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Absolute advantage is the ability to produce a: A. variety of goods. B. good when demand is high. C. good with fewer inputs than others. D. good at a lower opportunity cost than others.

When a monopolist incurs a loss in the short run, it will A) always shut down. B) always produce where marginal cost equals marginal revenue. C) produce as long as total revenue is sufficient to cover variable costs . D) produce as long as total revenue is sufficient to cover fixed costs

C) produce as long as total revenue is sufficient to cover variable costs

Why is the war on drugs hard to win

Drug dealers get stronger following successful government prohibition efforts

greater

Elasticities of demand and supply determine consumer and producer surplus The greater these elasticities, the ____ will be the deadweight loss

few firms, either identical or differentiated products, relatively hard to enter/exit

Characteristics of an oligopoly (# of firms in market, product, easiness of entry/exit)

false

Coffee growers in Mexico have no interest in the world price of oil since they do not produce oil. Choose: True or False

something of value that by agreement becomes the property of the lender if the borrower defaults.

Collateral

SnP 500:

Consists of 500 different stocks, larger companies receive greater weight in the index

3. In a highly competitive industry, demand for a firm's product is A. perfectly elastic. B. slightly elastic. C. unit elastic. D. perfectly inelastic.

If real GDP per capita in a country was $14,000 in year 1 and $14,560 in year 2, then the economic growth rate for this country from year 1 to year 2 was

4 percent.

Per capita GDP 2,000 years ago was about the same in all regions of the world, but today it is about ______ times as large in the richest countries as in the poorest countries.

subsidy

A ____ is a reverse tax

true

A firm's revenue is price per unit times the quantity sold, so an increase in price decreases revenue if demand is elastic. Choose: True or False

marginal cost

A firm's short-run supply curve is its ____ _____ curve.

All of the following are U.S. stock price indexes, except: A. the NASDAQ Composite. B. the Dow Jones Industrial. C. the S&P 500. D. the CPI.

D. the CPI.

consumer and/or producer surplus decrease without the surplus going to anyone.

Deadweight loss

consumer and/or producer surplus decrease without the surplus going to anyone.

Deadweight loss occurs when the gains from trade are lowered due to shifts in the supply or demand curve. consumer surplus transforms into producer surplus. consumer and/or producer surplus decrease without the surplus going to anyone. there is a shortage of a good or service.

is a maximum price allowed by law.

A price ceiling is a minimum price allowed by law. has an effect only when it is set above the market price. is a maximum price allowed by law. has little effect on market activity.

non binding price control

A price ceiling that doesn't have an effect on the market price is referred to as...

A purely competitive firm should produce in the short run if its total revenue is sufficient to cover its: A. total variable costs. B. total costs. C. total fixed costs. D. marginal costs.

A purely competitive firm's short-run supply curve is: A. perfectly elastic at the minimum average total cost. B. upsloping and equal to the portion of the marginal cost curve that lies above the average variable cost curve. C. upsloping and equal to the portion of the marginal cost curve that lies above the average total cost curve. D. upsloping only when the industry has constant costs.

Imperfect competition and market power: A) are major sources of inefficiency B) result in higher output that in perfect competition C) are always the results of product differentiation D) result from diseconomies of scale

A) are major sources of inefficiency

Employment protection laws typically I.increase the duration of unemployment. II.create insurance for workers with full-time jobs. III.increase unemployment across high-skilled workers that typically earn high wages. A. I and II only B. I only C. I and III only D. I, II, and III

A. I and II only

Employed:

Adults who have a job

Labor Force:

All the workers, unemployed + employed

buyers can substitute

An elastic demand curve means that....

An important economic problem associated with pure monopoly is that, at the profit maximizing outputs, resources are: A. overallocated because price exceeds marginal cost. B. overallocated because marginal cost exceeds price. C. underallocated because price exceeds marginal cost. D. underallocated because marginal cost exceeds price.

38) Refer to Figure 13.5. The profit‐maximizing price for this firm is A) $5. B) $7. C) $9. D) $11.

B) $7

Refer to Scenario 13.1. At what level of output (number of households) is Fun Cable Companyʹs total revenue maximized? A) 2500 B) 2750 C) 5000 D) Indeterminate from the given information.

B) 2750

A monopolistic firm face a(n)______demand curve. A) upward- sloping B) downward-sloping C) horizontal D) vertical

B) downward-sloping

Which of the following is NOT true of structural unemployment? A. It results from industry restructuring. B. It results from scarcity of information. C. It is long-term in duration. D. It is persistent over time.

B. It results from scarcity of information.

As the baby boomers retire, the United States labor force participation rate will: A. increase. B. decrease. C. remain the same. D. fluctuate wildly.

B. decrease.

true

Because people have short memories, an oil speculator will be more accurate about future oil prices than a political pundit. Choose: True or False

GDP in the United States was $14,119 billion in 2009, and grew to $14,660.4 billion in 2010. This represents an annual growth rate of

3.83 percent

30. Refer to the above diagram. At the profit-maximizing level of output, total cost will be: A. NM times 0M. B. 0AJE. C. 0CGC. D. 0BHE

31. Refer to the above diagram. At the profit-maximizing level of output, the firm will realize: A. an economic profit of ABHJ. B. an economic profit of ACGJ. C. a loss of GH per unit. D. a loss of JH per unit.

33. Refer to the above diagrams. Firm A is a: A. pure competitor and Firm B is a pure monopoly. B. pure competitor, as is Firm B. C. pure monopoly and Firm B is a pure competitor. D. pure monopoly, as is Firm B.

If the down payment for a $250,000 home is $50,000 and the mortgage is $200,000, the leverage ratio is

4.A monopolistically competitive industry is characterized by a. many firms, differentiated products, and barriers to entry. b. many firms, differentiated products, and free entry. c. a few firms, identical products, and free entry. d. a few firms, differentiated products, and barriers to entry.

44. Refer to the above diagram. To maximize profit or minimize losses this firm will produce: A. K units at price C. B. D units at price J. C. E units at price A. D. E units at price B.

7. Which of the following statements is correct? a. Cigarettes are likely to be produced in a monopolistically competitive industry. b. Novels are likely to be produced in a monopoly industry. c. Movies are likely to be produced in a monopolistically competitive industry. d. Milk is likely to be produced in an oligopoly industry.

In the United States, approximately what percent of scientists and engineers work for private firms?

70 percent

8. A market becomes more competitive as there are ______ buyers and ______ sellers. A. fewer; fewer B. fewer; more C. more; fewer D. more; more

Economic profits are calculated by subtracting: A. explicit costs from total revenue. B. implicit costs from total revenue. C. implicit costs from normal profits. D. explicit and implicit costs from total revenue.

8. Total costs cannot be minimized if firms A. face different prices. B. have different marginal cost curves. C. face the same prices. D. have the same marginal cost curves.

8. Which market structure would likely have the highest concentration ratio? a. Monopoly b. Oligopoly c. Monopolistic competition d. Perfect competition

If the average price level rises from 120 in year 1 to 130 in year 2, the inflation rate between years 1 and 2 will be

8.33 percent

There are 100 consumers, each of whom values a concert ticket at a unique whole number dollar amount between $1 and $100. One customer is willing to pay $1, a second is willing to pay $2, a third is willing to pay $3, and so on. An unlimited number of concert tickets are on sale for $15 each. What is the total consumer surplus in this market? A. $4,250.00 B. $4,887.50 C. $3,612.50 D. $5,000.00

Trade can reduce per-unit production costs through: A. economies of scale. B. raising tariff revenues. C. limiting competition. D. raising absolute advantages.

surplus.

A binding price floor leads to a(n) shortage. surplus. equilibrium quantity. quantity of zero units.

A competitive firm in the short run can determine the profit-maximizing (or loss-minimizing) output by equating: A. price and average total cost. B. price and average fixed cost. C. marginal revenue and marginal cost. D. price and marginal revenue.

increases; up and to the left

A farmer can grow soy or sorghum. If the price of soy increases, the opportunity cost of growing sorghum ______, shifting the supply curve of sorghum ______. decreases; down and to the right decreases; up and to the left increases; down and to the right increases; up and to the left

economic non-planning.

A market is a form of regional economic planning. economic non-planning. centralized economic planning. decentralized economic planning.

A monopolistically competitive firm's marginal revenue curve: A. is downsloping and coincides with the demand curve. B. coincides with the demand curve and is parallel to the horizontal axis. C. is downsloping and lies below the demand curve. D. does not exist because the firm is a "price maker."

A monopolistically competitive industry combines elements of both competition and monopoly. The monopoly element results from: A. the likelihood of collusion. B. high entry barriers. C. product differentiation. D. mutual interdependence in decision making.

A nondiscriminating pure monopolist's demand curve: A. is perfectly inelastic. B. coincides with its marginal revenue curve. C. lies above its marginal revenue curve. D. lies below its marginal revenue curve.

A one-firm industry is known as: A. monopolistic competition. B. oligopoly. C. pure monopoly. D. pure competition.

all combinations of goods that a country can produce given its productivity and supply of inputs.

A production possibilities frontier shows: the supply and demand for a good in a country. the uninhabited territory of a country that is full of new possibilities. the goods that a country will be able to produce in the future if it continues to grow. all combinations of goods that a country can produce given its productivity and supply of inputs.

A purely competitive seller is: A. both a "price maker" and a "price taker." B. neither a "price maker" nor a "price taker." C. a "price taker." D. a "price maker."

increase the demand for labor, increase the wages received by workers, and lower the wages paid by firms.

A wage subsidy would decrease the supply of labor, driving wages up and employment down. increase the demand for labor, increase the wages received by workers, and lower the wages paid by firms. decrease employment by raising the wages paid by firms. decrease the demand for labor, lowering wages.

Pigouvian tax

A(n) ______ is a tax on a good with external costs. specific tax Orwellian tax ad valorem tax Pigouvian tax

Refer to Figure 13.12. Suppose a monopolist faces the demand and costs in the figure and is able to perfectly price discriminate. How much surplus is realized by consumers? A) $0 B) $16,000 C) $32,000 D) Indeterminate from the given information.

A) $0

Refer to Figure 13.4. The marginal revenue of the sixth pound of burritos is: A) $10 B) $14 C) $20 D) $84

A) $10

38) Refer to Figure 13.5. The profit‐maximizing price for this firm is A) $5. B) $7. C) $9. D) $11.

A) $5

Refer to Table 13.2. If a monopoly faces the demand schedule given in the table and has a constant marginal and average cost of $2 per unit of providing the product, then the monopoly maximizes its profits by charging ________ per unit and selling ________ units of output. A) $6; 5 B) $9; 2 C) $5; 6 D) $8; 3

A) $6; 5

Long term unemployment tends to be higher when the government: I. raises job security II. raises hiring and firing costs III. lowers restrictions for firms to adjust work hours A. I and II only B. II and III only C. I and III only D. I, II, and III

A. I and II only

Which of the following programs could help overcome structural unemployment? I. Worker retraining II. Job search assistants programs III. Increased unemployment benefits A. I and II only B. I and III only C. II and III only D. All of the answers are correct

A. I and II only

Which of the following is true of frictional unemployment? A. It has a short duration. B. It arises as a result of too much market competition. C. It is a result of the minimum wage law. D. It rises in a recession.

A. It has a short duration.

When workers lose their jobs and become officially unemployed, the number of people in the labor force: A. remains constant B. increases C. decreases D. becomes difficult to predict

A. remains constant

good with fewer inputs than others.

Absolute advantage is the ability to produce a: variety of goods. good at a lower opportunity cost than others. good with fewer inputs than others. good when demand is high.

False

According to the elimination principle, above-normal profits will never occur. Choose: True or False

Accounting profits are typically: A. greater than economic profits because the former do not take explicit costs into account. B. equal to economic profits because accounting costs include all opportunity costs. C. smaller than economic profits because the former do not take implicit costs into account. D. greater than economic profits because the former do not take implicit costs into account.

supply increases and price decreases

Although large parts of beef cattle become meat products, other parts become leather jackets. As the demand for beef rises, what happens in the market for leather jackets? supply decreases and price increases demand and price decrease demand and price increase supply increases and price decreases

social costs equals social benefits.

An efficient equilibrium occurs when private costs equals social benefits. social costs equals private benefits. private costs equals private benefits. social costs equals social benefits.

easily find work in another industry

An elastic supply curve means that workers and capital can....

An industry comprised of a very large number of sellers producing a standardized product is known as: A. monopolistic competition. B. oligopoly. C. pure monopoly. D. pure competition.

Andy, because he is the less elastic factor

Andy and Annie are in a happy relationship. Annie has many substitutes for Andy, but Andy has few substitutes for Annie. Suppose that one of them has to move two hours away for work. Which one of them will do the majority of the driving if they decide to continue their relationship on a long-distance basis? Andy, because he is the more elastic factor Annie, because she is the less elastic factor Annie, because she is the more elastic factor Andy, because he is the less elastic factor

Answer the next question(s) on the basis of the following data confronting a firm: OUTPUT MARGINAL REVENUE MARGINAL COST 0 --- --- 1 16 10 2 16 9 3 16 13 4 16 17 5 16 21 33. Refer to the above data. This firm is selling its output in a(n): A. imperfectly competitive market. B. monopolistic market. C. purely competitive market. D. oligopolistic market.

Answer the next question(s) on the basis of the following information: TFC=Total Fixed Cost MC=Marginal Cost TVC=Total Varial Cost Q=Quantity of Output P=Product Price 25. Refer to the above information. Average fixed cost is: A. TVC-MC B. MC/Q C. TFC/Q D. TVC/Q

Answer the next question(s) on the basis of the following information: TFC=Total Fixed Cost MC=Marginal Cost TVC=Total Varial Cost Q=Quantity of Output P=Product Price Refer to the above information. Average total cost is: A. TVC-MC B. TVC-TFC/Q C. TVC/Q D. TFC+TVC/Q

*Gasoline industry* (↑demand for gas → ↑ price of oil → ↑ price of gas) *Electricity* (↑ demand → ↑ demand for coal) *Coal*

Any industry that buys a large fraction of the output of and increasing cost industry will also be an increasing cost industry. give three examples:

decrease.

As GDP per capita increases, child labor tends to increase. change unpredictably. decrease. remain the same.

Which of the following statements about the supply curve is TRUE?

As the price of a good rises, it becomes profitable to sell the higher cost good.

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: A. should close down in the short run. B. is maximizing its profits. C. is realizing a loss of $60. D. is realizing an economic profit of $40.

(econ 2) In the figure, which of the following statements is TRUE?

At a price of $6 per unit, consumers are willing and able to purchase 26 units of Good X

At its profit-maximizing output, a pure nondiscriminating monopolist achieves: A. neither productive efficiency nor allocative efficiency. B. both productive efficiency and allocative efficiency. C. productive efficiency but not allocative efficiency. D. allocative efficiency but not productive efficiency.

At zero economic profits, a competitive firm A. has an incentive to leave the industry to make higher profit elsewhere. B. is making a normal profit; its revenues are just sufficient to cover all costs of production, including opportunity costs. C. is unable to pay its opportunity costs of production but will remain in business to minimize losses. D. will benefit, in the form of higher profits, by raising its prices above average cost.

Average fixed cost: A. equals marginal cost when average total cost is at its minimum. B. may be found for any output by adding average variable cost and average total cost. C. graphs as a U-shaped curve. D. declines continually as output increases.

Refer to Table 13.1. If a monopoly faces the demand schedule given in the table, what is its marginal revenue from the 200th unit it sells? A) $2 B) $3 C) $3.50 D) $300

B) $3

Monopolies, oligopolies, and monopolistic competitive industries all: A) earn positive profits in the long run B) have market power C) are completely unconstrained in their pricing D) raise price and quantity over what would occur in perfect completion in order to maximize their profits

B) have market power

A monopolist maximizes total revenue when its marginal revenue is: A) positive B) zero C) negative D) equal to price

B) zero

If the adult population of a country is 200 million, 100 million are employed, and 10 million are unemployed, this country's labor force participation rate is: A. 5 percent. B. 55 percent. C. 50 percent. D. 9 percent.

B. 55 percent.

A country has 50 million people, 30 million of whom are adults. Of the adults, 5 million are not interested in working, another 5 million are interested in working but have given up looking for work, and 5 million are still looking for work. Of those who do have jobs, 5 million are working part time but would like to work full time, and the remaining 10 million are working full time. What is the country's labor force participation rate? A. 50% B. 66.7% C. 75% D. 83.3%

B. 66.7%

Which of the following individuals can be counted as part of the labor force? A. Lucas, who is on active military duty in SC B. Alex, who is collecting unemployment benefits C. Michael, who is a freshman at Clemson University D. James, who retired at the beginning of the year

B. Alex, who is collecting unemployment benefits

Which of the following is a case of structural unemployment? A. Abby is leaving his job to take a higher paying position B. Allie has been searching over a year for a position working as a mimeograph operator C. Andrew took an early retirement package D. Alex is searching for a position in which his expertise in criminal forensics can be used

B. Allie has been searching over a year for a position working as a mimeograph operator

The labor force consists of persons who are: I. in prison II. recently laid off and have given up looking for work III. unemployed A. II only B. III only C. II and III only D. I, II, and III

B. III only

If a cable news channel breaks news one morning that a major light bulb company announced a new long-lasting light bulb and you call your broker the next day to buy stock in the company, will you make money based on this information? A. Yes, because it will take a while for the company to recover the R&D costs of the light bulbs. B. No, because the new information will already be reflected in the stock price when you purchase the stock. C. No, because the broker fees will eat away all your profits. D. Yes, because it will take time before the light bulbs show up in stores (and thus time before the new revenue's reflected in the company's bottom line).

