costs will rise. c. Economic profit will fall. d. Explicit costs will rise. e. Accounting profit will rise.

Accounting profit will rise.

Demand for a necessity, such as food, is _____. a. both income and price inelastic. b. income inelastic and price elastic. c. income elastic and price inelastic. d. both income and price elastic. e. income elastic and perfectly price inelastic.

both income and price inelastic.

As a monopolist increases the quantity of output produced, _____. a. both price and marginal revenue remain constant. b. price remains constant, but marginal revenue decreases. c. price decreases, but marginal revenue remains constant. d. both price and marginal revenue decrease, but price falls faster than marginal revenue. e. both price and marginal revenue decrease, but marginal revenue falls faster than price.

both price and marginal revenue decrease, but marginal revenue falls faster than price.

Patents stimulate investment _____. a. by giving inventors an incentive to incur the up-front costs of developing new products. b. by giving tax breaks to inventors and researchers. c. by guaranteeing an economic profit to a firm from the sale of a new product. d. by lowering interest rates on loans taken for developing a new product. e. by covering the total cost of research and development incurred by a start-up firm.

by giving inventors an incentive to incur the up-front costs of developing new products.

According to the law of _____, the marginal utility received from each additional unit of a good consumed declines, other things constant. a. increasing marginal returns b. marginal rate of substitution c. supply d. diminishing marginal utility e. increasing marginal rate of substitution

diminishing marginal utility

Firms that ignore the profit maximization strategy _____. a. are somewhat profitable. b. are very profitable. c. are steady growth firms. d. survive for long periods. e. do not survive for long.

do not survive for long.

Because of the ease of entry of new firms into monopolistically competitive markets in the long run, existing firms in these markets _____. a. produce at the lowest average total cost. b. charge a price equal to marginal cost. c. earn no economic profit in the long run. d. take advantage of economies of scope. e. earn no economic profit in the short run.

earn no economic profit in the long run.

Suppose Joan uses her savings to purchase computer equipment for her new consulting business. Soon after this, the market interest rate rises. As a result, her _____. a. explicit costs rise immediately. b. accounting profit falls immediately. c. accounting profit rises immediately. d. economic profit rises immediately. e. economic profit falls immediately.

economic profit falls immediately.

If a 5 percent increase in price leads to an 8 percent decrease in quantity demanded, demand is _____. a. perfectly elastic. b. elastic. c. unit elastic. d. inelastic. e. perfectly inelastic.

elastic.

If a price reduction leads to an increase in total revenue, demand is _____. a. perfectly inelastic. b. inelastic. c. unit elastic. d. elastic. e. perfectly elastic.

elastic.

Someone who committed the association-is-causation fallacy might conclude that _____. a. event B, which followed event A, was caused by event A. b. event B, which followed event A, was not necessarily caused by event A. c. the simplest model is the best predictor of economic outcomes. d. what is true for the individual is also true for the group. e. what is true for the individual is not necessarily true for the group.

event B, which followed event A, was caused by event A

Cash payments for steel to be used in the production process would be an example of _____. a. sunk costs. b. fixed costs. c. explicit costs. d. implicit costs. e. entrepreneurial costs.

explicit costs.

Elijah, a basketball fan, reasons that because his favorite team has three superstars on it, the team must be a great team and will win the championship. Elijah is committing the _____. a. fallacy of composition. b. fallacy that association is causation. c. fallacy of segmentation. d. mistake of ignoring the secondary effects. e. mistake of ignoring the obvious.

fallacy of composition

Which of the following is most likely produced in a monopolistically competitive market? a. soybeans b. automobiles c. fast food d. oil e. wheat

fast food

In a perfectly competitive industry, we are likely to find that _____. a. firms produce a wide variety of products. b. there exist strict barriers to entry. c. firms do not earn positive profits in the short run. d. firms do not advertise. e. firms can choose the price of their products

firms do not advertise.

The reason economists assume that firms try to maximize economic profit is that _____. a. firms that don't earn profits will, over time, have difficulty securing financing to survive. b. firms in the real world always maximize profit. c. profit is easier to calculate than revenue. d. if a firm fails to earn a profit in its first year, it will go out of business. e. profit maximization is easier for firms than revenue maximization.

firms that don't earn profits will, over time, have difficulty securing financing to survive.

Which of the following best approximates a perfectly competitive market structure? a. automobile manufacturing b. the insurance market c. foreign exchange markets d. the airlines industry e. stereo equipment

foreign exchange markets

A rise in the demand for restaurant meals is likely to _____ in the long run. a. increase losses for each restaurant b. lower the price of restaurant meals c. decrease the number of restaurants d. increase the number of restaurants in the industry e. increase the economic profit earned by restaurants

increase the number of restaurants in the industry

If an increase in the price of a product from $1 to $2 per unit leads to a decrease in the quantity demanded from 100 to 80 units, then the demand is _____. a. elastic. b. inelastic. c. unit elastic. d. perfectly elastic. e. perfectly inelastic.

inelastic.

