Final exam review
graph- to maximize profit this firm should produce 250 120 450 525
450
A business is likely a sole proprietorship if: A- it has only one owner who has unlimited liability B- it is legally treated as a person and owned by stockholders who are liable for the actions of the corporate "person" C- multiple owners are liable only to the extent of their own investment D- it has two or more owners, with each owner liable for every others actions
A
A per unit tax on coffee paid by the seller causes the: A- supply of coffee to shift upward by the amount of the per-unit tax B- demand for coffee curve to shift downward by the amount of the per-unit tax C- demand for coffee curve to shift upward by the amount of the per-unit tax D- supply of coffee curve to shift downward by the amount of the per-unit tax
A
An entrepreneur is willing to bring a supply of goods to market if expected: A- price is greater than expected average total cost B- average revenue is expected price C- price and expected average total cost are equal d- Average total costs is greater than expected price
A
An entrepreneur is willing to bring a supply of goods to the market if expected: A- price is greater than expected average total cost B- average revenue is equal to expected price C- average total cost is greater than expected price D- price and expected average total costs are equal
A
Because a monopolistic competitor has some monopoly power, advertising to increase that monopoly power makes sense as long as: A- the marginal benefit of advertising exceeds the marginal cost of advertising B- the marginal cost of advertising exceeds the marginal benefit of advertising C- the marginal benefit of advertising is positive D- the marginal cost of advertising is positive
A
Businesses produce goods and services and sell them to households and governments. The market where this interaction takes place is called the goods market: A- True B- false
A
Economic efficiency is achieved at a particular output level if: A-average total cost is as low as possible B- average variable cost is as low as possible C- average fixed cost is as low as possible D- marginal cost is as low as possible
A
Economic profit is: A- implicit and explicit revenues minus implicit and explicit costs B- total revenue minus explicit measurable costs C- implicit and explicit revenues minus implicit costs D- explicit revenues minus explicit costs
A
Fixed cost exists only in the: A- short run when some inputs are fixed B- short run when all inputs are fixed C- long run when some inputs are fixed D- long run when all inputs are fixed
A
If an economist observed that higher hot dog prices lead to an increase in the demand for chili, she most likely would conclude that: A- chili and hot dogs are substitutes B- chili and hot dogs are both normal goods C- chili and hot dogs are both inferior goods D- chili and hot dogs are complements
A
If price is lowered by law from the market equilibrium value of $5 to a lower value of $4: A- producer surplus will decrease and there will be some lost total surplus B- consumer surplus will decrease and there will be some lost total surplus C- there will be loss surplus, as both producer surplus and consumer surplus decrease D- both producer surplus and consumer surplus will be increased
A
In the United states, government performs all of the following functions except: A- determining production levels B- purchasing goods and services C- redistributing income D- regulating the economy
A
Increasing marginal opportunity cost means that the production possibility curve is: A- bowed out so that for every additional unit of a good given up, you get fewer and fewer units of the other good B- bowed in so that for every additional unit of one good given up, you get fewer and fewer units of the other good
A
Short- run decisions are: A- constrained because inputs are fixed and others are variable B- constrained because all inputs are fixed C- unconstrained D- constrained because all inputs are variable
A
The goal of a socialist economies is to distribute what is produced according to the needs of individuals. Market economies tend to distribute what is produced according to ability and inherited wealth. A- True B- False
A
The increase in output obtained by hiring an additional worker is know as: A- the marginal product B- the average product C- the total product D- value added
A
The level of production that minimizes long- run average total cost is referred to as the: A- minimum efficient level of production B- technically efficient level of production C- economically efficient level of production D- minimum profitable level of production
A
The production possibility model can be used to demonstrate the concept of opportunity cost: A- True B- False
A
along a straight- line demand curve, total revenue is the highest when elasticity of demand is: A- 1 B- infinity C- zero D- between 1 and zero
A
Refer to the graph. The supply curve for the perfectly competitive firm firm is best represented by the segment: A- CE B-BD C-DE D-AB
A? A perfectively competitive firm's supply curve is the portion of the marginal cost curve that lies above the average variable cost curve
A partnership is a business: A- legally treated as a person and owner by stockholders who are not liable for the actions of the corporate person B- with two or more owners, with each owner liable for every other owners actions C- that has only one owner D- in which each owner is liable only to the extent of his or her own investment