B. No, because the new information will already be reflected in the stock price when you purchase the stock.

What types of laws affect young, minority, and unemployed workers most negatively? A. employment at will B. employment protection C. constructive discharge D. fair labor

B. employment protection

Barriers to entry in oligopolistic industries may consist of: A. diseconomies of scale. B. diminishing returns. C. ownership of essential resources. D. patent expirations.

Because the rate of profit tends to be ______ in all industries, the marginal value of resources is ______ in all industries. A. different; different B. the same; the same C. the same; different D. different; the same

true

Both the elasticities of demand and supply tend to be more elastic in the long-run. Choose: True or False

above-normal profits are eliminated by entry, and below-normal profits are eliminated by exit.

Elimination Principle

Zoey receives a big raise at work and decides to buy additional Precious Moments figurines. Which of the following statements is TRUE? A. Zoey's demand for Precious Moments figurines increased because they are relatively less expensive. B. Zoey's demand for Precious Moments figurines decreased. C. Zoey considers Precious Moments figurines to be a normal good. D. Zoey considers Precious Moments figurines to be an inferior good.

A country has 50 million people, 30 million of whom are adults. Of the adults, 5 million are not interested in working, another 5 million are interested in working but have given up looking for work, and 5 million are still looking for work. Of those who do have jobs, 5 million are working part time but would like to work full time, and the remaining 10 million are working full time. How many people in this country are in the labor force? A. 30 million B. 25 million C. 20 million D. 15 million

C. 20 million

Which of the following is consistent with the no free lunch principle? A. The best way to get rich is to invest in stocks. B. Investing in U.S. Treasury bills is the best advice in personal finance. C. An asset that brings higher returns must come with higher risk. D. Risk and return are unrelated in financial investment.

C. An asset that brings higher returns must come with higher risk.

All of the following are counted as employed persons EXCEPT: A. an employee working overtime every day. B. a part-time worker. C. a discouraged worker. D. an underemployed person.

C. a discouraged worker

How can people who are laid off from work due to a recession eventually turn into structurally unemployed people? A. by failing to file for unemployment benefits B. by becoming discouraged workers C. by staying unemployed so long that their skills become outdated D. be receiving food stamps

C. by staying unemployed so long that their skills become outdated

CH 8 #35 Refer to the above diagram. The profit-maximizing level of output for this firm: A. is at point a. B. is at point b. C. is at point c. D. cannot be determined from the information given.

Many firms, differentiated products, relatively easy to enter/exit

Characteristics of a Monopolistic Competition market (# of firms in market, product, easiness of entry/exit)

A lot of firms, identical products, very easy to exit/enter

Characteristics of a Perfect Competition market (# of firms in market, product, easiness of entry/exit)

one firm, identical product (only one), very hard to enter

Characteristics of a monopoly (# of firms in market, product, easiness of entry/exit)

Confronted with the same unit cost data, a monopolistic producer will charge: A. the same price and produce the same output as a competitive firm. B. a higher price and produce a larger output than a competitive firm. C. a higher price and produce a smaller output than a competitive firm. D. a lower price and produce a smaller output than a competitive firm.

False

Consumer surplus is a gain from exchange, but producer surplus is a loss from exchange. False True

are willing to pay for a good minus what they actually pay for it.

Consumer surplus is the amount that consumers: are willing to pay for a good plus the amount that they actually pay for it. actually pay for a good. are willing to pay for a good minus what they actually pay for it. are willing to pay for a good.

true

Consumer's self-interest is to pay attention to prices. Choose: True or False

price

Conveys important information and creates incentives

Anonymity on the Internet has lowered the cost of rudely confronting people. What has happened to the supply of rude confrontations? A. The supply has decreased, shifting down and to the right. B. The supply has decreased, shifting up and to the left. C. The supply has increased, shifting up and to the left. D. The supply has increased, shifting down and to the right.

For a normal good, higher income results in: A. a decrease in demand. B. an increase in the quantity demanded. C. a decrease in the quantity demanded. D. an increase in demand.

an increase in demand.

For a normal good, higher income results in: a decrease in demand. a decrease in the quantity demanded. an increase in demand. an increase in the quantity demanded.

less than 0

For complements, cross-price elasticity is.... (e.g., an increase in price of computers causes decrease in demand for software)

less than 0

For inferior goods, income elasticity is...

greater than 0

For substitutes, cross-price elasticity is.... (e.g., an increase in price of beef causes an increase in demand for chicken)

the market value of all final goods and services produced within a country in a year divided by population.

GDP per capita

Refer to Table 13.2. If a monopoly faces the demand schedule given in the table and has a constant marginal and average cost of $6 per unit of providing the product, then the monopoly maximizes its profits by charging ________ per unit and selling ________ units of output. A) $6; 5 B) $7; 4 C) $5; 6 D) $8; 3

D) $8; 3

Refer to Figure 13.9. If competition is introduced into the market the net social gain may be greater than the area BEC to the extent that A) the firm may have engaged in rent-seeking behavior, the cost of which would also be avoided. B) society may value the increase in consumer welfare on equity as well as efficiency grounds. C) firms facing competition may have a greater incentive to cut costs and innovate which result in gains to society. D) All of the above are correct

D) All of the above are correct

A firm must be able to ______competition if its is to exercise control over the price of it product. A) maximize B) increase C) not change D) limit

D) Limit

In a monopolistic industry there is (are): A) many firms and free entry of new firms B) many firms and entry of new firms is blocked C) a single firm and free entry of new firms D) a single firm and entry of new firms is blocked

D) a single firm and entry of new firms is blocked

Suppose we know that a monopolist is maximizing profits. Which of the following is a correct inference? The monopolist has: A) maximized its total revenue B) set price equal to its average cost C) maximized the difference between marginal revenue and marginal cost D) equated marginal revenue and marginal cost

D) equated marginal revenue and marginal cost

Relative to a competitively organized industry, firms acting collusively produce ________ output, charge ________ prices, and earn ________. A) more; higher; economic profits B) less, lower; economic profits C) less, lower; only a normal profit D) less, higher; economic profits

D) less, higher; economic profits

true

Ignoring any third-party commissions, the profit one party earns in a futures contract equals the loss the other party suffers. Choose: True or False

is less than $10.

Imagine a free market in which at a price of $10 quantity supplied is 50 units and quantity demanded is 40 units. Equilibrium price in this market: is less than $10. is equal to $10. differs from $10 in an indeterminate direction. is greater than $10.

If the adult population of a country is 200 million, 100 million are employed, and 10 million are unemployed, this country's labor force is: A. unknown given the above information. B. 100 million. C. 200 million. D. 110 million.

D. 110 million.

Constant cost industry

Industry costs do not change with greater output

All of the following are counted as employed persons EXCEPT: A. an employee working overtime every day. B. a part-time worker. C. an underemployed person. D. a discouraged worker.

D. a discouraged worker.

Which type of unemployment is an outcome of economist Joseph Shumpeter's creative destruction process within an industry? A. structural unemployment B. cyclical unemployment C. seasonal unemployment D. frictional unemployment

D. frictional unemployment

The price of milk rose as the supply of milk decreased.

Dairy farmers use sawdust for milk cow bedding. What happened to the price of milk because of the housing slowdown in 2007? The price of milk fell as the demand for milk decreased. The price of milk rose as the demand for milk rose. The price of milk fell as the supply of milk increased. The price of milk rose as the supply of milk decreased.

deadweight loss

Lost gains from trade

Incentives

Many companies pay their sales employees based on commissions—the more they sell, the more they get paid. This practice highlights the role of: sunk costs. incentives. marginal thinking. trade-offs.

Nonprice competition refers to: A. low barriers to entry. B. product development, advertising, and product packaging. C. the differences in information which consumers have regarding various products. D. an industry or firm in long-run equilibrium.

workers are rewarded for being loyal to the ruling Communist Party

North Korea

Two persons each produce two identical goods. Which of the following is true about their absolute and comparative advantages in the production of these two goods?

One person can have an absolute advantage in both goods but not a comparative advantage in both goods.

If hipsters decide that Pabst Blue Ribbon has become cliché and they seek out a more iconic beverage, what will happen in the market for PBR?

Demand will decrease, quantity supplied will decrease, and price will decrease.

Ease in finding substitutes, Time required to adjust to price changes, The definition of the commodity, Share of budget devoted to the good, Necessities vs Luxuries

Determinants of the Elasticity of Demand

false

Operating along the elastic portion of a linear demand curve, revenue rises with price. Choose: True or False

true

Speculators often raise prices today, but lower prices in the future. Choose: True or False

increase

Subsidies ___ the quantity traded

decrease

Taxes ___ the quantity traded

The MR = MC rule applies: A. to firms in all types of industries. B. only when the firm is a "price taker." C. only to monopolies. D. only to purely competitive firms.

the higher her opportunity cost of ironing her own shirts

The better Martha Stewart is at running her business: the more it makes sense for her to spend her time away from her business. the lower her opportunity cost of ironing her own shirts. the higher her opportunity cost of ironing her own shirts. the more it makes sense for her to iron her own shirts, because she will have more time.

The demand schedule or curve confronted by the individual purely competitive firm is: A. relatively elastic, that is, the elasticity coefficient is greater than unity. B. perfectly elastic. C. relatively inelastic, that is, the elasticity coefficient is less than unity. D. perfectly inelastic.

(Figure: Basic Supply and Demand) In the diagram, which of the following statements is TRUE?

The equilibrium price is $3 and the equilibrium quantity is 50 units.

The first, second, and third workers employed by a firm add 24, 18, and 9 units to total product respectively. Therefore, the: A. marginal product of the third worker is 9. B. total product of the three workers is 54. C. average product of the three workers is 18. D. marginal product of the first worker is 18.

a country's opportunity cost of production.

The slope of the production possibilities frontier at a given point indicates ______. a country's trade balance a country's total gains from trade. the preferences of a country. a country's opportunity cost of production.

the cost to everyone.

The social cost is the cost to everyone. a cost paid by people other than the consumer or the producer trading in the market. the cost of reaching an agreement. a cost paid by the consumer or the producer.

below the equilibrium price.

The yearly shortage of Super Bowl tickets implies that the price of Super Bowl tickets is: above the equilibrium price. not set by supply and demand, but instead by the NFL. set at the equilibrium price since they always sell out. below the equilibrium price.

Which of the following is true of monopoly? a. There are no barriers to entry. b. The firm is a price taker. c. There are no close substitutes for the product being produced. d. There are many firms in the industry. e. The firm faces a horizontal demand curve.

There are no close substitutes for the product being produced.

True

There is a tendency for economic profit in all competitive industries to go to zero. Choose: True or False

True

To assuage the deadweight loss from a natural monopoly, governments could employ a price control. Choose: True or False

above

Does the monopolist price its product above or below the price of the competitive firm?

Use the following data to answer the next question(s): Input of Labor Total Products 0 0 1 8 2 18 3 25 4 30 5 33 6 34 7 32 13. Refer to the above data. The average product (AP) when two units of labor are hired is: A. 8. B. 9. C. 10. D. 18.

A monopolist is a. one of a large number of small firms that produce a homogeneous good b. one of a small number of large firms that produce a differentiated good c. a single seller of a product with many close substitutes d. one of a small number of large firms that produce a homogeneous good e. a single seller of a product with no close substitutes

E:a single seller of a product with no close substitutes

Tit-for-tat

Whatever your rival does in one round (whether renege or cooperate), you do in the following round.

less

When supply is more elastic than demand, sellers pay ___ of the tax

consumers will be more likely to use wood in its most valuable uses.

When the price of wood is high: the quantity demanded of wood will also rise. consumers will be more likely to use wood in its least valuable uses. consumers will be more likely to use wood in its most valuable uses. the quantity demanded of wood will be unaffected.

They raise prices today but lower prices in the future

Why Do Speculators Have an Image Problem

the (national) expenditure approach formula:

Y=C+I+G+NX

His industry benefits from tariffs that decrease foreign competition.

You are a policymaker and a lobbyist comes to you, arguing that his industry is important for national security and has important spillover benefits. Why might you be suspicious of his claims?

Underemployment:

You have a job, but it doesn't match your skill

speculation

____ tends to smooth prices over time and increases welfare.

A price floor is

a minimum price allowed by law

Maximum profit for the profit-maximizing monopolist in Exhibit 9-10, which does not price discriminate, is a. $14 b. -$8 c. $0 d. $46.62 e. $54

a. $14

In Exhibit 9-1, the marginal revenue of the third unit is a. $20 b. $120 c. $100 d. $40 e. $0

a. $20

Firms price discriminate because, by doing so, they obtain a higher profit than by charging a single price. a. True b. False

a. True

In order to sell an additional unit of its product, a monopolist must decrease price on all units. a. True b. False

a. True

adam smith

author of wealth of nations

What output would maximize the profit of the nondiscriminating monopolist in Exhibit 9-10? a. 0 b. 7 c. 10 d. more than 10 e. less than 7

b. 7

Maximizing total revenue is the same as maximizing profit.

b. False

In Exhibit 9-1, total revenue from selling 5 units is a. $20 b. $140 c. $100 d. $10 e. $5

c. $100

The recent pace of globalization has been increased through:

each of these developments.

From 1950 to 1970 Japan's growth rate was

high and positive.

perfectly elastic

horizontal line when talking about supply

Economists assume that people respond to

incentives

average cost

is the cost per unit of output, i.e. the total cost divided by Q

governments may improve the situation by changing incentives when

markets don't align self-interest with social-interest

Diminishing returns to capital implies that

the marginal product of capital is decreasing

because prices are signals to consumers and producers

why are ceilings bad (what does taking away prices do)?

Because government couldnt raise prices on oil, consumers kept buying and then there was a shortage (iranian war, no imported oil)

why did having price ceilings on oil create shortages?

Each of the following ideas is central to economics, EXCEPT:

"good institutions can eliminate economic trade-offs."

(econ 11) Refer to the figure. This competitive firm operates in a constant cost industry. The current market price is $15. What is the long-run market price?

$12

(econ 3) Refer to the figure. As the price falls from $200 to $100, consumer surplus changes by

$12,500

(Figure: Quantity of Good X) Refer to the figure. As the price falls from $200 to $100, consumer surplus changes by:

$12,500.

(econ 12) If the government sets the price at $8.00 in this figure, demanders are willing to pay ______ per unit for ______ units

$14; 6

(Figure: Producer Surplus) In the diagram the market price of coffee is $4. How much producer surplus do suppliers earn?

$22.50

(Figure: Supply and Demand 2) If the government sets the price at $8.00 in this figure, the total value of the wasted time is

$36.

(Figure: Price and Quantity 3) At a quantity of 80 units in the figure, it cost sellers ______ to produce the last unit, but buyers value this last unit at ______.

$80; $20

(Figure: Price and Quantity 2) At a cost of $20 per unit in the diagram, the value of the unexploited gains from trade is:

$900.

how to calculate GDP growth rate:

(GDP2-GDP1)/(GDP1)

(t/f) Reducing tariffs causes consumer surplus to increase but producer surplus to decrease?

If Major League Baseball ticket prices rise by 15 percent, the number of tickets sold falls by 5 percent. The elasticity of demand is

-1/3

Unemployed:

-Adults who do not have a job but who are looking for work -16 years or older -not institutionalized (not in prison) -not in the military -should be looking for work

Stock Market Indexes:

-Dow Jones Industrial Average (Dow) -Standard & Poor's 500 (SnP 500) -Nasdaq

Structural Unemployment:

-Persistent, long term unemployment caused by long lasting shocks or permanent features of an economy that make it more difficult for some workers to find a job -economy wide shocks -labor regulations

Efficient Market Hypothesis:

-The prices of treatable assets that reflect all publicly available information -Unless someone is trading inside information, he or she will not systematically outperform the market (Eugene Fama)

Shortcomings of Unemployment Rate:

-does not count "discouraged workers" -does not count part time jobs -does not count underemployment

is an index that tracks the stock prices of 500 large companies

.The S&P 500

If a country has 5 percent real GDP growth and 5 percent population growth, how much per capita real GDP growth does it have?

0 percent

If the price of Good X rises from $4 to $5, and the quantity demanded of Good X falls from 200 units to 180 units, the price elasticity of demand is

0.47

1. If a single supplier produces a good with many good substitutes, then A. it will have little control over the market price. B. the demand curve for its output will be downward sloping. C. the price it chooses to set must be less than the market price in order to sell additional output. D. the market demand will be perfectly elastic.