In economics, marginal analysis _____. a. has no practical applications or real-world uses. b. eliminates incorrect decisions and bad choices. c. involves comparing the additional costs and additional benefits of an activity. d. involves examining only the total costs and total benefits of an activity. e. guarantees an incorrect decision.

involves comparing the additional costs and additional benefits of an activity

The total revenue curve for a perfectly competitive firm_____. a. is a vertical line intersecting the horizontal axis. b. is a horizontal line intersecting the vertical axis. c. is a backward-bending curve. d. is a straight line that starts from the origin and slopes upward. e. starts at the origin, slopes upward at first, and then slopes downward.

is a straight line that starts from the origin and slopes upward.

If a monopolistically competitive firm raises its price, it _____ a. earns a higher economic profit. b. loses some, but not all, of its customers. c. shuts down. d. has to pay higher taxes. e. gains customers.

loses some, but not all, of its customers.

Which of the following is not necessarily a characteristic of a perfectly competitive market structure? a. low prices b. a large number of buyers and sellers c. a homogeneous product d. perfect information e. easy entry and exit in the long run

low prices

All of the following are examples of product differentiation, except one. Which of the following is the exception? a. developing a new video game or a computer program called "How to Teach Your New Dog Old Tricks" b. manufacturing a car that minimizes outside noise more than other cars do c. lowering the price of a good for a special sale d. providing movies and special meals on airline flights e. making sodium-free, caffeine-free colas

lowering the price of a good for a special sale

For a perfectly competitive firm operating at the profit-maximizing output level in the short run ___. a. marginal revenue equals total revenue. b. marginal cost equals price. c. marginal cost equals average total cost. d. marginal cost equals average variable cost. e. average fixed cost equals price.

marginal cost equals price.

Which of the following is an example of a good that is nonrival and nonexclusive in consumption? a. televisions b. haircuts c. pizza d. national defense e. tickets to a rock concert

national defense

Barter occurs when _____. a. two people share everything. b. one product is exchanged directly for another product. c. money is used to buy goods. d. money in different currencies is exchanged directly. e. goods are used to buy money.

one product is exchanged directly for another product

A monopoly is the _____ supplier in the market, but there are _____ demanders a. only; many b. only; a few c. only; only one d. one of the many; only one e. one of the many; a few

only; many

Which of the following characterizes a perfectly competitive market? a. a few firms fiercely competing by slashing prices b. product differentiation through aggressive advertising c. perfect information d. limited resource mobility e. barriers to entry, such as licenses

perfect information

The demand curve for the output of a perfectly competitive firm is _____. a. perfectly inelastic. b. perfectly elastic. c. unit elastic. d. downward sloping. e. nonlinear.

perfectly elastic.

When diminishing marginal returns set in, marginal product is _____. a. positive and increasing. b. positive and decreasing. c. negative and increasing. d. negative and decreasing. e. zero.

positive and decreasing.

A perfectly competitive firm's profit per unit of output equals _____. a. price minus average variable cost. b. price minus marginal cost. c. total revenue minus total cost. d. price times quantity. e. price minus average total cost.

price minus the average total cost

A cost that has already been incurred and cannot be recovered is known as a(n)_____. a. sunk cost. b. opportunity cost. c. direct cost. d. implicit cost. e. explicit cost.

sunk cost

Utility measures _____. a. tastes and preferences in consumption. b. the difference in total satisfaction. c. the quality of products. d. the durability of products. e. the usefulness of products.

tastes and preferences in consumption.

If the price elasticity of supply in the kiwi fruit industry equals 1, supply is _____. a. perfectly elastic. b. relatively elastic. c. unit elastic. d. relatively inelastic. e. perfectly inelastic.

unit elastic

Which of the following equations describes the relationship between market price (P), average revenue (AR), and marginal revenue (MR) for a non-discriminating monopolist? a. P = AR = MR b. P > AR = MR c. P = AR > MR d. P > AR > MR e. P = AR < MR

P = AR > MR

Which of these is a similarity between a monopolist that does not practice price discrimination and a perfectly competitive firm? a. The firms face the same amount of competition from new entrants into the market. b. The firms have an equal number of rivals. c. The firms face perfectly price-elastic demand curves. d. Price equals marginal revenue at all output rates for both types of firms. e. Price equals average revenue at all output rates for both types of firms.

Price equals average revenue at all output rates for both types of firms.

In the circular-flow model, households supply all of the following except _____. a. labor. b. goods and services. c. capital. d. entrepreneurial ability. e. natural resources.

good and services

A profit-maximizing monopolist that produces in the short run will _____. a. choose the output level where marginal revenue exceeds marginal cost by the largest amount. b. increase output as long as the marginal revenue exceeds the marginal cost of producing that unit. c. choose the output level where average total cost is at its minimum. d. increase price as long as average revenue exceeds average total cost. e. choose the output level where average revenue exceeds average total cost by the largest amount.

increase output as long as the marginal revenue exceeds the marginal cost of producing that unit.

