Micro Econ

Refer to the above data. If columns (1) and (3) of the demand data shown above are this firm's demand schedule, economic profit will be:

$8

Refer to the above data. The average fixed cost of producing 3 units of output is:

$8

If the exchange rate changes so that more Mexican pesos are required to buy a dollar, then:

Americans will buy more Mexican goods and services.

Which of the following statements is correct?

An increase in the price of C will decrease the demand for complementary product D

Social, as distinct from industrial, regulation is the major focus of the:

Consumer Products Safety Commission.

Jennifer buys a piece of costume jewelry for $33 for which she was willing to pay $42. The minimum acceptable price to the seller, Nathan, was $30. Jennifer experiences:

Correct a consumer surplus of $9 and Nathan experiences a producer surplus of $3.

A constant-cost industry is one in which:

Correct resource prices remain unchanged as output is increased.

Examples of command economies are:

Cuba and North Korea

To the economist, total cost includes:

explicit and implicit costs

Assuming a competitive resource market, a firm is hiring resources in the profit-maximizing amounts when the:

marginal revenue product of each resource is equal to its price

If one worker can pick $30 worth of grapes and two workers together can pick $50 worth of grapes, the:

marginal revenue product of the second worker is $20

Which of the following is a land resource?

natural gas

The price elasticity of demand is generally:

negative, but the minus sign is ignored

The Celler-Kefauver Act of 1950:

prohibited any firm from acquiring the real assets of another firm where the effect was to lessen competition.

"Player drafts" of professional athletes:

promote monopsony in the hire of professional athletes.

Which of the following is most likely to be a fixed cost?

property insurance premiums

Copyrights and trademarks are examples of

property rights

Which of the following is a fundamental characteristic of the market system?

property rights

The primary purpose of Social Security is to:

provide income for retired and disabled workers

Interest is the:

price paid for the use of money

The two basic markets shown by the simple circular flow model are:

product and resource

Consumers spend their incomes to get the maximum benefit or satisfaction from the goods and services they purchase. This is a reflection of:

purposeful behavior

If price and total revenue vary in opposite directions, demand is:

relatively elastic

A production possibilities curve shows:

the maximum amounts of two goods that can be produced, assuming the full use of available resources.

The lowest point on a purely competitive firm's short-run supply curve corresponds to:

the minimum point on its AVC curve

The lowest point on a purely competitive firm's short-run supply curve corresponds to:

the minimum point on its AVC curve.

In a competitive market economy firms select the least-cost production technique because:

to do so will maximize the firms' profits

The MR= MC rule applies:

to firms in all types of industries

Which of the following most closely relates to the idea of opportunity costs?

tradeoffs

Refer to the above data. Average product is at a maximum when:

two workers are hired.

Which of the following constitutes an implicit cost to the Johnston Manufacturing Company?

use of savings to pay operating expenses instead of generating interest income

Which of the following is most likely to be an inferior good?

used clothing

DVD players and DVDs are:

complementary goods

In the resource market:

households sell resources to businesses

"Consumer sovereignty" refers to the:

idea that the decisions of producers must ultimately conform to consumer demands.

A constant-cost industry is one in which:

if 100 units can be produced for $100, then 150 can be produced for $150, 200 for $200, and so forth.

The production possibilities curve illustrates the basic principle that:

if all the resources of an economy are in use, more of one good can be produced only if less of another good is produced.

A firm is likely to be a natural monopoly:

if economies of scale are experienced over the full range of output.

A market is in equilibrium:

if the amount producers want to sell is equal to the amount consumers want to buy.

you should decide to go to a movie:

if the marginal benefit of the movie exceeds its marginal cost

Behavioralists believe that:

industries should be judged on the basis of their price-output behavior and their technological progressiveness.

In the diagram, curves 1, 2, and 3 represent the:

marginal, average, and total product curves respectively.

For a firm selling its product in an imperfectly competitive market, the marginal revenue product of labor can be found by:

multiplying marginal product by marginal revenue

Marginal Utility can be:

positive, negative, or zero

Wealth:

refers to accumulated financial and real assists

The basic characteristic of the short run is that:

the firm does not have sufficient time to change the size of its plant.

If a purely competitive firm is producing where price exceeds marginal cost, then:

the firm will fail to maximize profit and resources will be underallocated to the product.

Suppose the G8 nations decide that the dollar is too strong (high in value) relative to the yen. These nations might:

use official reserves of dollars to buy yen.

The scientific method is:

used by economists and other social scientists, as well as by physical scientists and life scientists.

The diagram suggests that:

when marginal product lies above average product, average product is rising.

Refer to the above information. The marginal cost of the third unit of output is:

$15

Refer to the above data. The average total cost of producing 3 units of output is:

$16

Refer to the above information. If these two nations specialize based on comparative advantage:

Harmony will produce chicken and Singsong will catch fish

Refer to the above data. We can conclude that:

both the product and resource markets are imperfectly competitive.

The demand for a product is inelastic with respect to price if:

consumers are largely unresponsive to a per unit price change.

In the United States professional football players earn much higher incomes than professional soccer players. This occurs because:

consumers have a greater demand for football games than for soccer games.

Refer to the above table. If the economy is producing at production alternative C, the opportunity cost of the tenth unit of consumer goods will be:

1/3 units of capital goods

If the rate of exchange for a pound is $4, the rate of exchange for the dollar is:

1/4 pound

United States exports of goods and services (on a national income account basis) are about:

13 percent of U.S. GDP

Suppose that interest payments are $140 per year on a $1,000 loan and $1,188 per year on a $8,485 loan. The interest rates on the two loans are:

14 percent on both loans

Refer to the above data. The marginal product of the sixth worker is:

15 units of output

Refer to the above diagram for a monopolistically competitive firm in short-run equilibrium. The profit-maximizing output for this firm will be:

160

Answer the question on the basis of the following information: Harry owns a barber shop and charges $6 per haircut. By hiring one barber at $10 per hour the shop can provide 24 haircuts per 8-hour day. By hiring a second barber at the same wage rate the shop can now provide a total of 42 haircuts per day. Refer to the above information. The MP of the second barber is:

18 haircuts

Answer the question on the basis of the data contained in the following table. Assume that the firm is hiring labor in a purely competitive market. Refer to the above data. If the wage rate is $20, how many workers will the firm choose to employ?

2

Suppose the price elasticity of demand for bread is 0.20. If the price of bread falls by 10 percent, the quantity demanded will increase by:

2 perent and total expenditures on bread will fall

In the quintile distribution of income, the term "quintile" represents:

20 percent of the income receivers

The price elasticity of demand for widgets is 0.80. Assuming no change in the demand curve for widgets, a 16 percent increase in sales implies a:

20 percent reduction in price

Refer to the above data. How many units of output are produced when 2 workers are employed?

24

Answer the question on the basis of the data contained in the following table. Assume that the firm is hiring labor in a purely competitive market. Refer to the above data. If the wage rate is $11, how many workers will the firm choose to employ?

3

Refer to the above data. How many workers will this profit-maximizing firm choose to employ?

3

Refer to the above data. If the firm's minimum average variable cost is $10, the firm's profit-maximizing level of output would be:

3

Refer to the above list. The outcome in a purely competitive labor market is shown by:

3

Refer to the above diagram where curves (a) through (e) are for five different countries. Of the countries listed below, income is most unequally distributed in country:

D

Refer to the above diagram. This economy will experience unemployment if it produces at point:

D

Which of the following is correct for a monopolistically competitive firm in long-run equilibrium?

P exceeds minimum ATC

Refer to the above diagram. The firm will shut down at any price less than:

P1

Refer to the above diagram for a purely competitive producer. The lowest price at which the firm should produce (as opposed to shutting down) is:

P2

Refer to the above diagram. The firm will produce at a loss if price is:

P2

Refer to the above diagram. This firm will earn only a normal profit if product price is:

P3

Refer to the above diagram. The firm will realize an economic profit if price is:

P4

In the short run, a purely competitive firm will earn a normal profit when:

P=ATC

In the short run a purely competitive firm will always make an economic profit if:

P> ATC

Refer to the above diagram, where Sd and Dd are the domestic supply and demand for a product and Pc is the world price of that product. If this economy was entirely closed to international trade, equilibrium price and quantity would be:

Pa and x

The greater the area between the Lorenz curve and the diagonal in the Lorenz Curve diagram, the:

larger is the Gini ratio and the greater is the degree of income inequality.

The process by which economists test hypotheses against facts to develop theories, principles, and models is called:

The scientific method

In comparing a tariff and an import quota we find that:

The tariff generates revenue for the United States Treasury but the quota does not.

Which of the following is a positive statement?

The temperature is 92 degrees today.

Research studies indicate that:

U.S. consumers lose more from tariffs than U.S. producers gain.

In the U.S. balance of payments, U.S. purchases of assets abroad are a(n):

U.S. dollar outflow

Which of the following would call for inpayments to the United States?

U.S. firms sell insurance to Brazilian shippers

Which of the following would call for outpayments from the United States?

U.S. purchases assets abroad

The monopolistically competitive seller's demand curve will become more elastic the:

larger the number of competitors

A merger of several firms operating in different industries-for example, a trucking company, a fast-food chain, and a brokerage house-is called:

a conglomerate merger

Refer to the above diagram. Line (2) reflects the long-run supply curve for:

a constant-cost industry

Which of the following do economists consider to be capital?

a construction crane

Amanda buys a ruby for $330 for which she was willing to pay $340. The minimum acceptable price to the seller, Tony, was $140. Amanda experiences:

a consumer surplus of $10 and Tony experiences a producer surplus of $190.

Assume the demand curve for product X shifts to the right. This might be caused by:

a decline in income if X is an inferior good

Which of the following will not cause a shift in the demand for resource X?

a decline in the price of resource X

Which one of the following, other things equal, will directly alter the United States balance of trade?

a decrease in U.S. goods exports

If two goods are complements:

a decrease in the price of one will increase the demand for the other.

The demand curve for labor would shift leftward as the result of:

a decrease in the productivity of labor

If consumer desire for product X increases, all of the following will occur except:

a decrease in the quantity of resources employed in industry X.

Microeconomics is concerned with:

a detailed examination of specific economic units that make up the economic system

According to the purchasing power parity theory of exchange rates:

a dollar, when converted to other currencies at the prevailing floating exchange rate, has the same purchasing power in various countries.

Oligopolistic industries are characterized by:

a few dominant firms and substantial entry barriers.

The term oligopoly indicates:

a few firms producing either a differentiated or a homogeneous product.

The "time-value of money" refers to the fact that:

a given amount of money is more valuable the sooner it is obtained.

Price fixing is considered to be a per se violation of the antitrust laws because:

a guilty verdict requires proof that the activity was attempted, not that it unreasonably restrained trade.

Which of the following findings would be the most likely to lead the U.S. Justice Department to block a corporate merger under terms of the Clayton Act?

a high pre-merger Herfindahl index in the industry and a large boost in the index because of the merger

Henry George's single tax movement was based on the argument that:

a high tax on land rent is justified because land rent performs no incentive function.

Refer to the above graph. Each of the three labor demand curves shown slopes downward because of the:

law of diminishing returns

The upward slope of the supply curve reflects the:

law of supply

Assume a purely competitive, increasing-cost industry is in long-run equilibrium. If a decline in demand occurs, firms will:

leave the industry and price and output will both decline.

The economizing problem is one of deciding how to make the best use of:

limited resources to satisfy virtually unlimited wants

Refer to the above diagram. If line b represents the pretax and transfer distribution of income in the United States, we would expect the post-tax and transfer distribution to be:

line a

Refer to the above diagram. If line c represents the distribution of income in 1970 in the United States, we would expect the distribution of income for 2008 to be more like:

line d

When economists say that people act rationally in their self interest, they mean that individuals:

look for a pursue opportunities to increase their utility

All but which one of the following are cash transfer programs?

low-rent public housing

In a decreasing-cost industry:

lower demand leads to higher long-run equilibrium prices.

Which one of the following is most likely to increase the Herfindahl index of a particular industry?

a horizontal merger

Which of the following is most likely to increase the Herfindahl Index of a particular industry?

a horizontal merger between two of the industry's largest firms.

Which of the following terms implies the least degree of confidence in an economic generalization?

a hypothesis

Assume that the demand curve for product C is downsloping. If the price of C falls from $2.00 to $1.75:

a larger quantity of C will be demanded.

An explicit cost is:

a money payment made for resources not owned by the firm itself.

It may be misleading to label a trade deficit as unfavorable or adverse because:

a nation's consumers benefit from a trade deficit during the period it occurs.

The fact that international specialization and trade based on comparative advantage can increase world output is demonstrated by the reality that:

a nation's trading possibilities line lies to the right of its production possibilities line.

The term "other things equal" means that:

a number of relevant variables are assumed to be constant.

The individual firm in a purely competitive labor market faces:

a perfectly elastic labor supply curve and a downsloping labor demand curve.

Which of the following is a capital resource?

a piece of software used by a firm

In the balance of payments of the United States, inflows of foreign currencies to the United States are recorded as:

a positive entry

A well-tested economic theory is often called:

a principle

Which of the following terms implies the greatest degree of confidence in an economic generalization?

a principle

If the wage rate increases:

a purely competitive and an imperfectly competitive producer will both hire less labor.

Which of the following would not shift the demand curve for beef?

a reduction in the price of cattle feed

Which of the following industries most closely approximates pure competition?

agriculture

In the long run:

all costs are variable costs

Specialization-the division of labor-enhances productivity and efficiency by:

all of the means identified in the other answers

Differences in production efficiencies among nations in producing a particular good result from:

all of these

For a purely competitive seller, price equals:

all of these

The assertion that "There is no free lunch" means that:

all production involves the use of scarce resources and thus the sacrifice of alternative goods

If all workers are homogeneous, all jobs are equally attractive to workers, and labor markets are perfectly competitive:

all workers would receive the same wage rate.

A major purpose of usury laws is to make more funds available to low-income borrowers. Economic analysis suggests that usury laws:

allocate available funds to high-income borrowers

Economists would describe the U.S. automobile industry as:

an oligopoly

Refer to the above data. Plan C entails:

an overallocation of resources to flood control

In long-run equilibrium monopolistic competition entails:

an underallocation of resources due to excess capacity.

The fact that people prefer present consumption to future consumption results in:

an up sloping supply of loanable funds curve

An increasing-cost industry is associated with:

an upsloping long-run supply curve.

Firms are motivated to minimize production costs because:

competitive pressures in the market will drive out higher- cost producers

Digital cameras and memory cards are:

complementary goods

Refer to the above diagram where curves (a) through (e) are for five different countries. Income is equally distributed in:

country a

The advent of DVDs has virtually demolished the market for videocassettes. This is an example of:

creative destruction

The process by which new firms and new products replace existing dominant firms and products is called:

creative destruction

Refer to the above information. Zippo has a:

current account deficit

In the balance of payments of the United States, U.S. goods imports are recorded as a:

current account entry

Refer to the above diagram pertaining to two nations and a specific product. Point G is the:

domestic price for the nation represented by lines GB and GD.