1. In the language of game theory, a situation in which each person must consider how others might respond to his or her own actions is called a a. quantifiable situation. b. cooperative situation. c. strategic situation. d. tactical situation

10. Refer to the above two diagrams for individual firms. In Figure 1 line B represents the firm's: A. demand and marginal revenue curves. B. demand curve only. C. marginal revenue curve only. D. average revenue curve only.

10.In a game, a dominant strategy is a. the best strategy for a player to follow only if other players are cooperative. b. the best strategy for a player to follow, regardless of the strategies followed by other players. c. a strategy that must appear in every game. d. a strategy that leads to one player's interests dominating the interests of the other players.

If in 2010 nominal GDP was $220 million and real GDP was $200 million, the GDP deflator in 2010 was

110.

(econ 9) Refer to the figure. What is the dollar amount of the value of wasted time if a price ceiling of $4 is implemented

160

At an average growth rate of 4 percent, how long would it take for an economy to double its GDP?

17.5 years

18. Refer to the above diagram for a monopolistically competitive firm in short-run equilibrium. This firm's profit-maximizing price will be: A. $10. B. $13. C. $16. D. $19.

19. Refer to the above diagram for a monopolistically competitive firm in short-run equilibrium. The profit-maximizing output for this firm will be: A. 100. B. 160. C. 180. D. 210.

excess capacity (The monopolistic competitor operates on the downward-sloping part of its AC curve, produces less than the cost-minimizing output) markup over marginal cost (P>MC)

2 reasons why monopolistic competition is less efficient than perfect competition

2. A market is considered perfectly competitive if I. there is a lot of product differentiation amongst sellers. II. there are many sellers, each small relative to the total market. III. the product sold is similar across sellers. IV. there are only a few buyers. A. I and II only B. I, II, and III only C. II and III only D. II, III, and IV only

(econ 8) Refer to the figure. How many workers are unemployed at a minimum wage of $8

20. Refer to the above diagram for a monopolistically competitive firm in short-run equilibrium. This firm will realize an economic: A. loss of $320. B. profit of $480. C. profit of $280. D. profit of $600.

Real GDP for the year 2000 (measured in 2005 dollars) is equal to

2005 prices × 2000 quantities

22. In short-run equilibrium, the monopolistically competitive firm shown above will set its price: A. below ATC. B. above ATC. C. below MC. D. below MR.

24. Refer to the above data for a nondiscriminating monopolist. This firm will maximize its profit by producing: A. 3 units. B. 4 units. C. 5 units. D. 6 units.

27. Refer to the above data for a nondiscriminating monopolist. At its profit-maximizing output, this firm's total profit will be: A. $82. B. zero. C. $54. D. $27.

specialization, division of knowledge, comparative advantage

trade increased productivity through ____, _____, and ____

Depreciation refers to the

wear and tear on capital through normal use

positive

what are the long run profits of a monopoly (pos, neg or zero)

Excess capacity refers to the: A. amount by which actual production falls short of the minimum ATC output. B. fact that entry barriers artificially reduce the number of firms in an industry. C. differential between price and marginal costs which characterizes monopolistically competitive firms. D. fact that most monopolistically competitive firms encounter diseconomies of scale.

(econ 4) Refer to the figure. When the price of the product rises from $4 to $6, the total revenue changes by the area(s) represented by

F - (E + B)

Consumer surplus is a gain from exchange, but producer surplus is a loss from exchange.

False

Poor countries are at a distinct disadvantage when it comes to economic production; they get outcompeted in everything since they do not have a comparative advantage in anything.

False

True/ False Because the monopolist is the sole producer of a good, it can never incur a loss.

False

True/ False A monopolyʹs supply curve is the portion of the firmʹs marginal cost curve that lies above its average variable cost curve

False

True/ False: A firm with market power has the ability to raise their price to any level they desire

False

True/ False: Imperfect completion results in inefficiency but greater equity than perfect competition

False

True/ False: We call a market where there is only one buyer for a good or service a monopoly

False

True/ False: there are a few firms selling differentiated products in a monopolistically competitive industry

False

True/False Both American Tobacco and United States Steel were found guilty of antitrust violations under the Sherman Act

False

True/False Government failure occurs when the government runs a budget deficit.

False

True/False Government led antitrust actions are far more common than private antitrust cases

False

True/False Monopolists use price discrimination to attempt to capture producer surplus and convert it to profits

False

True/False The Clayton Act outlawed tying contracts, price discrimination, and all mergers

False

True/False The rule of reason is the criterion introduced by the courts for determining whether a firmʹs action was illegal under the Clayton Act.

False

True/False When an industry is monopolized, the move from a competitive environment to a monopoly leads to a decrease in consumer surplus and an increase in industry profits in a one-to-one ratio

False

True/False The demand curve facing the monopoly is horizontal.

False

True/False A monopoly earns total revenue of $5000 when it sells 500 units of output and total revenue of $5400 when it sells 600 units of output. Thus, the marginal revenue of the 600th unit is $9.

False

The central bank of the United States is known as the:

Federal Reserve System.

reduce the costs of moving savings from savers to borrowers and investors.

Financial intermediaries

-It is costly to enter or exit -There is uncertainty about future prices

Firms must base their exit or entry decisions on lifetime expected profit when... (2)

Firms seek to maximize: A. per unit profit. B. total revenue. C. total profit. D. market share.

Fixed cost is: A. the cost of producing one more unit of capital, say, machinery. B. any cost which does not change when the firm changes its output. C. average cost multiplied by the firm's output. D. usually zero in the short run.

For a purely competitive firm total revenue: A. is price times quantity sold. B. increases by a constant absolute amount as output expands. C. graphs as a straight upsloping line from the origin. D. has all of these characteristics.

(Figure: U.S. Production Possibility Frontier) Suppose the figure illustrates the U.S. PPF for the production of corn and TVs. Which of the following statements is TRUE?

For each TV that the United States produces, it gives up 25 units of corn.

Based on the efficient market hypothesis, which of the following mutual funds has the better chance of beating the market in the long run?

Forget about it—it is nearly impossible to choose a fund that will systematically outperform the market.

Natural Unemployment Rate:

Frictional Unemployment Rate + Structural Unemployment Rate

the market value of all final goods and services produced within a country in a year

GDP

measures production by U.S. citizens wherever they work in the world.

GNP

the supply of the types of guns exchanged is highly elastic.

Gun buyback programs, such as the one instituted in Washington, D.C., tend to not be very effective because the programs tend to have a large impact on the price of guns on the street. the supply of the types of guns exchanged is highly elastic. the supply of the types of guns exchanged is not very elastic. the programs simply end up decreasing the elasticity of supply.

Which of the following is the best example of frictional unemployment?

Heather recently graduated with her doctorate in economics. She is searching for a job that matches her skills.

Which of the following statements is TRUE

High profits in an industry give entrepreneurs an incentive to enter that industry

sum of share of leading firms/total market size

How to calculate a concentration ratio

productive knowledge and skills that workers acquire through education, training, and experience.

Human capital

The steady-state level of capital occurs where I. investment equals depreciation. II. the level of output is constant. III. the growth rate of output is positive and constant.

I and II only

Inflation redistributes wealth from: I. citizens to the government. II. lenders to borrowers. III. savers to borrowers.

I, II, and III

Which of the following are considered financial intermediaries? I. commercial banks II. bond markets III. stock markets

I, II, and III

If Tom sells 500 sandwiches for $7 and has average cost of $5, what is his profit? A. $500 B. $1,000 C. $2,500 D. $3,500

tax revenues will be less than the amount of the lost consumer and producer surplus.

If a $2 tax on cigarettes decreases both consumer and producer surplus, tax revenues will be less than the amount of the lost consumer and producer surplus. there will be no deadweight loss. tax revenues will exactly equal the amount of the lost consumer and producer surplus. tax revenues will be more than the amount of the lost consumer and producer surplus.

If a purely competitive firm shuts down in the short run: A. its loss will be zero. B. it will realize a loss equal to its total variable costs. C. it will realize a loss equal to its total fixed costs. D. it will realize a loss equal to its total costs.

If a technological advance increases a firm's labor productivity, we would expect its: A. average total cost curve to rise. B. average total cost curve to fall. C. total cost curve to rise. D. average total cost curve to be unaffected.

lower

If demand decreases, ceteris paribus, market price will be ______ at the new equilibrium point. the same higher lower either higher or lower

If marginal cost is: A. falling, then average total cost must also be falling. B. rising, then average total cost must also be rising. C. rising, then average total cost could be either falling or rising. D. falling, then average total cost could be either falling or rising.

too little of the good

If market incentives to produce are too weak, the market will end up producing: zero output. a quantity equal to the efficient outcome, as any incentive will result in economic efficiency. too little of the good. too much of the good.

true

If more sugar cane is demanded for ethanol production, ceteris paribus, the price of sugar is expected to increase. Choose: True or False

reduces

If price effect > output effect, the firm _____ production

If profits are made in purely competitive market in the long run: a. additional firms will enter. b. the market supply curve will shift to the right. c. economic profits will be eliminated. d. all of the above.

binding price floor.

If quantity supplied equals 85 units and quantity demanded equals 80 units under a price control, then it is a nonbinding price ceiling . binding price floor. nonbinding price floor. binding price ceiling.

price of iPads will fall.

If the market for iPads experiences a surplus, then the: demand for iPads will rise. supply of iPads will fall. price of iPads will rise. price of iPads will fall.

surplus.

Imagine a free market in equilibrium. After a sudden decrease in demand (but before the price can adjust), the market experiences a: new equilibrium. no change. surplus. shortage.

Nothing unusual would happen.

In Ancient Egypt, the "Bronze Law" set maximum prices for wages, preventing them from rising above what rulers perceived as the minimum needed to survive. If this was 10¢ a day for a porter (someone who carries things short distances) and the market wage was 8¢ a day, which of the following would be a plausible consequence of this law? Porters would transport items they normally would not. Nothing unusual would happen. Porters would travel less quickly than they otherwise would. Unemployment for porters would decrease.

In competitive markets, the demand curve faced by the individual firm is A. equal to the market demand curve. B. perfectly elastic. C. perfectly inelastic. D. downward sloping.

Are motivated by self-interest

In his book, The Wealth of Nations, Adam Smith claimed that individuals: are motivated by self-interest. always act in an altruistic way. are not concerned with resources. always consider the effect of their actions on others.

In late November of 2010, a share of Microsoft sold for about $25 and a share of McDonald's sold for about $80. In late June of 2011, Microsoft shares were about $26 and McDonald's shares were about $85. If these two companies were the only choices available, what is your economic profit if you invest $400 in Microsoft? A. -$25 B. -$9 C. $9 D. $16

In pure competition in the long run when firms are in an increasing cost industry, the entry of additional firms causes: a. cost per unit to fall, prices to rise and profits to increase. b. cost per unit to rise, prices to fall and profits to decrease. c. cost per unit to rise, prices to fall and profits to increase. d. cost per unit to fall, prices to rise and profits to decrease.

In the short run a pure monopolist: A. always earns an economic profit. B. always earns a normal profit. C. always realizes a loss. D. may realize an economic profit, a normal profit, or a loss.

In the short run, if price is less than average cost, a firm A. will certainly shut down. B. might shut down, but might stay open. C. is earning positive profits. D. is earning normal profits.

Decreasing cost industry

Industry cost ↓ with greater output, shown with a flat supply curve

Increasing cost industry

Industry costs ↑ with greater output, show with an upward sloped supply curve

in a free market, P = MC1 = MC2 = ... = MCn

Invisible Hand Property 1

Is there a way for policymakers to improve the market outcome in monopolistic competition?

It is good when entrepreneurs move capital and labor resources from low-profit industries to high-profit industries. Choose: True or False

Which of the following is true of structural unemployment?

It is long-term in duration. It is persistent over time. It results from industry restructuring.

Jack and Jill work at a bakery. In one hour, Jack can decorate either 5 ice-cream cakes or 2 wedding cakes. In one hour, Jill can decorate either 4 ice-cream cakes or 1 wedding cake. According to this scenario, _____ has a comparative advantage in decorating ice-cream cakes and _____ has a comparative advantage in decorating wedding cakes.

Jill; Jack

Labor Force Participation Rate:

Labor force / adult population (adult population does not include people who are institutionalized or in the military)

Which of the following is the reason India uses its capital inefficiently?

Large-scale production is prohibited.

greater

Larger share of budget devoted to a good, the ____ elasticity

placing a large dome over a polluting factory

Many remedies to resolving externalities involve "internalizing the externality." Which of the following best approximates that goal? punching people who smell nice placing a large dome over a polluting factory buying yourself flowers to counteract the bad smell from a neighboring pig farm giving candy to disruptive children

Marginal cost is the: A. rate of change in total fixed cost that results from producing one more unit of output. B. change in total cost that results from producing one more unit of output. C. change in average variable cost that results from producing one more unit of output. D. change in average total cost that results from producing one more unit of output.

Marginal product becomes negative with the hiring of the __________ unit of labor. A. third B. fourth C. sixth D. seventh

Marginal product is: A. the increase in total output attributable to the employment of one more worker. B. the increase in total revenue attributable to the employment of one more worker. C. the increase in total cost attributable to the employment of one more worker. D. total product divided by the number of workers employed.

Marginal product: A. diminishes at all levels of production. B. may initially increase, then diminish, but never become negative. C. may initially increase, then diminish, and ultimately become negative. D. is always less than average product.

Marginal revenue is the: A. change in product price associated with the sale of one more unit of output. B. change in average revenue associated with the sale of one more unit of output. C. difference between product price and average total cost. D. change in total revenue associated with the sale of one more unit of output.

Both Maria and Jorge bake cookies and bread, but Maria spends less time baking each batch of cookies and each loaf of bread than Jorge does. Which of the following is TRUE?

Maria has an absolute advantage in baking both cookies and bread.

they control a good that is used to produce other goods

Monopolies are especially harmful if ....

Monopolistic competition means: A. a market situation where competition is based entirely on product differentiation and advertising. B. a large number of firms producing a standardized or homogeneous product. C. many firms producing differentiated products. D. a few firms producing a standardized or homogeneous product.

Monopolistically competitive firms: A. realize normal profits in the short run but losses in the long run. B. incur persistent losses in both the short run and long run. C. may realize either profits or losses in the short run, but realize normal profits in the long run. D. persistently realize economic profits in both the short run and long run.

Which identity represents the quantity theory of money?

Mv = PYR.

Between the years 1993 to 1998, U.S. Senators' stock portfolio outperformed the market by an average of 12 percent a year. Does this overturn the efficient market hypothesis?

No, because Senators are probably trading using nonpublic information.

TR >TC

P > AC is equivalent (inequality that starts with TR)

True

Patent buyouts could reduce deadweight loss from monopolies, while still protecting the incentive to innovate. Choose: True or False

Price exceeds marginal revenue for the pure monopolist because the: A. law of diminishing returns is inapplicable. B. demand curve is downsloping. C. monopolist produces a smaller output than would a purely competitive firm. D. demand curve lies below the marginal revenue curve.

Product differentiation is present in: A. purely competitive markets only. B. monopolistically competitive markets only. C. oligopolistic markets only. D. both monopolistically competitive and oligopolistic markets.

total revenue - total cost

Profit = ________

TR - TC, or (P -AC)Quantity

Profit equation (there is 2)

Pure monopolists may obtain economic profits in the long run because: A. of advertising. B. marginal revenue is constant as sales increase. C. of barriers to entry.

Pure monopoly means: A. any market in which the demand curve to the firm is downsloping. B. a standardized product being produced by many firms. C. a single firm producing a product for which there are no close substitutes. D. a large number of firms producing a differentiated product.

Price effect

Raising output increases market quantity, which reduces price and reduces profit on all units sold

Refer to the above diagram, which pertains to a purely competitive firm. Curve C represents: A. total revenue and marginal revenue. B. marginal revenue only. C. total revenue and average revenue. D. average revenue and marginal revenue.

meant the government prevented the entry of new competitors to maintain high ticket prices.

Regulation of airline fares under the Civil Aeronautics Board lead to greater innovation in the airline industry at a cost of higher ticket prices. made it possible for lower-income Americans to afford air travel for the first time. created incentives for optimal resource allocation. meant the government prevented the entry of new competitors to maintain high ticket prices.

Frictional Unemployment:

SHORT TERM unemployment caused by difficulties of matching employee to employer

Searching for food in one direction means an ant cannot search in another direction

Searching for food in one direction means an ant cannot search in another direction.

The value of Q where MR= 0 is one half of that where P = 0.

Shortcut for finding MR in a monopoly

The ultimate cause for the different economic performance in North and South Korea is

South Korea has better economic institutions

help stabilize prices over time.

Speculators cause prices to rise but never to fall. help stabilize prices over time. profit by setting market prices at monopoly levels. profit at the expense of consumers.

A firm's decisions about P or Q can affect other firms and cause them to react. The firm will consider these reactions when making decisions.

Strategic behavior in oligopoly

In 2011, revolutions and uprisings spread across North Africa and the Middle East, where a lot of oil is pumped. How did this affect the oil market?

