Economics Midterm
I'MABigCorp. produces and sells kitchen wares. Last year, it produced 7,000 can openers and sold each one for $6. To produce the 7,000 can openers, the company incurred variable costs of $28,000 and a total cost of $45,000. I'MABIGCorp.'s average fixed cost to produce the 7,000 can openers was
$2.43
In the United States, venture capital firms invested __________ in 2009.
$21 billion
In 2004, Ted and Diane paid 20% down and took out a five-year mortgage for the balance of the $265,000 price of a home. After deducting interest, their monthly payments toward the principle balance owed on the mortgage was reduced by $2,000.00 each year. If they were to sell their home in 2009, it would sell for $215,000. What is the equity in their home?
13000
Which of the following would be classified as a differentiated product produced by a monopolistic competitor?
Channel no.5
Bulgaria primarily produces two goods, nesting dolls and grapes. The production of both goods primarily requires labor. The following table shows possible combinations of nesting dolls and grapes. Which of the following points is not feasible? Nesting Dolls (measured in thousands) Bushels of Grapes (measured in thousands) A 10 6 B 3 40 C 8 30 D 3 60 E 5 15
D
_____________ and __________________ refer to the quantity and price at a point in time
Productive; allocative efficiency
Perfect competition displays _____________________ because the social benefits of additional production, as measured by the price that people are willing to pay, are in balance with the ____________ to society of that production.
allocative efficiency; marginal costs
What role can advertising play with respect to differentiated products?
allows a firm to raise the prevailing market price
_______________ include both the private costs incurred by firms and also costs incurred by third parties outside the production process.
Social costs
The marginal revenue curve for a monopolist ____________________ the market demand curve.
always lies beneath
Small companies typically prefer____________ to borrowing from a bank because it is a source of funding where the company is not obligated to _____________________ .
an IPO; make interest payments
The term "applied research" refers to research that is focused on a particular product that promises to offer commercial applications in the short-term. to offer commercial applications in the long-term. an economic payoff in the short or medium-term. an economic payoff in the medium or long-term.
an economic payoff in the short or medium-term.
The US laws dealing with original works of authorship allow the US Copyright Office to enforce protection for all but one of the following. Which one is it?
ancient bible texts
If the price that a firm charges is higher than its ________________ cost of production for that quantity produced, then the firm will earn profits.
average
In order to determine ____________, the firm's total costs must be divided by the quantity of its output.
average cost
If the average product for six workers is fifteen and the marginal product of the seventh worker is eighteen, then
average product is rising.
The _____________________ curve will always lie below the curve for average cost because average cost includes _____________ in the numerator of the calculation.
average variable cost; fixed costs
How has the widespread adoption of debit cards as the preferred method of payment for consumer purchases likely affected bank administration costs?
costs are reduced because the cost of purchase is immediately debited from purchaser's checking account
It is said that in a perfectly competitive market, raising the price of a firm's product from the prevailing market price of $179.00 to $199.00, ____________________.
could likely result in a notable loss of sales to competitors
Market-oriented environmental tools _______________ for firms to take the social costs of pollution into account and ____________________ in reacting to these incentives.
create incentives; allow firms some flexibility
If a monopoly or a monopolistic competitor raises their prices, then
decline in quantity demanded will be larger for the monopolistic competitor.
If a firm is experiencing _____________________, then as the quantity of output rises, the average cost of production rises.
decreasing returns to scale
If a perfectly competitive market involves many firms selling identical products, then, in the face of such competition,
each of these firms must act as a price-taker.
In a monopolistic competitive industry, firms can try to differentiate their products by creating optimal perceptions of the product. choosing optimal locations from which the product is sold. enhancing the intangible aspects of the product. enhancing product's physical aspects and all of the above.
enhancing product's physical aspects and all of the above.
Which of the following is most unlikely to present a barrier to entry into a market?
deregulation
n economics, labor demand is synonymous with
derived demand
When I'MaGoldMiner chooses what quantity of gold each of it/s mines will produce over the next 12 months, this quantity, along with the prices prevailing in the market for output and inputs, will
determine the company's total revenue, total costs, and its profits.
Many residents of a particular town enjoy taking their dogs with them when they go to their local park for recreation and picnics. Everybody enjoys the park more when each group cleans up after themselves and their pets, but nobody enjoys the act of cleaning up after themselves or their dogs. We can expect the park to be _______, due to a _________ .
dirty, prisonerÕs dilemma
In microeconomics, the term ___________________ is synonymous with decreasing returns of scale.
diseconomies of scale
In the competitive market for figure skate blades, manufacturers offer an array of products that are
distinctly different in a particular way.