An economy's production possibilities frontier _____. a. helps explain the immense complexity of the real economy. b. demonstrates that there is no problem of scarcity for society as a whole. c. is based on unrealistic assumptions and has no value as an economic tool. d. is based on simplifying assumptions, but is still useful for illustrating scarcity, opportunity cost, and economic growth. e. is based on the assumption that technology is constantly changing.

is based on simplifying assumptions, but it still useful for illustrating scarcity, opportunity cost, and economic growth

A golf course or a swimming pool in a resort that is not crowded is an example of a(n) _____. a. private good. b. natural monopoly. c. open-access good. d. public good. e. quasi-private good.

natural monopoly.

According to the utility theory, in "consumer equilibrium," households have _____. a. consumed as much of every commodity as they wanted. b. spent their incomes in such a way that their overall satisfaction is maximized. c. spent their incomes in such a way that their marginal utility is maximized. d. spent their incomes in such a way that their marginal utility is zero for every product consumed. e. spent their incomes in such a way that their total utility is zero.

spent their incomes in such a way that their overall satisfaction is maximized.

Comparative advantage refers to _____. a. the ability of an individual to produce a greater amount of a good than another individual. b. the ability of an individual to produce a lesser amount of a good than another individual. c. the ability of an individual to produce a good at a lower opportunity cost than another individual. d. the ability of an individual to produce a good at a lower dollar cost than another individual. e. the ability of an individual to produce a good using fewer labor hours than other individuals.

the ability of an individual to produce a good at a lower opportunity cost than another individual

Recently, it has been discovered that lobsters grown on lobster farms can feed on algae, which is a cheaper lobster food. As a result of this discovery, _____. a. the supply curve of lobsters will shift to the left b. the supply curve of lobsters will shift to the right c. there will be an increase in the quantity of lobsters supplied d. there will be a decrease in the quantity of lobsters supplied e. both supply and demand curves will shift to the right

the supply curve of lobsters will shift to the right

In economics, tastes and preferences refer to _____. a. consumption. b. income. c. prices. d. utility. e. trends.

utility.

A young chef is considering opening his own sushi bar. To do so, he would have to quit his current job, which pays $20,000 a year, and move into a storage building that he owns and currently rents to his brother for $6,000 a year. His estimated expenses at the sushi bar would be $50,000 for food and $2,000 for gas and electricity. The chef's implicit costs are equal to _____. a. $26,000 b. $66,000 c. $78,000 d. $52,000 e. $72,000

$26,000

Suppose a soccer coach has been making $25,000 per year but gives up his coaching job in order to make soccer shoes. If his revenue from the sale of these shoes is $50,000 and his materials cost $20,000, then his economic profit is equal to _____. a. $5,000. b. $25,000. c. $30,000. d. $50,000. e. $80,000.

$5,000.

25. A young chef is considering opening his own sushi bar. To do so, he would have to quit his current job, which pays $20,000 a year, and move into a building that he owns and currently rents to his brother for $6,000 a year. His estimated expenses at the sushi bar would be $50,000 for food and $2,000 for gas and electricity. The chef's explicit costs are equal to _____ a. $26,000. b. $66,000. c. $78,000. d. $52,000. e. $72,000.

$52,000.

Harvey develops gaming apps from home instead of working as an engineer and earning $50,000 a year. He has invested $20,000 to upgrade to the hardware that he needs and estimates his expenses at $17,000 a year. Downloads generated $130,000 in revenue during the first year. What is his accounting profit? a. $37,000 b. $50,000 c. $43,000 d. $93,000 e. $130,000

$93,000

If quantity increases by 15 percent when prices decrease 5 percent, then elasticity for this product is _____. a. 15. b. 10. c. 5. d. 3. e. 1.

3

If the price of Coca-Cola increases from 40 cents to 50 cents per can and the quantity demanded decreases from 100 cans to 50 cans, then the value of the price elasticity of demand for Coca-Cola is _____. a. 0.5. b. 0.25. c. 1. d. 3. e. 2.

3

If the price of a product increases from $15 to $17 per unit and the quantity demanded decreases from 75 to 50 units, then the price elasticity of demand for this product is _____. a. 3.2. b. 12.5. c. 17. d. 2. e. 40.

3.2.

Which of these is likely to be true of perfect competition but not of monopoly? a. A firm can produce a good only if government licenses authorize it to produce the good. b. A firm can sell a good in the market only if the government grants a patent to the firm. c. A firm can earn economic profit in the long run. d. A firm can shut down in the short run only if the price charged by it exceeds the average variable cost of production. e. A firm can face competition from new entrants into the market in the long run.

A firm can face competition from new entrants into the market in the long run.

Don can produce 10 pens or 20 pencils in one hour, while Bob can produce 5 pencils or 15 pens in one hour. Which of the following statements is correct? a. Bob has an absolute advantage in the production of pencils. b. Bob has an absolute advantage in the production of pens. c. Bob has a comparative advantage in the production of pencils. d. Don has a comparative advantage in the production of pens. e. Don does not have a comparative advantage in the production of either good.