Supply decreased, causing the price to rise.

-1/2.

Suppose that along a given demand curve, price goes up by 10 percent, decreasing quantity demanded by 5 percent. The price elasticity of demand is impossible to calculate without specific prices and quantities. 50. -1/2. -2.

(Table: Movies and Oil) According to the table, which state has the comparative advantage in oil?

Texas, because its opportunity cost for a barrel of oil is 1.5 movies per year

Studios would know in advance whether the prediction market was accurate.

The Hollywood Stock Exchange allows users to bet on the success of movies already produced. Imagine that a new exchange develops that allows users to bet on the success of movies not yet produced. A contract would pay some fraction of the film's future gross earnings if the film actually gets produced, and users would have their money returned to them if the film were not made. Which of the following is NOT true? Studios could make better decisions about budgeting and marketing. Studios would know in advance whether the prediction market was accurate. Studios have an incentive to set up such a market. Studios could use such information to make films that are more popular and profitable.

The MR = MC rule applies: A. in the short run, but not in the long run. B. in the long run, but not in the short run. C. in both the short run and the long run. D. only to a purely competitive firm.

The Private Express Statutes, passed in 1792 and (in amended form) still in effect today,contain federal civil and criminal laws relating to the delivery of mail. The Statutes grant monopoly powers to the U.S. Postal Service. The average effect of this monopoly on the price and quality of mail service in the populated parts of the U.S. is that the ______ because of the monopoly privilege of the USPS. A. price and quality of service are higher B. price and quality of service are lower C. price is higher and the quality of service is lower D. price is lower and the quality of service is higher

If a bond for Alexcorp has a 10 percent rate of return and an otherwise identical bond for Tylercorp has a 15 percent rate of return, which bond carries greater risk?

The Tylercorp bond is riskier.

Nixon

The United States attempted to centrally plan the allocation of oil under the ______ Administration. Nixon Reagan Clinton Carter

speculation

The attempt to profit from future price changes.

The basic characteristic of the short run is that: A. barriers to entry prevent new firms from entering the industry. B. the firm does not have sufficient time to change the size of its plant. C. the firm does not have sufficient time to cut its rate of output to zero. D. a firm does not have sufficient time to change the amounts of any of the resources it employs.

The demand curve for oil from OPEC is A. flat. B. vertical. C. upward-sloping. D. downward-sloping.

The demand curve in a purely competitive industry is ______, while the demand curve to a single firm in that industry is ______. A. perfectly inelastic, perfectly elastic B. downsloping, perfectly elastic C. downsloping, perfectly inelastic D. perfectly elastic, downsloping

false

The demand for fruit is more elastic than the demand for apples. Choose: True or False

more elastic

The demand for most goods tends to become ______ over time. downward sloping more vertical less elastic more elastic

true

The demand for necessity goods tends to be less elastic. Choose: True or False

it is not possible to systematically pick stocks that outperform the market.

The efficient market hypothesis

how much less of a good or service consumers will buy when the price increases.

The elasticity of demand measures a supplier's estimate of market demand. how consumers substitute across goods when the price of one increases. whether consumers will buy more or less as the price increases. how much less of a good or service consumers will buy when the price increases.

false

The elasticity of demand measures how responsive the price of a good is to a change in the demand. Choose: True or False

consumers' willingness to pay equals producers' willingness to sell.

The equilibrium quantity is the quantity at which: consumers' willingness to pay equals producers' willingness to sell. suppliers' production is maximized. gains from trade are minimized. buyers have no unsatisfied wants.

less

The higher the concentration ratio, the ____ competition.

low-skilled unemployed

The higher the minimum wage is above the equilibrium wage, the greater is the number of ____ ___, ____ workers.

some industries deserve protection because they provide positive spillover effects to the rest of the economy.

The key industries argument for trade restrictions relies on the notion that economies of scale are easier to achieve in exporting industries. products with inelastic supply are the major source for job creation. some industries deserve protection because they provide positive spillover effects to the rest of the economy. war may disrupt trade flows.

The kinked-demand curve describes a situation in which an oligopolist will be: A. interested in maintaining the going price unless there is a rather large change in costs. B. anxious to either increase or lower price. C. anxious to increase price but not to lower price. D. anxious to lower price but not to increase price.

The kinked-demand curve model helps to explain price rigidity because: A. there is a gap in the marginal revenue curve within which changes in marginal cost will not affect output or price. B. demand is inelastic above and elastic below the going price. C. the model assumes firms are engaging in some form of collusion. D. the associated marginal revenue curve is perfectly elastic at the going price.

The law of diminishing returns indicates that: A. as extra units of a variable resource are added to a fixed resource, marginal product will decline beyond some point. B. because of economies and diseconomies of scale a competitive firm's long-run average total cost curve will be U-shaped. C. the demand for goods produced by purely competitive industries is downsloping. D. beyond some point the extra utility derived from additional units of a product will yield the

The likelihood of a cartel being successful is greater when: A. firms are producing a differentiated, rather than a homogeneous, product. B. cost and demand curves of various participants are very similar. C. the number of firms involved is relatively large. D. the economy is in the recession phase of the business cycle.

The long-run average total cost curve: A. will rise if diminishing returns are encountered. B. will fall if diminishing returns are encountered. C. will rise if economies of scale are incurred. D. is based on the assumption that all resources are variable.

The marginal cost curve intersects the average cost curve A. on the downward-sloping portion. B. on the upward-sloping portion. C. at its minimum point. D. on the vertical portion.

false

The midpoint method of calculating elasticity yields the same results as other methods. Choose: True or False

Invisible Hand Property 1

The minimization of total industry costs of production

The monopolistically competitive firm shown in the above figure: A. is in long-run equilibrium. B. might realize an economic profit or a loss, depending on its choice of output level. C. cannot operate profitably in the short run. D. can realize an economic profit.

The monopolistically competitive seller maximizes profit by producing at the point where: A. total revenue is at a maximum. B. average costs are at a minimum. C. marginal revenue equals marginal cost. D. price equals marginal revenue.

The monopolistically competitive seller's demand curve will become more elastic the: A. more significant the barriers to entering the industry. B. greater the degree of product differentiation. C. larger the number of competitors. D. smaller the number of competitors.

more elastic demand

The more quantity demanded responds to a change in the price of that good the _____ is for that good. more elastic supply less elastic demand less elastic supply more elastic demand

The nondiscriminating monopolist's demand curve: A. is less elastic than a purely competitive firm's demand curve. B. is perfectly elastic. C. coincides with its marginal revenue curve. D. is perfectly inelastic.

The nondiscriminating pure monopolist's demand curve: A. is the industry demand curve. B. shows a direct or positive relationship between price and quantity demanded. C. tends to be inelastic at high prices and elastic at low prices. D. is identical to its marginal revenue curve.

Why is it less costly to attend college during a recession?

The opportunity cost is lower during a recession because there are fewer labor market opportunities

When Angel has a comparative advantage over Blake in cooking, it means that:

The opportunity cost of cooking is lower for Angel than Blake

the tax whether it is imposed on buyers or on sellers.

The price paid by buyers minus the price paid by sellers equals the tax only if it is imposed on buyers. the tax only if it is imposed on sellers. the tax whether it is imposed on buyers or on sellers. the subsidy whether it is given to buyers or to sellers.

returns in capital implies that a country that lost much of its capital during a war willbefore the war experience a higher growth rate than

The principle of diminishing

The pure monopolist's demand curve is: A. identical with the industry demand curve. B. of unit elasticity throughout. C. perfectly inelastic. D. perfectly elastic.

her opportunity cost of ironing exceeds the person's wages providing the ironing service.

The reason why Martha Stewart does not iron her own clothes is that: she has a comparative advantage in ironing. she does not have an absolute advantage in ironing. she has never learned how to iron. her opportunity cost of ironing exceeds the person's wages providing the ironing service.

The short-run average total cost curve is U-shaped because: A. average fixed costs decline continuously as output increases. B. of increasing and diminishing returns. C. of economies and diseconomies of scale. D. minimum efficient scale is encountered.

both the cost of the vehicle's pollution and its operation (gas, etc).

The social cost of driving an SUV is equal to both the cost of the vehicle's pollution and its operation (gas, etc). only the cost of the pollution emitted by the vehicle. both the cost of producing and driving the vehicle. the cost of producing the vehicle.

The term allocative efficiency refers to: A. the level of output that coincides with the intersection of the MC and AVC curves. B. minimization of the AFC in the production of any good. C. the production of the product-mix most desired by consumers. D. the production of a good at the lowest average total cost.

Mobile homes are housing units installed on a permanent foundation owned by a landlord. Although a resident owns the home, she rents the foundation from the landlord. In theory, owners of mobile homes can transfer their home to a different foundation if the rent becomes too steep, but uninstalling, transporting, and reinstalling the mobile home is usually prohibitively expensive. This "lock-in" effect encourages state legislatures to create rent controls for mobile home foundations. Which of the following is a plausible unintended consequence of these laws?

There are few new mobile home foundations constructed.

To economists, the main difference between the short run and the long run is that: A. the law of diminishing returns applies in the long run, but not in the short run. B. in the long run all resources are variable, while in the short run at least one resource is fixed. C. fixed costs are more important to decision making in the long run than they are in the short run. D. in the short run all resources are fixed, while in the long run all resources are variable.

To the economist, total cost includes: A. explicit and implicit costs, including a normal profit. B. neither implicit nor explicit costs. C. implicit, but not explicit, costs. D. explicit, but not implicit, costs.

Tom opens a sandwich shop; which of the following is NOT an economic cost (total cost) of running his business? A. his forgone earnings as a book editor, his next best opportunity for employment B. the interest income he could have earned on the money he invested in his business from savings C. the wages that he pays his workers D. the expenses for his own lunch every day

Total cost incorporates A. implicit and explicit cost. B. implicit cost only. C. explicit cost only. D. neither explicit nor implicit cost.

Trade-offs

Trade-offs: Gaining some enjoyment is worth giving up some safety.

True/ False Monopolists do not have supply curves that are independent of market demand.

True

True/ False A monopolistʹs profit‐maximizing level of output occurs where marginal revenue equals marginal cost

True

True/False If an industry realizes significant economies of scale relative to the size of the market, it is most efficient for there to be a single firm in the industry.

True

True/False Monopolists who perfectly price discriminate produce the socially efficient level of output.

True

True/False A per se rule is a rule enunciated by the courts declaring a particular action or outcome an intrinsic violation of antitrust law.

True

True/False The U.S. law that declared monopolies illegal is the Sherman Act of 1890.

True

True/False Barriers to entry include network externalities and patents.

True

True/False If a monopoly earns a loss in the short run and market conditions do not change, then it should exit the industry in the long run.

True

True/False To call a firm a natural monopoly the firm must realize economies of scale at a scale that is close to total demand in the market.

True

One person can have an absolute advantage in both goods but not a comparative advantage in both goods.

Two persons each produce two identical goods. Which of the following is true about their absolute and comparative advantages in the production of these two goods? One person can have an absolute advantage in both goods but not a comparative advantage in both goods. One person can have neither an absolute nor a comparative advantage in either good. Both persons can always have both an absolute and comparative advantage in both goods. One person can have a comparative advantage in both goods but not an absolute advantage in both goods.

Akemi, who is a Japanese citizen, works in the United States as a computer programmer. The value of her output is included in

U.S. GDP and Japan's GNP.

financial instruments in order of increasing average return.

U.S. T-Bills, corporate bonds, S&P 500 index fund, small stocks

fall.

Under a binding price ceiling, we expect the quality of a good to rise. change in an indeterminate direction. fall. remain the same.

Under pure competition in the long run: A. neither allocative efficiency nor productive efficiency are achieved. B. both allocative efficiency and productive efficiency are achieved. C. productive efficiency is achieved, but allocative efficiency is not. D. allocative efficiency is achieved, but productive efficiency is not.

Under which of the following market structures will the long-run equilibrium price be equal to marginal cost? A. oligopoly B. monopolistic competition C. pure monopoly D. pure competition

Cyclical Unemployment:

Unemployment correlated with the business cycle (cyclical unemployment is higher under recessions)

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? A. Subway Sandwiches B. Pittsburgh Plate Glass C. Ford Motor Company D. Microsoft

*P = AC* (a compromise Profits are normal There is a deadweight loss P = MC → Optimal level of output At P = MC P < AC due to economies of scale The firm's profit is less than the normal level.)

What price should the government choose for natural monopoly? -P = MC or -P = AC

zero

When P = AC, profits are _____

less

When demand is more elastic than supply, buyers pay ___ of the tax

prisoners dilemma

When oligopolies form a cartel in hopes of reaching the monopoly outcome, they become players in a ____ _____

are not necessarily supplied by their lowest-cost producer.

When price floors are in effect goods and services do not necessarily flow to their highest-valued use. are not necessarily supplied by their lowest-cost producer. are neither necessarily supplied by their lowest-cost producer nor do they flow to their highest-valued use. are still allocated efficiently.

surplus.

When the quantity supplied of a good exceeds the quantity demanded, there is a(n): equilibrium. shortage. opportunity cost. surplus.

Which of the following conditions is true for a purely competitive firm in long-run equilibrium? A. P > MC = minimum ATC. B. P > MC > minimum ATC. C. P = MC = minimum ATC. D. P < MC < minimum ATC.

Which of the following correctly arrays the various market structures in terms of their similarities to one another? A. pure competition, oligopoly, monopolistic competition, pure monopoly B. pure monopoly, oligopoly, monopolistic competition, pure competition C. pure competition, pure monopoly, monopolistic competition, oligopoly D. pure competition, oligopoly, pure monopoly, monopolistic competition

price

Which of the following does NOT shift demand? expectations population price income

Which of the following industries most closely approximates pure competition? A. agriculture B. farm implements C. clothing D. steel

The skills of central planners go unappreciated.

Which of the following is NOT a difficulty of central planning? Distinguishing between low- and high-value uses of an item. Ensuring that planners have the incentive to move goods from low- to high-valued uses. Communicating orders to everyone involved in production. The skills of central planners go unappreciated.

political turnover

Which of the following is NOT a good institution? property rights political turnover honest government a dependable legal system

Which of the following is correct as it relates to cost curves? A. Average variable cost intersects marginal cost at the latter's minimum point. B. Marginal cost intersects average total cost at the latter's minimum point. C. Average fixed cost intersects marginal cost at the latter's minimum point. D. Marginal cost intersects average fixed cost at the latter's minimum point.

it is increasing because of diminishing marginal product

Why is the marginal cost of all firms are equal to each other

Zero profits - means at the market price the firm is covering all of its costs including enough to pay labor and capital their ordinary opportunity cost.

Why would firms remain in an industry if profits are zero?

Discouraged Workers:

Workers who have given up looking for work, but would still like to have a job

monopoly

a firm with market power

Cartel

a group of firms that gets together to make output and price decisions in an oligopoly

An increase in the investment rate results in

a higher steady-state capital stock and a higher steady-state output

Wealthy countries tend to have ______ physical capital per worker and _______ human capital per worker.

a lot of; a lot of

Tax wedge

a vertical line measuring the difference between the price paid by buyers and the price received by sellers

Refer to Table 13.1. If a monopoly faces the demand schedule given in the table, what is its marginal revenue from the 600th unit it sells? A) -$1 B) $1 C) $1.50 D) $100

a) -$1

Females started entering the labor force, and particularly professional schools, in increasing numbers beginning around a) 1970 b) 1960 c) 1940 d) 1950

a) 1970

Innovation is the process of turning an invention into a marketable product. a. True b. False

a. True

Elimination Principle

above-normal profits are eliminated by entry, and below-normal profits are eliminated by exit.

the ability to produce a good with fewer inputs than others

absolute advantage

One person can have an absolute advantage in both goods but not a comparative advantage in both goods.

absolute and comparative advantages

Profit computed using explicit costs as the only measure of costs is

accounting profit

When a fund manager tries to pick stocks to outperform the market averages, the mutual fund is called a(n)

active fund

The investment approach of one of T. Rowe Price's mutual funds is: "Reflecting a value approach to investing, the fund will seek the stocks of companies whose current stock prices do not appear to adequately reflect their underlying value as measured by assets, earnings, cash flow, or business franchises." This fund is a(n)

active fund.

When price floors are in effect goods and services

are not necessarily supplied by their lowest-cost producer.