If oligopolistic firms banded together with the intention of acting like a monopoly, it would likely result in their being able to
divide up the monopoly level of profit amongst themselves.
Those firms in the oil refining industry that can reduce pollution __________________ will do so _______________________ .
cheaply and easily; to minimize their pollution taxes
For a monopolistic firm, the demand for its product is
completely inelastic
A situation known as _____________________ occurs when all production inputs are allowed to expand, but that expansion does not result in much of a change in the average cost of production.
constant returns to scale
The problem of pollution typically arises in ______________ economies around the world.
high or low incomes
The bottom line on investing in individual stocks is: _______________ on average over lengthy periods of time; ________________, especially in the short run; _______________, since stock does need to be sold to turn gains into spendable money.
high rate of return; high risk; moderate liquidity
As environmental protection increases,
in addition to a and b above, the quality of environmental protection increases.
The term "constant returns to scale" describes a situation where
expanding all inputs does not change the average cost of production.
A bond is a form of ___________ through which a corporation agrees to repay the amount that was borrowed together with ___________ over a period of time in the future.
financial contract; a rate of interest
Which of the following is the most appropriate response of public policy to a negative externality like pollution?
find ways to account for the social costs of the negative externality in economic decisions
A natural monopoly occurs when the quantity demanded is ________ the minimum quantity it takes to be at the bottom of the long-run average cost curve.
less than
The _________ of an investment is determined by how easy it is to sell an asset at any given time.
liquidity
A checking account typically pays __________________, but gives easy access to your money, either by writing a check or by using ______________.
little or no interest; a debit card
Which of the following is most likely to be a monopoly?
local electricity distributor
In the ________, the perfectly competitive firm will react to losses by __________________________ .
long run; reducing production or shutting down
Which of the following have historically been more willing to sacrifice their environmental quality for some additional economic output? high-income, market-oriented economies low incomes and command economies the United States European Union
low incomes and command economies
In microeconomics, the term _____________________ is synonymous with economies of scale.
increasing returns to scale
__________________ law implies ownership over an idea or concept or image
intellectual property
In economics, the term "shutdown point" refers to the point where the
marginal cost curve crosses the average variable cost curve
The economies-of-scale curve is a long-run average cost curve, because
it allows all factors of production to change
the perceived demand curve for a group of competing oligopoly firms will appear kinked as a result of their commitment to
match price cuts, but not price increases.
In economics, a firm that faces no competitors is referred to as _________________.
monopoly
Once it's patent application has been accepted, a firm is able to earn ________ on its product, which ___________________________________
monopoly profits; offers an incentive for research and development to take place
As the name monopolistic competition implies, a firm's decisions in this setting will in certain ways resemble ______________ and in other ways resemble________________ . monopoly; imperfect competition
monopoly; perfect competition
Which of the following is an example of economic output that can injure the environment?
radio-active waste leaking into a river, and all of the above
In the event that Only1Corp. obtains control of all the natural gas producers in the US, it would most likely
raise prices, cut production, and realize positive economic profits.
A public good is a good that is ____________________ , and thus is difficult for market producers to sell to individual consumers.
nonexcludable and nonrivalrous
In monopolistic competition, the end result of entry and exist is that firms end up with a price that lies
on the downward-sloping portion of the average cost curve
Roughly speaking, patent law covers __________ and __________ law protects an author's original books.
original inventive creations; copyright
Following the assumption that firms maximize profits, how will the price and output policy of an unregulated monopolist compare with ideal market efficiency?
output will be too small and its price too high.
nvestors who believe that the stock is _____________ , relative to the fundamental value of its future expected profits, will sell their shares to those who believe that the stock is __________.
overvalued; undervalued
The ownership in a company is represented by ________________ and those who are legally recognized as having ownership in a company are called _____________.
ownership of shares in the company's stock; shareholders
Which of the following is a feature that typically distinguishes a savings account from a checking account?
pays interest
When exit occurs in a monopolistically competitive industry the
perceived demand and marginal revenue curves will shift to the right.
Firms operating in a market situation that creates ___________________, sell their product in a market with other firms who produce identical or extremely similar products.
perfect competition
When a government establishes a marketable permit program to address environmental pollution, it is actually issuing a form of
permit to pollute
In a monopolistically competitive market, the rule for maximizing profit is to set MR = MC, which means
price is higher than marginal revenue.
I'maGoldMiner has benefited from a record rise in gold prices in the global commodities market. While the price of its output is highly influenced by market speculation, if it wants to increase production to take advantage of the current profit-maximizing opportunity, the company
must accept market price for its physical capital inputs.
