Economics

Perfect price discrimination consists of: a. Charging each customer their reservation price b. Charging each customer based on the marginal cost c. Basing price on the highest marginal cost the customer is willing to pay d. Charging each customer the lowest price they are willing to pay

a. Charging each customer their reservation price

The marginal principal says that decisions about quantities are best made a. incrementally b. arbitrarily c. all at once d. in total

a. incrementally

A measure of how responsive buyers are to price changes is the: a. Price elasticity of demand b. Price elasticity of supply c. Cross price elasticity of demand d. Income elasticity of demand

a. price elasticity of demand

The price of chicken breast rises from $3.00 to $3.60 per pound. Demand for chicken breast falls by 25% as a result of the price change. The absolute value of the price elasticities of demand for chicken breast is ______ and the price elasticities of demand is ________. a. 0.8; elastic b. -1.4; elastic c. 1.4; inelastic d. 1.25; elastic

b. -1.4; elastic

In the short run, companies face________, and in the long run,_______. a. The changing number of competitors; the number of competitors is fixed b. A fixed set of competitors; the number of competitors can change c. Variation in all costs; all costs are fixed d. Only fixed costs; all costs vary

b. A fixed set of competitors; the number of competitors can change

Charging more for fast shipping than for slower shipping is an example of a retailer using ________ to create ________. a. Timing; growth in demand b. Alternative versions; hurdles c. Timing; lower average costs d. Alternative versions; higher average costs

b. Alternative versions; hurdles

Marginal revenue reflects the ________ effect and the _______ effect. a. Cost; revenue b. Output; discount c. Discount; cost d. Revenue; sales

b. Output; discount

What type of good is rival and nonexcludable? a. Private goods b. Club goods c. Common resources d. Public goods

c. Common resources

Mergers harm society when they lead to: a. Price reductions b. Cost savings c. A higher number of companies d. Increased market power

d. Increased market power

Why are reparations and customer loyalty important to a company? a. They raise the market demand for a product b. They raise the cost to customers if they switch to another provider c. They render the company less likely to lose customers to new firms entering the market d. They encourage excellence in the industry, raising customer satisfaction across companies

c. They render the company less likely to lose customers to new firms entering the market

A non-rival good is a good: a. That someone cannot be easily excluded from using. b. Where the market has only one producer, the producer does not face any rival suppliers. c. Where one person's use of the good does not reduce another person's ability to use the same unit of the good. d. In which only one version is available, so consumers do not have choices, although there are many sellers.

c. Where one person's use of the good does not reduce another person's ability to use the same unit of the good.

Which of the following two market structures are less common? a. Monopoly and perfect competition b. Perfect competition and oligopoly c. Oligopoly and monopolistic competition d. Monopolistic competition and monopoly

a. Monopoly and perfect competition

The opportunity cost principle states that the true cost of something is the a. Next best alternative you have to give up to get it b. Least desired alternative you have to give up to get it c. Economic surplus you give up to get it d. Economic surplus you receive from getting it

a. Next best alternative you have to give up to get it

When your actions affect bystanders, then your________ is in conflict with ________. a. Private interest; society's interest b. External cost; society's marginal cost c. Externalities; society's externality d. Interest in society; society's interest in that person

a. Private interest; society's interest

If raising taxes through policy A yields a greater economic surplus than raising taxes through policy B, then: a. Policy A is more efficient and equitable than Policy B. b. Policy A is more efficient than Policy B but may not be more equitable than Policy B. c. Policy A is more equitable than Policy B but may not be more efficient than Policy B. d. Policy A is less efficient and equitable than Policy B.

b. Policy A is more efficient than Policy B but may not be more equitable than Policy B.

A shortage occurs when: a. Quantity supplied exceeds quantity demanded b. Quantity demanded exceeds quantity supplied c. there is excess production d. When there is insufficient demand

b. Quantity demanded exceeds quantity supplied

What happens to the equilibrium price and quantity when demand decreases? a. The equilibrium price rises, and the equilibrium quantity falls b. The equilibrium price falls, and the equilibrium quantity falls c. The equilibrium price falls and the equilibrium quantity rises d. The equilibrium price rises, and the equilibrium quantity rises

b. The equilibrium price falls, and the equilibrium quantity falls

The price of product C is cut by 10%. As a result, the quantity demanded of product D rises by 20%. The cross-price elasticity of demand between product C and product D is _______, and they are _______. a. -0.75; substitutes b. -1.25; compliments c. -2; compliments d. 1.25; substitutes

c. -2; compliments

What standard is used to determine the most efficient economic outcome? a. Lowest cost b. Highest benefit c. Largest economic surplus d. Smallest inequality

c. Largest economic surplus

Following the rational rule, the economic surplus is maximized when a. Total benefits equal total cost b. Total benefits exceed total cost c. Marginal benefit equals marginal cost d. Marginal benefits exceed marginal cost

c. Marginal benefit equals marginal cost

A central and fundamental theme in economics is that: a. For me to have something, someone else must be willing to give it up b. The United States is a rich country, but we are simply not aware of it c. Resources are limited and cannot satisfy all the ways society wants to use them d. We can build as much as we want since resources are limited

c. Resources are limited and cannot satisfy all the ways society wants to use them

When the hurdle method is used to price discriminate, buyers: a. Are put into a price group based on an observable, personal characteristic b. Are unaware that they are paying a different price than some of the other buyers c. Sort themselves into reservation price groups based on their willingness to overcome the hurdle d. Face insurmountable obstacles to access the product

c. Sort themselves in the reservation price groups based on their willingness to overcome the hurdle

An externality is defined as: a. the effect of an activity undertaken outside a building rather than inside a building b. an effect of market activity that impacts the opposite side of the market from the side whose decision caused the effect c. a side effect of an activity that affects bystanders whose interests are not taken into account d. the impact of an activity on buyers and sellers in the market where the activity takes place

c. a side effect of an activity that affects bystanders whose interests are not taken into account

What is collusion? a. Cooperation between sellers to increase the level of competition b. Regulatory restrictions on the entry of new sellers into an industry c. A merger of two sellers d. An agreement between sellers to increase their market power

d. An agreement between sellers to increase their market power

A bakery hires a baker who can make 15 cakes per day. The bakery then decides to hire a second baker who will use the kitchen at the same time as the first baker. The bakery finds that the second baker can produce only an additional nine cakes pretty. What concept does this scenario illustrate? a. The cost benefit principle b. The marginal principle c. Opportunity cost principle d. Diminishing marginal product

d. Diminishing marginal product

Which of the following government policies would create a direct barrier to entry for new sellers in a market? a. Taxing business profits with a progressive tax b. Banning switching costs to protect consumers c. Ensuring that all sellers have equal access to inputs d. Granting a patent to the developer of a new product

d. Granting a patent to the developer of a new product

Holding all else constant, if people eat out more at expensive restaurants when they earn more, then expensive restaurant meals are a. goods with a congestion-effect b. goods with a network-effect c. Inferior goods d. Normal goods

d. Normal goods

A market with a large number of sellers and a high level of product differentiation is known as: a. a perfectly competitive market b. a monopoly c. an oligopoly d. a monopolistically competitive market

d. a monopolistically competitive market

On a market graph, the economic surplus can be identified as the area that is to the: a. right of the quantity, above the demand curve, and below the supply curve b. Left of the quantity, above the demand curve, and below the supply curve c. Right of the quantity and between the demand and supply curves d. left of the quantity in between the demand and supply curves

d. left of the quantity in between the demand and supply curves