Institutions

are the rules of the game that structure economic incentives

Consumer surplus is the amount that consumers:

are willing to pay for a good minus what they actually pay for it.

total cost/quantity

average cost of production (AC) =

Eli Whitney III receives a patent for the rayon gin, a product for which there are no close substitutes. Eli will maximize his profit when a. MR is maximized b. MR = MC c. MR > MC d. MR < MC e. P = MR > MC

b. MR = MC

The firm in Exhibit 9-3, which charges the same price to all customers, will produce where a. MR = 0 b. MR = MC c. MC < MR d. MC = ATC e. P = MC

b. MR = MC

The nondiscriminating monopolist in Exhibit 9-5 will produce where a. MR = 0 b. MR = MC c. MC < MR d. MC = ATC e. D = MC

b. MR = MC

The welfare loss of monopoly is also called a. converted consumer surplus b. deadweight loss c. economic profit under monopoly d. producer surplus e. contestable profit

b. deadweight loss

When compared to firms in perfect competition, monopolists tend to charge __________ prices and offer __________ quantities of output. a. lower; lower b. higher; lower c. lower; higher d. higher; higher e. higher; the same

b. higher; lower

made it harder for households, farmers, and small firms to get credit, worsening the recession.

bank failures during the onset of the Great Depression

The nondiscriminating monopolist at its profit-maximizing quantity in Exhibit 9-5 is making a profit of a. $6,200 b. $13,320 c. $11,000 d. $15,200 e. $0

c. $11,000

Between which quantities in Exhibit 9-2 is demand unit elastic? a. 1 and 2 b. 2 and 3 c. 3 and 4 d. 4 and 5 e. 5 and 6

c. 3 and 4

Which of the following is true at the profit-maximizing quantity for both a perfectly competitive firm and a monopoly? a. Price equals marginal cost. b. Price is greater than marginal cost. c. Marginal revenue equals marginal cost. d. Marginal revenue is less than marginal cost. e. Marginal revenue is greater than average revenue.

c. Marginal revenue equals marginal cost.

The practice of charging different prices to different consumers of the same product is called a. monopolistic pricing b. unit pricing c. price discrimination d. elasticity pricing e. marginal cost pricing

c. price discrimination

In the Solow model production function, Y = F(A, K, eL), K stands for

capital.

change in price leads to movement along demand curve not shift, known as

ceteris parebus

when buyers compete with other buyers, raising prices, and sellers compete with sellers, lowering prices.

competitive market

If the cross-price elasticity of demand of two goods is negative, we can conclude that the two goods are

complements

(econ 6) Refer to the figures. This industry is a(n)

constant cost industry

Deadweight loss occurs when

consumer and/or producer surplus decrease without the surplus going to anyone

Deadweight loss occurs when

consumer and/or producer surplus decrease without the surplus going to anyone.

the amount that consumers are willing to pay for a good minus what they actually pay for it.

consumer surplus

When the price of wood is high

consumers will be more likely to use wood in its most valuable uses

The national spending approach to calculating GDP states that GDP is equal to

consumption + investment + government spending + net exports

In a decreasing industry

cost falls as the industry expands

an underemployed person, an employee working overtime everyday, and a part-time worker

counted as employed persons

Peter, a highly skilled construction worker, lost his job when the recession began. He is looking for work, but demand in the construction industry is still low.

cyclical unemployment

Suppose that Congress decided to exempt seniors from paying income tax on labor income. What would happen to the labor force participation rate for seniors? a) It would remain the same. b) It would decrease. c) It is impossible to tell. d) It would increase.

d) It would increase

The total revenue for the nondiscriminating monopolist at its profit-maximizing quantity in Exhibit 9-5 is a. $16,200 b. $36,000 c. $39,600 d. $30,800 e. $31,000

d. $30,800

What is the maximum profit the monopolist in Exhibit 9-6 can earn? a. -$5 b. $40.80 c. $43.60 d. $44.20 e. $42.60

d. $44.20

What is the profit-maximizing price for the monopolist in Exhibit 9-6? a. $14 b. $11 c. $10 d. $9 e. $8

d. $9

Perfectly competitive firms and monopolist firms both maximize profit where a. price equals marginal cost b. total revenue is maximized c. average total cost is minimized d. marginal cost equals marginal revenue e. price is as high as possible

d. marginal cost equals marginal revenue

The demand curve a monopolist uses in making an output decision is a. the same as the demand curve facing a perfectly competitive firm b. vertical because there are no close substitutes for its product c. horizontal because there are no close substitutes for its product d. the same as the market demand curve e. perfectly inelastic

d. the same as the market demand curve

changes in GDP overstate the true increase in production over the past 100 years.

decline in the use of unpaid child labor

Diversification typically ______ portfolio risk.

decreases

Which of the following would NOT happen as the result of a price floor?

decreases in product quality

When a price ceiling is in effect, quantity ______ will be greater than quantity ______ creating a ______

demanded; supplied; shortage

How much per-unit costs ↑ as production ↑

determinants of elasticity of supply

Buy a mutual fund of a broad stock market index.

diversification in stock investment

do shortages is that they eliminate competition?

not necessarily

does MR = MC mean the firm makes a profit?

In Exhibit 9-1, the marginal revenue of the sixth unit is a. $10 b. $60 c. $100 d. $40 e. -$40

e. -$40

For a monopolist, a. P = MR = AR b. P = MR > AR c. P > MR = AR d. P = MR < AR e. P = AR > MR

e. P = AR > MR

Which of the following would not be considered price discrimination? a. charging higher rates on long distance calls during normal business hours b. giving lower air fares to those who buy tickets a month before departure c. charging lower prices for senior citizens at museums d. getting separate prices for residential and commercial users of natural gas e. charging more for BMWs than for Chevrolets

e. charging more for BMWs than for Chevrolets

rules of the game that promote economic incentives

economic institutions

Profits in excess of both explicit and implicit costs are

economic profits

Firms have an incentive to exit an industry if

economic profits are negative

the decrease in average production costs when output rises.

economies of scale

They create employment security for workers with a job.

employment protection laws

If market supply increases:

equilibrium price will decrease but equilibrium quantity will increase.

the quantityat which consumers' willingness to pay equals producers' willingness to sell.

equilibrium quantity

tap water, cable tv

examples of monopoly

wheat, milk

examples of perfect competition

Under a binding price ceiling, we expect the quality of a good to

fall.

Consumer surplus is a gain from exchange, but producer surplus is a loss from exchange. true or false

false

role is to reduce the default risk on money they save and lend.

financial intermediaries

_______ has been increased through declining transportation costs, the integration of world markets, and increased speed of communication

globalization

honest government, property rights, and a dependable legal system

good institution

Absolute advantage is the ability to produce a:

good with fewer inputs than others.

When markets don't align self-interest with social interest:

governments may improve the situation by changing incentives.

The level of capital stock increases when investment in capital is

greater than depreciation.

In general, the flatter the demand curve the

greater the demand elasticity

The best measure of a country's changing living standards over time is the

growth in real GDP per capita.

Marginal product of capital is ______ in China relative to marginal product of capital in developed economies.

high

(Figure: Oil) Compared with producing the 20 millionth barrel of oil, the cost of producing the 40 millionth barrel of oil is:

higher.

hold an auction

lost consumer surplus + lost producer surplus

how to calculate deadweight loss w price ceilings

% change of quantity demanded/% change in price

how to calculate elasticity of demand

change in quantity supplied/change in price

how to calculate elasticity of supply

Qd at controlled price - Qs at controlled price

how to calculate shortage

time cost per unit x Q of units bought

how to calculate wasted time

Qd- Qs rectangle

how to find import rectangle

move together

if inelastic revenue and price....

unit elastic

if the absolute value of the elasticity demand is = 1

elastic

if the absolute value of the elasticity demand is greater than 1

in a monopoly, P is _____ than MC

Bond prices and bond interest rates move

in opposite directions

market price

in order to maximize profits, what price do you set?

negative

in the long run, stop producing if profits are ____

fixed costs, variable costs

in the short run produce if total profits can cover ___ and some of ____

variable costs

in the short run stop producing if total profits dont cover ____

Many companies pay their sales employees based on commissions—the more they sell, the more they get paid. This practice highlights the role of:

incentives.

Toyota, a Japanese car company, producing cars in the United States

included in US GDP

Long-lasting unemployment benefits tend to

increase the rate of structural unemployment

Suppose that Congress decided to exempt seniors from paying income tax on labor income. What would happen to the labor force participation rate for seniors?

increase.

A decrease in production costs at any given quantity ______ supply.

increases

positive change in taste-

increases demand

As trade becomes more widespread, specialization ______, which in turn ______ productivity.

increases; increases

A farmer can grow soy or sorghum. If the price of soy increases, the opportunity cost of growing sorghum ______, shifting the supply curve of sorghum ______.

increases; up and to the left

higher future prices

indicate investors believe there will be supply disruptions

lower future prices

indicate investors believe there will be unusually favorable supply conditions or higher future demand.

A 4 percent increase in the price of beer will cause a 1 percent decline in the quantity of beer demanded. The demand for beer is

inelastic

The Zimbabwean government printed money as fast as it could for years. As a result

inflation

ultimate reasons for growth:

institutions and incentives

Which of the following is an example of passive investing?

investing in a mutual fund that tries to mimic the S&P 500

purchase of new capital goods.

investment

A price ceiling

is a maximum price allowed by law

A price ceiling

is a maximum price allowed by law.

A firm earning zero economic profits

is earning just "normal profits"

The opportunity cost of committing a crime and spending 5 years in jail:

is higher for people who are employed than for the unemployed.

yes, resources can be used more efficiently

is less productivity of sugar by the US beneficial? why?

Imagine a free market in which at a price of $10 quantity supplied is 50 units and quantity demanded is 40 units. Equilibrium price in this market:

is less than $10

Imagine a free market in which at a price of $10 quantity supplied is 50 units and quantity demanded is 40 units. Equilibrium price in this market:

is less than $10.

Natural monopoly

is said to exist when a single firm can supply the entire market at a lower cost than two or more firms.

Quantity demanded:

is the amount that buyers are willing and able to buy at a particular price.

global

is the economy primarily global or national?

As the price of a good increases

it becomes profitable to produce more of the good even with higher costs of production

on a demand curve if it shifts to left-

it decreased

Which of the following is true of frictional unemployment?

it has a short duration

if demand curve shifts to right

it increased

The demand curve for physician office visits is quite inelastic; therefore, a

large increase in price causes quantity demanded to decrease by very little

The lower the price ceiling is relative to the market equilibrium price, the

larger the shortage

Sherman Antitrust Act (1890)

law that Forbids collusion between competitors

Regulation of airline fares under the Civil Aeronautics Board

meant the government prevented the entry of new competitors to maintain high ticket prices.

oil industry

name an increasing cost industry,

Perfect Competition, Monopolistic Competition, Oligopoly, Monopoly

name the four market structures

ideas are

not rivalrous

(econ 5) Refer to the four panels in the figure. Which of the panels shows a competitive firm making zero economic profits?

panel B

incomes fall during a recession, and oil is a normal good

price of oil will fall

shows all combinations of goods that a country can produce given its productivity and supply of inputs.

production possibilities frontier

profit = P (<,>,=) AC

Because producing more oil requires a significant increase in exploration and drilling costs, the supply curve for oil is

relatively inelastic

For most of recorded human history, real GDP per capita has

remained steady

create larger shortages in the long run than in the short run because long-run supply is more elastic.

rent control

tariff amount x quantity of imports (Q taxed)

revenue raised by a tariff is _____ x _____

Better ideas cause the economy's production function to

rotate upward

income, expectations, and population

shifts demand

if price of a substitute increases then demand for other good-

shifts to right , decreases

short run: firm behavior similar to monopoly long run: entry and exit drive profit to zero

short and long run of monopolistic competition

A binding interest rate ceiling creates ______ savings.

shortage

A binding price ceiling leads to a(n)

shortage

(econ 10) Refer to the figure. If the government imposes a price ceiling in this market at a price of $6, the result would be a

shortage of 20 units

(Figure: Basic Supply and Demand) In the diagram, if the market price is $2, then there is a:

shortage of 20 units.

(econ 7) Refer to the figure. A price ceiling of $10 results in a

shortage of 40 units

A price ceiling creates a ________ when it is set ________

shortage; below the equilibrium price

Government ownership

solution to natural monopoly

increases them

specializing does what to outputs

If the demand for good A increases when the price of good B increases, then good A and good B are:

substitutes of each other

prices of related products are known as-

substitutes or complements

A technological innovation in the production of golf balls increases ______ causing the price to ______ and the ______.

supply; fall; quantity demanded to increase

The elasticity of demand

tells us how responsive consumer purchases are to price changes

The industrial revolution was centered in

the United Kingdom.

marginal cost

the change in total cost from producing an additional unit

marginal revenue

the change in total revenue from selling an additional unit

protectionism

the economic policy of restraining trade through quotas, tariffs, or other regulations that burden foreign producers but not domestic producers

The efficient market hypothesis states that

the price of assets already reflects all publically available information

A supply curve indicates that:

the quantity supplied of a good is higher when the price of that good is higher.

The price elasticity of demand is

the responsiveness of quantity demanded to changes in the price of the product

Game theory

the study of how people behave in strategic situations.

long run

the time after all exit or entry has occured

perfectly elastic

the world supply curve is ___ at the world price

adam smith

"if a foreign country can supply us with a commodity cheaper than we ourselves can make it, better buy it of them with some part of the produce of our own industry employed in a way in which we have some advantage"

When you are willing to pay $5 for a hamburger but you pay $4 for it, your consumer surplus for the hamburger is

At an annual growth rate of 1.4 percent, approximately how long does it take for real GDP per capita to increase from $30,000 to $60,000 in a country?

50 years

Refer to Figure 13.9. If Ohio Edison is forced to act as a perfect competitor (instead of the monopoly level), the net social gain is A) ACF. B) FGBC. C) BEC. D) FABE

C) BEC.

For a monopolist, price _____ marginal revenue. A) always equal B) is less than C) is greater than D) is first greater than and than less than

C) is greater than

A monopolist will not produce if: A) marginal revenue is declining B) price is less than average total cost but greater than average variable cost C) is in the inelastic portion of its demand curve, where marginal revenue is negative D) price is greater than average total cost

C) is in the inelastic portion of its demand curve, where marginal revenue is negative

sometimes cause prices to rise and sometimes cause prices to fall.

Speculators sometimes cause prices to rise and sometimes cause prices to fall. generally cause prices to fall. rarely influence prices. generally cause prices to rise.

false

Speculators drive prices up in the current period by withholding supply, but they decrease prices in the future by increasing supply. Choose: True or False

True

Speculators often raise prices today, but lower prices in the future. True False

the domestic country better off at the expense of foreign countries.

Strategic trade protectionism makes foreign countries better off at the expense of the domestic country. all countries better off. the domestic country better off at the expense of foreign countries. no one better off.

A production possibilities frontier shows:

all combinations of goods that a country can produce given its productivity and supply of inputs.

When a market is competitive:

buyers compete with other buyers, raising prices, and sellers compete with sellers, lowering prices.

If the adult population of a country is 200 million, 100 million are employed, and 10 million are unemployed, this country's labor force is a) unknown given the above information b) 100 million c) 110 million d) 200 million

c) 110 million

A country has 50 million people, 30 million of whom are adults. Of the adults, 5 million are not interested in working, another 5 million are interested in working but have given up looking for work, and 5 million are still looking for work. Of those who do have jobs, 5 million are working part time but would like to work full time, and the remaining 10 million are working full time. How many people in this country are in the labor force? a) 15 million b) 25 million c) 20 million d) 30 million

c) 20 million

Which type of unemployment is an outcome of economist Joseph Shumpeter's creative destruction process within an industry? a) structural unemployment b) cyclical unemployment c) frictional unemployment d) seasonal unemployment

c) frictional unemployment

If minimum wages are higher relative to the median wage, then minimum wage will affect a) more people and create less unemployment. b) fewer people and create less unemployment. c) more people and create more unemployment. d) fewer people and create more unemployment.

c) more people and create more unemployment

Long-lasting unemployment benefits tend to a) decrease the rate of structural unemployment. b) increase the rate of frictional unemployment. c) decrease the rate of frictional unemployment. d) increase the rate of structural unemployment.

d) increase the rate of structural unemployment

All of the following policies can reduce structural unemployment EXCEPT a) job retraining b) job search assistance c) work tests d) raising unemployment benefits

d) raising unemployment benefits

The total cost for the firm in Exhibit 9-3, a monopolist that maximizes profit while charging all customers the same price, is a. $3,300 b. $3,400 c. $2,808 d. $2,340 e. $1,638

d. $2,340

Optimal output and price for the nondiscriminating monopolist in Exhibit 9-5 are a. 90 and $18 b. 1,500 and $24 c. 1,700 and $22 d. 1,100 and $28 e. 1,500 and $22

d. 1,100 and $28

Which of the following is true? a. Patents reduce a firm's incentive to develop new products. b. Patents are given for new works of art or literature. c. Patents give a permanent exclusive right to produce a new good. d. Patents give a temporary exclusive right to produce a new good. e. Patents guarantee economic profits.

d. Patents give a temporary exclusive right to produce a new good.

Which of the following would not be considered price discrimination? a. Long distance telephone rates are cheaper late at night. b. Airline fares are cheaper if you reserve several weeks in advance. c. The price of lettuce is 59 cents a head and two for a dollar. d. The price of a brand-name prescription drug is higher than the price of a generic brand. e. Senior citizens pay less for a movie.

d. The price of a brand-name prescription drug is higher than the price of a generic brand.