The demand for land is:

downsloping

The demand curve in a purely competitive industry is _____, while the demand curve to a single firm in that industry is _____.

downsloping, perfectly elastic

The MR = MC rule can be restated for a purely competitive seller as P = MC because:

each additional unit of output adds exactly its price to total revenue.

In order for mutually beneficial trade to occur between two otherwise isolated nations:

each nation must be able to produce at least one good relatively cheaper than the other.

Refer to the above diagram. If this competitive firm produces output Q, it will:

earn a normal profit

We would expect an industry to expand if firms in that industry are:

earning economic profits

Refer to the above data. Assuming total fixed costs equal to zero, the firm's:

economic profit is $16.

The primary force encouraging the entry of new firms into a purely competitive industry is:

economic profits earned by firms already in the industry.

If a competitive industry is neither expanding nor contracting, we would expect:

economic profits to be zero

Refer to the above diagram for a purely competitive producer. If product price is P3:

economic profits will be zero

A market in which the money of one nation is exchanged for the money of another nation is a:

foreign exchange market

Which of the following is most likely to be an implicit cost for Company X?

forgone rent from the building owned and used by Company X

Other things equal, economists would prefer:

free trade to tariffs and tariffs to import quotas

Refer to the above table. For these data the law of increasing opportunity costs is reflected in the fact that:

larger and larger amounts of capital goods must be sacrificed to get additional units of consumer goods.

In the long-run, economic theory predicts that a monopolistically competitive firm will:

have excess production capacity

Real wages in the United States in the long run:

have increased at about the same rate as increases in output per worker.

Medicaid:

helps finance medical expenses for those participating in the TANF and Supplemental Security Income programs.

Which of the following helps explain growing income inequality in the United States in recent years?

increased demand for highly skilled workers

The entrance of large numbers of "baby boomers" into the labor force in the 1970s and 1980s:

increased income inequality

Refer to the above diagram. Flow(2) represents:

land, labor, and capital, and entrepreneurial ability.

The four factors of production are:

land, labor, capital, and entrepreneurial ability

Monopolistic competition is characterized by a:

large number of firms and low entry barriers.

Other things equal, if wage rates increase by 20 percent, the greatest decline in employment will occur when labor costs are a:

large proportion of total costs and product demand is elastic.

Suppose the price of local cable TV service increased from $16.20 to $19.80 and as a result the number of cable subscribers decreased from 224,000 to 176,000. Along this portion of the demand curve, price elasticity of demand is:

1.2

Suppose that as the price of Y falls from $2.00 to $1.90 the quantity of Y demanded increases from 110 to 118. Then the price elasticity of demand is:

1.37

One reason that the quantity demanded of a good increases when its price falls is that the:

lower price increases the real incomes of buyers, enabling them to buy more.

The main purpose of industrial regulation is to:

lower price to average total cost such that the firm earns a fair return.

Other things equal, the monopsonistic employer will pay a:

lower wage rate and hire fewer workers than will a purely competitive employer.

The problems of aggregate inflation and unemployment are:

major topics of macroeconomics

The Sherman Act was designed to:

make monopoly and acts that restrain trade illegal.

In construction models, economists:

make simplifying assumptions

The current system of exchange rates can best be described as:

managed floating exchange rates.

Monopolistic competition means:

many firms producing differentiated products.

At the optimal quantity of a public good:

marginal benefit equals marginal cost

In the short run the individual competitive firm's supply curve is that segment of the:

marginal cost curve lying above the average variable cost curve.

Other things equal, if the prices of a firm's variable inputs were to fall:

marginal cost, average variable cost, and average total cost would all fall.

If in the short run a firm's total product is increasing, then its:

marginal product could be either increasing or decreasing.

Refer to the above diagram. At output level Q:

marginal product is falling

The first, second, and third workers employed by a firm add 24, 18, and 9 units to total product respectively. Therefore, we can conclude that:

marginal product of the third worker is 9.

A firm will find it profitable to hire workers up to the point at which their:

marginal resource cost is equal to their MRP

A competitive firm in the short run can determine the profit-maximizing (or loss-minimizing) output by equating:

marginal revenue and marginal cost.

Curve (2) in the above diagram is a purely competitive firm's:

marginal revenue curve

The monopolistically competitive seller maximizes profit by producing at the point where:

marginal revenue equals marginal cost

When a monopolistically competitive firm is in long-run equilibrium:

marginal revenue equals marginal cost and price equals average total cost.

The change in a firm's total revenue that results from hiring an additional worker is measured by:

marginal revenue product

In a monopsonistic labor market the employer will maximize profits by employing workers up to that point at which:

marginal revenue product equals marginal resource (labor) cost

A firm that is hiring labor in a purely competitive labor market and selling its product in a purely competitive product market will maximize its profit by hiring labor until:

marginal revenue product equals marginal resource (labor) cost.

Under monopolistic competition entry to the industry is:

more difficult than under pure competition but not nearly as difficult as under pure monopoly.

The demand curve of a monopolistically competitive producer is:

more elastic than that of a pure monopolist, but less elastic than that of a pure competitor.

The primary gain from international trade is:

more goods than would be attainable through domestic production alone.

Wealth in the United States is:

more unequally distributed than is income.

Economics involves marginal analysis because:

most decisions involve changes from the present situation

Refer to the above diagram. An increase in quantity supplied is depicted by a:

move form point y to point x

Refer to the above diagram. A decrease in quantity demanded is depicted by a:

move from point y to point x.

Assuming a firm is selling its output in a purely competitive market, its resource demand curve can be determined by:

multiplying marginal product by product price

For a firm selling its product in a purely competitive market, the marginal revenue product of labor can be found by:

multiplying marginal product by product price.

If a nation has a comparative advantage in the production of X, this means the nation:

must give up less of other goods than other nations in producing a unit of X.

If country A can produce both goods X and Y more efficiently, that is, with smaller absolute amounts of resources, than can country B:

mutually advantageous specialization and trade between A and B may still be possible.

In the real world, specialization is rarely complete because:

nations normally experience increasing opportunity costs in producing more of the product in which they are specializing.

A market in which the entire demand for a good or service can be satisfied at the least cost by a single firm is a:

natural monopoly

Refer to the above information. Zippo has:

neither a balance of payments deficit nor a surplus

Refer to the above diagram. At output level Q1:

neither productive nor allocative efficiency are achieved.

In the U.S. balance of payments account for a certain year, a positive number in the financial account means a:

net reduction in the ownership of assets by U.S. interests.

Refer to the above diagram. If all monopolistically competitive firms in the industry have profit circumstances similar to the firm shown above:

new firms will enter the industry

If a purely competitive firm is producing at the MR = MC output level and earning an economic profit, then:

new firms will enter this market

The two main characteristics of a public good are:

non rivalry and non excludability

The demand for most products varies directly with changes in consumer incomes. Such products are known as:

normal goods

A deficit on the current account:

normally causes a surplus on the capital and financial account.

Refer to the above diagram. If demand is D2, a tax of A per acre will:

not affect the quantity of land available to society

The invisible hand refers to the:

notion that, under competition, decisions motivated by self-interest promote the social interest.

A positive statement is one which is:

objective and is based on facts

Tying agreements:

obligate a purchaser of product X to also buy product Y from the same seller.

Refer to the above diagram. Economies of scale:

occur over the 0Q1 range of output.

Refer to the above diagram. Constant returns to scale:

occur over the Q1Q3 range of output.

Resource pricing is important because:

of all of these reasons

The marginal revenue product (MRP) of land declines as more land is brought into production because:

of diminishing returns

A purely competitive firm is precluded from making economic profit in the long run because:

of unimpeded entry to the industry

Refer to the above diagram which is a rectangular hyperbola, that is, a curve such that each rectangle drawn from any point on the curve will be of identical area. If this rectangular hyperbola was a demand curve, we could say that it would be:

of unit elasticity throughout

Innovations that lower production costs or create new products:

often generate short-run economic profits that do not last into the long run.

An industry comprised of a small number of firms, each of which considers the potential reactions of its rivals in making price-output decisions is called:

oligopoly

In which of the following market structures is there clear-cut mutual interdependence with respect to price-output policies?

oligopoly

An industry comprised of four firms, each with about 25 percent of the total market for a product is an example of:

oligopoly.

A vertical merger involves a combining of one or more firms:

operating at different stages of the production process in a particular industry.

Joe sold gold coins for $1000 that he bought a year ago for $1000. He says, "At least I didn't lose any money on my financial investment." His economist friend points out that in effect he did lose money, because he could have received a 3 percent return on the $1000 if he had bought a bank certificate of deposit instead of the coins. The economist's analysis in this case incorporates the idea of:

opportunity costs

Suppose that a university decides to spend $1 million to upgrade personal computers and scientific equipment for faculty rather than spend $1 million to expand parking for students. This example illustrates:

opportunity costs

The Latin Term "ceteris parties" means:

other things equal

Refer to the diagram. This firm is selling its product in a(n):

purely competitive market

Refer to the above data. This firm is selling its output in a(n):

purely competitive market.

Economists contend that most economic decisions are:

purposeful

Refer to the above data. If price was initially $4 and free to fluctuate, we would expect the:

quantity of wheat supplied to decline as a result of the subsequent price change

The pure rate of interest is approximated by the:

rate paid on long-term government bonds

The terms of trade reflect the:

ratio at which nations will exchange two goods

The terms of trade reflect the:

ratio at which nations will exchange two goods.

Alex sees that his neighbors' lawns all need mowing. He offers to provide the service in exchange for a wage of $20 per hour. Some neighbors accept Alex's offer and others refuse. Economists would describe Alex's behavior as:

rational self-interest, because he attempting to increase his own income by identifying and satisfying someone else's wants.

Which of the following is correct?

real capital is a resource, but money is not

In making an investment decision a business firm is most interested in the:

real interest rate

Suppose that in some year nominal interest rates are less than the rate of inflation. This means that:

real interest rates are negative

Refer to the above data. Given the $75 product price, at its optimal output the firm will:

realize a $30 economic profit.

Refer to the above diagram for a monopolistically competitive producer. The firm is:

realizing a normal profit in the long run

From society's point of view the economic function of profits and losses is to:

reallocate resources from less desired to more desired uses

The highest quintile of households in the income distribution:

receives about 50 percent of the total income

Which of the following is not a basic characteristic of monopolistic competition?

recognized mutual interdependence

A profit-maximizing firm will:

reduce employment if marginal revenue product is less than marginal resource cost.

Suppose that tacos and pizza are substitutes, and that soda and pizza are complements. We would expect an increase in the price of pizza to:

reduce the demand for soda and increase the demand for tacos.

The term "quantity demanded":

refers to the amount of a product that will be purchased at some specific price.

Production costs to an economist:

reflect opportunity costs.

When economists say that the demand for labor is a derived demand, they mean that it is:

related to the demand for the product or service labor is producing.

The law of diminishing returns describes the:

relationship between resource inputs and product outputs in the short run.

Long-run equilibrium for a monopolistically competitive firm where economic profits are zero results from:

relatively easy entry

Other things the same, if a price change causes total revenue to change in the opposite direction, demand is:

relatively elastic

Refer to the above diagram. In the P1P2 price range demand is:

relatively elastic

Gigantic State University raises tuition for the purpose of increasing its revenue so that more faculty can be hired. GSU is assuming that the demand for education at GSU is:

relatively inelastic

Refer to the above diagram. In the P3P4 price range demand is:

relatively inelastic

The demand for a luxury good whose purchase would exhaust a big portion of one's income is:

relatively price elastic

Refer to the above information. On the basis of its balance of payments position, and other things equal, we can expect the international value of Zippo's currency to:

remain constant

Refer to the above diagram. Line (2) reflects a situation where resource prices

remain constant as industry output expands

Housing subsidies for low-income households:

represent a non cash transfer

If the price of product Y is $25 and its marginal cost is $18:

resources are being underallocated to Y.

When an economy is operating under conditions of full employment, the production of more of commodity A will mean the production of less of commodity B because:

resources are limited

Refer to the above diagram. At output level Q2:

resources are overallocated to this product and productive efficiency is not realized.

A nation's production possibilities curve is bowed out from the origin because:

resources are to generally equally efficient in producing every good

Refer to the above diagram. At output level Q1:

resources are underallocated to this product and productive efficiency is not realized.

The elasticity of resource demand measures the:

responsiveness of producers to changes in resource prices.

An effective ceiling price will:

result in a product shortage.

An effective price floor will:

result in a product surplus

Specialization in production is important primarily because it:

results in greater total output

Long-run competitive equilibrium:

results in zero economic profits.

An excise tax on an imported good that is not produced domestically is called a:

revenue tariff

If the long-run supply curve of a purely competitive industry slopes upward, this implies that the prices of relevant resources:

rise as the industry expands

If the nominal wage rises by 6 percent, and the price level falls by 2 percent, the real wage will:

rise by 8 percent

The financial account balance is a nation's:

sale of real and financial assets to people living abroad minus its purchases of real and financial assets from foreigners.

Other things equal, a tariff is:

superior to an import quota for Americans because a tariff generates revenue for the United States Treasury.

An increase in the excise tax on cigarettes raises the price of cigarettes by shifting the:

supply curve for cigarettes leftward.

Refer to the above diagram, which shows demand and supply conditions in the competitive market for product X. Given D0, if the supply curve moved from S0 to S1, then:

supply has decreased and equilibrium quantity has decreased

Refer to the above data. Zabella has a balance of trade (goods):

surplus of $10 billion

Refer to the above data. The United States has a balance of goods:

surplus of $20 billion

The demand for farmland will increase if:

technological advances make land more productive

Refer to the above table. As compared to production alternative D, the choice of alternative C would:

tend to generate a more rapid growth rate

Any point inside the production possibilities curve indicates:

that more output could be produced with available resources.

A normal profit is:

the "price" required to retain entrepreneurial talent in some particular line of production.

Suppose that Mick and Cher are the only two members of society and are willing to pay $10 and $8, respectively, for the 3rd unit of a public good. Also, assume that the marginal cost of the 3rd unit is $17. We can conclude that:

the 3rd unit should be produced.

All of the following can file antitrust charges under the Sherman Act except:

the Federal Energy Regulatory Commission

When LCD televisions first came on the market, they sold for at least $1,000, and some for much more. Now many units can be purchased for under $400. These facts imply that:

the LCD television industry is a decreasing-cost industry.

Which one of the following acts declared "Every contract, combination ... or conspiracy, in restraint of trade or commerce among the several states ... to be illegal"?

the Sherman Act

Which of the following would contribute to a United States balance of payments surplus?

the United States cuts back on U.S. military personnel stationed in Germany

The long run is characterized by:

the ability of the firm to change its plant size.