Bob has an absolute advantage in the production of pens

Which of the following is true of firms in monopolistic competition and perfect competition? a. Firms face a horizontal demand curve. b. Price exceeds marginal revenue. c. Firms can enter and leave the industry with relative ease. d. Price exceeds marginal cost. e. Products are differentiated.

Firms can enter and leave the industry with relative ease

Tyrell has $50 to spend on Good A and Good B per week. The price of Good A is $5 and that of Good B is $4. He buys six units of Good A and five units of Good B. The marginal utility of the sixth unit of Good A is 25 units, and the marginal utility of the fifth unit of Good B is 20 units. Which of the following is true? a. He is maximizing his utility. b. His last dollar spent on Good A exceeds the last dollar spent on Good B. c. He is not maximizing his utility and should buy more of Good A. d. He is not maximizing his utility and should buy more of Good B. e. He is not maximizing his utility because he is not spending all of his income.

He is maximizing his utility.

A firm facing a downward-sloping demand curve sells 50 units of output at $10 each. Which of the following can be concluded about the firm's marginal revenue for this output level? a. Marginal revenue is equal to $500. b. Marginal revenue is more than $10. c. Marginal revenue is equal to $10. d. Marginal revenue is less than $10 but more than zero. e. Marginal revenue is zero.

Marginal revenue is less than $10 but more than zero.

Which of these is a key difference between a perfectly competitive firm and a monopolist that does not practice price discrimination? a. The marginal cost curve is U-shaped for a perfectly competitive firm but not for a monopolist. b. Price is equal to average revenue for a perfectly competitive firm in equilibrium but not for a monopolist. c. Price is equal to marginal revenue for a perfectly competitive firm in equilibrium but not for a monopolist. d. The average revenue curve is the demand curve for a perfectly competitive firm but not for a monopolist. e. A monopolist aims to maximize profits, while a perfectly competitive firm tries to maximize total revenue.

Price is equal to marginal revenue for a perfectly competitive firm in equilibrium but not for a monopolist.

Suppose the market for hot pretzels in New York City is perfectly competitive. Which of the following is true of the demand in this market? a. The demand curve facing each seller is perfectly elastic. b. The demand curve facing each seller is perfectly inelastic. c. The market demand curve is perfectly elastic. d. The market demand curve is perfectly inelastic. e. The market demand curve is positively sloped.

The demand curve facing each seller is perfectly elastic.

Suppose a monopolist must choose between two points on its demand curve. It can either sell 100 units for $3 each or sell 140 units for $2 each. Which of the following is true? a. The demand for the monopolist's product is price elastic for the given range of output. b. The demand for the monopolist's product is unit elastic for the given range of output. c. The demand for the monopolist's product is price inelastic for the given range of output. d. The monopolist is facing a horizontal supply curve. e. The monopolist is facing an upward-rising demand curve.

The demand for the monopolist's product is price inelastic for the given range of output.

Which of the following illustrates the law of diminishing marginal utility? a. The marginal utility of Diane's second Coke is greater than the marginal utility of her third pretzel, other things constant. b. The marginal utility of Diane's second Coke is greater than the marginal utility of Ken's third pretzel, other things constant. c. The marginal utility of Diane's second Coke is greater than the marginal utility of her third Coke, other things constant. d. The total utility of one Coke is greater than the total utility of two Cokes, other things constant. e. The marginal utility of Diane's second Coke is greater than the marginal utility of Ken's third Coke, other things constant.

The marginal utility of Diane's second Coke is greater than the marginal utility of her third Coke, other things constant.

Carvel advertises a football-shaped ice cream cake for $7; you can buy a second one for only $4. What does Carvel know about consumer preferences? a. Consumers would never buy a second ice cream cake. b. Two cakes are worth less to a consumer than one. c. The marginal utility of ice cream cakes diminishes. d. Consumers only value the first cake at $4. e. Consumers value all cakes they eat at $4.

The marginal utility of ice cream cakes diminishes.

"The second glass of Evian water was very good. May I have another?" Which of the following is necessarily true of this statement? a. The marginal utility of the second glass of water was negative. b. The marginal utility of the first glass of water was zero. c. The marginal utility of the second glass of water was positive. d. The water is available free of cost. e. The marginal utility of the third glass of water will be negative.

The marginal utility of the second glass of water was positive.

The production function is defined as _____. a. a firm's total output. b. the increase in output that occurs when all resources are increased by the same proportion. c. the increase in output that occurs when an additional unit of a resource is added, holding all other resources constant. d. the amount of additional resources needed to increase output by one unit when all resources are increased by the same amount. e. The relationship between the amount of resources employed and total product.

The relationship between the amount of resources employed and total product.

Identify a distinguishing feature of a monopoly. a. There are no barriers to entry in a monopolized market. b. A monopolist is a price taker. c. There are no close substitutes for a monopolist's product. d. There are many firms in a monopolized industry. e. A monopolist faces a horizontal demand curve.

There are no close substitutes for a monopolist's product.