B
A perfectively competitive firm in the long run earns: A-zero economic profits and zero normal profits B- positive normal profits but zero economic profits C-positive economics profit zero normal profits D- positive economics profits and positive normal economics
B
A perfectly competitive firm will be profitable if price at the profit- maximizing quantity is above: A- MC B-ATC C-AVC D-AFC
B
A rational consumer maximizes his or her : A- wealth B- total utility C- marginal utility D- profit
B
According to Adam Smith individuals are directed to do things for which they have a comparative advantage by: A- government policy B- their self interest C- the educational system D- corporate management
B
An entrepreneur would least likely to develop a product if expected average total cost is:product A- 50 and expected is 50 B- 65 and expected price is 40 C- 50 and expected price is 75 D- 60 and expected price is 65
B
Economic efficiency is achieved at a particular output level if: A- marginal cost is as low as possible B- average total cost is as low as possible C- average variable cost is as low as possible D- average fixed cost is as low as possible
B
Economies of scale are associated with: A- diminishing marginal productivity B- individual setup costs C- the short run D- zero setup costs
B
For substitutes: A- cross price elastic of demand can be any value less than 1 B- cross price elasticity of demand can be any positive value C- cross price elasticity of demand can be a negative value D- price elasticity of demand can be any positive value
B
Government establish the laws that regulate the interaction between businesses and households but do not serve as actors in the economy themselves: A- True B-false
B
If a perfectly competitive firm finds that price is less than average variable cost, it should: A-Not adjust output if marginal cost equals price B-shut down immediately C-decrease output until price equals marginal cost D-increase output until price equals marginal cost
B
If elastic of demand is greater than 1: A- a rise in price increases total revenue B- a rise in price lowers total revenue C- a decline in price will not change total revenue D- a decline in price lowers total revenue
B
If quantity demanded falls by 25 percent when price rises by 50 percent, demand is said to be: A- proportional B- inelastic C- unit elastic D- elastic
B
If the United states imposes tariffs on steel imports: A- the demand for steel shifts to the left and lowers its market price B- the supply of the imported steel shifts to the left and raises its market price C- the demand for steel shifts to the left and raises its market price D- the supply of the steel shifts to the right and lowers its market price
B
If the supply curve is perfectly inelastic and the demand curve us elastic, the burden of a tax on suppliers is borne: A- entirely by the consumers B- entirely by the suppliers C- mostly by the suppliers and partly by the consumers of the demand curve is inelastic D- partly by the suppliers and mostly by the consumers if the demand curve is elastic
B
In a third- party payer system: A- total expenditures generally fall B- total expenditures generally rise C- quantity demanded generally falls D- quantity supplied generally falls
B
In general, the greater the elasticity, the: A- smaller the responsiveness of price to changes in quantity B- larger the responsiveness of quantity to changes in price C- smaller the responsiveness of quantity to changed in price D- larger the responsiveness of price to changes in quantity
B
In principle, socialism is: A-just as concerned about fairness as capitalism B- more concerned about fairness than capitalism C- not concerned about fairness at all D- less concerned about fairness than capitalism
B
Limited liability is key advantage of partnerships and sole proprietorship over corporations A- true B- false
B
Marginal product eventually: A- increases because some inputs are variable B- declines because some inputs are fixed C- declines because some inputs are variable D- increases because some inputs are fixed
B
Mexico has a comparative advantage in producing corn: A- If its opportunity cost of producing corn is higher than the opportunity cost in other countries B- if its opportunity cost of producing corn is lower than the opportunity cost in other countries C-if its opportunity cost of producing corn is the same as the opportunity cost in other countries D- regardless of the opportunity cost in other countries
B
Rachel left her job as a graphic artist, where she earned$42,000 per year, to open her own graphic arts firm. Her implicit costs of her new business include: A- only the expenses incurred for office space, equipment, and supplies B- only her forgone salary of $42,000 per year C- neither the expenses incurred for the office space, equipment, an supplies not her forgone salary of $42,000 per year D- both the expenses incurred for office space, equipment, supplies and her forgone salary of $42,000 per year
B
Refer to the graph shown. If the firm increases output from 30 to 40, total revenue will increase: A- more than total cost, and so profit will decrease B-more than total cost, and so profit will increase C- less than total cost, and so profit will decrease D-less than total cost, and so profit will increase