The total cost for the nondiscriminating monopolist at its profit-maximizing quantity in Exhibit 9-5 a. is $16,500 b. is $24,200 c. is $16,200 d. is $19,800 e. cannot be determined, as no fixed costs are given

d. is $19,800

Suppose that a price-discriminating monopolist divides its market into two segments. In each market segment, price is determined by finding the level of output where that market's a. average revenue equals average total cost b. average revenue equals average variable cost c. marginal revenue equals average total cost d. marginal revenue equals marginal cost e. marginal cost equals average total cost

d. marginal revenue equals marginal cost

Roses grown in Kenya travel to Amsterdam and ultimately to your local flower shop because:

markets coordinate the specialization and trade necessary for the flower industry to function.

Structural unemployment is a bigger problem in Europe than in the United States because of

labor market regulations

Clayton Antitrust Act (1914)

law that Strengthened rights of individuals damaged by anticompetitive arrangements between firms

A price ceiling is a(n)

legally established maximum price that can be charged for a good

New housing takes some time to build, so rent control creates larger shortages in the

long run than in the short run because long-run supply is more elastic.

The business-stealing externality

losses incurred by existing firms when new firms enter market

If demand decreases, ceteris paribus, market price will be ______ at the new equilibrium point.

lower

The most likely influence of the Internet on the rate of frictional unemployment has been to

lower it.

In their calculation of profit, accountants typically do not take into account

opportunity costs

higher valued uses, lower valued uses

price control prevents _______ uses from outbidding ______ uses

Raising output increases market quantity, which reduces price and reduces profit on all units sold

price effect

Firms should exit the market if

price falls below the average cost

misallocation of resources, lost gains from trade, surplus of the good

price floor

surplus

price floor creates

above

price floor has to be (above/below) price equilibrium

goods and services are not necessarily supplied by their lowest-cost producer.

price floors

surplus

price floors are associated with (shortage/surplus)

minimum wage

price floors are associated with what?

law of demand-

price goes up quantity goes down

If the market for iPads experiences a surplus, then the

price of iPads will fall.

If the market for iPads experiences a surplus, then the:

price of iPads will fall.

what can affect supply?

price of input increases and cost of production increases, technology, taxes and subsidies (price goes up), changes in OC, number of sellers(increases shifts to right)

consumers will be more likely to use wood in its most valuable uses.

price of wood is high

Refer to Figure 13.3. The firms marginal revenue will be positive at: A) price about $5 B) prices below $5 C) all prices D) prices between $4 and $8

prices above $5

The key reason for the growth miracle of China to begin in the late 1970s is the assignment of

private property rights

The quantity supplied is the quantity that

sellers are willing and able to sell at a given price

typically borrows short-term and invests in longer-term assets. includes investment banks, hedge funds, money markets and a variety of other complex financial entities.

shadow banking system

production possibility frontier

shows all the combinations of goods that a country can produce given: productivity, supply of inputs

The supply curve:

shows how much sellers are willing and able to sell at different prices

Collateral is

something of value that by agreement becomes the property of the lender if the borrower defaults

Patents, Government regulations (other than patents), Economies of scale, Exclusive access to an important input, Technological innovation

sources of market power (5)

Which of the following do price ceilings not cause?

speculation

Because stock indexes offer higher returns than bonds historically, the rule of 70 implies that we should invest

stock indexes.

Stocks typically earn a higher average rate of return than bonds because

stocks are riskier than bonds.

a ________________ correlation between per capita GDP and infant survival

strong positive

natural rate of unemployment:

structural + frictional

Job retraining, Job search assistance, and work tests. These policies can reduce

structural unemployment

exports

we pay for our imports with ____

increase in domestic production, decrease in domestic consumption from Qd with free trade to Qd with tariff

what 2 things happen with higher price on imported goods due to tariffs

cant charge more so why would they increase quality

what caused a reduction in quality after price ceilings?

prices tell suppliers information about supply and demand so without prices producers didnt know how much to produce which caused shortage

what caused shortage?

if foreign countries can produce more efficiently than us we should let them

what did adam smith say (regarding international trade)?

tradeoffs

what does a PPF illustrate?

shortage

what does price control below the equilibrium cause?

Under rent control, bribery is used to

make the total price of a rental property (including the bribe) closer to the market price that would prevail without rent controls

if more is produced then on the supply curve-

margianl cost goes up

MR = ΔTR/ΔQ

marginal revenue formula

increases equilibrium price will decrease but equilibrium quantity will increase.

market supply

average cost

what does profit have to be greater than to have a profit?

the opportunity cost

what does the slope on a PPF graph represent?

bribery and illegal increases in price until it reaches the value that the consumer would have been willing to pay anyway

what does wasted time w price ceilings on oil cause?

Prices increased and number and quality of choices increased

what happened when congress lifted caps on pay TV rates in 1979 and all cable TV in 1984

greater elasticity of demand

what happens if the time required to adjust to price changes is longer

greater elasticity of demand

what happens when it is easier to find substitutes

poverty (not trade)

what is the cause of child labor

Most of the tax is paid by sellers

what is the result if demand is more elastic than supply

Most of the tax is paid by buyers

what is the result if supply is more elastic than demand

HIV medicine

what medication was discussed as a monopoly?

ronald regan

what president finally eliminated price ceilings on oil?

richard nixon

what president implemented price ceilings?

P = MC

what quantity should you produce to maximize profits?

when p < AC only if expected to remain like that for a while

when do you exit the market?

preferences differ

when does trade make people better off?

$4,250.00

Suppose the nominal GDP of a country is $500 billion. If the velocity of money in the country is 10, then the country's money supply should equal:

$50 million

(Last Word) Increased concentration in the beer industry has been caused by: A. changes in consumer tastes from the strong beers of small breweries to the light beers of the large brewers. B. a shift of beer consumption from bars to homes. C. technological progress which has speeded up canning and bottling lines and lowered costs. D. all of these factors.

(Last Word) The U.S. beer industry: A. has become monopolistically competitive as the result of new production technologies. B. has evolved from monopolistic competition to oligopoly in the past 50 years. C. is populated by hundreds of relatively large, independent brewers. D. approximates the purely competitive market model.

(T/F) The side of the market that is more elastic will escape more of the tax and receive less of the benefit of the subsidy

Refer to Figure 13.9. If Ohio Edison is forced to produce the efficient level of electricity (instead of the monopoly level) A) the net social gain equals area BEC. B) the monopolist loses profits equal to FABE. C) consumers gain consumer surplus of AFC. D) all of the above

) A) the net social gain equals area BEC

How to pick a stock:

-diversify (choose a large number of stocks in different areas) -avoid high fees -compound returns build wealth (rate of returns, rule of 70) -no free lunch principle, no return without risk

Determinants of Labor Force Participation Rate:

-incentives -life cycle & demographics

Labor Regulations:

-minimum wage -labor unions -affordable care act -unemployment benefits -employment protection law

Uses of the stock market:

-new stock issues are an important way to raise money for new investments -stock markets can tell us how well the firm performs -stock markets are a way of transferring company control from less competent people to more competent people

. The above diagram indicates that the marginal revenue of the sixth unit of output is: A. -$1. B. $1. C. $4. D. $24.

. A natural monopoly occurs when: A. long-run average costs decline continuously through the range of demand. B. a firm owns or controls some resource essential to production. C. long-run average costs rise continuously as output is increased. D. economies of scale are obtained at relatively low levels of output.

. Diminishing returns begin to occur with the hiring of the _________ unit of labor. A. first B. second C. third D. seventh

. Economic profit in the long run is: A. possible for both a pure monopoly and a pure competitor. B. possible for a pure monopoly, but not for a pure competitor. C. impossible for both a pure monopolist and a pure competitor. D. only possible when barriers to entry are nonexistent.

. For an imperfectly competitive firm: A. total revenue is a straight, upsloping line because a firm's sales are independent of product price. B. the marginal revenue curve lies above the demand curve because any reduction in price applies to all units sold. C. the marginal revenue curve lies below the demand curve because any reduction in price applies to all units sold. D. the marginal revenue curve lies below the demand curve because any reduction in price applies only to the extra unit sold.

. If a firm in a purely competitive industry is confronted with an equilibrium price of $5, its marginal revenue: A. may be either greater or less than $5. B. will also be $5. C. will be less than $5. D. will be greater than $5.

. In an oligopolistic market: A. one firm is always dominant. B. products may be standardized or differentiated. C. the four largest firms account for 20 percent or less of total sales. D. the industry is monopolistically competitive.

. In the short-run, a profit-maximizing monopolistically competitive firm sets it price: A. equal to marginal revenue. B. equal to marginal cost. C. above marginal cost. D. below marginal cost.

. OPEC provides an example of: A. an unwritten, informal understanding. B. noncollusive oligopoly. C. an international cartel. D. a monopolistically competitive industry.

. The Herfindahl index for a pure monopolist is: A. 100. B. 10,000. C. 100,000. D. 10.

. The kinked-demand curve model of oligopoly is useful in explaining: A. the way that collusion works. B. why oligopolistic prices and outputs are extremely sensitive to changes in marginal cost. C. why oligopolistic prices might change only infrequently. D. the process by which oligopolists merge with one another.

. The kinked-demand curve model of oligopoly: A. assumes a firm's rivals will ignore a price cut but match a price increase. B. embodies the possibility that changes in unit costs will have no effect on equilibrium price and output. C. assumes a firm's rivals will match any price change it may initiate. D. assumes a firm's rivals will ignore any price change it may initiate.

. The lowest point on a purely competitive firm's short-run supply curve corresponds to: A. the minimum point on its ATC curve. B. the minimum point on its AVC curve. C. the minimum point on its AFC curve. D. the minimum point on its MC curve.

. The term oligopoly indicates: A. a one-firm industry. B. many producers of a differentiated product. C. a few firms producing either a differentiated or a homogeneous product. D. an industry whose four-firm concentration ratio is low.

. Which of the following is true concerning purely competitive industries? A. There will be economic losses in the long run because of cut-throat competition. B. Economic profits will persist in the long run if consumer demand is strong and stable. C. In the short run, firms may incur economic losses or earn economic profits, but in the long run they earn normal profits. D. There are economic profits in the long run, but not in the short run.

As oil prices increase, producers divert sugar cane from sugar production to ethanol production.

.How are oil prices and sugar prices related? Governments set the price of sugar (per ton) to equal 45% the price of a barrel of oil. Governments set the price of sugar (per ton) to equal 1.2 times the price of a barrel of oil. Oil prices and sugar prices are not related. As oil prices increase, producers divert sugar cane from sugar production to ethanol production.

A zero-coupon bond matures in one year. The price of the bond is $500, and it will pay $1,000 in one year's time. What is the rate of return on the bond

100 percent

11. Refer to the above two diagrams for individual firms. In Figure 1, line A represents the firm's: A. demand and marginal revenue curves. B. demand curve only. C. marginal revenue curve only. D. total revenue curve only.

If the adult population of a country is 200 million, 100 million are employed, and 10 million are unemployed, this country's labor force is

110 million

12. Refer to the above two diagrams for individual firms. Figure 2 pertains to: A. a market characterized by government regulation of price and output. B. either an imperfectly competitive or a purely competitive seller. C. a purely competitive seller. D. an imperfectly competitive seller.

It takes approximately _______ years and _______ to bring a new drug to the market.

12; $900 million

13. Refer to the above two diagrams for individual firms. In Figure 2 the firm's demand and marginal revenue curves are represented by: A. lines B and C respectively. B. lines A and C respectively. C. lines A and B respectively. D. line B.

Approximately how many years will it take for an investment of $1,000 that yields 5 percent a year to double in value?

A country has 50 million people, 30 million of whom are adults. Of the adults, 5 million are not interested in working, another 5 million are interested in working but have given up looking for work, and 5 million are still looking for work. Of those who do have jobs, 5 million are working part time but would like to work full time, and the remaining 10 million are working full time. How many people in this country are in the labor force?

15 million

With labor held constant, Y = F(K) = , 400 units of capital, the fraction of output invested in new capital at γ = 0.2, and a depreciation rate of δ = .05, what is the steady-state amount of capital?

17. If the firm in the above diagram lowers price from P1 to P2, it will: A. lose P1P2ba in revenue from the price cut but increase revenue by Q1bcQ2 from the increase in sales. B. lose P1P2ca in revenue from the price cut but increase revenue by Q1acQ2 from the increase in sales. C. incur a decline in total revenue because it is operating on the elastic segment of the demand curve. D. incur an increase in total revenue because it is operating on the inelastic segment of the demand curve.

2.Which of the following statements is not correct? a. Monopolistic competition is different from monopoly because monopolistic competition is characterized by free entry, whereas monopoly is characterized by barriers to entry. b. Both monopolistic competition and oligopoly fall in between the more extreme market structures of competition and monopoly. c. Monopolistic competition is different from oligopoly because each seller in monopolistic competition is small relative to the market, whereas each seller can affect the actions of other sellers in an oligopoly. d. Both monopolistic competition and perfect competition are characterized by product differentiation.

The value of a car produced and sold in 2005 and sold again in 2011 is included in

2005's GDP only.

21. Refer to the above diagram for a monopolistically competitive firm in short-run equilibrium. Assume the firm is part of an increasing-cost industry. In the long run firms will: A. leave this industry, causing both demand and the ATC curve to shift upward. B. enter this industry, causing demand to rise and the ATC curve to shift downward. C. enter this industry, causing demand to fall and the ATC curve to shift upward. D. enter this industry, causing both demand and the ATC curve to shift upward.

(econ 8) Refer to the figure. At a minimum wage of $8, firms are willing to hire ________ workers

25 percent

When the demand curve for a good is unit elastic, raising the price of the good by 25 percent will raise the revenue of the firm by

25 percent

25. Refer to the above data for a nondiscriminating monopolist. At its profit-maximizing output, this firm's total costs will be: A. $300. B. $248. C. $198. D. $126.

25. Refer to the above diagram for a monopolistically competitive firm. Long-run equilibrium price will be: A. above A. B. EF. C. A. D. B.

26. Refer to the above data. At its profit-maximizing output, this firm's total revenue will be: A. $300. B. $198. C. $180. D. $280.

26. Refer to the above diagram for a monopolistically competitive firm. Long-run equilibrium output will be: A. greater than E. B. E. C. D. D. C.

27. 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: A. resource misallocation would become more severe. B. the demand curve would become more elastic. C. equilibrium output would decline and equilibrium price would rise. D. equilibrium output would decline and equilibrium price would fall.

28. Refer to the above diagram. To maximize profits or minimize losses this firm should produce: A. E units and charge price C. B. E units and charge price A. C. M units and charge price N. D. L units and charge price LK.

29. Refer to the above diagram. At the profit-maximizing level of output, total revenue will be: A. NM times 0M. B. 0AJE. C. 0EGC. D. 0EHB.

Resale Price Maintenance ("Fair Trade"), predatory pricing, Tying

3 controversies Over Antitrust Policy

what price to set, what quantity to produce, when to enter and exit the industry

3 questions to ask if you want to maximize profit

At an annual growth rate of 2 percent, approximately how long does it take for real GDP per capita to increase from $30,000 to $60,000 in a country?

35 years

39. Refer to the above diagrams. Diagram (A) represents: A. equilibrium price and quantity in a purely competitive industry. B. the pure monopoly model. C. an industry in which there is productive efficiency but not allocative efficiency. D. a single firm operating in a purely competitive industry.

If the down payment for a $250,000 home is $50,000 and the mortgage is $200,000, the leverage ratio is

4. Economists call the time after all exit or entry has occurred A. the short run. B. the medium run. C. the long run. D. the marginal run.

4. Graphically, a firm's marginal revenue curve is A. perfectly elastic and equal to their marginal cost curve. B. downward sloping and equal to the market demand curve. C. downward sloping, but with twice the slope of the market demand curve. D. perfectly elastic but lies underneath the market demand curve.

40. 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: A. P1. B. P2. C. P3. D. P4.

40. Refer to the above diagrams. Diagram (B) represents: A. the pure competition model. B. an industry in which there is allocative efficiency but not productive efficiency. C. the pure monopoly model. D. a long-run constant-cost industry.

41. Refer to the above diagram for a purely competitive producer. The firm will produce at a loss at all prices: A. above P1. B. above P3. C. above P4. D. between P2 and P3.

41. Refer to the above diagrams. In diagram (B) the profit-maximizing quantity is: A. g and the profit-maximizing price is e. B. h and the profit-maximizing price is e. C. g and the profit-maximizing price is f. D. g and the profit-maximizing price is d.

42. Refer to the above diagram for a purely competitive producer. If product price is P3: A. the firm will maximize profit at point d. B. the firm will earn an economic profit. C. economic profits will be zero. D. new firms will enter this industry.

42. Refer to the above diagrams. With the industry structure represented by diagram: A. (A) there will be only a normal profit in the long run, while in (B) an economic profit can persist. B. (A) price exceeds marginal cost, resulting in allocative inefficiency. C. (B) price equals marginal cost, resulting in allocative efficiency. D. (B) equilibrium price and quantity will be e and h, respectively.