Suppose a monopolistically competitive firm is in long-run equilibrium. The firm's demand curve is tangent to its average cost curve at Q = 25. Average cost is minimized at Q = 35, where average cost is $50. Which of the following is true? a. This firm maximizes profit at an output level of 25 units. b. This firm maximizes profit at an output level of 35 units. c. This firm maximizes profit at an output level lower than 25 units. d. This firm maximizes profit at an output level greater than 35 units. e. This firm incurs an economic loss in the long run.

This firm maximizes profit at an output level of 25 units.

Which of the following is most likely to cause the demand for ice cream, a normal good, to decrease? a. a decrease in the price of ice cream b. a decrease in the price of milk c. warmer weather d. an increase in the number of consumers e. a decrease in consumer income

a decrease in consumer income

If elasticity for a product is 2 and demand increases by 10 percent, what was the percent price change for this product? a. an increase of 2 percent b. a decrease of 2 percent c. an increase of 10 percent d. a decrease of 5 percent e. an increase of 5 percent

a decrease of 5 percent

Other things constant, which of the following is likely to change the quantity of wheat supplied? a. a government subsidy for farmers who do not grow wheat b. an increase in the price of soybeans c. a decrease in the price of the fertilizer used in wheat production d. a fall in the price of wheat e. an expectation of a future increase in wheat prices

a fall in the price of wheat

Which of the following provides the best evidence of the specialization of labor? a. a firm that produces a line of related products, such as eight kinds of breakfast cereal b. an architect who is willing to practice in only one geographic area c. a physician who practices cardiology and orthopedic surgery d. a family that eats at Wendy's every Thursday night e. a retailer who sells goods but does not provide services

a firm that produces a line of related products, such as eight kinds of breakfast cereal

Total product is defined as _____. a. a firm's total output. b. the increase in output that occurs when all resources are increased by the same proportion. c. the increase in output that occurs when an additional unit of a resource is added, holding all other resources constant. d. the amount of additional resources needed to increase output by one unit when all resources are increased by the same amount. e. the amount of additional money needed to increase output by one unit when all resources are held constant.

a firm's total output.

The term opportunity cost suggests that _____. a. one person must lose when someone else gains in an exchange situation. b. not all individuals make the most of life's opportunities. c. executives do not always recognize opportunities for profit as quickly as they should. d. the only factor that is important in decision making is cost. e. a good must be given up to get some other good in return as resources are scarce.

a good must be given up to get some other good in return as resources are scarce

Which of the following is an example of diminishing marginal utility? a. a person buying additional goods after getting a pay raise b. a person eating more Twinkies but enjoying each successive Twinkie less than the previous one c. a person giving some of his income to a needy person d. a person who spends more hours studying than his fellow students e. a person buying goods as long as her marginal utility is greater than zero

a person eating more Twinkies but enjoying each successive Twinkie less than the previous one

Which of the following is the best definition of economics? a. An investigation of the evolutionary process of mankind b. A study of society as a system of interconnected parts c. A study of how people deal with the problem of scarcity d. An examination of the structure and the role of the government in an economy e. A study of how to conduct free and fair elections in a country

a study of how people deal with the problem of scarcity

If at a given price, the amount by which quantity supplied exceeds quantity demanded, there is _____. a. supply. b. demand. c. equilibrium. d. a surplus. e. a shortage.

a surplus

_____ is the ability to make something using fewer resources than other producers use. a. Specialization. b. Exchange. c. Arbitrage. d. Absolute advantage. e. Comparative advantage.

absolute advantage

Marginal utility is the _____. a. overall satisfaction obtained from consuming a good. b. additional satisfaction obtained from consuming one more unit of a good. c. average satisfaction obtained from consuming a good. d. increase in satisfaction that results from reducing the consumption of a good by one percent. e. additional cost of purchasing one more unit of a good.

additional satisfaction obtained from consuming one more unit of a good.

Which of the following would most likely increase the supply of college textbooks? a. the exit of five major publishers from the industry b. an increase in the cost of paper used in the books c. an increase in the wage rate of workers associated with printing d. an expectation of a price rise in the future e. an improvement in the technology used in book production

an improvement in the technology used in book production

Diminishing marginal utility means that _____. a. as one consumes more of a good, other things constant, the total satisfaction obtained from consuming the good tends to fall. b. as one hires more labor, other things constant, the total amount of output produced begins to fall. c. as one hires more units of labor, other things constant, the marginal product of labor begins to fall. d. as one consumes more of a good, other things constant, the additional satisfaction obtained from each additional unit of the good tends to fall. e. as one consumes more of a good, other things constant, the extra satisfaction obtained from each extra good becomes negative.

as one consumes more of a good, other things constant, the additional satisfaction obtained from each additional unit of the good tends to fall.