Pure or economic profit is:

the amount by which accounting profits exceed normal profits.

The "future value" of a sum of money refers to:

the amount to which some current sum of money will grow over time.

Refer to the above diagram. The vertical distance between ATC and AVC reflects:

the average fixed cost at each level of output.

Refer to the above diagram for a purely competitive producer. The firm's short-run supply curve is:

the bcd segment and above on the MC curve

In comparing the changes in TVC and TC associated with an additional unit of output, we find that:

the changes in TC and TVC are equal.

Allocative efficiency occurs only at that output where:

the combined amounts of consumer surplus and producer surplus are maximized.

A normal good is one:

the consumption of which varies directly with incomes

A firm charged with monopolizing a market is less likely to be convicted if:

the court accepts a broad definition of the market

Marginal costs exist because:

the decision to engage in one activity means forgoing some other activity

Opportunity costs exist because:

the decision to engage in one activity means forgoing some other activity

In answering the question, assume a graph in which dollars are measured on the vertical axis and output on the horizontal axis.

the demand and marginal revenue curves will coincide.

Demand-side market failures occur when:

the demand and supply curves don't reflect consumers' full willingness to pay for a good or service.

Supply-side market failures occur when:

the demand and supply curves don't reflect the full cost of producing a good or service

Refer to the above diagram for a monopolistically competitive firm. If more firms were to enter the industry and product differentiation were to weaken, then:

the demand curve would become more elastic.

Other things equal, if more firms enter a monopolistically competitive industry:

the demand curves facing existing firms would shift to the left.

We would expect:

the demand for Coca-Cola to be more price elastic than the demand for soft drinks in general.

Suppose that the price of peanuts falls from $3 to $2 per bushel and that, as a result, the total revenue received by peanut farmers changes from $16 to $14 billion. Thus:

the demand for peanuts is inelastic

The demand for a resource depends primarily on:

the demand for the product or service that it helps produce.

The demand for airline pilots results from the demand for air travel. This fact is an example of:

the derived demand for labor

Other things equal, which of the following might shift the demand curve for gasoline to the left?

the development of a low-cost electric automobile

Which of the following arguments for trade protection contends that new domestic industries need support to establish themselves and survive?

the infant-industry argument

Which of the following generalizations is false? Other things equal:

the interest rate is less on small loans than on larger loans.

If a firm is hiring a certain type of labor under purely competitive conditions:

the labor supply and marginal labor (resource) cost curves will coincide and be perfectly elastic.

Refer to the above diagrams. Assume that only wheat can be grown on the three grades of land shown in Figures a, b, and c. Also assume that identical amounts of labor, capital, and other needed inputs are used in farming each grade of land. On the basis of these three figures we can say that:

the land shown in Figure (a) only is a "free good"

The narrower the definition of a product:

the larger the number of substitutes and the greater the price elasticity of demand.

If a variable input is added to some fixed input, beyond some point the resulting extra output will decline. This statement describes:

the law of diminishing returns

The term productive efficiency refers to:

the production of a good at the lowest average total cost.

Creative destruction is:

the process by which new firms and new products replace existing dominant firms and products.

The term allocative efficiency refers to:

the production of the product-mix most desired by consumers.

Which one of the following is not prohibited by the original Clayton Act?

the purchase of the assets of rival firms that lessens competition

The idea that freely floating exchange rates equate the buying power of national currencies is called:

the purchasing power parity theory

The equilibrium interest rate equates:

the quantities demanded and supplied of loanable funds.

Effective usury laws cause:

the quantity of loanable funds demanded to exceed the quantity supplied.

The Illinois Central Railroad once asked the Illinois Commerce Commission for permission to increase its commuter rates by 20 percent. The railroad argued that declining revenues made this rate increase essential. Opponents of the rate increase contended that the railroad's revenues would fall because of the rate hike. It can be concluded that:

the railroad felt that the demand for passenger service was inelastic and opponents of the rate increase felt it was elastic.

Which of the following will not produce an outward shift of the production possibilities curve?

the reduction of unemployment

Normal profit is:

the return to the entrepreneur when economic profits are zero.

Economists use the term imperfect competition to describe:

those markets which are not purely competitive.

The main purpose of the antitrust laws is:

to prevent the monopolization of industries.

The term "growing income inequality" implies that the:

top quintile of income receivers is getting relatively more of the total income than before and the bottom quintile is getting relatively less.

Because the marginal product of a variable resource at first increases and then decreases as the output of the firm is increased:

total cost at first increases at a decreasing rate and then increases at an increasing rate.

Curve (4) in the above diagram is a purely competitive firm's:

total cost curve

Curve (1) in the above diagram is a purely competitive firm's:

total economic profit curve

Accounting profits equal total revenue minus:

total explicit costs

There must always be a balance of a nation's:

total international payments

Refer to the above data. When two workers are employed:

total product is 18.

Firms seek to maximize:

total profit

A firm reaches a break-even point (normal profit position) where:

total revenue and total cost are equal

Curve (3) in the above diagram is a purely competitive firm's:

total revenue curve

A competitive firm will maximize profits at that output at which:

total revenue exceeds total cost by the greatest amount

Refer to the above diagram, which pertains to a purely competitive firm. Curve A represents:

total revenue only

A purely competitive firm should produce in the short run if its total revenue is sufficient to cover its:

total variable costs

In the United States, The lifetime distribution of income is more equal than the annual distribution. This statement is:

true, because there is considerable income mobility over time.

Which of the following represents a long-run adjustment?

unable to meet foreign competition, a U.S. watch manufacturer sells one of its branch plants

Refer to the above data. The firm is hiring labor:

under purely competitive conditions

Graphically, if the supply and demand curves are linear, consumer surplus is measured as the triangle:

under the demand curve and above the actual price

Refer to the above data. The marginal cost of producing the sixth unit of output is:

$8

Refer to the above data. The marginal revenue product of the fourth worker is:

$8

Refer to the above data. The marginal cost of the fifth unit of output is:

$80

The market system's answer to the fundamental question "What will be produced?" is essentially:

"Goods and services that are profitable"

The market system's answer to the fundamental question "Who will get the goods and services?" is essentially:

"Those willing and able to pay for them."

The market system's answer to the fundamental question "How will the system accommodate change?" is essentially:

"Through the guiding function of prices and the incentive function of profits."

The market system's answer to the fundamental question "How will the system promote progress?" is essentially:

"Through the profit potential that encourages development of new technology."

The market system's answer to the fundamental question "How will the goods and services be produced?" is essentially:

"Using the least-cost production techniques."

The French term "laissez-fair" means:

"let it be"

Refer to the above data. If there is neither a union nor a minimum wage, we can conclude that this firm:

"purchases" labor in purely competitive labor market

Which one of the following expressions best states the idea of opportunity cost?

"there is no such thing as a free lunch"

Refer to the above data. Suppose government has already produced 4 units of this public good. The amount individual B is willing voluntarily to pay for the 4th unit is:

$0

Refer to the above diagram. A shortage of 160 units would be encountered if price was:

$0.50

The above data are for:

the short run

The Gini ratio of income inequality ranges between:

0 and 1

Refer to the above information. How many workers should the farmer hire?

3

Refer to the information. Average fixed cost is:

TFC/Q

In the above diagram it is assumed that:

all costs are variable

Command systems are also known as:

communism

A product has utility if it:

satisfies consumer wants

The Lorenz curve portrays:

the personal distribution of income

Refer to the above diagram, where Sd and Dd are the domestic supply and demand for a product and Pc is the world price of that product. With free trade, that is, assuming no tariff, the outputs produced by domestic and foreign producers respectively would be:

v and vz

Refer to the above data. At the profit-maximizing output the firm's total revenue is:

$48

Refer to the above data. Zabella's balance on goods and services shows a:

$5 billion surplus

Refer to the above information. The current account items for Zippo are:

1,3,4,5,7, and 9

Assume that in the short run a firm is producing 100 units of output, has average total costs of $200, and average variable costs of $150. The firm's total fixed costs are:

$5,000

Refer to the above data. If columns (1) and (3) of the demand data shown above are this firm's demand schedule, the profit-maximizing price will be:

$9

Refer to the above information. Which one of the following would not be feasible terms for trade between Singsong and Harmony?

1 chicken for 1/5 of a fish

Refer to the above data. What are the limits of the terms of trade between Gamma and Sigma?

1 tea= 1 pot to 1 tea = 3 pots

Refer to the above data. With free trade, that is, assuming no tariff, the outputs produced by domestic and foreign producers respectively would be:

1 unit and 15 units

Which of the above distributions is closest to describing the United States?

C

Refer to the above data. The collective willingness of this society to pay for the 2nd unit of this public good is:

$6

Refer to the above diagram for a monopolistically competitive firm. Long-run equilibrium output will be:

D

Alex, Kara, and Susie are the only three people in a community and Alex is willing to pay $20 for the 5th unit of a public good; Kara, $15, and Susie, $25. Government should produce the 5th unit of the public good if the marginal cost is less than or equal to:

$60

Refer to the above diagram. The highest price that buyers will be willing and able to pay for 100 units of this product is:

$60

Refer to the data. At 3 units of output, total variable cost is ____ and total cost is ____.

$60; $210

Which of the following will not hold true for a competitive firm in long-run equilibrium?

P equals AFC

Refer to the above data. At 5 units of output average fixed cost, average variable cost, and average total cost are:

$10, $60, and $70 respectively.

Refer to the above data. If the economy was opened to free trade and the world price of $1 prevailed, the price and quantity sold of this product would be:

$1 and 16 units

Suppose a person pays $80 of annual interest on a loan that has a 5 percent annual interest rate. The loan amount is:

$1,600

Refer to the above diagram. The equilibrium price and quantity in this market will be:

$1.00 and 200

Refer to the above data. What will be the profit-maximizing selling price of the product?

$1.60

Refer to the above diagram. A surplus of 160 units would be encountered if the price was:

$1.60

Answer the question on the basis of the following information: Harry owns a barber shop and charges $6 per haircut. By hiring one barber at $10 per hour the shop can provide 24 haircuts per 8-hour day. By hiring a second barber at the same wage rate the shop can now provide a total of 42 haircuts per day. Refer to the above information. The MRP of the second barber is:

$108

Refer to the above information. The average fixed cost of 3 units of output is:

$13.33

A firm can hire six workers at a wage rate of $8 per hour but must pay $9 per hour to all of its employees to attract a seventh worker. The marginal wage cost of the seventh worker is:

$15

Refer to the above data. The marginal revenue product of the second worker is:

$16

Refer to the above diagram for a monopolistically competitive firm in short-run equilibrium. This firm's profit-maximizing price will be:

$16

Refer to the above diagrams in which figures (a) and (b) show demand curves reflecting the prices Alvin and Elmer are willing to pay for a public good, rather than do without it. The collective willingness to pay for the 1st unit of this public good is:

$18

Refer to the above data. Equilibrium price will be:

$2

Refer to the above data. If the market wage rate is $8 and the firm hires its profit-maximizing number of workers, the firm's total revenue will exceed its total wage payment by:

$20

Refer to the above data. The United States' balance on financial account is a:

$20 billion surplus

Suppose that a business incurred implicit costs of $200,000 and explicit costs of $1 million in a specific year. If the firm sold 4,000 units of its output at $300 per unit, its accounting profits were:

$200,000 and its economic profits were zero.

Refer to the above data. At the profit maximizing level of employment, this firm's total labor cost will be:

$24

Refer to the above information. The marginal revenue product of the second worker is:

$24

Refer to the above data. The U.S. balance on current account is a:

$25 billion deficit

If a U.S. importer can purchase 10,000 British pounds for $20,000, the rate of exchange is:

$2= British pound in the United States

Refer to the above data. At what price does each shoe shine sell?

$3

Refer to the above data. What will be the profit-maximizing wage rate?

$3

Refer to the above data. Assuming that Alpha and Beta are the only two nations in the world, the equilibrium world price of steel must be between:

$3 and $2

Refer to the above data. The domestic equilibrium prices of steel in Alpha and Beta are:

$3 and $2, respectively

Refer to the above data. At the profit maximizing level of employment, this firm's total revenue will be:

$30

Refer to the above data. The U.S. balance on goods and services is a:

$30 billion deficit

Answer the question on the basis of the following information for Manfred's Shoe Shine Parlor. Assume Manfred hires labor, its only variable input, under purely competitive conditions. Shoe shines are also sold competitively. Refer to the above data. If the wage rate is $11 and Manfred's only fixed input is capital, the total cost of which is $30, then what will be his economic profit?

$32

Refer to the above data. If the market wage rate is $8 and the firm hires its profit-maximizing number of workers, the firm's total wage bill (payment) will be:

$32

Refer to the above information. The average total cost of 3 units of output is:

$35

Assume labor is the only variable input and that an additional input of labor increases total output from 72 to 78 units. If the product sells for $6 per unit in a purely competitive market, the MRP of this additional worker is:

$36

Refer to the above data. The total variable cost of producing 5 units is:

$37

Refer to the above data. This firm's product price is:

$4

Refer to the above diagram. If this is a competitive market, price and quantity will move toward:

$40 and 150, respectively.

Suppose the balance on the financial account is -$300 billion and the balance on the capital account is +$5 billion. The size of the current account is:

+$295 billion

Suppose the balance on the financial account is + $200 billion and the balance on the capital account is + $2 billion. The size of the current account is:

-$202 billion

Suppose the balance on the current account is +$50 billion and the balance on the capital account is +$1 billion. The balance on the financial account is:

-$51 billion

Suppose the balance on the current account is +$100 billion and the balance on the capital account is Picture $1 billion. The balance on the financial account is:

-$99 billion

Which of the following Gini ratios indicates the lowest degree of income inequality?

0.31

Which of the following Gini ratios indicates the highest degree of income inequality?

0.78

Refer to the above diagram. At output level Q total cost is:

0BEQ plus BCDE.

Refer to the above diagram. At output level Q total variable cost is:

0BEQ.

Refer to the above diagram, which shows demand and supply conditions in the competitive market for product X. If the initial demand and supply curves are D0 and S0, equilibrium price and quantity will be:

0F and 0C, respectively.

Refer to the above diagram, which shows demand and supply conditions in the competitive market for product X. If supply is S1 and demand D0, then

0F represents a price that would result in a shortage of AC.

Refer to the above list. The outcome in a monopsony labor market is shown by:

1

Answer the question on the basis of the following information for a public good. Pa and Pb are the prices that individuals A and B are willing to pay for the last unit of a public good, rather than do without it. These people are the only two members of society.

3 units

Refer to the above data. What is the marginal product of the sixth worker?