A monopolistically competitive industry does not display ____________________ in either the short-run, when firms are making _______________, nor in the long-run, when firms are earning ________________ .
productive and allocative efficiency; profits and losses; zero profits
XYZ Corporation plans to open a manufacturing plant in China, but the company has not retained any of its yearly profits for this purpose. How will XYZ Corporation likely raise the money to finance its offshore expansion?
sale of bonds to institutional investors
The first step to be undertaken by a profit-maximizing monopolistic competitor wanting to decide what price to charge is to
select the profit maximizing quantity to produce
A beekeeper decides to locate her business on a plot of land that is between an apple orchard and an elementary school. A positive externality that can result is
the bees helping to pollinate the orchard, leading to more fruit.
The shape of the perceived demand curve for a perfectly competitive firm reflects that firm's ability to sell any quantity it wishes at the prevailing market price. raise its price without losing all of its customers. choose any combination of price and quantity. lose fewer customers than a monopoly that raised its prices.
sell any quantity it wishes at the prevailing market price
Traditionally, policies for environmental protection in the U.S. have focused on __________________ pollutant could be emitted.
setting limits for how much of each
n the _________, if profits are not possible, the perfectly competitive firm will seek out the quantity of output where _____________________ .
short run; losses are smallest
A monopolistically competitive firm may earn abnormally high profits in the
short term, but the process of entry will drive those profits to zero in the long run.
f a firm's revenues do not cover its average variable costs, then that firm has reached its _________________ . price taking point shutdown point marginal point opportunity margin
shutdown point
A highly innovative firm operating in a competitive market will usually have
some time before competitors catch up to its innovations.
Which of the following should typically be ignored because spending has already been made and cannot be changed?
sunk costs
For a perfectly competitive firm, the marginal cost curve is identical to the firm's ________________ . demand curve supply curve average total cost curve average variable cost curve
supply curve
he perceived demand for a monopolistic competitor
takes competitors into account.
Which of the following would most likely be recognized as a defining characteristic of a public good?
the good is both a and b above
Even when competitive firms are unable to calculate marginal revenue product directly, _________________________________________ will push wage rates toward the marginal revenue product of labor.
the pressures of competition in the labor market
Some economists argue that if privately owned firms were required to pay the social costs of their pollution, the result would be:
the price of goods will rise and a and b abov
Which of the following has become the least willing to sacrifice their environmental quality for some additional economic output?
the european union
If the firm is producing at a quantity of output where marginal revenue exceeds marginal cost, then,
the firm should keep expanding production
If one firm operating in an oligopoly raises its price and other firms do not do so,
the sales of the firm that increased its price will decline sharply.
For a pure monopoly to exist,
there is a single seller in a particular industry
In the highly competitive setting in which oligopoly firms operate, which of the following are considered to be typical temptations each may face?
to cooperate to act as a single monopoly and all of the above
Market-oriented environmental policies are ________, and __________ will work better in some situations than in others.
tool-kit; specific tools
Which of the following denotes the typical shape of the monopolist's total cost curve?
total costs rise and grow steeper as output rises
Refer to the diagram below. At the point marked m, A graph of the Firm in Competitive Equilibrium price is determining production at a level where P = MC. TR is exactly equal to TC, so profits equal zero. price is above average cost of production. the leftover rectangle is the profit earned.
tr is exactly equal to TC so profits equal zero.
In the business world, a _________________ is recognized as a legally acceptable way for any business to keep knowledge of its particular methods of production from being known by competing firms.
trade secret
In a free market economy, firms operating in a perfectly competitive industry are said to have only one major choice to make. Which of the following correctly sets out that choice?
what quantity to produce
f a monopolistic competitor raises its price, it _________ customers than a perfectly competitive firm, but ________________ customers compared to the number that a monopoly that raised its prices would.
will lose fewer; it will lose more
If oligopolists compete hard against each other
zero profits result for all.
Paddy and Mick are the only two inhabitants of a small island off the coast of Ireland. They burn coal to keep their houses warm at night. However, this coal burning is harming the air quality on their island. Both Paddy and Mick could install air filters on their chimneys. These filters cost 50 each. Each filter provides a social benefit of 80, but those benefits are divided equally among Paddy and Mick. If both Paddy and Mick install the filters
both will gain 30
Marketable permits can be viewed as a form of improved _______________.
property rights
Which of the following represents one of the methods that the government uses to promote technology?
protection of intellectual property
______________ of well-to-do individuals often put their own money into small new companies at an early stage of development, in exchange for owning some portion of the firm.
a network
A complementary approach to supporting R&D that does not involve the government's close scrutiny of particular R&D projects is to give firms
a reduction in corporate taxes based on amount of R&D performed.