The most important characteristic of the equilibrium price is that it _____. a. guarantees that producers earn profit. b. clears the market, leaving neither a surplus nor a shortage. c. maximizes the quantity demanded of a good. d. minimizes the quantity demanded of a good. e. guarantees that buyers maximize their utility.

clears the market, leaving neither a surplus nor a shortage

Suppose a monopolistically competitive firm is producing at an output level where marginal revenue is less than marginal cost. This firm should _____quantity and _____ price to increase profit or reduce losses. a. increase, increase b. increase; decrease c. decrease; increase d. decrease; decrease e. increase; not change

decrease; increase

If corn and soybeans are alternative crops grown by most farmers, an increase in the price of corn, other things constant, is likely to _____. a. increase the supply of corn. b. increase the supply of soybeans. c. decrease the supply of soybeans. d. decrease the supply of corn. e. decrease the demand for soybeans.

decreases the supply of soybeans

If a good is inferior, an increase in income would shift the _____. a. demand curve leftward. b. supply curve leftward. c. supply curve rightward. d. supply and demand curves leftward. e. demand curve rightward.

demand curve leftward

The term "monopolistic competition" _____. a. is an alternate expression for monopoly. b. is used to describe perfect competition that has strong entry barriers. c. denotes an industry characterized by one seller of many differentiated products. d. denotes an industry characterized by many sellers of homogeneous products. e. denotes an industry characterized by many sellers of differentiated products.

denotes an industry characterized by many sellers of differentiated products.

The efficient quantity of a public good produced is _____. a. determined by the intersection of the market demand curve and the marginal cost curve. b. achieved where the sum of marginal valuations equals the sum of marginal costs. c. determined by the intersection of the market demand and market supply curves. d. achieved where marginal revenue product equals marginal factor cost. e. achieved at the minimum point of the average total cost curve.

determined by the intersection of the market demand curve and the marginal cost curve.

The short run is a period of time _____. a. less than one year. b. greater than one year. c. during which all resources are variable. d. during which at least one resource is fixed. e. during which at least one resource is variable.

during which at least one resource is fixed.

Unlike perfectly competitive firms, monopolists _____. a. earn positive short-run economic profit even if price is less than average variable cost at all rates of output. b. sell any quantity of output at any price they choose. c. earn long-run economic profits. d. reduce the sales of firms in other industries through advertising. e. face a perfectly elastic demand curve.

earn long-run economic profits.

Harvey develops gaming apps from home instead of working as an engineer and earning $50,000 a year. He has invested $20,000 to upgrade to the hardware that he needs and estimates his expenses at $17,000 a year. If downloads generate $45,000 in revenue during the first year, then his business _____. a. has an accounting profit but an economic loss. b. has an accounting loss and an economic profit. c. has both accounting and economic profits. d. has both an accounting and an economic loss. e. has a normal profit.

has an accounting profit but an economic loss.

FlyHigh Travel Agency, a monopolistic competitor, offers services that are differentiated from the services of other producers in the industry. This implies that it _____. a. faces a perfectly elastic demand curve. b. is a price taker. c. has some control over the price it charges. d. faces a perfectly inelastic demand curve. e. produces a product with no close substitutes.

has some control over the price it charges.

You can either read a book, get something to eat, or take a nap. The opportunity cost of getting something to eat is _____. a. the cost of what you eat. b. the difference between the costs of the book and the food. c. the difference between the opportunity costs of reading and sleeping. d. the net benefit of sleeping. e. impossible to determine because the most preferred alternative is not known.

impossible to determine because the most preferred alternative is not known

Natural resources _____. a. include bodies of water, trees, oil reserves, and minerals. b. are not scarce. c. are inexhaustible as long as they are managed properly. d. are the result of human effort. e. do not follow the law of demand and supply.

include bodies of water, trees, oil reserves, and minerals

If the price elasticity of demand for a product is 5, and prices decrease 10 percent then demand will _____. a. increase by 5 percent. b. increase by 10 percent. c. increase by 50 percent. d. decrease by 50 percent. e. decrease by 3 percent.

increase by 50 percent.

Suppose Ripco owns the building from which it operates. If _____. a. the firm pays no rent, there is no opportunity cost. b. the firm does not rent the building to anyone else, there is no opportunity cost. c. the firm pays rent, there is an opportunity cost. d. its usage of the building precludes it from renting to anyone else, there is an opportunity cost. e. the firm can use the building for other things, there is no opportunity cost.

its usage of the building precludes it from renting to anyone else, there is an opportunity cost.

Suppose Ripco owns the building from which it operates. If _____. a. the firm pays no rent, there is no opportunity cost. b. the firm does not rent the building to anyone else, there is no opportunity cost. c. the firm pays rent, there is an opportunity cost. d. its usage of the building precludes it from renting to anyone else, there is an opportunity cost. e. the firm can use the building for other things, there is no opportunity cost.

its usage of the building precludes it from renting to anyone else, there is an opportunity cost.

The price charged by a perfectly competitive firm is determined by _____. a. each individual firm. b. a group of firms acting together as a cartel. c. market demand and market supply. d. the firm's total costs. e. the firm's average variable cost.

market demand and market supply.