B
Refer to the graph shown. Suppose the market price is $3. At this price, a perfectly competitive firm should: A-continue to produce in the short run but shut down in the long run B- Shut down immediately C- shut down in the short run but continue production in the long run D- continue to produce in both the short and long run
B
Refer to the graph. The perfectly completive firm depicted is currently: A- earning positive economic profit B- incurring a loss, but the loss is smaller than it would be if the firm shut down C- earning zero economic profit D- incurring a loss that is larger than total fixed cost, and so the firm should shut down
B
Suppose a factory that produces toasters experiences a decline in its average total cost with no change in its output level. This decline might be explained by: A- Decreasing marginal utility B- technological change C- economies of scale D- increasing marginal productivity
B
Suppose that the firm in the perfectly competitive oat industry currently are receiving a price of $2 per bushel for their product. The minimum possible average total cost of producing oats in the long run is $1 per bushel. It follows that: A-Firms in the oat industry will earn economic profits in both the long run and the short run B- new firms will enter the oat industry C- the price of oats will remain at $2 per bushel in the long run D- the oat industry is an equilibrium
B
Suppose the average total cost of producing semiconductors declines over time while production volumes do not change. This drop in average total cost might best be explained by: A- economies of scale B- learning by doing C- economies of scope D- diminishing marginal productivity
B
The consumption of an additional unit of a good proves additional satisfaction, which is called: A- average utility B- marginal utility C- total benefit D- marginal social benefit
B
The increase in output obtained by hiring an additional worker is known as: A- value added B- the marginal product C- the total product D- the average product
B
The law of one price means that prices eventually will be the same in all countries and eventually countries will not have a reason to trade: A- True B- False
B
The price elasticity of supply is the: A- percentage change in the price divided by the percentage change in the quantity supplied B- percentage change in the quantity supplied divided by the percentage change in price C- change in the price divided by the change in the quantity supplied D- change in the quantity supplied by the change in price
B
The profit- maximizing condition for a perfectly competitive firm is: A-MR= AVC B-P= MC C-P=AVC D-MR=P
B
To keep the price of gas from rising quickly after Katrina, the government instituted price ceilings on the price of gasoline in some states. The price ceilings cause ______ in the gasoline market. A- movements along the demand curve B- shortages C- movement of the demand curve D- surplus
B
Total fixed costs: A- decrease as output increases B- are positive even when no output is produced C- increase as output increases D- are zero when no output is produced
B
Which of the following would most likely generate a negative externality? A- education B-cigarette smoke C-a lighthouse D- employment
B
With a sole proprietorship: A- responsivities is shared B- all of ones assets are at risk of loss C-shares are values by the marketplace D- income is taxed twice
B
monopoly is a market structure in which: A- a few firms dominate the market B- one firm makes up the entire market C- many firms produce differentiated products D- many firms produce identical products
B
A market economy: A- requires government to set prices B- allocates according to need C- relies on the invisible hand to coordinate supply and demand
C
An effective price ceiling is nest defined as a price: A- higher than any consumer is willing to pay B- imposed by government above equilibrium price C- imposed by government below equilibrium price D- lower than any supplier is willing to sell
C
An increase in price and decrease in quantity are consistent with a: A- leftward shift in demand and no shift in supply B- rightward shift in supply and a rightward shift in demand C- leftward shit in supply and no shift in demand D- rightward shift in supple and a leftward shift in demand
C
Because you can get more of one good only by giving up some of another good, the shape of a production possibility curve is: A- upward sloping B- perfectly horizontal C- downward sloping D- perfectly vertical
C
Economies of scope cannot exist in: A- the presence of diseconomies of scale B- firms that produce multiple products C- firms that produce a single product D- the presence of economies of scale
C
Fixed costs plus variable costs equal: A- average total costs B- marginal costs C- total costs D- average costs
C
If MR> MC, a monopolist should: A- Maintain same level of production B- stop producing C- increase production D- Decrease production
C
If a monopolistically completive firm is earning economic profits in the short run: A- price will be driven down to minimum average total cost in the ling run B- its output will increase in the long run C- these profits will be eliminated in the long run as new firms enter the industry D- these profits will persist in the long run because of the firms limited monopoly power
C