In the framework of monopolistic competition, advertising works because it causes
a steeper perceived demand curve, as well as c above.
If a government chooses a system of marketable permits as its environmental managing tool, the reduction in pollution will
ake place in the firms where it is least expensive to do so.
A drug company is deciding how much to invest in Research and Development into finding a cure for diabetes. The table below shows the company's demand for financial capital for R&D based on its expected rates of return from selling the cure. Every investment provides an additional 4% social return: that is, an investment that pays at least a 5% return to the drug company will create at least a 9% return for society as a whole. If the opportunity cost of financial capital for the drug company is 7%, the drug company will invest ___ in R&D if it receives only the private benefits of this investment. Estimated Rate of Return Value of R&D Projects That Provide at Least This High a Private Rate of Return to the Drug Company (measured in millions of dollars) 10% $220 9% $228 8% $238 7% $250 6% $264 5% $280 4% $298 3% $308
250
____________________________ occur when the marginal gain in output diminishes as each additional unit of input is added.
Diminishing marginal returns
If a $1,000 five-year bond that was issued at an interest rate of 7% is offered for sale one year before it matures, and the current interest is 5%, how much should an investor be willing to pay for it?
$1,019
ToasterOvensInc. is developing technology to make a toaster oven than uses less electricity. If successful, the technology will significantly reduce the amount of energy that is wasted due to product inefficiencies. If the firm sells only in response to the market price, the quantity shown in the third column of the table below is supplied. If the firm were also to receive the broader social benefits of the new technology, the willingness to supply is shown in the fourth column. If the firm were to receive a price based only on private benefits, the equilibrium price and quantity would be Price Quantity Demanded Quantity Supplied Quantity Supplied If Firm Also Receives Social Benefits 15 800 500 710 16 740 540 740 17 680 580 770 18 620 620 800 19 560 660 830 20 500 700 860
$18, 620
In order to produce 100 oatmeal cookies, GoodieCookieCo incurs an average total cost of $0.25 per cookie. The company's marginal cost is constant at $0.10 for all oatmeal cookies produced. The total cost to produce 50 oatmeal cookies is
$20
Given the data provided in the table below, what will the marginal cost equal for production at quantity (Q) level 4? Q P TC TR MR MC Profit 0 $5 $9 1 $5 $10 2 $5 $12 3 $5 $15 4 $5 $19 5 $5 $24 6 $5 $30 7 $5 $45
$4
If a firm holds a pure monopoly in the market and is able to sell 4 units of output at $2.00 per unit and 5 units of output at $1.75 per unit, it will produce and sell the fifth unit if its marginal cost is
0.75 or less
I'MAStart-UP Corp. issued and sold 2,500,000 common voting shares during its first public stock sale. What is the minimum number of shares needed to be able to elect a new director to the Board?
1.25 million
A monopolistic competitor has the following information about cost and demand. If this industry was perfectly competitive, what price would the good sell for? Quantity Price ($) Total Revenue ($) Marginal Revenue ($) Total Cost ($) Marginal Cost ($) Average Cost($) 0 15 0 15 175 — — 5 14 70 13 180 1 36 10 13 130 11 190 2 19 15 12 180 9 207 3.4 13.8 20 11 220 7 225 3.6 11.25 25 10 250 5 250 5 10 30 9 270 3 290 8 9.67 35 8 280 1 335 9 9.57 40 7 280 -1 385 10 9.63 45 6 270 -3 465 16 10.33 50 5 250 -5 565 20 11.3
10
In the United States, a pharmaceutical company's exclusive patent rights last for
20 years
A monopolistic competitor has the following information about cost and demand. If this industry was perfectly competitive, what price would the good sell for? Quantity Price ($) Total Revenue ($) Marginal Revenue ($) Total Cost ($) Marginal Cost ($) Average Cost($) 0 25 0 25 30 — — 2 24 48 23 35 2.5 17.5 4 23 92 21 45 5 11.25 6 22 132 19 60 7.5 10 8 21 168 17 77 8.5 9.63 10 20 200 15 100 11.5 10 12 19 228 13 126 13 10.5 14 18 252 11 165 19.5 11.79 16 17 272 9 210 22.5 13.13 18 16 288 7 260 25 14.44 20 15 300 5 320 30 16
21
Approximately what percentage of the US labor force is employed by firms that have fewer than 100 employees?