Barriers to entry _____. a. cause monopolies to experience diseconomies of scale in the long run. b. prevent monopolies from earning profit in the short run. c. may allow monopolies to earn profit in the long run. d. prevent the government from regulating a monopoly. e. prevent a natural monopoly from raising its price.

may allow monopolies to earn profit in the long run.

For a monopolist, average revenue is _____. a. equal to marginal revenue at all output levels. b. greater than price at all output levels. c. less than price at all output levels. d. represented by a horizontal curve at all output levels. e. more than marginal revenue at all output levels.

more than marginal revenue at all output levels.

Inferior goods have an income elasticity of demand that is _____. a. positive. b. negative. c. zero. d. greater than 1 in absolute value. e. equal to 1 in absolute value.

negative.

When total utility falls, marginal utility is _____. a. at its maximum. b. infinite. c. positive. d. negative. e. zero.

negative.

A 5 percent increase in income leads to a 10 percent increase in the quantity demanded for a service. This service is a(n) _____ good, and the demand is _____. a. normal; elastic b. normal; inelastic c. normal; unit elastic d. inferior; elastic e. inferior; inelastic

normal; elastic

For perfectly competitive firms, which of the following correctly shows the relationship among market price (P), average revenue (AR), and marginal revenue (MR)? a. price = average revenue (AR) = marginal revenue (MR) b. price > average revenue (AR) = marginal revenue (MR) c. price = average revenue AR > marginal revenue (MR) d. price = average revenue (AR) < marginal revenue (MR) e. price < average revenue (AR) = marginal revenue (MR)

price = average revenue (AR) = marginal revenue (MR)

In economics, elasticity means _____. a. responsiveness to price changes. b. shifts in demand. c. shifts in supply. d. how many goods money can buy. e. how corporations maximize their revenue.

responsiveness to price changes.

Private goods are _____. a. rival and nonexclusive. b. exclusive and nonrival. c. rival and exclusive. d. nonrival and exclusive. e. nonrival and nonexclusive.

rival and exclusive.

A good that is open-access is _____. a. rival and nonexclusive. b. exclusive and nonrival. c. rival and exclusive. d. nonrival and exclusive. e. nonrival and nonexclusive.

rival and nonexclusive.

The division of labor means _____. a. discrimination in labor markets. b. separating a job into smaller tasks to be completed by different people. c. dividing one worker's time among different jobs and duties. d. assigning the same task to different groups of people. e. the fact that two 20-year-olds are more productive than one 40-year-old.

separating a job into smaller tasks to be completed by different people

When economists refer to human capital, they refer to _____. a. income earned by capitalists. b. skills used in production. c. dividends earned by investors. d. bonds held by the public. e. bank loans given to the public.

skills used in production

If all resources are used efficiently to produce goods and services, a nation will find itself producing _____. a. inside its production possibilities frontier. b. somewhere on its production possibilities frontier. c. outside its production possibilities frontier. d. only one type of commodity. e. more of one product with no decrease in the production of any other product.

somewhere on its production possibilities frontier

On a given production possibilities frontier, which of the following is not assumed to be fixed? a. the amount of labor available b. the amount of capital available c. the level of technology d. the amount of land and natural resources available e. the amount of goods produced

the amount of goods produced

Which of the following is most likely to be a fixed resource for a word processing firm? a. a laptop b. a worker c. the building d. a month's electricity bill e. a bundle of paper

the building

Sugar and honey are viewed as substitutes for each other in many recipes. If the price of sugar rises, we would expect _____. a. the demand for honey to increase. b. the demand for honey to decrease. c. the quantity demanded of honey to decrease. d. the price of honey to decrease. e. the quantity demanded of honey to increase.

the demand for honey to increase

Microeconomics is the study of _____. a. the effect of an increase in money supply on interest rates. b. the effect of an increase in interest rates on the level of investment in an economy. c. the government's role as a distributor in an economy. d. the economic behavior of individual decision makers. e. the government's role as a producer in an economy.

the economic behavior of individual decision makers

You will buy another pair of jeans only if _____. a. the marginal benefit from the change exceeds the average benefit from the change. b. there are no costs involved. c. the change increases social welfare. d. there is no uncertainty about the results of the change. e. the expected marginal benefit exceeds the expected marginal cost

the expected marginal benefit exceeds the expected marginal cost

The reason why Diana does not drink five cups of coffee at breakfast is that _____. a. the marginal utility derived from the fifth cup of coffee is negative. b. the marginal satisfaction derived from the fifth cup of coffee rises. c. the total utility from the consumption of coffee rises as she consumes more coffee. d. the total utility from the consumption of coffee becomes negative as she consumes more coffee. e. the marginal satisfaction derived from all five cups of coffee is constant.

the marginal utility derived from the fifth cup of coffee is negative.

The reason why Diana does not drink five cups of coffee at breakfast is that _____. a. the marginal utility derived from the fifth cup of coffee is negative. b. the marginal satisfaction derived from the fifth cup of coffee rises. c. the total utility from the consumption of coffee rises as she consumes more coffee. d. the total utility from the consumption of coffee becomes negative as she consumes more coffee. e. the marginal satisfaction derived from all five cups of coffee is constant.

the marginal utility derived from the fifth cup of coffee is negative.