Long- run decisions are: A- constrained because all inputs are fixed B- constrained because all inputs are variable C- unconstrained since all inputs are variable D- constrained because some inputs are fixed and others are variable
C
Long- run decisions are: A- Constrained because all inputs are fixed B- constrained because all inputs are variable C- unconstrained since all inputs are variable D- constrained because some inputs are fixed and others are variable
C
One advantage of partnership over a sole proprietorship is: A- ease of formation B- limited liability C- the ability to share the work and risks of business D- greater accountability
C
Profit is: A- the same as revenue B- what is left over from the total cost after all of the appropriate revenues have been subtracted C- what is left over from total revenue after all the appropriate costs have been subtracted D-the same as cost
C
Refer to the graph. The output range in region a is associated with: A- constant returns to scale B- diseconomies of scale C- economies of scale D- increasing marginal productivity
C
Suppose that a firms in a perfectly competitive oat industry are currently receiving a price of $2 per bushel for their product and there are constant returns to scale. The minimum possible average cost of producing oats in the long run is $1 per bushel. Other things being equal. it follows that: A- It is not possible to determine the price of oats in the long run form the information given B- The price of oats will be $2 in the long run C- the price of oats will be $1 in the long run D- the price of oats will be somewhere between $1 and $2 in the long run
C
The demand curve for monopolist is: A- perfectly elastic B- perfectly inelastic C- the market demand curve D- not relevant since the monopolist sets price
C
The law of diminishing marginal productivity foes not apply in the long run because: A- some inputs are variable in the long run B- all inputs are fixed in the long run C- no inputs are fixed in the long run D- some inputs are fixed in the long run
C
The level of production that minimizes long- run average total costs is referred to as the: A- minimum profitable level of production B- Economically efficient level of production C- minimum efficient level of production D- technically efficient level of production
C
The relationship between the quantity of inputs and the quantity of output is called the: A- marginal product B- average product C- production function D- law of diminishing returns
C
When a hurricane destroys a significant portion of an apple crop: A- apple prices decline and quantity sold rises B- apple prices decline and quantity sold falls C-apple prices rise and quantity sold falls D- apple prices rise and quantity sold rises
C
which of the following is not a characteristic of pure capitalism? A- worker freedom B- freedom of enterprise C- government ownership of capital D- private ownership of land
C
"For- benefit" corporations are created to pursue multiple goals, such as profitability, social responsibility, and value for the broader society. These firms provide examples of: A- technical inefficiency B- long-run efficiency C- non- entrepreneurial thinking D- social entrepreneurship
D
An increase in the Federal minimum wage, assuming the minimum is higher than equilibrium wage and that all other things remain constant, will: A- shift the demand of labor to the right B- shift the supple of labor to the left C- reduce the number of unemployed D- increase the number of unemployed
D
Assuming government's goal is to benefit society as much as possible A- actions with negative and positive externalities should be restricted. B- actions with negative and positive externalities should be encouraged C- actions with negative externalities should be encouraged and actions with positive externalities should be restricted D- actions with negative externalities should be restricted and actions with positive externalities should be encouraged
D
At a Chicago bulls game 20,000 tickets were sold at $30 apiece. the game was sold out and some people did not get tickets. this suggests that selling the price: A-could not have been any higher B- was above equilibrium price C- was at equilibrium price D- was below equilibrium price
D
Entrepreneurship is defines as the ability to: A- minimize production costs B- earn above average profits C- raise investment capital D- organize and get something done
D
For a market to exist: A-government must guarantee equal treatment for all B- everyone must have identical wants and desires C- individuals must be concerned with the social good D- private property rights must be allocated and defended by government
D
Greentree Corperation sells live Christmas trees. It observes that when it increases the price of Christmas trees by 10 percent, revenue rises by 25 percent. The demand for Christmas trees is: A- elastic B- unit elastic C- perfectly elastic D- inelastic
D
If the marginal revenue of the next widget a firm produces is $50 and its marginal cost is $35, a firm should: A- decrease production B- hold production constant C- reconsider past production decisions D- increase production
D
If the supply curve is perfectly elastic and the demand curve is inelastic, the burden of a tax on suppliers is borne: A- partly by the suppliers and mostly by the consumers if the demand curve is elastic B- mostly by the suppliers and partly by the consumers if the demand curve is inelastic C- entirely by the suppliers D- entirely by the consumers