35%
Carl and Don run separate chemical fertilizer manufacturing companies in the same industrial park. Both pollute the river flowing through the industrial park with debris and waste from their manufacturing processes. In the table below, the first row shows the current level of debris and waste each produces that makes its way into the river. The information in the table also indicates how much it would cost each manufacturer to reduce its pollution by additional increments of 10 pounds. If the government imposes a pollution tax of $7 for each 10 pounds of debris, total pollution will fall by ____ pounds, at a total cost of ____. Reduction in Pounds Carl Don Current debris in pounds 60 80 Cost of reducing debris by 10 pounds $5 $2 Cost of reducing debris by a second 10 pounds $10 $4 Cost of reducing debris by a third 10 pounds $15 $6 Cost of reducing debris by a fourth 10 pounds $20 $8 Cost of reducing debris by a fifth 10 pounds $25 $10
40; $17
The International Ecotourism Society estimates that international tourists interested in seeing nature or wildlife spend over
450 billion a year
Two rubber companies, Boing and Twang, are currently producing along, and polluting, the same river. Both companies are considering whether to install pollution filters on their factories. These filters cost $15 million each. If a filter is installed, there is a benefit of $20 million, but this benefit is divided equally between the two companies. If both firms install the filters, then Boing will earn ________ and Twang will earn ________ .
5 million and 5 million
A monopolistic competitor has the following information about cost and demand. What will this firm's profits equal in the long run? Quantity Price ($) Total Revenue ($) Marginal Revenue ($) Total Cost ($) Marginal Cost ($) Average Cost($) 0 15 0 15 175 — — 5 14 70 13 180 1 36 10 13 130 11 190 2 19 15 12 180 9 207 3.4 13.8 20 11 220 7 225 3.6 11.25 25 10 250 5 250 5 10 30 9 270 3 290 8 9.67 35 8 280 1 335 9 9.57 40 7 280 -1 385 10 9.63 45 6 270 -3 465 16 10.33 50 5 250 -5 565 20 11.3
55
he following table shows the demand curve and cost information for a firm that is a monopoly. If they maximize their profits, what will their profits equal? Price Quantity TC $30 0 $500 $25 50 $600 $20 100 $1,350 $15 150 $2,300 $10 200 $3,400
650
Mindy's company manufactures rubber balls used by elementary schools for playground activities. The table below sets out her firm's production cost information. Some values are missing. Which of the following statements is correct? Quantity Variable Cost Fixed Cost Total Cost Average Variable Cost ($ per unit) Marginal Cost ($ per unit) 0 0 40 40 0 - 1 5 B 5 E 2 15 C D F 3 A 60 20 G
A = 20; E = 5
_____________ occurs when circumstances have allowed several large firms to have all or most of the sales in an industry.
An oligopoly
Which of the following would be classified as a situation where a third party benefits from a market transaction by others?
City buying 10,000 trees for green space renewal projects.
When making decisions about what safety systems should be required in cars or airplanes, the ___________________ will only approve rules where the estimated cost per life saved is __________ or less.
Environmental Protection Agency; $3 million
________________ are a form of _______ bonds that offer relatively high interest rates to compensate for their relatively high chance of default.
Junk bonds; corporate
________________________ arises where many firms are competing in a market to sell similar but differentiated products
Monopolistic competition
The supply and demand conditions facing a firm that makes widgets and generates a negative externality by dumping a highly toxic sludge in a nearby river is given in the table below. The equilibrium price and quantity when only private costs are taken into account are Price Quantity Demanded Quantity Supplied without Paying Social Costs Quantity Supplied after Paying Social Costs 100 0 120 75 80 10 100 50 55 30 90 30 40 55 85 25 30 80 80 20 20 100 65 15
Price = $30, Quantity = 80
The supply and demand conditions facing a firm that makes widgets and generates a negative externality by dumping a highly toxic sludge in a nearby river is given in the table below. The equilibrium price and quantity when social costs are taken into account are Price Quantity Demanded Quantity Supplied without Paying Social Costs Quantity Supplied after Paying Social Costs 100 0 120 75 80 10 100 50 55 30 90 30 40 55 85 25 30 80 80 20 20 100 65 15 Price = $55, Quantity = 30 Price = $40, Quantity = 55 Price = $30, Quantity = 20 Price = $30, Quantity = 80
Price = $55, Quantity = 30
The term _________________ refers to a firm operating in a perfectly competitive market that must take the prevailing market price for its product.
Price Taker
Treasury bonds are issued by the federal government through the _____________________
U.S. Department of the Treasury
Which of the following is not a typical question that must be answered with regard to a private company that is owned by a large number of shareholders?
What is the dividend yield on preferred shares of companies that hold this stock?