3 units

Refer to the above data. In maximizing its profit, this firm will employ:

3 units of labor

Refer to the above data. If the firm is hiring workers under purely competitive conditions at a wage rate of $22, it will employ:

3 workers

Refer to the above short-run data. The profit-maximizing output for this firm is:

320 units

Answer the question on the basis of the following information. A farmer who has fixed amounts of land and capital finds that total product is 24 for the first worker hired; 32 when two workers are hired; 37 when three are hired; and 40 when four are hired. The farmer's product sells for $3 per unit and the wage rate is $13 per worker. Refer to the above information. What is the farmer's profit-maximizing output?

37

Refer to the above data. How many units of output will this profit-maximizing firm produce?

39

Refer to the above tables. Assume that before specialization and trade, Latalia produced combination C and Trombonia produced combination B. If these two nations now specialize completely based on comparative advantage, the total gains from specialization and trade will be:

4 tons of beans

Refer to the above tables. Which of the following would be feasible terms for trade between Latalia and Trombonia?

4 tons of beans for 1 ton of pork

Refer to the above data. If this good were a private good instead of a public one, the total quantity demanded at a $3 market price would be:

4 units

Refer to the above data. If product price is $75, the firm will produce:

4 units of output

Refer to the above data. If the market wage rate is $8, this firm will employ:

4 workers

Refer to the above data. Assume that before specialization and trade Gamma and Sigma both chose production possibility "C." Now if each specializes according to comparative advantage, the gains from specialization and trade will be:

40 tons of tea

Refer to the above data. If the wage rate is $11, how many workers will Manfred hire to maximize profits?

5

Refer to the above data. If the firm is hiring workers under purely competitive conditions at a wage rate of $10, it will employ:

5 workers

Refer to the above data. The firm will maximize profits (or minimize losses) by employing:

5 workers

Refer to the above information. What percentage of total income is received by the richest quintile?

50

Refer to the above information. The financial account items for Zippo are:

6 and 8

Refer to the above data. With a $1 per unit tariff, the quantities sold by foreign and domestic producers respectively will be:

7 units and 4 units

Refer to the above information. The marginal product of the second worker is:

8

Refer to the above data. If columns (1) and (3) of the demand data shown above are this firm's demand schedule, the profit-maximizing level of output will be:

8 units

The first Pepsi yields Craig 18 units of utility and the second yields him an additional 12 units of utility. His total utility from three Pepsis is 38 units of utility. The marginal utility of the third Pepsi is:

8 units of utility

Refer to the above data. The average product (AP) when two units of labor are hired is:

9

Refer to the above diagram for a monopolistically competitive firm. Long-run equilibrium price will be:

A

If the demand curve for product B shifts to the right as the price of product A declines, then:

A and B are complementary goods.

A merger between a maker of household detergents and a fast food chain would be an example of:

a conglomerate merger

Which of the following statements best illustrates the concept of derived demand?

A decline in the demand for shoes will cause the demand for leather to decline.

Which of the following is a short-run adjustment?

A local bakery hires two additional bakers.

Which of the following would likely reduce income inequality?

A reduction in the number of high school dropouts.

Which of the following statements concerning the relationships between total product (TP), average product (AP), and marginal product (MP) is not correct?

AP continues to rise so long as TP is rising.

Other things equal, if the wage rates paid to a firm's labor inputs were to rise, we would expect the:

AVC, ATC, and MC curves all to rise.

While eating at Alex's "Pizza by the Slice" restaurant, Kara experiences diminishing marginal utility. She gained 10 units of satisfaction from her first slice of pizza consumed, and would only receive 5 units of satisfaction from consuming a second slice. Based on this information we can conclude that:

Alex may have to lower the price to convince Kara to buy a second slice.

Suppose an economist says that "Other things equal, the lower the price of bananas, the greater the amount of bananas purchased." This statement indicates that:

All factors other than the price of bananas (for example, consumer tastes and incomes) are assumed to be constant

Which of the following is an example of market failure?

All of these

Assume that by devoting all of its resources to the production of X, nation Alpha can produce 40 units of X. By devoting all of its resources to Y, Alpha can produce 60Y. Comparable figures for nation Beta are 60X and 40Y. We can conclude that:

Alpha should specialize Y and Beta in X

Refer to the above data. At a world price of $5:

Alpha will want to export 50 units of steel

Which of the following is correct?

Although land has no production cost from society's viewpoint, rental payments are costs to individual producers.

Which of the following is a correct statement?

Although they are generalizations, economic laws are useful because they allow us to predict and therefore control or adjust to events.

Refer to the above data. Item (6) indicates that:

Americans provided a net amount of $15 billion in remittances to the rest of the world.

Which one of the following is not correct?

Antitrust suits can only be originated by the Federal Trade Commission.

Refer to the above short-run data. Which of the following is correct?

Any level of output between 100 and 440 units will yield an economic profit.

Economic profits and losses:

Are essential to the reallocation of resources from less desired to more desired goods

Which of the following is an example of creative destruction?

Automobile production causes the wagon industry to shut down.

Other things equal, if the fixed costs of a firm were to increase by $100,000 per year, which of the following would happen?

Average fixed costs and average total costs would rise.

Refer to the above diagram. The firm's supply curve is the segment of the:

MC curve above its intersection with the AVC curve.

The total output of a firm will be at a maximum where:

MP is zero

Refer to the above diagram. At output level Q total fixed cost is:

BCDE

The given data show that:

Beta is more efficient than Alpha both in catching fish and in producing chips

Refer to the above data. Assuming that Alpha and Beta are the only two nations in the world, at the equilibrium world price:

Beta will export still and Alpha will import steel

Which of the following statements best illustrates the time-value of money concept?

Bob is willing to forgo receiving $100 today in order to receive $110 next month.

Which of the following best illustrates the circular flow model in action?

Bobbie goes to work and builds cars, and uses the income she receives to buy food at the grocery store. Evan buys a new couch; the owner of the furniture store uses some of the money from the sale to pay her supplier, and uses the rest to take her family out to dinner. Boeing experiences a surge in orders for new airplanes, prompting the company to hire more workers. Correct All of these answers illustrate the workings of the circular flow model.

Brinley says that "Gas prices are rising because there aren't enough oil refineries." Katie argues that "Gas prices are rising because of the growing demand for gasoline from China and India." We can conclude that:

Both statements are positive

When a monopolistically competitive firm is in long-run equilibrium:

MR = MC and P> minimum ATC

Refer to the above diagram. Assuming equilibrium price P1, producer surplus is represented by areas:

C+D

Which of the following amended the Clayton Act's prohibition against mergers that substantially lessen competition?

Celler-Kefauver Act of 1950

Refer to the information. Marginal cost is:

Change in TVC/ change in Q

Critics of a single tax on land oppose the idea because:

Changes in land ownership would cause the tax burden to fall unfairly on people who did not receive economic rents.

Which country has the largest share of total world exports?

China

Which one of the following is not one of the so-called G8 nations?

China

Which of the following laws prohibited mergers by stock acquisition if the effect was to lessen competition?

Clayton Act of 1914

Tying contracts are illegal under the:

Clayton Act of 1914.

Which of the following is least likely to violate the Sherman Act or the Clayton Act?

Competitive firms F and G independently charge lower prices to frequent customers than to occasional customers.

Which of the following combinations is plausible, as it relates to a nation's balance of payments?

Current account = $ + 30 billion; capital account = $ - 20 billion; financial account = $ - 10 billion.

Which of the following definitions is correct?

Economic profit = accounting profit - implicit costs.

Which of the following statements is correct?

Economic profits induce firms to enter an industry; losses encourage firms to leave.

Which of the following statements is correct?

Economic rent is a price paid for productive land resources whose supply is perfectly inelastic.

Refer to the above diagram. If the supply of loanable funds is S1 and the demand for loanable funds is D1, the equilibrium interest rate and quantity of funds borrowed will be:

F and A

Refer to the above diagram. If the supply of loanable funds is S0 and the demand for loanable funds is D0, the equilibrium interest rate and quantity of funds borrowed will be:

F and C

Which one of the following is concerned with industrial regulation, as distinct from social regulation?

Federal Communications Commission

The antitrust laws are enforced by the:

Federal Justice Department and the Federal Trade Commission.

Which of the following distinguishes the short run from the long run in pure competition?

Firms can enter and exit the market in the long run, but not in the short run.

All of the following are regulatory commissions dealing with industrial regulation (as distinct from social regulation) except the:

Food and Drug Administration

A significant difference between a monopolistically competitive firm and a purely competitive firm is that the:

Former sells similar, although not identical, products.

On the basis of the above information:

Gamma should export tea to Sigma and Sigma should export pots to Gamma.

In terms of absolute dollar volume, the top 3 leaders in world exports are:

Germany, the United States, and China

Which of the following would most likely increase income inequality?

Greater monopoly power among product sellers.

Refer to the above diagram pertaining to two nations and a specific product. The equilibrium level of exports and imports occurs at:

H, where GB and FC intersect

The economist who advocated a single tax on land was:

Henry George

Ben says that "An increase in the tax on beer will raise its price." Holly argues that "Taxes should be increased on beer because college students drink too much." We can conclude that:

Holly's statement is normative, but Ben's is positive

The antitrust laws are based on the:

Idea that competition leads to greater economic efficiency than does monopoly.

Which of the following is correct?

If demand is elastic, a decrease in price will increase total revenue.

Which of the following is correct?

If the demand for a product is inelastic, a change in price will cause total revenue to change in the same direction.

Which of the following statements is correct?

In the long run purely competitive firms and monopolistically competitive firms earn zero economic profits, while pure monopolies may or may not earn economic profits.

Which of the following statements is not correct?

In the range of prices in which demand is elastic, total revenue will diminish as price decreases.

Which of the following is true concerning purely competitive industries?

In the short run, firms may incur economic losses or earn economic profits, but in the long run they earn normal profits.

Which of the following is correct?

Income is a flow and wealth is a stock concept.

International transactions fall into what two broad categories?

International trade and international asset transactions.

A normative statement is one that:

Is based on value judgements

A monopolistically competitive firm's marginal revenue curve:

Is downsloping and lies below the demand curve.

The marginal revenue curve of a purely competitive firm:

Is horizontal at the market price.

Refer to the above diagram. Other things equal, this economy will achieve the most rapid rate of growth if:

It chooses point A

Which of the following statements applies to a purely competitive producer?

It will not advertise its product.

The short-run supply curve of a purely competitive producer is based primarily on its:

MC curve

Suppose the demand for strawberries rises sharply, resulting in an increased price of strawberries. As it relates to strawberry pickers, we could expect the:

MRP curve to shift to the right

A profit-maximizing firm employs resources to the point where:

MRP=MRC

If a firm is hiring variable resources D and F in imperfectly competitive input markets, it will maximize profits by employing D and F in such quantifies that:

MRPD/MRCD = MRPF/MRCF = 1.

If a firm is a monopsonist in the hiring of both labor and capital, it will obtain the profit-maximizing quantities of labor and capital when:

MRPL/MRCL = MRPC/MRCC = 1.

Which of the following is correct as it relates to cost curves?

Marginal cost intersects average total cost at the latter's minimum point.

Which of the following statements is correct?

Marginal cost is the price or cost of an extra variable input (for example, an additional worker or machine) divided by its marginal product.

Which of the following is correct?

Marginal product rises faster than average product and also falls faster than average product.

Which of the following helps finance the medical expenses of individuals receiving TANF or SSI?

Medicaid

Which of the following terms describes a system of subsidized health insurance available to the aged?

Medicare

Which of the following has been a significant factor in iPods replacing portable CD players?

Most consumers perceive iPod portability and storage to be superior to CD players

Mrs. Arnold is spending all her money income by buying bottles of soda and bags of pretzels in such amounts that the marginal utility of the last bottle is 60 utils and the marginal utility of the last bag is 30 utils. The prices of soda and pretzels are $.60 per bottle and $.40 per bag respectively. It can be concluded that:

Mrs. Arnold should spend more on soda and less on pretzels.

Refer to the above tables. If these two nations specialize on the basis of comparative advantage:

Natalia will produce beans and Trombone will produce pork

Which of the following statements pertains to macroeconomics?

National income grew by 2.7 percent last year

The "rule of reason" indicated that:

Only contracts and combinations that unreasonably restrain trade violate the antitrust laws.

The Clayton Act of 1914:

Outlawed price discrimination, tying contracts, intercorporate stockholding, and interlocking directorates that lessen competition.

Allocative efficiency is achieved when the production of a good occurs where:

P = MC

Which of the following conditions is true for a purely competitive firm in long-run equilibrium?

P = MC = minimum ATC

Refer to the above diagram, where Sd and Dd are the domestic supply and demand for a product and Pc is the world price of that product. If the economy is opened to free trade, the price and quantity sold of this product would be:

Pc and z

Refer to the diagram. Which of the following is a normative statement?

Point C is superior to point B because it is important to enhance the future of society.

Which of the following measurement issues make interpretation of U.S. poverty rates difficult?

Poverty statistics measure income rather than consumption, and some families may be able to consume above the official poverty line.

Refer to the above diagram. A government-set price floor is best illustrated by:

Price C

Which of the following is characteristic of a purely competitive seller's demand curve?

Price and marginal revenue are equal at all levels of output.

Which of the following is not a valid generalization concerning the relationship between price and costs for a purely competitive seller in the short run?

Price must be at least equal to average total cost.

On the basis of the above data we can say that:

Program B is the most efficient on economic grounds.

The Earned Income Tax Credit:

Provides a cash payment to low-income working families if their tax credit exceeds their tax liability.

Refer to the above diagram, where Sd and Dd are the domestic supply and demand for a product and Pc is the world price of that product. With a PcPt per unit tariff, per unit revenue received by domestic and foreign producers respectively will be:

Pt and Pc

Refer to the above diagram, where Sd and Dd are the domestic supply and demand for a product and Pc is the world price of that product. With a per unit tariff in the amount PcPt, price and total quantity sold will be:

Pt and y

An industry comprised of a very large number of sellers producing a standardized product is known as:

Pure competition

In the above diagram the range of diminishing marginal returns is:

Q1Q3

Refer to the above diagram for athletic shoes. The optimal output of shoes is:

Q2

In the above diagram, total product will be at a maximum at:

Q3 units of labor

In a market economy the distribution of output will be determined primarily by:

The quantities and prices of the resources that households supply.

Which of the following made monopoly and restraints of trade criminal offenses against the Federal government?

Sherman Act of 1890

Economic profits in an industry suggest the industry:

Should be larger to better satisfy consumers' desire for the product

Suppose a firm in a purely competitive market discovers that the price of its product is above its minimum AVC point but everywhere below ATC. Given this, the firm:

Should continue producing in the short run, but leave the industry in the long run if the situation persists.

For which of the following income-maintenance programs is aggregate spending the greatest?

Social Security

Which of the following statements is false?

Studies show that developing nations that have relied on import restrictions to protect domestic industries have had higher growth rates than similar nations pursuing more open economic policies.