43. Refer to the above diagram for a purely competitive producer. The firm's short-run supply curve is: A. the abcd segment and above on the MC curve. B. the bcd segment and above on the MC curve. C. the cd segment and above on the MC curve. D. not shown.

43. Refer to the above diagrams. With the industry structure represented by diagram: A. (B) there will be allocative efficiency. B. (A) economic profit can persist in the long run. C. (B) output will be less than in diagram (A). D. (B) output will be the same as in diagram (A).

44. Refer to the above diagrams. The price will be _______ and the quantity will be _______ with the industry structure represented by diagram (B) compared to the one represented in (A). A. higher; higher B. higher; lower C. lower; lower D. lower; higher

45. Refer to the above diagram. At the profit-maximizing output, total revenue will be: A. 0AHE. B. 0BGE. C. 0CFE. D. ABGE.

46. Refer to the above diagram. At the profit-maximizing output, total fixed cost is equal to: A. 0AHE. B. 0BGE. C. 0CFE. D. BCFG.

47. Refer to the above diagram. At the profit-maximizing output, total variable cost is equal to: A. 0AHE. B. 0CFE. C. 0BGE. D. ABGH.

48. Refer to the above diagram. At the profit-maximizing output, the firm will realize: A. a loss equal to BCFG. B. a loss equal to ACFH. C. an economic profit of ACFH. D. an economic profit of ABGH.

1)trade reduces jobs in US 2) Its wrong to trade with countries with child labor 3) national security 4) key industries = spillovers onto other sectors of economy 5) increase US well being with strategic trade protectionsim

5 arguments against international trade

shortages, reductions in quality, wasteful lines and other search costs, loss of gains from trade, misallocation of resources

5 effects of price ceilings

Population 400 million adults in labor force 260 million adults not in labor force 80 million employed workers 247 million What is the unemployment rate of the country in 2010?

5 percent

If an economy described by the production function Y = has 30 percent of output invested in new capital and 6 percent of the capital stock depreciated each year, what is the steady-state level of capital?

5 units

5. Suppose that Jay-Z and Beyonce are duopolists in the music industry. In January, they agree to work together as a monopolist, charging the monopoly price for their music and producing the monopoly quantity of songs. By February, each singer is considering breaking the agreement. What would you expect to happen next? a. Jay-Z and Beyonce will determine that it is in each singer's best self interest to maintain the agreement. b. Jay-Z and Beyonce will each break the agreement. The new equilibrium quantity of songs will increase, and the new equilibrium price will decrease. c. Jay-Z and Beyonce will each break the agreement. The new equilibrium quantity of songs will decrease, and the new equilibrium price will increase. d. Jay-Z and Beyonce will each break the agreement. The new equilibrium quantity of songs will increase, and the new equilibrium price also will increase.

56. The above diagram portrays: A. a competitive firm that should shut down in the short run. B. the equilibrium position of a competitive firm in the long run. C. a competitive firm that is realizing an economic profit. D. the loss-minimizing position of a competitive firm in the short run.

57. Refer to the above diagram. If this competitive firm produces output Q, it will: A. suffer an economic loss. B. earn a normal profit. C. earn an economic profit. D. achieve productive efficiency, but not allocative efficiency.

9. Refer to the above two diagrams for individual firms. Figure 1 pertains to: A. an imperfectly competitive firm. B. a purely competitive firm. C. an oligopolist. D. a pure monopolist.

A country should specialize in producing a good or service for which it has a: A. lower opportunity cost. B. higher opportunity cost. C. lower absolute advantage. D. higher absolute advantage.

As trade becomes more widespread, specialization ______, which in turn ______ productivity. A. increases; increases B. decreases; increases C. decreases; decreases D. increases; decreases

Both Maria and Jorge bake cookies and bread, but Maria spends less time baking each batch of cookies and each loaf of bread than Jorge does. Which of the following is TRUE? A. Maria has an absolute advantage in baking both cookies and bread. B. Jorge has a comparative advantage in baking both cookies and bread. C. Maria has a comparative advantage in baking both cookies and bread. D. Jorge has an absolute advantage in baking both cookies and bread.

In many universities, graduate students are employed to teach introductory undergraduate courses, even though the full professors at these universities have more experience and could potentially teach these courses better. Which of the following best explains why universities choose to hire graduate students instead of full professors to teach their introductory courses? A. The opportunity cost of teaching an introductory course is higher for full professors than for graduate students. B. The opportunity cost of teaching an introductory course is higher for graduate students than for full professors. C. Introductory classes are the best place for graduate students to build their teaching skills. D. Graduate students are cheaper.

Quantity demanded: A. is the amount that buyers are willing and able to buy at a particular price. B. shows how much sellers are willing and able to sell at different prices. C. shows how much buyers are willing and able to buy at different prices. D. is the amount that sellers are willing and able to sell at a particular price.

Suppose a farm hires two workers: Jason and Jose. In one hour, Jason can pick 30 apples or one pound of cherries. In one hour, Jose can pick 20 apples or one pound of cherries. Based on this information, the opportunity cost of picking one pound of cherries is: A. higher for Jason than for Jose. B. higher for Jose than for Jason. C. the same for Jason and Jose. D. The opportunity cost cannot be determined

Which of the following does NOT shift demand? A. price B. income C. expectations D. population

Variable Costs

A Firm Should Stay Open in the Short Run if it Can Cover its ____ ____

A break-down in price leadership leading to successive rounds of price cuts is known as: A. limit pricing B. a price war C. informal pricing D. price discrimination

A firm earning zero economic profits A. will shut down immediately. B. may continue to operate in the short run, but will always shut down in the long run if zero economic profits continue. C. is earning just "normal profits." D. will not be earning enough to cover all payments to capital and labor.

A firm's total variable cost will depend on: A. the prices of variable resources. B. the production techniques that are used. C. the level of output. D. all of these.

a contract to buy or sell commodities at some point in the future at a predetermined price.

A futures contract is a contract to rent a resource for a specified period with the option of buying it at the end of the lease. an investment security whose value depends on the prices of several other securities. the rate at which one currency trades for another currency. a contract to buy or sell commodities at some point in the future at a predetermined price.

A monopolistically competitive industry combines elements of both competition and monopoly. It is correct to say that the competitive element results from: A. a relatively large number of firms and the monopolistic element from product differentiation. B. product differentiation and the monopolistic element from high entry barriers. C. a perfectly elastic demand curve and the monopolistic element from low entry barriers. D. a highly inelastic demand curve and the monopolistic element from advertising and product promotion.

A natural monopoly exists when: A. unit costs are minimized by having one firm produce an industry's entire output. B. several formerly competing producers merge to become the only firm in an industry. C. short-run average total cost curves are tangent to long-run average total cost curves. D. minimum efficient scale is attained at a small level of output.

A perfectly elastic demand curve implies that the firm: A. must lower price to sell more output. B. can sell as much output as it chooses at the existing price. C. realizes an increase in total revenue which is less than product price when it sells an extra unit. D. is selling a differentiated (heterogeneous) product.

A significant difference between a monopolistically competitive firm and a purely competitive firm is that the: A. former does not seek to maximize profits. B. latter recognizes that price must be reduced to sell more output. C. former sells similar, although not identical, products. D. former's demand curve is perfectly inelastic.

zero-sum

A situation in which an economic gain by one country results in an economic loss by another

prediction market

A speculative market designed so prices can be interpreted as probabilities and used to make predictions

present; present

A spot market allows for the exchange of commodities in the ______ at prices that are settled upon in the ______. past; present present; present present; future future; present

A strawberry farmer has 5,000 pounds of strawberries ready to harvest. The cost of picking and transporting the strawberries to the market is $3,500. If the market pays $0.60 per pound of strawberries, what should the strawberry farmer do? A. pick and sell the strawberries to recover the fixed costs of planting B. not make a decision until he knows something about average costs C. pick and sell the strawberries, since doing so increases profits by $500 D. not pick and sell the strawberries, since doing so would reduce profits by $500

a tax on imports.

A tariff is a restriction on the quantity of goods that can be imported. a tax on imports. the restriction of trade through regulations on domestic producers. equal to exports minus imports.

supply; fall; quantity demanded to increase

A technological innovation in the production of golf balls increases ______ causing the price to ______ and the ______. supply; fall; demand to increase supply; rise; demand to decrease supply; fall; quantity demanded to increase quantity supplied; fall; quantity demanded to increase

a restriction on the quantity of goods that can be imported.

A trade quota is the restriction of trade through regulations on domestic producers. a restriction on the quantity of goods that can be imported. a tax on imports. a tax on exports.

Refer to Figure 13.12. Suppose a monopolist faces the demand and costs in the figure and is able to perfectly price discriminate. What is the societal loss from having a monopoly instead of a perfectly competitive industry supplying widgets? A) $0 B) $4,000 C) $16,000 D) Indeterminate from the given information.

A) $0

Refer to Figure 13.3. The marginal revenue of the fifth pound of cheese is: A) $1 B) $3 C) $6 D0 $24

A) $1

Refer to Figure 13.4. The marginal revenue of the 10th pound of burritos is: A) $2 B) $4 C) $10 D) $100

A) $2

elasticity of demand

a measure of how responsive the quantity demanded is to a change in price

Refer to Scenario 13.1. If Fun Cable Company were to be awarded the exclusive right to provide cable service on Catalina Island, how many households would it service? A) 2500 B) 2750 C) 5500 D) 5000

A) 2500

The two different administrative bodies responsible for initiating actions on behalf of the U.S. government against individuals or companies violating antitrust laws are called the A) Antitrust Division of the Justice Department and the Federal Trade Commission. B) Interstate Commerce Commission and the Federal Trade Commission. C) Antitrust Division of the Justice Department and the Federal Utility Commission. D) Interstate Commerce Commission and the Federal Utility Commission.

A) Antitrust Division of the Justice Department and the Federal Trade Commission

The ________ Act made tying contracts illegal and banned price discrimination. A) Clayton B) Federal Trade Commission C) Sherman D) Cellar‐Kefauve

A) Clayton

Refer to Figure 13.9. If this industry was originally perfectly competitive and becomes monopolized, the amount of consumer surplus transferred to Ohio Edison in the form of profits is A) FGBE. B) BEC. C) FGBC. D) FABE

A) FGBE

Congress established the ________ to investigate ʺ...the organization, business conduct, practices, and managementʺ of companies that engage in interstate commerce. A) Federal Trade Commission B) Antitrust Division of the Justice Department C) Interstate Commerce Commission D) National Transportation Board

A) Federal Trade Commission

Refer to figure 13.1. The demand curve facing Microsoft is most likely represent by: A) Panel A B) Panel B C) Panel C D) Panel D

A) Panel A

Refer to figure 13.1. The demand curve facing an electric company is most likely represented by: A) Panel A B) Panel B C) Panel C D) Panel D

A) Panel A

________ is(are) protected by barriers to entry, specifically _______. A) State lotteries; government rules B) DeBeers Company; economies of scale C) Cable companies; patents D) All of the above are correct.

A) State lotteries; government rules

Why do price discriminating firms often offer lower prices to children and elderly? A) They have a lower willingness to pay than other consumers. B) Their demand for goods and services tends to be less elastic than other consumers. C) Such a strategy lowers the costs of the firm. D) All of the above are correct

A) They have a lower willingness to pay than other consumers

A monopoly is an industry with: A) a single firm in which the entry of new firms is blocked B) a small number of firms each large enough to impact the market price of its output C) many firms each able to differentiate their product D) many firms each too small to impact the market price of its output

A) a single firm in which the entry of new firms is blocked

Refer to Table 13.1. If a monopoly faces the demand schedule given in the table, its marginal revenue is positive A) at prices above $2.00. B) at all prices. C) at prices below $2.00. D) at all price but $2.00.

A) at prices above

A ________ prevents new firms from entering and competing in a monopolistic industry. A) barrier to entry B) collusive agreement C) market power sharing agreement D) cartel agreement

A) barrier to entry

Antitrust cases against Eastman Kodak, International Harvester, United Shoe Machinery, and United States Steel resulted in the firms A) being found not guilty of unreasonable conduct under the Sherman Act. B) being fined and then dissolved. C) settling their cases with consent decrees. D) being found guilty of tying under the Clayton Act

A) being found not guilty of unreasonable conduct under the Sherman Act

Courts must approve ________, that is, formal agreements on remedies between all parties to an antitrust case. A) consent decrees B) criminal actions C) treble damages D) private actions

A) consent decrees

A monopolistʹs supply of a good is A) dependent on the monopolistʹs demand curve and its marginal cost curve. B) given by the portion of the monopolistʹs marginal cost curve that lies above its average variable cost curve. C) independent of the monopolistʹs demand curve. D) given by the portion of the monopolistʹs average variable cost curve that lies above its marginal cost curve.

A) dependent on the monopolistʹs demand curve and its marginal cost curve.

Refer to Figure 13.2. The only firm producing electricity has a long‐run average total cost curve as shown. The market demand for electricity from all buyers is 100,000 kilowatts per hour. It makes economic sense for this firm to be the only producer of electricity because it has A) economies of scale in producing electricity. B) a patent on the production process necessary to produce electricity C) control over a scarce factor of production. D) a government franchise to produce electricity.

A) economies of scale in producing electricity.

Firms with market power must decide all of the following EXCEPT: A) how much to supply in each input market B) how much to produce C) how to produce it D) what price to charge for their output

A) how much to supply in each input market

The Rare Bird Company has a monopoly in the sale of macaws in Iowa. When the Rare Bird Company sells three macaws its marginal revenue is $50. When the Rare Bird Company sells four macaws its marginal revenue will be: A) less the $50 B) greater than $30 C) equal to $50 D) greater than $50 if demand is elastic and less than $50 if demand is inelastic

A) less the $50

The Sherman Antitrust Act of 1890 A) made illegal every conspiracy in restraint of trade or commerce among the several states. B) made tying contracts illegal. C) limited mergers that would substantially lessen competition or tend to create a monopoly. D) banned price discrimination

A) made illegal every conspiracy in restraint of trade or commerce among the several states.

The dammed for Ben & Jerry's ice cream will likely be _____the demand for dessert. A) more price elastic than B) less price elastic than C) equally price elastic as D) indeterminate from the given information

A) more price elastic than

The ____broadly we define a market, the more difficult it becomes to find ____. A) more; substitutes B) more; complements C) less; substitutes D) less; goods independent of each other

A) more; substitutes

For a monopoly, the marginal revenue curve has ___point(s) in common with the firm's demand curve: A) one B) no C) all D) Indeterminate from the given information

A) one

Refer to Figure 13.2. Each electricity producer has the given LRACcurve. The total cost of producing 100,000 kilowatts per hour is minimized with ________ firm(s) in the industry. A) one B) ten C) one hundred D) Indeterminate from the given information

A) one

A monopolists price equals its marginal revenue only when: A) output is zero B) total revenue is maximum C) marginal revenue is zero D) the monopolists demand schedule intersects the horizontal(quantity) axis

A) output is zero

Refer to Figure 13.4. The firms marginal revenue will be negative at: A) prices below $10 B) prices above $10 C) all prices D) prices between $4 and $8

A) prices below $10

Market power refers to a firm's ability to : A) raise price without losing all demand for its product B) charge any price it likes C) sell any amount of output it desires at the markets determined price D) monopolize a market completely

A) raise price without losing all demand for its product

Refer to Figure 13.6. The Silver Exchange has a monopoly over the sale of solid silver walking sticks. The Silver Exchange has hired you as an economic consultant. You should advise this monopolist to A) shut down in the short run and exit the industry in the long run. B) produce in the short run and expand capacity in the long run. C) produce in the short run but exit the industry in the long run. D) shut down in the short run but expand capacity in the long run

A) shut down in the short run and exit the industry in the long run.

Patents A) slow the flow of benefits from research and development to consumers. B) are granted for a period of 10 years in the United States. C) create monopolies and are thus inefficient. D) All of the above are correct

A) slow the flow of benefits from research and development to consumers.

For a monopoly to be a natural monopoly A) the firm must realize economies of scale at a scale that is close to total demand in the market. B) the firm must realize economies of scale at a scale that is small relative to the market. C) the firm must realize constant returns to scale over all output. D) the firmʹs long‐run average cost curve must continue to increase until it hits the market demand curve.

A) the firm must realize economies of scale at a scale that is close to total demand in the market.

The market demand curve facing a monopoly is: A) the only firms demand curve B) the summation of all individual firms demand curves C) nonexistent D) the marginal cost curve above minimum average variable cost

A) the only firms demand curve

Why is the unemployment rate considered to be an incomplete indicator of the health of the labor market? I. because it does not measure how well people are matched to the jobs they do II. because the definition of discouraged workers is not clear III. because it does not correctly define the adult population A. I and II only B. II and III only C. I and III only D. I, II, and III

A. I and II only

When a fund manager tries to pick stocks to outperform the market averages, the mutual fund is called a(n): A. active fund. B. loaded fund. C. random walk fund. D. passive fund.