Which of the following is a question economists have struggled to address with only partial success?
Whether a market-oriented economy produces the optimal amount of variety?
Bringing the nations of the world to act together in addressing environmental issues that spill over national borders requires _______________ between countries with _________________ .
a difficult set of negotiations; different income levels and sets of priorities
Marketable permits work best when there are _____________________ permit holders who are highly interested in trading.
a few dozen or a few hundred
When P > MC in a monopolistically competitive market, that industry will most likely produce ______________________ than would be found in a perfectly competitive industry.
a lower quantity of a good and charge a higher price
Why are the underlying economic meanings of the perceived demand curves for a monopolist and monopolistic competitor different?
a monopolist faces the market demand curve and a monopolist competitor does not
Which of the following represents a difference in the process by which a monopolistic competitor and a monopolist make their respective decisions about quantity and price?
a monopolist need not fear entry and also selection b above
The refundable charge of 5 or 10 cents for returning recyclable cans and bottles works like
a pollution tax incentive to avoid littering
A firm that holds a monopoly position in the market place is
a price maker
If monopolists are able to produce fewer goods and sell them at a higher price than they could under perfect competition, the result will be
abnormally high sustained profits
In order to reduce the harmful affects of recession and carbon emissions, the government provided tax incentives for manufacturing firm's to ___________________ that provide alternative, more efficient methods of combining inputs to produce output.
acquire energy efficient production technologies
One concern that environmentalists have is that market-oriented environmental tools are
an excuse to allow pollution to be maintained or to grow.
Because of the legal protection for intellectual property, such as patents, a firm has a better chance of recouping the costs of research if it pursues
applied technological research
In the U.S., the command-and-control environmental laws of the early 1970s, together with the ensuing amendments and updates that have been made to them over time,
are given considerable credit for cleaner air and water in recent decades.
Through the process of exit, monopolistically competitive firms remaining in the market
are no longer earning losses
The fact that a consumer is not required to buy the goods that a given firm produces, as well as the fact that the consumer might want the goods a firm produces, but may choose to buy from other firms instead
are two stark realities any business firm must recognize
By 2007, US market deregulation has proven to be most toxic to the overall health of the US economy in the ________________________ .
banking sector
Which of the following is not an ironclad rule in the financial markets?
banks fund small business loans and large firms issue bonds to raise money
Occasionally, _________________ may lead to pure monopoly; in other market conditions, they may limit competition _________________ .
barriers to entry; to a few oligopoly firms
Tom, Mary and Jill have apartments in the same building. A security system for their building costs $750. Tom is willing to pay $100 for the security system, Mary is willing to pay $300 and Jill is willing to pay $300. They have a meeting to vote on whether to pay $250 each for the security system. At least two of them must vote for the system to be installed before the vote is passed. The efficient outcome is to have the security system installed. After the meeting the security system will __________, which illustrates ___________.
be installed, the free rider problem
The term __________ refers to the __________ that a bond is expected to pay at the time of purchase
bond yield; rate of return
Jackie has invested $25,000 for a 10 period at a guaranteed interest rate of 9%. If Jackie decides to sell her investment before the 10 year period has ended, she may receive less if the interest rates at that time are lower. Jackie is a
bondholder
The problem of pollution arises in primarily ______________ economies around the world. command-oriented market-oriented middle income both a and b
both a and b
What type of environmental tool was adopted by the U.S. government in 1990, in order to reduce emissions of coal burning electricity-generating plants? shrinkable marketable permits free marketable permits command-and-control permits both a and b above
both a and b
Environmentalist groups act to directly reduce of emissions by
buying marketable emission permits and not re-selling them.
Oligopoly firms acting individually may seek to gain profits ___________________________ .
by expanding levels of output and cutting price
Temperatures have persisted below freezing levels in Florida throughout the months of December and January. As a result, demand for electricity sharply increased and the price of electricity rose sharply. The price of coal also rose. In these circumstances, any resulting shifts in the supply curves for coal miners and electricity producers
can also be interpreted as shifts of their respective marginal cost curves
Command-and-control regulation is a body of law that fails to consider private costs of firms. specifies allowable quantities of pollution. details which pollution-control technologies must be used. can include both b and c.
can include both b and c
Which of the following falls outside of the classification of business expenses that fall into the category of fixed costs?
costs incurred in the act of producing
Which of the following falls outside of the classification of business expenditures that fall into the category of variable costs?
costs of research and development
If a monopoly or a monopolistic competitor raises their prices, the quantity demanded ____________.
decline
The future of cities in the United States and in other countries will be determined by their ability to benefit from the _________________ and to minimize or counterbalance the ______________________.