Use your basic knowledge and your understanding of market structures to answer this question. Which of the following companies most closely approximates a monopolistic competitor?

Subway Sandwiches

Which of the following provides public assistance to those who are blind and otherwise disabled?

Supplemental Security Income (SSI)

What two conditions must hold for a competitive market to produce efficient outcomes?

Supply curves must reflect all costs of production, and demand curves must reflect consumers' full willingness to pay.

Refer to the above data. The United States' balance of capital and financial account is a:

Surplus of $25

Susie buys two goods - rounds of golf and massages. Suppose that the price of a round of golf is $20, and the price of a massage is $30. In a typical week Susie will play two rounds of golf, getting 20 units of satisfaction from the second round. She normally buys three massages each week, with the third giving her 30 units of satisfaction. If she were to buy a fourth massage in a week, it would give her 20 units of satisfaction. If the price of massages is reduced to $15, which of the following outcomes might we expect to occur?

Susie would buy more massages and fewer rounds of golf, as predicted by the substitution effect.

Refer to the information. Average total cost is:

TFC+ TVC/Q

Marginal product is:

The amount an additional worker adds to the firm's total output.

If the demand curve reflects consumers' full willingness to pay, and the supply curve reflects all costs of production, then which of the following is true?

The benefit surpluses shared between consumers and producers will be maximized.

Which of the following statements is correct?

The demand curve for a purely competitive firm is perfectly elastic, but the demand curve for a purely competitive industry is downsloping.

Which of the following best describes the invisible-hand concept?

The desires of resource suppliers and producers to further their own self-interest will automatically further the public interest.

Refer to the above diagrams which pertain to a purely competitive firm producing output q and the industry in which it operates. Which of the following is correct?

The diagrams portray short-run equilibrium, but not long-run equilibrium.

Under what conditions would an increase in demand lead to a lower long-run equilibrium price?

The firms in the market are part of a decreasing-cost industry.

Which of the following measurement issues make interpretation of U.S. poverty rates difficult?

The high cost of living in urban areas tends to result in the understatement of poverty.

Which of the following statements is correct?

The long-run supply curve for a purely competitive increasing-cost industry will be upsloping.

Which of the following is most likely to be an example of monopsony?

The market for major league baseball umpires

Which of the following is correct?

The nominal and the real wage may both fall.

Which of the following generalizations is not correct?

The price elasticity of demand is greater for necessities than it is for luxuries.

Which of the following is a microeconomic statement?

The price of personal computers declined last year.

Which of the following would contribute to a United States balance of payments deficit?

United States tourists travel in large numbers to Europe

Which of the following is correct?

Vertical mergers are more likely to be acceptable under antitrust laws than are horizontal mergers.

Which is correct?

Wealth is less equally distributed than income and therefore increases income inequality.

Refer to the above diagrams. The solid lines are production possibilities curves; the dashed lines are trading possibilities curves. The data suggest that:

West Lothian should specialize in, and export, beer

The production possibilities curves above suggest that:

West Mudville should specialize in, and export, baseball bats.

Which of the following is one of the Five Fundamental Questions?

What goods and services will be produced?

A positive statement is concerned primarily with:

What is

Which of the following gave the Federal Trade Commission responsibility to protect the public against false and misleading advertising?

Wheeler-Lea Act of 1938

In which of the following statements are the terms "demand" and "quantity demanded" used correctly?

When the price of ice cream rose, the quantity demanded of ice cream fell, and the demand for ice cream toppings fell.

Economic systems differ according to which two main characteristics?

Who owns the factors of production, and the methods used to coordinate economic activity.

Refer to the above diagram where curves (a) through (e) are for five different countries. The Gini ratio is:

Zero in country (a) and 1 in country (e)

Refer to the above diagram where curves (a) through (e) are for five different countries. The Gini ratio is lowest in country:

a

A purely competitive seller is:

a "price taker"

Refer to the above diagram. The area that identifies the maximum sum of consumer surplus and producer surplus is:

a + b + c + d.

In the past few years, the demand for donuts has greatly increased. This increase in demand might best be explained by:

a change in buyer tastes

Which of the following will not cause the demand for product K to change?

a change in the price of K

The economic perspective entails:

a comparison of marginal benefits and marginal costs in decision making

Which of the following is a labor resource?

a computer programmer

A monopolistically competitive industry combines elements of both competition and monopoly. It is correct to say that the competitive element results from:

a relatively large number of firms and the monopolistic element from product differentiation.

Economists use the term "demand" to refer to:

a schedule of various combinations of market prices and amounts demanded.

Effective usury laws cause:

a shortage of money in money markets

Refer to the above diagram. A price of $60 in this market will result in:

a surplus of 100 units.

Refer to the above diagrams, which pertain to a purely competitive firm producing output q and the industry in which it operates. The predicted long-run adjustments in this industry might be offset by:

a technological improvement in production methods.

The law of diminishing returns results in:

a total product curve that eventually increases at a decreasing rate.

Suppose Slow Ketchup requires that, as a condition of purchase, all restaurants using its product must buy and make available its new sales product. This arrangement is an example of:

a tying contract

Which of the following is an example of a public good?

a weather warning system

Refer to the above diagram. Assuming equilibrium price P1, consumer surplus is represented by areas:

a+b

Refer to the above diagram. In short-run equilibrium, the monopolistically competitive firm shown will set its price:

above ATC

In the long run, a profit-maximizing monopolistically competitive firm sets it price:

above marginal cost

In the long-run, a profit-maximizing monopolistically competitive firm sets it price:

above marginal cost

In the short run, a profit-maximizing monopolistically competitive firm sets it price:

above marginal cost

In the short-run, a profit-maximizing monopolistically competitive firm sets it price:

above marginal cost

Graphically, producer surplus is measured as the area:

above the supply curve and below the actual price

Refer to the above table. For this economy to produce a total output of 3 units of capital goods and 13 units of consumer goods it must:

achieve economic growth

The view that the antitrust laws need to be strongly enforced to prevent illegal business behaviors, monopolization of markets, and allocative inefficiency is known as the:

active antitrust perspective

Nonprice competition refers to:

advertising, product promotion, and changes in the real or perceived characteristics of a product.

Changes in the equilibrium interest rate will:

affect both the size of the domestic output and the allocation of capital goods among industries.

The real rate of interest is the interest rate:

after adjustment has been made for inflation.

Two major virtues of the market system are that it:

allocates resources efficiently and allows economic freedom.

The equilibrium interest rate:

allocates the available supply of loanable funds to investment projects that have high enough rates of return to justify the borrowing.

The basic purpose of the other-things-equal assumption is to:

allow one to reason about the relationship between variables X and Y without the intrusion of variable Z.

The supply of land is:

almost perfectly inelastic

In a market economy a significant change in consumers' desire for product X will:

alter the profits or losses received by suppliers of product X. cause a reallocation of scarce resources. cause some industries to expand and others to contract. do all of these.

The Celler-Kefauver Act of 1950:

amended the Clayton Act

Marginal resource cost refers to the:

amount by which a firm's total resource cost increases as the result of hiring one more unit of the resource.

Excess capacity refers to the:

amount by which actual production falls short of the minimum ATC output.

Marginal revenue product measures the:

amount by which the extra production of one more worker increases a firm's total revenue.

Refer to the above diagram. If actual production and consumption occur at Q1:

an efficiency loss (or deadweight loss) of b + d occurs.

Refer to the above diagram. If actual production and consumption occur at Q3:

an efficiency loss (or deadweight loss) of e + f occurs.

Which of the following is associated with macroeconomics?

an empirical investigation of the general price level and unemployment rates since 1990

A tariff can best be described as:

an excise tax on an imported good

Which one of the following will not directly affect the U.S. balance on current account?

an increase in U.S. purchases of asset abroad

In the market for loanable funds:

an increase in borrowing for investment will increase the interest rate.

Which of the following will cause the demand curve for product A to shift to the left?

an increase in money income if A is an inferior good.

Purely competitive industry X has constant costs and its product is an inferior good. The industry is currently in long-run equilibrium. The economy now goes into a recession and average incomes decline. The result will be:

an increase in output, but not in the price, of the product.

Refer to the above diagram. Other things equal, an increase of product price would be shown as:

an increase in the steepness of curve (3), an upward shift in curve (2), and upward shift in curve (1).

Refer to the above graph. A move from b to a along labor demand curve D1 would result from:

an increase in the wage rate

Refer to the above diagram. Line (1) reflects the long-run supply curve for:

an increasing-cost industry

Suppose losses cause industry X to contract and, as a result, the prices of relevant inputs decline. Industry X is:

an increasing-cost industry.

Structuralists take the position that:

an industry that is highly concentrated will behave monopolistically.

Suppose a purely competitive, increasing-cost industry is in long-run equilibrium. Now assume that a decrease in consumer demand occurs. After all resulting adjustments have been completed, the new equilibrium price:

and industry output will be less than the initial price and output.

Fixed cost is:

any cost which does not change when the firm changes its output.

The rent paid for the pasture land used to graze cattle would increase if:

any of the above occurred

In the short run the Sure-Screen T-Shirt Company is producing 500 units of output. Its average variable costs are $2.00 and its average fixed costs are $.50. The firm's total costs:

are $1,250

Standard Census data on the distribution of income:

are before taxes in that they do not account for personal income and payroll taxes.

Economic rent refers to the price paid for land and other natural resources that:

are fixed in total supply

Economic theories:

are generalizations bases on a careful observation of facts

The law of diminishing returns indicates that:

as extra units of a variable resource are added to a fixed resource, marginal product will decline beyond some point.

Markets, viewed from the perspective of the supply and demand model:

assume many buyers and many sellers of a standardized product.

the invisible hand concept suggests that:

assuming competition, private and public interests will coincide

Which of the following lists includes only capital resources (and therefore no labor or land resources)?

autos owned by a car rental firm; computers at the car rental agency; the vans that shuffle rental customers to and from the airport.

Refer to the above diagram, which pertains to a purely competitive firm. Curve C represents:

average revenue and marginal revenue.

For most producing firms:

average total costs decline as output is carried to a certain level, and then begin to rise.

If you operated a small bakery, which of the following would be a variable cost in the short run?

baking supplies (flour, salt, etc.)

If a nation's goods exports are $55 billion, while its goods imports are $50 billion, we can conclude with certainty that this nation has a:

balance of trade (goods) surplus

Monopolistic competition resembles pure competition because:

barriers to entry are either weak or nonexistent.

Other things equal, the resource demand curve of an imperfectly competitive seller will:

be less elastic than that of a purely competitive seller.

The demand for loanable funds is downsloping:

because businesses find that more investments are profitable at low interest rates than at high interest rates.

A recent study found that an increase in the Federal tax on beer (and thus an increase in the price of beer) would reduce the demand for marijuana. We can conclude that:

beer and marijuana are complementary goods.

Refer to the above diagrams. The solid lines are production possibilities curves; the dashed lines are trading possibilities curves. The opportunity cost of producing a:

beer in West Lothian is 1/2 a pizza

Refer to the above diagram. Diseconomies of scale:

begin at output Q3.

In short-run equilibrium, the monopolistically competitive firm shown above will set its price:

below ATC

A person should consume more of something when its marginal:

benefits exceeds its marginal cost

Refer to the above diagram for a purely competitive producer. The firm will produce at a loss at all prices:

between P2 and P3

A firm's supply curve is upsloping because:

beyond some point the production costs of additional units of output will rise.

Which of the following occupations is projected to be the fastest growing in the U.S. in terms of percentage increases?

biomedical engineers

The above data indicate that production in:

both Latalia and Trombone is subject to constant opportunity cost

Under pure competition in the long run:

both allocative efficiency and productive efficiency are achieved.

If for a firm P = minimum ATC = MC, then:

both allocative efficiency and productive efficiency are being achieved.

The labor demand curve of an imperfectly competitive seller is downsloping:

both because of diminishing returns and the necessity to lower price to sell more output.

Refer to the above diagram. By producing output level Q:

both productive and allocative efficiency are achieved.

In the United States:

both taxes and transfers decrease income inequality

The MRP curve is the resource demand curve for:

both the purely competitive and imperfectly competitive seller.

Which is an example of a nontariff barrier (NTB)?

box-by-box inspection requirements for imported fruit

In the simple circular flow model:

businesses are sellers of final products

The price elasticity of demand coefficient measures:

buyer responsiveness to price changes

"Consumer sovereignty" means that:

buyers determine what will be produced based on their "dollar votes" for the goods and services offered by sellers.

A major criticism of industrial regulation is that:

by allowing a fair return price, it gives natural monopolists little incentive to contain costs.

Social Security is financed:

by payroll taxes on employees and employers.

The most efficient combination of resources in producing a given output is the combination that:

can be obtained for the smallest money outlay

A perfectly inelastic demand schedule:

can be represented by a line parallel to the vertical axis

A conglomerate merger:

can extend the line of products sold, extend the territories in which products are sold, or combine totally unrelated products.

On the basis of the above information we:

can say that the firm is selling its product in a purely competitive market.

Answer the Question on the basis of the following information. Suppose population A, consisting of Al, Bob, Curt, Doris, and Ellie, receive annual incomes of $5,000, $2,500, $1,250, $750, and $500, respectively. Refer to the above information. Population B, consisting of Fred, George, Holly, Irma, and Joan, receive incomes of $4,000, $3,000, $1,250, $950, and $800, respectively. We:

can say that the income of population B is more equally distributed than that of population A.

Refer to the above diagrams. Assume that only wheat can be grown on the three grades of land shown in Figures a, b, and c. Also assume that identical amounts of labor, capital, and other needed inputs are used in farming each grade of land. On the basis of these three figures we:

can say that the land in Figure c is most productive.

OF the following countries, which one best exhibits the characteristics of a market economy?

canada

Refer to the above data. The profit-maximizing output for this firm:

cannot be determined from the information given.

A purely competitive firm:

cannot earn economic profit in the long run.

The monopolistically competitive firm shown in the above figure:

cannot operate profitably in the short run.

Under a system of freely floating exchange rates, an increase in the international value of a nation's currency will:

cause its imports to rise

If a firm's demand for labor is elastic, a union-negotiated wage increase will:

cause the firm's total payroll to decline

Which of the following is a distinguishing feature of a command system?

central planning

Marginal revenue is the:

change in total revenue associated with the sale of one more unit of output.

The U.S. poverty rate for:

children under 18 years of age is higher than for the overall population.

The study of economics is primarily concerned with:

choices that are made in seeking the best use of resources

Suppose you find that the price of your product is less than minimum AVC. You should:

close down because, by producing, your losses will exceed your total fixed costs.

Differences in the amounts and quality of education and training:

combine with differences in mental, physical, and aesthetic talents to produce income inequality.

Countries engaged in international trade specialize in production based on:

comparative advantage

A nation's official reserves:

compensates for differences in the current and capital and financial accounts.