D
If you move from a point inside the production possibility curve to a point on the production possibility curve. It follows that efficiency is: A- reduced if less of one good is produced B- increased as long a the combined output of both goods increases C- increased only if production of both goods increases D- increased because the economy is now on the production possibility curve
D
One advantage of a sole proprietorship over a partnership is: A- greater ease of obtaining financing B- the ability to share the work and risks of business C- limited liability D- direct control by the owner
D
Refer to the graph shown. If the market price is $4 , a perfectly competitive firm: A- Earns a profit B- Incurs a loss and cannot cover its variable costs C- breaks even D- incurs loss but can still cover its variable costs and some of its fixed costs
D
Refer to the graph shown. The profit maximizing monopolistic would be: A- making zero economic profits B- earning accounting but not economic profits C- sustaining loss D- making economic profits
D
Refer to the graph. If market price is currently $5.00 per unit, this perfectly competitive firm will maximize profit by producing A- 850 B-between 550 and 650 C- 450 D-650
D
Refer to the graph: Which graph depicts a perfectively competitive firm that will minimize short run losses by producing zero output? A- Graph I B- graph II C-graph III D-IV
D
Suppose the price of tomatoes dramatically increases. Which of the following could cause this change? A- advertising for catsup increases demand for catsup, shifting the demand curve to the left B-A reduction in tariffs of tomatoes from central American, shifting supply right C- a news report stating that a pesticide used on tomatoes might cause cancer, shifting the demand to the right D- hurricanes during the late summer damages the Florida crop, shifting supply left
D
The law of diminishing marginal productivity holds: A- in the long run B- when all outputs are fixed C- when all inputs are variable D- in the short run
D
The law of diminishing marginal productivity implies that the marginal product of a variable input: A- is constant B- never declines C- always declines D- eventually declines
D
The problem created by price controls become greatest as time goes by when: A- demand becomes more inelastic and supply becomes more elastic B- demand and supply become more inelastic C- supply becomes more inelastic and demand becomes more elastic D- demand and supply become more elastic
D
The problems created by price controls become greatest as time goes by when: A- demand becomes more in elastic and supply becomes more elastic B- demand and supply become more inelastic C- supply becomes more inelastic and demand becomes more elastic D- demand and supply become more elstic
D
The underlying psychological foundation of individual choice and economic reasoning is: A- generosity B- bounded rationally C- focal point equilibrium D- self interest
D
The upward- sloping part of the long- run average cost curve is explained by: A- indivisible setup costs B- output levels that exceed the minimum efficient level of production C-decreasing marginal productivity D- diseconomies of scale
D
Variable costs: A- exists only in the short run B- are positive even when a firm produces no output C- do not vary with output D- changes as output changes
D
When small groups are helped by a government action and large groups are hurt by that same action, the small group tends to lobby far more effectively than the large group: thus policies tend to reflect the smalls groups interest, not the interest of the large group. This statement is: A- evidence of the futility of lobbying B- the law of effective lobbying C- the large/ small rule. D- the general rule of political economy
D
Which of the following occur in the real world? A- market failures but not government failures B- neither market failures nor government failures C- government failures but not market failures D- both market and government failures
D
Which of the following provides the best explanation for diseconomies of scale? A- individual hand B- increased specialization C- Diminishing marginal productivity D- monitoring costs and loss of team spirit
D
the demand for a good is inelastic. Which of the following would be an explanation for this? A- the time interval considered is long B- the good is specifically defined C- the good costs a large portion of ones total income D- the good is a necessity
D
total utility refers to: A- satisfaction one gets from the consumption of an additional unit of a product B- maximum satisfaction one can get from the consumption of a good C-satisfaction one gets from the consumption of an additional unit of a product times its price D- total satisfaction one gets from the consumption of the product
D
In a perfectly competitive market, the demand curve faced by an individual firm is: Relatively inelastic Relatively elastic Perfectly inelastic Perfectly elastic
Perfectly elastic
In a perfectly competitive, firm set: Neither price nor quantities Quantities but not price Prices but not quantities Prices and quantities
Quantities but not price
A perfect competitive firm will be profitable if price at the profit- maximizing quantity is above
average total cost