economies of agglomeration; corresponding diseconomies
The term __________________ describes a situation where the quantity of output rises, but the average cost of production falls.
economies of scale
In order to calculate marginal cost, the change in ______________ is divided by the amount of change in quantity.
either total cost or variable cost
The property rights approach to environmental issues often becomes highly relevant in cases involving __________________.
endangered species
In a perfectly competitive market, each firm produces at a quantity where price is set
equal to marginal cost, both in the short run and in the long run
Which of the following will need to strike some balance between economic output and environmental quality as a prominent climate change priority? countries with high-incomes every country market-oriented countries command-oriented countries
every country
If a perfectly competitive firm raises its price, the quantity demanded of its product _____________.
falls to zero
A firm's ___________ consist of expenditures that must be made before production starts that typically, over the short run, _______________ regardless of the level of production.
fixed cost; do not change
The branch of mathematics that analyzes situations in which players must make decisions and then receive payoffs most often used by economists is
game theory
Which of the following would most likely create the setting for an oligopoly?
government grants Alex, Trent, and Alyse each a patent for their respective molybdenum based electric car batteries
o be effective, U.S. command-and-control environmental regulation required
he EPA to oversee all environmental laws and all of the above.
Why did Gordon Gould have to endure a lengthy legal battle in order to receive a patent for his innovative laser idea concocted in 1957?
he delayed applying to patent his idea, mistakenly believing he needed to have a working laser to apply
If the research and development efforts of a firm have ended in failure, then
he firm could experience a and/or b.
When entry occurs in a monopolistically competitive industry,
he perceived demand and marginal revenue curves for each firm will shift to the left.
f pollutants are emitted into the air and water, what costs might be incurred as a result? compromised recreation possibilities decreased property values loss from destruction of wildlife habitat health injuries and all of the above
health injuries and all of the above
Which of the following would an economist identify as a difficulty relating to environmental command-control regulations?
high degree of inflexibility
Economic profit can be derived from calculating total revenues minus all of the firm's costs,
including its opportunity costs
Venture capitalists typically create wealth by investing in a start up firm when its stock is less valuable, and then subsequently selling that stock for a higher price during the firm's _____________________ ,
initial public offering
If an alternative policy could encourage both _____________________, instead of ________________________, consumers would benefit.
invention and competition; invention and monopoly
Refer to the diagram below. In this instance, the range of production possibilities at point d, Graph of Web Page Designs and Costs
is a steeper slope reflecting a return to losses due to diminishing returns.
I'mAComputerCo. would likely be more willing to undertake an innovative research project to reduce the amount of electricity required to run its computers if there were some form of guarantee that if it succeeded,
it could sell the new computers as a monopoly for at least a few years
Why would a typical U.S. business fail to take the social costs of pollution into consideration during the development of their operating strategies?
it isn't required to pay any of the cost of cleaning up its pollution
If some of the products developed by I'mASoftwareCo. must face market competition that can very quickly produce either an identical product or a close substitute for it, then
it may decide against R&D projects of this sort.
Kate's 24-Hour Breakfast Diner menu offers one item, a $5.00 breakfast special. Kate's costs for servers, cooks, electricity, food, etc. average out to $3.95 per meal. Her costs for rent, insurance cleaning supplies and business license average out to $1.25 per meal. Since the market is highly competitive, Kate should
keep the business open in the short-run, but plan to go out of business in the long-run.
If the CEO of I'MaBigBank is playing prisoner's dilemma then, from his perspective, the gains to be had from cooperation are
larger than the rewards from pursuing self-interest.
Rather than arguing over whether the ultimate goal is zero pollution or a reasonable level of pollution, the immediate focus should be to tackle the environmental issues where the _____________________ and the __________________ .
marginal benefits are greatest; marginal costs are least
If a monopolist increases quantity by one unit, but sells the increased output at a slightly lower price,
marginal revenue is affected by adding one additional unit sold at the new price.
Refer to the table below. In this instance, confirmation that this firm is operating in a perfectly competitive market can readily be ascertained by the fact that its Q P TR MR TC MC 0 $30 0 --- $15 --- 1 $30 $30 $30 $25 $10 2 $30 $60 $30 $40 $15 3 $30 $90 $30 $60 $20 4 $30 $120 $30 $85 $25 5 $30 $150 $30 $115 $30 6 $30 $180 $30 $150 $35 marginal cost is increasing. total cost is increasing. economic profits are zero. marginal revenue is constant.
marginal revenue is constant.