The regulatory mechanism of the market system is:

competition

A monopsonistic employer:

confronts a marginal resource (labor) cost that is greater than the wage rate.

Antitrust authorities are least likely to take action against:

conglomerate mergers

Which of the following is not a basic characteristic of pure competition?

considerable nonprice competition

Refer to the above diagrams. The solid lines are production possibilities curves; the dashed lines are trading possibilities curves. The data contained in the production possibilities curves are based on the assumption of:

constant costs

Which of the following outcomes is consistent with a purely competitive market in long-run equilibrium?

consumer and producer surplus will be maximized.

Which of the following would not be expected to occur in a purely competitive market in long-run equilibrium?

consumer and producer surplus will be minimized

Refer to the above diagram. Flow (4) represents:

consumer expenditures

If the demand for steak (a normal good) shifts to the left, the most likely reason is that:

consumer incomes have fallen

A shift to the right in the demand curve for product A can be most reasonably explained by saying that:

consumer preferences have changed in favor of A so that they now want to buy more at each possible price.

The dollar votes of consumers ultimately determine the composition of output and the allocation of resources in a market economy. This statement best describes the concept of:

consumer sovereignty

The economic inefficiencies of monopolistic competition may be offset by the fact that:

consumers have increased product variety.

If competitive industry Y is incurring substantial losses, output will:

contract as resources move away from industry Y.

The distribution of wealth in the United States is such that it:

contributes to income inequality

"Because the outputs of many industries are the inputs to other industries, the failure of any single industry to fulfill the output quantities specified in the central plan caused a chain-reaction of adverse repercussions on production." This quotation best identifies the:

coordination problem under central planning

"Under central planning, some group has to decide how to get the necessary inputs produced in the right amounts and delivered to the right places at the right time. This is a nearly impossible task without markets and profits." This quotation best identifies the:

coordination problem under central planning

Studies show that:

costs of trade barriers exceed their benefits, creating an efficiency loss for society.

Kara was out jogging and despite being tired, decided to run one more mile. Based on her actions, economists would conclude that Kara:

decided that the marginal benefit of running one more mile would outweigh the cost of the additional mile.

The Sherman Act:

declared monopoly and restraints of trade to be illegal.

Other things equal, we would expect the labor demand curve of a monopolistic seller to:

decline more rapidly than that of a purely competitive seller.

Refer to the above data. Suppose that entry into the industry changes this firm's demand schedule from columns (1) and (3) shown above to columns (2) and (3). Economic profit will:

decline to zero

Average fixed cost:

declines continually as output increases.

If the demand for farm products is price inelastic, a good harvest will cause farm revenues to:

decrease

The price elasticity of demand for beef is about 0.60. Other things equal, this means that a 20 percent increase in the price of beef will cause the quantity of beef demanded to:

decrease by approximately 12 percent

Other things equal, an increase in the equilibrium interest rate will:

decrease purchases of capital goods and reduce R&D spending.

An increase in the price of product A will:

decrease the marginal utility per dollar spent on A

Refer to the above diagram. If line c represents the distribution of income before taxes and transfers and line b represents the distribution after taxes and transfers, then taxes and transfers have:

decreased the Gini ratio

Refer to the above data. Zabella's balance on financial account shows a:

deficit of $10 billion

Refer to the above data. Zabella's balance on capital and financial account shows a:

deficit of $5 billion

If X is a normal good, a rise in money income will shift the:

demand curve for X to the right.

If Z is an inferior good, an increase in money income will shift the:

demand curve for Z to the left.

The marginal revenue product (MRP) of land declines as more land is brought into use. As a result the:

demand curve for land is downsloping

Diminishing marginal utility explains why:

demand curves are downsloping.

The state legislature has cut Gigantic State University's appropriations. GSU's Board of Regents decides to increase tuition fees to compensate for the loss of revenue. The board is assuming that the:

demand for education at GSU is inelastic

If the price of hand calculators falls from $10 to $9 and, as a result, the quantity demanded increases from 100 to 125, then:

demand is elastic

For a linear demand curve:

demand is elastic at high prices

Suppose Aiyanna's Pizzeria currently faces a linear demand curve and is charging a very high price per pizza and doing very little business. Aiyanna now decides to lower pizza prices by 5 percent per week for an indefinite period of time. We can expect that each successive week:

demand will become less price elastic

Refer to the above diagrams, which pertain to monopolistically competitive firms. Long-run equilibrium is shown by:

diagram a only

Refer to the above diagrams, which pertain to monopolistically competitive firms. A short-run equilibrium entailing economic profits is shown by:

diagram b only

Refer to the above diagrams, which pertain to monopolistically competitive firms. Short-run equilibrium entailing economic loss is shown by:

diagram c only

One cause of income inequality in the United States is:

differences in preferences for market work relative to nonmarket activities as well as differences in preferences for types of work.

The automobile, household appliance, and automobile tire industries are all illustrations of:

differentiated oligopoly

Which of the following is an example of a labor-intensive commodity?

digital cameras

The MB curves in the above diagram slope downward because of the law of:

diminishing marginal utility

The MC curves in the above diagram slope upward because of the law of:

diminishing returns

The relationship between quantity supplied and price is _____ and the relationship between quantity demanded and price is ____.

direct; inverse

Some economists advocate taxes on land because such taxes:

do not affect the supply of land

A unique characteristic of taxes on economic rents is that such taxes:

do not lead to a reallocation of the resource

The total-revenue test for elasticity:

does not apply to supply because price and quantity are directly related.

Refer to the above diagram for a monopolistically competitive producer. This firm is experiencing:

excess capacity of DE

In his book Progress and Poverty, Henry George argued that:

economic rent could be heavily taxed without impairing the supply of land or therefore the productive capacity of the economy.

Refer to the diagram. At the profit-maximizing output, total profit is:

efbc

Refer to the above diagram. If actual production and consumption occur at Q2:

efficiency is achieved

When the elasticity coefficient for resource demand is greater than one, resource demand is:

elastic

Suppose the above total revenue curve is derived from a particular linear demand curve. That demand curve must be:

elastic for price increases that reduce quantity demanded from 4 units to 3 units.

The price elasticity of demand of a straight-line demand curve is:

elastic in high-price ranges and inelastic in low-price ranges.

Suppose the United States eliminates high tariffs on German bicycles. As a result, we would expect:

employment to decrease in the U.S. bicycle industry.

Property rights are important because they

encourage cooperation by improving the chances of mutually agreeable transactions

The competitive market system:

encourages innovation because successful innovators are rewarded with economic profits.

Private property:

encourages owners to maintain or improve their property, so as to preserve or enhance value.

Barter:

entails the exchange of goods for goods.

Innovation lagged in the centrally planned economies because:

enterprises resisted innovation in fear that their production targets would be raised

Marginal cost:

equals both average variable cost and average total cost at their respective minimums.

A producer's minimum acceptable price for a particular unit of a good:

equals the marginal cost of producing the particular unit

In long-run equilibrium both purely competitive and monopolistically competitive firms will:

equate marginal cost and marginal revenue.

The diamond-water paradox arises because:

essential goods may be cheap while nonessential goods may be expensive.

Usury laws:

establish a legal ceiling on interest rates

In the long-run, the price charged by a monopolistically competitive firm seeking to maximize profit will:

exceed MC, but equal ATC

Under the managed floating system of exchange rates:

exchange rates are essentially flexible, but governments intervene to offset disorderly fluctuations in rates.

A profit-maximizing firm will:

expand employment if marginal revenue product exceeds marginal resource cost.

if competitive industry Z is making substantial economic profit, output will:

expand in industry Z, as more resources will move to that industry.

Economic profits are calculated by subtracting:

explicit and implicit costs from total revenue.

In a nation's balance of payments, which one of the following items is always recorded as a positive entry?

exports of services

An important similarity between a monopolistically competitive firm and a pure monopolist is that both:

face demand curves which are less than perfectly elastic.

Economic resources are also called:

factors of production

If production is occurring where marginal cost exceeds price, the purely competitive firm will:

fail to maximize profit and resources will be overallocated to the product.

If the nominal wage rises by 4 percent, and the price level rises by 7 percent, the real wage will:

fall by 3 percent

Refer to the above data. If the price in this market was $4:

farmers would not be able to sell all their wheat

Which of the following groups has the highest poverty rate?

female-headed households

If the equilibrium exchange rate changes so that fewer dollars are needed to buy a South Korean won, then:

fewer U.S. goods and services will be demanded by the South Koreans.

Refer to the above information. Zippo has a:

financial account surplus

The general rule for hiring any input (say, labor) in the profit-maximizing amount is MRC = MRP. This rule takes the special form W = MRP (where W is the wage rate) when the:

firm is hiring labor under purely competitive conditions

The legal cartel theory of regulation argues that:

firms in certain industries want to be regulated rather than face the rigors of competition.

Refer to the above diagrams which pertain to a purely competitive firm producing output q and the industry in which it operates. In the long run we should expect:

firms to leave the industry, market supply to fall, and product price to rise.

The monopolistic competition model assumes that:

firms will engage in nonprice competition

The short run is characterized by:

fixed plant capacity

Which of the following is a noncash transfer?

food stamps

The "coincidence of wants" problem associated with barter refers to the fact that:

for exchange to occur each seller must have a product that some buyer wants

In the U.S. balance of payments, foreign purchases of assets in the United States are a:

foreign currency inflow

Most demand curves are relatively elastic in the upper-left portion because the original price:

from which the percentage price change is calculated is large and the original quantity from which the percentage change in quantity is calculated is small.

Which of the following is most likely to be a variable cost?

fuel and power payments

Which of the following lists of exchange-rate systems is arranged in proper historical order, from earliest to most current?

gold standard, Bretton Woods system, managed float

Refer to the above diagram. Flow (3) represents:

goods and services

A price floor means that:

government is imposing a minimum legal price that is typically above the equilibrium price.

Which of the following is not a characteristic of the market system?

government ownership of major industries.

The term laissez-faire suggests that:

government should not interfere with the operation of the economy.

Each of the following contributes to income inequality except:

government transfers

Each of the following has contributed to growing income inequality in the United States since 1970 except:

government transfers

Price elasticity of demand is generally:

greater in the long run than in the short run

A significant benefit of monopolistic competition compared with pure competition is:

greater product variety

Accounting profits are typically:

greater than economic profits because the former do not take implicit costs into account.

If a demand for a product is elastic, the value of the price elasticity coefficient is:

greater than one

If the price of capital declines, the consequent output effect would be:

greater, the more elastic the demand for the product

If you owned a small farm, which of the following would most likely be a fixed cost?

hail insurance

Refer to the above diagrams. The firm:

has a constant marginal resource cost of $5

Prashanth decides to buy a $75 ticket to a particular New York professional hockey game rather than a $50 ticket for a particular Broadway play. We can conclude that Prashanth:

has a higher "marginal utility to price ratio" for the hockey game than for the play.

For a purely competitive firm total revenue:

has all of these characteristics.

The long-run trend of real wages:

has been upward

Unlike a private good, a public good:

has benefits available to all, including non payers

Overall, economists believe that deregulation of industries formerly subjected to industrial regulation:

has produced large net benefits for consumers and society.

Assume a purely competitive increasing-cost industry is initially in long-run equilibrium and that an increase in consumer demand occurs. After all economic adjustments have been completed product price will be:

higher and total output will be larger than originally.

The less elastic a monopolistic competitor's long-run demand curve, the:

higher its price relative to that of a pure competitor having the same cost curves.

To say that land rent performs no incentive function means that:

higher rental payments will not bring forth a larger quantity of land

Assuming labor forces of equal size, the production possibilities curves above suggest that workers in West Mudville will have:

higher wages than workers in East Mudville both before and after trade.

A monopolistically competitive firm has a:

highly elastic demand curve

Answer the question on the basis of the following information: Harry owns a barber shop and charges $6 per haircut. By hiring one barber at $10 per hour the shop can provide 24 haircuts per 8-hour day. By hiring a second barber at the same wage rate the shop can now provide a total of 42 haircuts per day. Refer to the above information. Harry should:

hire the second barber because he will add $28 to profits.

Refer to the above data. If this firm can hire as few or many workers as it wants at $8, it is:

hiring labor in a purely competitive labor market.

A firm hiring labor in a perfectly competitive labor market faces a:

horizontal labor supply curve and downsloping labor demand curve.

The labor supply curve facing a purely competitive employer is __________ whereas the labor supply curve facing a monopsonist is _________.

horizontal; upsloping

The simple circular flow model shows that:

households are on the selling side of the resource market and on the buying side of the product market.

The supply curve of loanable funds is upsloping because:

households are willing to save more at high interest rates than they are at low interest rates.

Suppose that two firms in an industry that has a Herfindahl index of 1,000 announce a merger. The U.S. Justice Department concludes the merger will boost the index to 1,050. The antitrust authorities will most likely:

ignore this merger because of the relatively small size of, and increase in, the Herfindahl index.

Interlocking directorates are:

illegal under provisions of the Clayton Act of 1914.

Even though local newspapers are very inexpensive, people rarely buy more than one of them each day. This fact:

implies that, for most people, the marginal benefit of reading a second newspaper is less than the marginal cost.

Refer to the above diagram pertaining to two nations and a specific product. In equilibrium, the nation represented by lines FA and FC will:

import H from the country represented by lines GB and GD

Country A limits other nation's exports to Country A to 1,000 tons of coal annually. This is an example of a(n):

import quota

Suppose the United States sets a limit on the number of tons of sugar that can be imported each year. This is an example of a(n):

import quota

Increases in the productivity of labor result partly from:

improvements in technology

The MR = MC rule applies:

in both the short run and the long run.

To economists, the main difference between the short run and the long run is that:

in the long run all resources are variable, while in the short run at least one resource is fixed.

A nation's capital and financial account:

includes both inpayments and outpayments.

When the price of a product increases, a consumer is able to buy less of it with a given money income. This describes the:

income effect

The movement of individuals and households from one income quintile to another over time is called:

income mobility

Refer to the above diagram. Line (1) reflects a situation where resource prices:

increase as industry output expands

Refer to the diagram, which shows demand and supply conditions in the competitive market for product X. A shift in the demand curve from D0 to D1 might be caused by a(n):

increase in the price of complementary good Y.

When the price of oil declines significantly, the price of gasoline also declines. The latter occurs because of a(n):

increase in the supply of gasoline.

Marginal revenue product (MRP) of labor refers to the:

increase in total revenue resulting from the hire of one more unit of labor

The exercise of market power by suppliers in resource markets tends to:

increase income inequality by raising incomes of those able to "rig the market."

A decline in the price of resource A will:

increase the demand for complementary resource B.

Other things equal, an increase in the productivity of capital goods will:

increase the demand for loanable funds and increase the equilibrium interest rate.