As a consumer allocates income between Good A and Good B, total utility is maximized when a. the marginal utility of Good A = the marginal utility of Good B. b. the marginal utility of Good A = the marginal utility of Good B = 0. c. the price of Good A = the price of Good B. d. the marginal utility of Good A/the price of Good A = the marginal utility of Good B/the price of Good B = 0. e. the marginal utility of Good A/the price of Good A = the marginal utility of Good B/the price of Good B.

the marginal utility of Good A/the price of Good A = the marginal utility of Good B/the price of Good B.

Demand is inelastic if _____. a. the percentage change in price is greater than the percentage change in quantity demanded. b. the percentage change in price is less than the percentage change in quantity demanded. c. the percentage change in price is equal to the percentage change in quantity demanded. d. the absolute value of price elasticity is equal to 1. e. the absolute value of price elasticity is greater than 1.

the percentage change in price is greater than the percentage change in quantity demanded.

Studies show that the demand curve for peas has shifted over time. Which of the following explanations would you reject first? a. The price of string beans has changed. b. The demand for corn has changed. c. The demand for string beans has changed. d. The income of consumers has changed. e. The price of peas has changed.

the price of peas has changed

Which of the following is assumed to be constant while calculating the price elasticity of demand? a. the price of the product itself b. the quantity demanded of the product c. total revenue received from the sale of the product d. the prices of all other products e. the cost of production

the prices of all other products

A common feature of monopolistic competition, pure monopoly, and perfect competition is that _____. a. entry is free in each market structure. b. producers in each market structure earn economic profit in the long run. c. producers in each market structure sell differentiated products. d. firms in these market structures act as price takers. e. the profit-maximizing condition in each market is the same.

the profit-maximizing condition in each market is the same.

A movement along the demand curve for a good can be attributed to a change in _____. a. the demand for the good. b. the opportunity cost of producing the good. c. the quantity demanded of the good. d. the substitution effect of consuming the good. e. the income and preference of a consumer.

the quantity demanded of the good

One group of people uses the New York City subways only during the rush hour to travel to and from work. Another group uses them only at midday for leisure activity. If New York City wants to increase transit fares with the smallest possible reduction in revenue, for which group should it increase the fare? a. the rush-hour group, because its demand for subway service is more elastic than that of the mid-day group b. the rush-hour group, because its demand for subway service is less elastic than that of the mid-day group c. the mid-day group, because its demand for subway service is more elastic than that of the rush-hour group d. the mid-day group, because its demand for subway service is less elastic than that of the rush-hour group e. It doesn't matter, because both groups have the same elasticity of demand.

the rush-hour group, because its demand for subway service is less elastic than that of the mid-day group

If a manufacturer shuts down in the short run, it must be true that before the shutdown, at all positive output levels, _____. a. average total cost was less than average variable cost. b. fixed cost was greater than total revenue. c. total revenue was greater than the variable cost of production. d. profit was zero. e. total cost plus total revenue was less than profit.

total revenue was greater than the variable cost of production.

In the short run, a monopolist will always shut down when _____. a. total cost is greater than total revenue at all output levels. b. total variable cost is greater than fixed cost. c. total revenue is greater than total variable cost at all output levels. d. total revenue is greater than fixed cost at all output levels. e. total variable cost is greater than total revenue at all output levels.

total variable cost is greater than total revenue at all output levels.

The law of supply indicates that _____. a. when prices rise, the quantity demanded rises. b. when prices rise, the quantity demanded falls. c. when prices fall, the quantity supplied rises. d. when prices fall, the quantity supplied falls. e. when prices rise, the quantity demanded stays the same.

when prices fall, the quantity supplied falls

The law of demand indicates that _____. a. when prices rise, the quantity demanded rises. b. when prices rise, the quantity demanded falls. c. when prices fall, the quantity supplied rises. d. when prices fall, the quantity supplied falls. e. when prices rise, the quantity demanded stays the same.

when prices rises, the quantity demanded falls

Which of the following is a positive statement? a. An unemployment rate of 7 percent or higher is a national disgrace. b. Unemployment is a less important problem than inflation. c. When the unemployment rate in an economy is 7 percent, the unemployment rate of the urban population is often close to 40 percent. d. Unemployment and inflation are equally important problems. e. An inflation rate of 7 percent is too high.

when the unemployment rate in an economy is 7 percent, the unemployment rate of the urban population is often close to 40 percent

Which of the following characteristics does perfect competition share with monopolistic competition? a. price-taking firms b. zero long-run economic profit c. homogeneous products d. strong barriers to entry e. economies of scale in production

zero long-run economic profit

Suppose John goes to a wedding reception where free drinks are served. He will drink until the marginal utility of an additional drink is _____. a. infinite. b. zero. c. one. d. less than zero. e. greater than one.

zero.