An economist is more likely to identify __________________ as a more efficient and flexible way for society to __________________________ .
marketable permits; allow a limited, declining amount of pollution to occur
Shopping malls typically lease retail space to a large number of clothing stores. When this group of retailers competes to sell similar but not identical products, they engage in what economists call ________________________.
monopolistic competition
The largest cattle rancher in a given region will be unable to have a __________ when sufficient numbers of smaller cattle ranchers provide sources of competition.
monoply
Why did Thomas Edison vow that he would work only on ideas for things that people would buy?
no government would buy his first patented invention.
It is commonly understood that every invention
often results in new technology and all of the above.
In circumstances involving millions of emitters of small amounts of pollution who have no strong interest in trading, _________________ will typically offer a better choice for achieving desired reductions of environmental pollution levels.
pollution charges
Because of the nature of the comprehensive environmental laws adopted during the late 1960s and early 1970s by the United States government, these laws are typically referred to as ____________________ .
positive regulations
When entry occurs in a monopolistically competitive industry,
price is equal to marginal revenue gained by society
A _________ refers to a group of firms colluding with one another to produce at the monopoly output and sell at the monopoly price.
prisoner's dilemma
For a negative externality, the __________________________ than the costs imposed on society as a whole.
private costs of an action are less
Refer to the graph shown below. Based on the information illustrated in the graph, which of the following is correct? Graph of Price and Quantity
producing a marginal unit is increasing average costs overall
Monopolistic competitors can make a _____________ in the short-run, but in the long run, ______________ will drive these firms toward _______________________ .
profit or loss; entry and exit; a zero-profit outcome
A _____________ is a firm that has sold its stock by making it available to be bought and sold by outside investors.
public company
Since stock prices will shift in response to unpredictable future news, these prices will tend to follow what mathematicians call _________________.
random walk with a trend
While the traditional approach of U.S. government policies for environmental protection has had some level of success, some economists are proposing a change to
range of more flexible, market-oriented pollution control policies.
Government has a variety of policies that allow inventors to _____________________ , such as the granting patents and __________________ .
receive an increased rate of return; subsidization of research and development
The typical slope of the demand curve as perceived by a monopolistic competitor will
reflect that firm's ability raise its price without losing all of its customers.
Refer to the diagram below. In this instance, the marginal revenue curve A graph of the Firm in Competitive Equilibrium
reflects each of the above
The term ____________ refers to a market exchange that affects a third party who is outside or external to the exchange.
spillover
The total revenue curve for a monopolist will
start low, rise, and then decline
Since 1969, when the Cuyahoga River in Ohio was so polluted that it spontaneously burst into flame, the overall quality of water in the U.S. has
steadily improved.
The comprehensive environmental laws adopted during the late 1960s and early 1970s by the United States government
stipulated mandatory use of particular pollution-control technologies.
Some of the leading ecotourism destinations include:
the Caribbean, New Zealand and all of the above
Which of the following best identifies what the concept of differentiated products is closely related to? unique style. the degree of monopolistic competition that exists. optimal location. the degree of product variety that is available.
the degree of product variety that is available.
The figure below shows the demand curve and the long run average cost curve for an electric company. This market is a natural monopoly because Graph displaying the demand curve and the long run average cost curve for an electric company. the long run average cost curve is U-shaped when producing large quantities, the long run average cost is greater than demand when producing small quantities, the demand is higher than long run average cost the demand curve intersects the long run average cost curve at a point where the long run average cost curve is downward sloping
the demand curve intersects the long run average cost curve at a point where the long run average cost curve is downward sloping
Product differentiation may occur in _______________ because ____________________ created strong preferences for certain brands.
the minds of buyers; past habits and advertising
If large numbers of individuals choose to behave as free riders,
the public good may never be provided.
In order to determine the average variable cost, the firm's variable costs are divided by _______________________.
the quantity of output
A pollution charge is a form of tax imposed on
the quantity of pollution that a firm emits
If each of two competing monopolists undertakes equal advertising efforts to attract consumers away from the other, the total result is
they will simply neutralize one another's efforts.
Why do business firms need financial capital?
to make real physical capital investments
When a firm pursues a predatory pricing strategy, it does so
to maximize profits in the long run.
Why was the Clean Air Act amended in 1990?
to reduce sulfur dioxide emissions from electric power plants to half of 1980 levels
The marginal cost curve is generally ______________, because diminishing marginal returns implies that additional units are ________________________.
upward-sloping; more costly to produce
One difficulty with direct government support of R&D is that it inevitably involves government decisions about ___________________.
which of the vast number of proposed projects are worthwhile
If you are highly asthmatic, then having high levels of industrial air pollutants waft over your house every day
would be a negative externality.