An increase in consumer desire for strawberries is most likely to:

increase the number of strawberry pickers needed by farmers

A protective tariff will:

increase the price and sales of domestic producers

If the price elasticity of demand for a product is 2.5, then a price cut from $2.00 to $1.80 will:

increase the quantity demanded by about 25 percent.

If the price elasticity of demand for a product is unity, a decrease in price will:

increase the quantity demanded, but total revenue will be unchanged.

If a purely competitive constant-cost industry is realizing economic profits, we can expect industry supply to:

increase, output to increase, price to decrease, and profits to decrease.

Since 1980 the difference between the earnings of college graduates and high school graduates has:

increased, thereby increasing income inequality.

Refer to the above diagram. Suppose that the demand for loanable funds is D0 and the supply of loanable funds initially is S0. If the supply of loanable funds declines to S1, the equilibrium interest rate will:

increases from F to G

A lower equilibrium interest rate:

increases investment, increases total spending, and increases total output.

A government subsidy to the producers of a product:

increases product supply

Refer to the above diagram for a monopolistically competitive producer. If this firm were to realize productive efficiency, it would:

incur a loss

Broadly defined, competition involves:

independently acting buyers and sellers and freedom to enter or leave markets.

The incentive function of prices:

indicates that price increases bring forth more of a resource.

The long-run average total cost curve:

indicates the lowest unit costs achievable when a firm has had sufficient time to alter plant size.

A demand curve:

indicates the quantity demanded at each price in a series of prices.

purposeful behavior suggests that:

individuals may make different choices because of different desired outcomes

The invisible hand promotes society's interests because:

individuals pursuing their self-interest will try to produce goods and services that people in society want and are willing to purchase.

Where there is natural monopoly, government is most likely to implement:

industrial regulation

The equality-efficiency tradeoff suggests that:

inefficiencies result when incentives to produce are reduced.

If a 10 percent wage increase in a particular labor market results in a 5 percent decline in employment in that market, labor demand is:

inelastic

If the University Chamber Music Society decides to raise ticket prices to provide more funds to finance concerts, the Society is assuming that the demand for tickets is:

inelastic

When the elasticity coefficient for resource demand is less than one, resource demand is:

inelastic

Suppose that the above total revenue curve is derived from a particular linear demand curve. That demand curve must be:

inelastic for price declines that increase quantity demanded from 6 units to 7 units.

College students living off-campus frequently consume large amounts of ramen noodles and boxed macaroni and cheese. When they finish school and start careers, their consumption of both goods frequently declines. This suggests that ramen noodles and boxed macaroni and cheese are:

inferior goods

If the United States has full employment and the dollar dramatically depreciates in value, we can expect (other things equal):

inflation to occur

The main function of the entrepreneur is to:

innovate

Entrepreneurs in purely competitive industries:

innovate to lower operating costs and generate short-run economic profits.

A decreasing-cost industry is one in which:

input prices fall or technology improves as the industry expands.

Refer to the above diagram. At output level Q average fixed cost:

is measured by both QF and ED.

Refer to the diagram. The profit-maximizing output:

is n

Refer to the above diagram. The monopolistically competitive firm shown:

is realizing an economic profit

Price floors and ceiling prices:

interfere with the rationing function of prices

A function of the Federal Trade Commission is to:

investigate instances of faulty and misleading advertising.

The process of producing and accumulating capital goods is called:

investment

The XYZ Corporation can make a real (inflation-adjusted) return on an investment of 9 percent. The nominal rate of interest is 13 percent and the rate of inflation is 7 percent. We can conclude that the:

investment will be profitable

Refer to the above diagram showing the average total cost curve for a purely competitive firm. At the long-run equilibrium level of output, this firm's total cost:

is $400

Refer to the above diagram showing the average total cost curve for a purely competitive firm. At the long-run equilibrium level of output, this firm's total revenue:

is $400

Refer to the above diagrams. The profit-maximizing firm's total wage cost:

is 0Wbc

Refer to the above diagrams. The profit-maximizing firm's total revenue:

is 0abc

Refer to the above data. The marginal product of the fourth worker:

is 5

Refer to the above tables. In Latalia the domestic real cost of 1 ton of pork:

is 5 tons of beans

Refer to the above diagrams. At the profit-maximizing level of employment for this firm, the amount available to pay to nonlabor resources:

is Wab

Refer to the above diagrams. The firm:

is a "wage taker"

Income:

is a flow concept

The Gini ratio:

is a numerical measure of the overall dispersion of income in a nation.

An economic system:

is a particular set of institutional arrangements and a coordinating mechanism used to respond to the economizing problem.

Price fixing:

is a per se violation of the antitrust laws

An economic hypothesis

is a possible explanation of causes and effect

According to economists, economic self- interest:

is a reality that underlies economic behavior

If there is a surplus of a product, its price:

is above the equilibrium level

Refer to the above diagram. Minimum efficient scale:

is achieved at Q1

A market:

is an institution that brings together buyers and sellers.

Microeconomics:

is concerned with individual economic units and specific markets.

The MRP curve for labor:

is downsloping and shows the relationship between wage rates and the quantity of labor demanded.

The price of product X is reduced from $100 to $90 and, as a result, the quantity demanded increases from 50 to 60 units. Therefore demand for X in this price range:

is elastic

The federal Trade Commission

is empowered to file antitrust suits

Unemployment:

is illustrated by a point inside the production possibilities curve

In the short run, a purely competitive seller will shut down if product price:

is less than AVC

Henry George advocated a single tax on:

land

Assume the XYZ Corporation is producing 20 units of output. It is selling this output in a purely competitive market at $10 per unit. Its total fixed costs are $100 and its average variable cost is $3 at 20 units of output. This corporation:

is realizing an economic profit of $40.

Consumer surplus:

is the difference between the maximum prices consumers are willing to pay for a product and the lower equilibrium price.

Producer surplus:

is the difference between the minimum prices producers are willing to accept for a product and the higher equilibrium price.

The MRP curve for labor:

is the firm's labor demand curve

Income mobility:

is the movement of individuals and households from one income quintile to another over time.

The utility of a good or service

is the satisfaction or pleasure one gets from consuming it

A nation's export supply curve for a specific product:

is upsloping

Refer to the above diagram showing the average total cost curve for a purely competitive firm. At the long-run equilibrium level of output, this firm's economic profit:

is zero

The use of money contributes to economic efficiency because:

it promotes specialization by overcoming the problem with barter

According to some supporters of the minimum wage, it has very small or even nonexistent negative employment effects because:

it reduces turnover among minimum wage workers, prompts employers to use them more efficiently, and thus raises their average productivity.

Suppose that Dairy Barn Foods produces a regular sour cream with 10 grams of fat per serving, and a "low fat" sour cream with only 5 grams of fat per serving (assume that this is still considered a lot of fat to consume per serving). According to prospect theory, how should Dairy Barn promote its "low fat" sour cream?

it should advertise that the "low fat" sour cream has only "half the fat" of the regular sour cream.

If a purely competitive firm shuts down in the short run:

it will realize a loss equal to its total fixed costs.

If government set a maximum price of $45 in the above market:

it would create neither a shortage nor a surplus.

In the theory of comparative advantage, a good should be produced in that nation where:

its cost is least in terms of alternative goods that might otherwise be produced.

If a firm decides to produce no output in the short run, its costs will be:

its fixed costs

The current account in a nation's balance of payments includes:

its goods exports and imports, and its services exports and imports

Which of the following is not included in the current account of a nation's balance of payments?

its purchases of real assets abroad

Refer to the above data. If this demand schedule were graphed, we would find that:

its slope is constant throughout

The view that the antitrust laws should be enforced relatively leniently because of the tendency for monopoly power to erode over time is known as the:

laissez-faire perspective on antitrust

Which of the following groups has the lowest poverty rate?

married-couple families

In long-run equilibrium, purely competitive markets:

maximize the sum of consumer surplus and producer surplus.

When a firm is maximizing profit it will necessarily be:

maximizing the difference between total revenue and total cost.

In the short-run, the price charged by a monopolistically competitive firm attempting to maximize profits:

may be either equal to ATC, less than ATC, or more than ATC.

Tariffs:

may be imposed either to raise revenue (revenue tariffs) or to shield domestic producers from foreign competition (protective tariffs).

Marginal product:

may initially increase, then diminish, and ultimately become negative.

The law of increasing opportunity costs:

may limit the extent to which a nation specializes in producing a particular product.

Monopolistically competitive firms:

may realize either profits or losses in the short run, but realize normal profits in the long run.

If consumer incomes increase, the demand for product X:

may shift either to the right or left

Using antitrust law to split up an unregulated natural monopoly into several competing firms:

might either increase product price or reduce product price.

Which of the following is not considered by economists to be an economic resources?

money

Which of the following would not be classified as an economic resource by economists?

money in a business checking account

Money is not an economic resource because:

money, as such, does not produce anything

The restaurant, legal assistance, and clothing industries are each illustrations of:

monopolistic competition

Product variety is likely to be greater in:

monopolistic competition than in pure competition.

An industry comprised of 40 firms, none of which has more than 3 percent of the total market for a differentiated product is an example of:

monopolistic competition.

Refer to the above data. Suppose that entry into this industry changes this firm's demand schedule from columns (1) and (3) shown above to columns (2) and (3). We can conclude that this industry is:

monopolistically competitive

Monopolistically competitive industries are inefficient because:

monopolistically competitive industries are overpopulated with firms whose plants are underutilized.

Economic profit is most closely associated with:

monopoly, innovation, and uninsurable risks

The economic term for a firm that is the sole buyer in a market is:

monopsonist

A change in an input price will alter both production costs and the profit-maximizing output. Thus a decline in the price of capital will reduce production costs, increase the profit-maximizing output, and thereby increase the demand for labor. This describes the:

output effect

Some economists have criticized standard government figures on income inequality, arguing that these data:

overstate the degree of income inequality by failing to include noncash transfers as income.

Economic cost can best be defined as:

payments that must be received by resource owners to insure the resources' continued supply.

Purposeful behavior means that:

people weigh costs and benefits to make decisions

Conspiracies to fix prices are:

per se violations of the antitrust laws.

The basic formula for the price elasticity of demand coefficient is:

percentage change in quantity demanded/percentage change in price

Elasticity of resource demand is measured by the:

percentage change in resource quantity demanded divided by the percentage change in resource price.

A firm can sell as much as it wants at a constant price. Demand is thus:

perfectly elastic

A firm operating in a purely competitive resource market faces a resource supply curve that is:

perfectly elastic

Refer to the above data. The labor supply curve facing firms is:

perfectly elastic

The demand schedule or curve confronted by the individual purely competitive firm is:

perfectly elastic

If quantity demanded is completely unresponsive to price changes, demand is:

perfectly inelastic

The total supply of land is:

perfectly inelastic

Specialization in production is economically beneficial primarily because it:

permits the production of a larger output with fixed amounts of resources

The scarcity problem:

persists because economic wants exceed available productive resources

If discrimination based on gender and race was eliminated, we would expect the:

personal distribution of income to become more equal.

For economists, the word "utility" means

pleasure of satisfaction

The Lorenz Curve:

plots graphically the distribution of income

In which of these continuums of degrees of competition (highest to lowest) is oligopoly properly placed?

pure competition, monopolistic competition, oligopoly, pure monopoly

"Economics is concerned with how individuals, institutions, and society make optimal choices under conditions of scarcity." This statement is:

positive and correct

When total product is increasing at a decreasing rate, marginal product is:

positive and decreasing

When total product is increasing at an increasing rate, marginal product is:

positive and increasing

"Macroeconomics is the part of economics concerned with individual units such as a person, a household, a firm, or an industry." This statement is:

positive, but incorrect

The equality-efficiency tradeoff refers to:

possible conflicts between the goals of economic efficiency and greater income equality.

Which of the following occupations is among the ten projected most rapidly declining U.S. occupations in terms of percentage increases?

postal service workers

Refer to the above diagram. A government-set price ceiling is best illustrated by:

price A

Refer to the above diagram. A government price support program to aid farmers is best illustrated by:

price C

If a firm is confronted with economic losses in the short run, it will decide whether or not to produce by comparing:

price and minimum average variable cost

The demand curve shows the relationship between:

price and quantity demanded

The law of demand states that, other things equal:

price and quantity demanded are inversely related.

The supply curve shows the relationship between:

price and quantity supplied.

In the above market, economists would call a government-set maximum price of $40 a:

price ceiling

Which of the following is not characteristic of long-run equilibrium under monopolistic competition?

price equals minimum average total cost

Which of the following is directly illegal under the Sherman Act?

price fixing

Resources are efficiently allocated when production occurs where:

price is equal to marginal cost.

In the short run a purely competitive seller will shut down if:

price is less than average variable cost at all outputs.

The purely competitive employer of resource A will maximize the profits from A by equating the:

price of A will the MRP of A

A decrease in the demand for recreational fishing boats might be caused by an increase in the:

price of outboard motors

In which of the following instances will total revenue decline?

price rises and demand is elastic

Which of the following is not a characteristic of pure competition?

price strategies by firms

Refer to the above data. With the demand schedule shown above by columns (2) and (3), in long-run equilibrium:

price will equal average total cost

For a monopolistically competitive firm in long-run equilibrium:

price will equal average total cost.

In which of the following cases will total revenue increase?

prie rises and demand is inelastic

The market system does not produce public goods because:

private firms cannot stop consumers who are unwilling to pay for such goods from benefiting from them.

Market failure is said to occur whenever:

private markets do not allocate resources in the most economically desirable way.

Refer to the diagram. At P3, this firm will:

produce 40 units and incur a loss

A firm finds that at its MR = MC output, its TC = $1,000, TVC = $800, TFC = $200, and total revenue is $900. This firm should:

produce because the resulting loss is less than its TFC

A firm finds that at its MR = MC output, its TC = $1,000, TVC = $800, TFC = $200, and total revenue is $900. This firm should:

produce because the resulting loss is less than its TFC.

The law of supply indicates that, other things equal:

producers will offer more of a product at high prices than at low prices.

If products were in short or surplus supply in the Soviet Union:

producers would not react because no price or profit signals occurred.

In the long run a monopolistically competitive firm:

produces where P=ATC

Refer to the given data. The domestic opportunity cost of:

producing a ton of chips in Beta is 6 tons of fish.

In which of the following industry structures is the entry of new firms the most difficult?

pure monopoly

A firm is producing an output such that the benefit from one more unit is more than the cost of producing that additional unit. This means the firm is:

producing less output than allocative efficiency requires.

Refer to the above graphs. Stanville has a comparative advantage in producing:

product B

A monopolistically competitive industry combines elements of both competition and monopoly. The monopoly element results from:

product differentiation

On a per unit basis economic profit can be determined as the difference between:

product price and average total cost.

The fact that the major indicator of enterprise success in the Soviet Union and pre-reform China was the quantity of output implied that:

product quality was neglected

In terms of the circular flow diagram, businesses obtain revenue through the _____ market and make expenditures in the _____ market.

product; resource

in terms of the circular flow diagram, households make expenditures in the _____ market and receive income through the _____ market.

product; resources

Enterprise managers and workers in the Soviet Union often resisted innovations in production methods because:

production targets were often increased when innovation occurred

The location of the product supply curve depends on the:

production technology

According to Emerson: "Want is a growing giant whom the coat of Have was never large enough to cover." According to economists, "Want" exceeds "Have" because:

productive resources are limited

Employers will hire more units of a resource if the:

productivity of the resource increases

In an oligopolistic market:

products may be standardized or differentiated.

Refer to the above diagram for a monopolistically competitive firm in short-run equilibrium. This firm will realize an economic:

profit of $480

Suppose that a business incurred implicit costs of $500,000 and explicit costs of $5 million in a specific year. If the firm sold 100,000 units of its output at $50 per unit, its accounting:

profits were zero and its economic losses were $500,000.

Assume that a restaurant is hiring labor in an amount such that the MRC of the last worker is $16 and her MRP is $12. On the basis of this information we can say that:

profits will be increased by hiring fewer workers

Excise taxes on imported goods that help shield domestic producers of the good are called:

protective tariffs

"International trade" refers to:

purchasing or selling currently produced goods or services across an international border.

A production possibilities curve illustrates:

scarcity

in deciding whether to study for an economics quiz or go to a movie, one is confronted by the idea(s) of:

scarcity and opportunity costs

Households and businesses are:

sellers in the resource and product markets respectively

A government may be able to reduce the international value of its currency by:

selling its currency in the foreign exchange market.

Refer to the above data. This firm is:

selling its product in a purely competitive market

Refer to the above data. Marginal product becomes negative with the hiring of the __________ unit of labor.

seventh

According to the concept of the "invisible hand," if Susie opens and operates a profitable childcare center, then:

she has served society's interests by providing a desired good or service.

Refer to the above diagram. A decrease in demand is depicted by a:

shift from D2 to D1.

Refer to the above graph. Other things equal, an increase in labor productivity would cause a:

shift from D2 to D3

Refer to the above graph. Other things equal, a decrease in the price of a substitute resource would cause a:

shift from D2 to D3 assuming the output effect exceeds the substitution effect.

Refer to the above graph. Other things equal, an increase in the price of substitute resource would cause a:

shift from D2 to D3 assuming the substitution effect exceeds the output effect.

Refer to the above graph. Other things equal, an increase in the price of a complementary resource would cause a:

shift from D3 to D2

Refer to the above diagram. A decrease in supply is depicted by a:

shift from S2 to S1.

A decrease in the price of digital cameras will:

shift the demand curve for memory cards to the right.

An improvement in production technology will:

shift the supply curve to the right.

If some firms leave a monopolistically competitive industry, the demand curves of the remaining firms will:

shift to the right

If the price of product L increases, the demand curve for close-substitute product J will:

shift to the right

Refer to the above diagram. A price of $20 in this market will result in a:

shortage of 100 units

A competitive employer is using labor in such an amount that labor's MRP is $10 and its wage rate is $8. This firm:

should hire more labor because this will increase profits

Refer to the given data. Beta:

should specialize in catching fish and trade with Alpha for chips

A nation's import demand curve for a specific product:

shows the amount of the product it will import at prices below its domestic price.

The economic function of profits and losses is to:

signal that resources should be reallocated

A demand curve for a public good is determined by:

summing vertically the individual demand curves for the public good

Refer to the above diagram which is a rectangular hyperbola, that is, a curve such that each rectangle drawn from any point on the curve will be of identical area. In comparing the price elasticity and the slope of this demand curve we can conclude that the:

slope of the curve varies, but its elasticity is constant.

The labor demand curve of a purely competitive seller:

slopes downward because of diminishing marginal productivity.

The labor demand curve of a purely competitive seller:

slopes downward because the marginal product of successive workers declines.

The larger the coefficient of price elasticity of demand for a product, the:

smaller the resulting price change for an increase in supply.

Economics may best be defined as the

social science concerned with how individuals, institutions, and society make optimal choices under conditions of scarcity.

Refer to the above diagram for athletic shoes. if the current output of shoes is Q1, then:

society would consider additional units of shoes to be more valuable than alternative uses of those resources.

A leftward shift of a product supply curve might be caused by:

some firms leaving an industry

If at the MC = MR output, AVC exceeds price:

some firms should shut down in the short run.

If all monopolistically competitive firms in the industry have profit circumstances similar to the firm shown above:

some firms will exit the industry

Which of the following is not correct? A typical production possibilities curve:

specifies how much of each product society should produce.

In answering the question, assume a graph in which dollars are measured on the vertical axis and output on the horizontal axis.

straight line, parallel to the horizontal axis.

In answering the question, assume a graph in which dollars are measured on the vertical axis and output on the horizontal axis.

straight, upsloping line.

In effect, tariffs on imports are:

subsidies for domestic producers

In 2007, the price of oil increased, which in turn caused the price of natural gas to rise. This can best be explained by saying that oil and natural gas are:

substitute goods and the higher price for oil increased the demand for natural gas.

A firm will employ more of an input whose relative price has fallen and, conversely, will use less of an input whose relative price has risen. Thus a fall in the price of capital will increase the relative price of labor and thereby reduce the demand for labor. This describes the:

substitution effect

Total utility may be determined by:

summing the marginal utilities of each unit consumed.

A fundamental difference between the command system and the market system is that, in command systems:

the division of output is decided by central planning rather than by individuals operating freely through markets.

The income and substitution effects account for:

the downward sloping demand curve.

Which of the following is not characteristic of the demand for a commodity that is elastic?

the elasticity coefficient is less than one

Macroeconomics approaches the study of economics from the viewpoint of:

the entire economy

The above diagram portrays:

the equilibrium position of a competitive firm in the long run.

The diagram portrays:

the equilibrium position of a competitive firm in the long run.

Answer the question on the basis of the data contained in the following table. Assume that the firm is hiring labor in a purely competitive market. The above data reveal that:

the firm is selling its product in an imperfectly competitive market.

Suppose a technological improvement increases the productivity of a firm's capital and, simultaneously, its workers' union negotiates a wage increase. We can predict that:

the firm will use relatively more capital and relatively less labor

The marginal revenue product schedule is:

the firm's resource demand schedule

Implicit and explicit costs are different in that:

the former refer to non-expenditure costs and the latter to monetary payments.

The amount to which some current amount of money will grow as interest compounds over time is known as:

the future value of the sum of money

If someone produced too much of a good, this would suggest that:

the good was produced to the point where its marginal cost exceeded its marginal benefit.

The elasticity of demand for a product is likely to be greater:

the greater the amount of time over which buyers adjust to a price change

Graphically, the market demand curve is:

the horizontal sum of individual demand curves.

Steve went to his favorite hamburger restaurant with $3, expecting to buy a $2 hamburger and a $1 soda. When he arrived he discovered that hamburgers were on sale for $1, so Steve bought two hamburgers and a soda. Steve's response to the decrease in the price of hamburgers is best explained by:

the income effect

When the price of a product falls, the purchasing power of our money income rises and thus permits consumers to purchase more of the product. This statement describes:

the income effect

Marginal product is:

the increase in total output attributable to the employment of one more worker.

Marginal resource cost is:

the increase in total resource cost associated with the hire of one more unit of the resource.

Critics of the regulation of natural monopolies contend that:

the industry may "capture" or control the regulatory commission

If the number of firms in a monopolistically competitive industry increases and the degree of product differentiation diminishes:

the industry would more closely approximate pure competition.

The exchange rate system currently used by the industrially advanced nations is:

the managed float

The above data indicate that:

the marginal cost and marginal benefit of Program A are $2 and $9 respectively.

If a firm is selling in an imperfectly competitive product market, then:

the marginal products of successive workers must be sold at lower prices.

The economizing problem is:

the need to make choices because economic wants exceed economic means.

Refer to the above data. Item (5) indicates:

the net amount Americans received as interest and dividends on existing U.S. investments abroad.

Suppose an increase in product demand occurs in a decreasing-cost industry. As a result:

the new long-run equilibrium price will be lower than the original long-run equilibrium price.

The public interest theory of industrial regulation contends that:

the objective of regulation is to protect the public from the market power inherent in natural monopolies.

Refer to the diagram. This production possibilities curve is constructed so that:

the opportunity costs of both bread and tractors increase as more of each is produced.

Assume the price of capital falls relative to the price of labor and, as a result, the demand for labor increases. Therefore:

the output effect is greater than the substitution effect

Which of the following represents an uninsurable risk to a business firm?

the possibility that an adverse change in consumer tastes will decrease the demand for the firm's product

The value today of a sum of money to be received in the future is referred to as:

the present value of the sum of money

If a firm can sell 3,000 units of product A at $10 per unit and 5,000 at $8, then:

the price elasticity of demand is 2.25

The diamond-water paradox occurs because:

the price of a product is related to its marginal utility, not its total utility.

Economic or pure rent is:

the price paid for the use of land and other nonreproducible resources.

The concept of price elasticity of demand measures:

the sensitivity of consumer purchases to price changes.

When the price of a product rises, consumers shift their purchases to other products whose prices are now relatively lower. This statement describes:

the substitution effect.

Landowners will not receive any rent so long as:

the supply curve lies entirely to the right of the demand curve.

Wage differentials may result from all the following except:

the tendency of qualified workers to move from lower pay jobs to higher pay jobs.

The firm represented by the above diagram would maximize its profit where:

the vertical distance between curves (3) and (4) is the greatest.

In monopsony:

the wage rate paid by the employer varies directly with the number of workers employed.

Which of the following characteristics is least unique to a market system?

the widespread use of money

Suppose you have a limited money income and you are purchasing products A and B whose prices happen to be the same. To maximize your utility you should purchase A and B in such amounts that:

their marginal utilities are the same.

Monopolistically competitive and purely competitive industries are similar in that:

there are few, if any, barriers to entry

At the equilibrium price:

there are no pressures on price to either rise or fall.

Assume a purely competitive firm is maximizing profit at some output at which long-run average total cost is at a minimum. Then:

there is no tendency for the firm's industry to expand

In a purely competitive industry:

there may be economic profits in the short run, but not in the long run.

If two nations have straight-line production possibilities curves:

there will be a basis for mutually advantageous trade provided the slopes differ.

What do the income effect, the substitution effect, and diminishing marginal utility have in common?

they all help explain the downsloping demand curve

Graphical analysis of tariffs reveals that:

they increase domestic production of the good for which imports face tariffs.

Refer to the above data. Diminishing returns begin to occur with the hiring of the _________ unit of labor.

third

Refer to the above data. Diminishing marginal returns become evident with the addition of the:

third worker

Suppose the above total revenue curve is derived from a particular linear demand curve. That demand curve must be:

unit elastic for price increases that reduce quantity demanded from 5 units to 4 units.

A purely competitive firm's short-run supply curve is:

upsloping and equal to the portion of the marginal cost curve that lies above the average variable cost curve.

Export supply curves are __________________; import demand curves are ___________________.

upsolaping; downsloping

Kelly works at an ice cream shop and observes that the number of people buying ice cream varies greatly from day to day. For a couple of weeks she has recorded the number of people at the shop each day, as well as the daily temperature. If Kelly is using the scientific method to better understand ice cream buying habits, her next step is to:

use the observed data to form an hypothesis about ice cream being behavior

In economics, the pleasure, happiness, or satisfaction received from a product is called:

utility

The ability of a good or service to satisfy wants is called:

utility

The amount of calendar time associated with the long run:

varies from industry to industry.

A merger between an automobile manufacturer and a maker of automobile tires is an example of a:

vertical merger

Economists who adhere to the laissez-faire antitrust perspective:

view competition as a long-run dynamic process in which firms battle for dominance of markets but rarely can sustain such dominance once it is achieved.

Refer to the above diagram. Flow (1) represents:

wage, rent, interest, and profit income

We say that the demand for labor is a derived demand because:

we demand the product that labor helps produce rather than labor service per se.

Normative statements are concerned primarily with:

what ought to be

Which of the following is not one of the five fundamental questions?

what prices will be charged for goods and services?

A balance-of-payments deficit occurs:

when a nation must make an inpayment of official reserves to its capital and financial account.

In the short run a purely competitive firm that seeks to maximize profit will produce:

where total revenue exceeds total cost by the maximum amount.

Economies and diseconomies of scale explain:

why the firm's long-run average total cost curve is U-shaped.

People's incomes are relatively low when they are young, reach a peak in middle age, and then decline. This fact helps explain:

why the lifetime distribution of income is more equal than the distribution in any given year.

Increasing marginal cost of production explains:

why the supply curve is upsloping.

Which of the following is a distinguishing feature of a market system?

wide-spread private ownership of capital

If a firm in a purely competitive industry is confronted with an equilibrium price of $5, its marginal revenue:

will also be $5

If the dollar depreciates relative to the Russian ruble, the ruble:

will appreciate relative to the dollar

In the long-run, the price charged by the monopolistically competitive firm attempting to maximize profits:

will be equal to ATC

Suppose the MRP of a firm's 12th worker is $22 and the worker's marginal wage cost is $16. We can say with certainty that the firm:

will find it profitable to hire more workers

Suppose the MRP of a firm's twelfth worker is $22 and the worker's marginal wage cost is $16. We can say with certainty that the firm:

will find it profitable to hire more workers

The labor demand curve of a firm:

will shift to the left if the price of the product the labor is producing falls.

Responsibility for enforcing the antitrust laws rests:

with both the Department of Justice and the Federal Trade Commission.

Which of the following is an example of a land-intensive commodity?

wool

A monopsonist's wage cost in hiring an additional worker is the:

worker's wage rate plus the wage increases paid to all workers already employed.

The productivity and real wages of workers in industrially advanced economies have risen historically partly because:

workers have been able to use larger quantities of capital equipment.

Creative destruction is least beneficial to:

workers in the "destroyed" industries.

The division of labor means that:

workers specialize in various production tasks

The incentive problem under communist central planning refers to the idea that:

workers, managers, and entrepreneurs could not personally gain by responding to shortages or surpluses or by introducing new and improved products.

Refer to the above diagrams. The solid lines are production possibilities curves; the dashed lines are trading possibilities curves. The trading possibilities curves imply that:

world resources will be allocated more efficiently if the two nations specialize and trade based on comparative advantage.

Refer to the above diagram. Land:

would be a free resource if demand is D4 or less.

Refer to the above table. A total output of 3 units of capital goods and 4 units of consumer goods:

would involve an inefficient use of the economy's scarce resources

Refer to the above diagram, where Sd and Dd are the domestic supply and demand for a product and Pc is the world price of that product. With a PcPt per unit tariff, the quantities sold by foreign and domestic producers respectively will be:

wy and w