A. active fund.

The efficient market hypothesis states that: A. asset prices represent all publicly available information B. stock values revert to their historical mean values C. the prices of assets are systematically biased, allowing savvy investors to make above-market returns by exploiting the efficiency losses D. stock buyers are more likely to assess financial information more efficiently than the sellers of stocks

A. asset prices represent all publicly available information

Which of the following is NOT a part of natural unemployment? A. cyclical unemployment B. frictional unemployment C. structural unemployment D. none of the above

A. cyclical unemployment

An unemployed person is one who: A. does not have a job but is actively looking for one. B. is not willing to work even though he or she is able to. C. stays at home and is not looking for work. D. works for a job that pays less than he or she expected.

A. does not have a job but is actively looking for one.

Which of the following does NOT determine the labor force participation rate? A. education B. lifecycle C. demographics D. incentives

A. education

______________ ________________ is the type of unemployment that is associated with information costs and job search. A. frictional unemployment B. structural unemployment C. cyclical unemployment D. seasonal unemployment

A. frictional unemployment

Which of the following is an example of passive investing? A. investing in a mutual fund that tries to mimic the S&P 500 B. investing in a mutual fund that is actively managed by a fund manager C. researching many different stocks and accumulating your own portfolio of investments D. investing in one specific stock

A. investing in a mutual fund that tries to mimic the S&P 500

Suppose that Congress decided to exempt seniors from paying income tax on labor income. What would happen to the labor force participation rate for seniors? A. it would increase B. it would decrease C. it would remain the same D. it is impossible to tell

A. it would increase

Stocks typically earn a higher average rate of return than bonds because: A. stocks are riskier than bonds. B. bonds are unsecured. C. there is a higher demand for stocks. D. stocks are better managed than bonds.

A. stocks are riskier than bonds.

The natural unemployment rate is the rate of ______ unemployment plus the rate of ______ unemployment. A. structural; frictional B. cyclical; structural C. cyclical; frictional D. frictional structural; cyclical

A. structural; frictional

Which of the following does NOT contribute directly to the persistence of structural unemployment? A. work tests B. unemployment benefits C. employment protection laws D. unions

A. work tests

Structural unemployment is more persistent in many Western European economies than in the United States because: A. workers in these European economies have less incentive to quickly seek a new position since their unemployment benefits are much higher than those in the United States B. many of the European countries have labor relations that require a mandatory waiting period before a worker can reapply for a new job C. American workers have many more job opportunities than their European counterparts D. labor unions are weaker in Europe than they are in the United States

A. workers in these European economies have less incentive to quickly seek a new position since their unemployment benefits are much higher than those in the United States

Anything that prevents new firms from competing on an equal basis with existing firms in an industry is called a barrier to entry. a. True b. False

A: True

Above-normal profits are eliminated by ______, and below-normal profits are eliminated by ______. A. entry; entry B. exit; exit C. entry; exit D. exit; entry

People work for the benefit of others because it benefits them to do so

Adam Smith wrote, "It is not from the benevolence of the butcher, the brewer, or the baker, that we expect our dinner, but from their regard to their own interest." He meant that: high-interest payments mean that no one has to work anymore. most of us no longer get our dinner directly from the butcher, the brewer, and the baker. butchers, brewers, and bakers are not productive members of society. people work for the benefit of others because it benefits them to do so.

the invisible hand

Adam Smith's term for the natural self-regulation of a market economy driven by self-interest and efficiency

individuals acting to maximize their own profits would minimize industry costs

Adam smith's description of the invisible hand says that ....

the high-skilled worker

An employer has work that can be done in the same time by one high-skilled worker paid $50 an hour or by eight low-skilled workers paid $5 an hour each and the minimum wage is $7.25 an hour. In this scenario, who benefits from the minimum wage, the high-skilled worker, or the low-skilled workers? (HINT: Who would you hire for the job?) the high-skilled worker the low-skilled workers both benefit equally It is impossible to say who benefits more.

An industry comprised of four firms, each with about 25 percent of the total market for a product is an example of: A. monopolistic competition. B. oligopoly. C. pure monopoly. D. pure competition.

The supply has increased, shifting down and to the right.

Anonymity on the Internet has lowered the cost of rudely confronting people. What has happened to the supply of rude confrontations? The supply has decreased, shifting up and to the left. The supply has increased, shifting up and to the left. The supply has decreased, shifting down and to the right. The supply has increased, shifting down and to the right.

Answer the next question(s) on the basis of the following information: TFC=Total Fixed Cost MC=Marginal Cost TVC=Total Varial Cost Q=Quantity of Output P=Product Price Refer to the above information. Total cost is: A. The change in marginal cost B. TVC-TFC C. TFC+TVC D. TFC+TVC/Q

increases; increases

As trade becomes more widespread, specialization ______, which in turn ______ productivity. increases; increases decreases; decreases decreases; increases increases; decreases

Assume a pure monopolist is currently operating at a price-quantity combination on the inelastic segment of its demand curve. If the monopolist is seeking maximum profits, it should: A. retain its current price-quantity combination. B. increase both price and quantity sold. C. charge a lower price. D. charge a higher price.

Cigarette sellers will increase the supply of cigarettes to New Jersey and decrease the supply of cigarettes to South Carolina.

Assume that cigarettes sell for $7 per pack in New Jersey and $3 per pack in South Carolina, and New Jersey taxes cigarettes at $3.00 per pack and South Carolina taxes cigarettes at $0.10 per pack. How might cigarette sellers respond to the after-tax price differential between the two states? Cigarette sellers will decrease the supply of cigarettes to New Jersey and increase the supply of cigarettes to South Carolina. Cigarette sellers will increase the supply of cigarettes to New Jersey and decrease the supply of cigarettes to South Carolina. Cigarette sellers will increase the supply of cigarettes to both New Jersey and South Carolina. Cigarette sellers will decrease the supply of cigarettes to both New Jersey and South Carolina.

Nasdaq:

Average price of all companies traded on Nasdaq

A farmer can grow soy or sorghum. If the price of soy increases, the opportunity cost of growing sorghum ______, shifting the supply curve of sorghum ______. A. increases; down and to the right B. increases; up and to the left C. decreases; up and to the left D. decreases; down and to the right

Because the knowledge of each individual brain is limited, specialization leads to: A. lower labor productivity. B. higher labor productivity. C. a higher absolute advantage. D. a lower absolute advantage.

Martha Stewart can iron 20 shirts per hour. Her housekeeper can iron 12 shirts per hour. From this information alone, we can infer that: A. the housekeeper has a comparative advantage in ironing. B. Martha has an absolute advantage in ironing. C. Martha has a comparative advantage in ironing. D. the housekeeper has an absolute advantage in ironing.

Suppose a farm hires two workers: Jason and Jose. In one hour, Jason can pick 30 apples or one pound of cherries. In one hour, Jose can pick 20 apples or one pound of cherries. According to the theory of trade, which of the following is TRUE about Jose? A. Jose should specialize in picking cherries because he has an absolute advantage in picking cherries. B. Jose should specialize in picking cherries because he has a comparative advantage in picking cherries. C. Jose should pick both apples and cherries because he has an absolute advantage in doing both. D. Jose should be fired because he has no comparative advantage.

The recent pace of globalization has been increased through: A. the integration of world markets. B. each of these developments. C. increased speed of communication. D. declining transportation costs.

The slope of the production possibilities frontier at a given point indicates ______. A. a country's trade balance. B. a country's opportunity cost of production. C. the preferences of a country. D. a country's total gains from trade.

Which of the following is a reason to trade with other countries? A. to take advantage of similarities B. to take advantage of differences C. to exploit poor workers overseas D. to provide foreign aid to poor workers overseas

Refer to Figure 13.4. The firms total revenue will be maximized at a price of: A) $12 B) $10 C) $8 D) $6

B) $10

A monopolist suffers a loss if its ________ schedule is everywhere above its ________ schedule. A) ATC; MC B) MC; AVC C) ATC; Demand D) Demand; ATC

C) ATC; Demand

Refer to Figure 13.12. Suppose a monopolist faces the demand and costs in the figure and is able to perfectly price discriminate. How much profit does the monopolist earn? A) $0 B) $16,000 C) $32,000 D) Indeterminate from the given information.

B) $16,000

Refer to Table 13.1. If a monopoly faces the demand schedule given in the table and has a constant marginal and average cost of $1 per unit of providing the product, what price should it charge per unit of output so as to maximize its profits? A) $2.00 B) $2.50 C) $3.00 D) $3.50

B) $2.50

Refer to Table 13.1. If a monopoly faces the demand schedule given in the table and has a constant marginal and average cost of $1 per unit of providing the product, what is the societal loss associated with the monopoly? A) $0 B) $225 C) $450 D) Indeterminate from the given information.

B) $225

When a monopolist sells two units of output its total revenue is $600. When a monopolist sells three units of output its total revenue is $690. When the monopolist sells three units of output, the price per unit is A) $210. B) $230. C) $300. D) $630.

B) $230.

Refer to Figure 13.3. The marginal revenue of the third pound of cheese is: A) -$5 B) $5 C) $7 D) $21

B) $5

When a monopolist sells two units of output its total revenue is $150. When it sells three units of outputs its total revenue, is $180. When the monopolist sells three units of output, the price per unite is: A) $50 B) $60 C) $75 D) $90

B) $60

Refer to Table 13.1. If a monopoly faces the demand schedule given in the table and has a constant marginal and average cost of $1 per unit of providing the product, what is the maximum profit the monopoly can earn? A) $300 B) $600 C) $900 D) $1,000

B) $600

Refer to Table 13.1. If a monopoly faces the demand schedule given in the table and has a constant marginal and average cost of $1 per unit of providing the product, what is the most the monopoly would expend in rent-seeking activity? A) $300 B) $600 C) $900 D) $1,000

B) $600

Refer to Scenario 13.1. If Fun Cable Company were to be awarded the exclusive right to provide cable service on Catalina Island, how much profit would it earn? A) $0 B) $62,500 C) $75,000 D) $112,500

B) $62,500

Refer to Scenario 13.1. What is the most Fun Cable Company would bid for the franchise? A) $0 B) $62,500 C) $75,000 D) $112,500

B) $62,500

Refer to Table 13.2. If a monopoly faces the demand schedule given in the table and has a constant marginal and average cost of $4 per unit of providing the product, then the monopoly maximizes its profits by charging ________ per unit and selling ________ units of output. A) $6; 5 B) $7; 4 C) $5; 6 D) $9; 2

B) $7; 4

Stereo Sound Unlimited has a monopoly over the installation of surround sound systems. If Stereo Sound Unlimited's total revenue from installing 10 sound systems is $20,000 and its total revenue from installing 11 sound system is $19,000 what is the marginal revenue of the eleventh sound system? A) -$2,000 B) -$1,000 C) $2,000 D) $3,8000

B) -$1,000

Refer to Figure 13.10. For Armstrong Cable the profit‐maximizing number of subscribers is A) 800. B) 1,000. C) 2,200. D) 2,500.

B) 1,000

Refer to Figure 13.10. The monopoly profit maximizing number of subscribers and price are: A) 800; $15 B) 1,000; $16 C) 2,200 $13 D) 2,500; $12

B) 1,000; $16

Refer to Figure 13.7. The Memory Companyʹs profit‐maximizing level of output is ________ high school yearbooks. A) 0 B) 200 C) 300 D) 350

B) 200

37) Refer to Figure 13.5. The profit‐maximizing level of output for this monopolist is ________ units of output. A) 20 B) 22 C) 24 D) 26

B) 22

Refer to Figure 13.12. Suppose a monopolist faces the demand and costs in the figure and is able to perfectly price discriminate. How many widgets does the monopoly supply when they act so as to maximize their profits? A) 200 B) 400 C) 500 D) Indeterminate from the given information.

B) 400

Refer to Table 13.1. If a monopoly faces the demand schedule given in the table and has a constant marginal and average cost of $1 per unit of providing the product, what is the level of output that would maximize its profits? A) 200 B) 400 C) 500 D) 600

B) 400

Refer to Figure 13.9. If Ohio Edison engages in rent‐seeking behavior to maintain their monopoly, the true net social cost of monopoly is A) FGBC. B) BEC and the portion of area FGBE that pays for the rent‐seeking behavior. C) AGB and the portion of area FGBE that pays for the rent‐seeking behavior. D) FAC.

B) BEC and the portion of area FGBE that pays for the rent‐seeking behavior

Refer to Figure 13.9. Ohio Edison would be willing to pay up to area ________ for rent‐seeking activities to protect its monopoly power. A) FAE B) FGBE C) FGBC D) BEC

B) FGBE

Refer to Figure 13.9. The amount of consumer surplus under monopoly equals area A) AFE. B) GAB. C) BEC. D) AFC.

B) GAB

Refer to figure 13.1. The demand curve facing an individual producer of wheat is most likely represented by: A) Panel A B) Panel B C) Panel C D) Panel D

B) Panel B

In imperfectly completive markets : a) there is no competition among firms B) some completion may exist among firms C) Some competition may exist but only in price and not in other ways D) Some completion may exist nut only in other ways and not in price

B) Some competition may exist among firms

A monopolist is NOT guaranteed positive economic profits solely because it is a monopoly since there may be no output for which A) TR = TVC. B) TR > TC. C) MC = MR. D) ATR < MR.

B) TR > TC

Related to the Economics in Practice on page 280: The cable industry is best characterized as ________. A) perfectly competitive B) a natural monopoly C) monopolistically competitive D) having diseconomies of scale

B) a natural monopoly

We call ________ a barrier to entry that grants exclusive use of an invented product or process to the inventor. A) a government franchise B) a patent C) economies of scale D) the ownership of a scarce resource

B) a patent

In an imperfectly completive industry: A) a single firm has no control over the price of its output B) a single firm has some control over the price of its output C) a single firm will charge whatever prices it wants to charge D) the government will always regulate the output price

B) a single firm has some control over the price of its output

An oligopoly is an industry market structure with: A) a single firm in which the entry of new firms is blocked B) a small number of firms each large enough to impact the market price of its output C) many firms each able to differentiate their products D) many firms each too small to impact the market price

B) a small number of firms each large enough to impact the market price of its output

A monopolist who has a horizontal ATCschedule and charges the same monopoly price to all buyers A) appropriates more consumer surplus as profit than a perfect price discriminator does. B) appropriates less consumer surplus as profit than a perfect price discriminator does. C) appropriates less consumer surplus as profit than a perfectly competitive firm does. D) does not lower the amount of consumer surplus that buyers have compared with what they would have if instead they faced a perfectly competitive firm

B) appropriates less consumer surplus as profit than a perfect price discriminator does

Due to the network externalities in the game console market, we would expect this market to A) overproduce game consoles. B) be highly concentrated. C) be efficient. D) be serviced by a natural monopoly.

B) be highly concentrated

Refer to Figure 13.9. If Ohio Edison is regulated to act as a perfectly competitive firm (instead of the monopoly level) A) output would increase from 500 to 600 units. B) consumer surplus would increase by the area FGBC. C) the firm will earn profits of BEC. D) the net social gain to society equals ACF.

B) consumer surplus would increase by the area FGBC

Verizon® has a monopoly over local telephone service.If Verizon® is producing where marginal revenue is greater than marginal cost, the firm A) could increase profits by reducing output. B) could increase profits by increasing output. C) is maximizing profits. D) must be earning zero profit

B) could increase profits by increasing output

When a monopolist sells two units of outputs its total revenue is $600. When a monopolist sells three units of output its total revenue is $690. In order to sell three units of output instead of only two, the monopolist must A) decrease its price by $30 per unit B) decrease its price by $70 per unit C) make not change in price and increate output by one unit D) decrease its price by $90 per unit

B) decrease its price by $70 per unit

A monopolist is currently producing output that maximizes its profits. In addition, if P > ATC> MC, then it is A) breaking even. B) earning positive economic profits. C) covering total variable costs but not total fixed costs. D) covering total fixed costs but not total variable costs.

B) earning positive economic profits

The ________ type of entry barrier allows an electric company to maintain a monopoly over electricity production. A) patent B) economies of scale C) diseconomies of scale D) ownership of a scarce factor of production

B) economies of scale

We know ________ as the notion that government becomes the tool of the rent seeker and makes the allocation of resources even less efficient than before and this is described in ________ theory. A) rent-seeking; public choice B) government failure; public choice C) discrimination; conspiracy D) collusion; conspiracy

B) government failure; public choice

Hi Phi Sound Unlimited has a monopoly over the installation of surround sound systems. Hi Phi Unlimited's total revenue from installing 20 sounds sound systems is $30,000 and its total revenue from installing 21 sound systems is $33,800. The price of the 21st sound system is ______the marginal revenue of that system. A) equal to B) greater than C) less than D) Indeterminate from the given information

B) greater than

Refer to Figure 13.10. If Armstrong Cable is forced to sell the efficient level output, it will A) incur a loss of $7,250. B) incur a loss of $1,250. C) earn a zero profit. D) earn a profit of $4,000.

B) incur a loss of $1,250

For a monopolist to sell more units of output: A) it must increase the price B) it must decrease the price C) demand must become more elastic D) the other competing firms must sell fewer units

B) it must decrease the price

Government failure A) leads to a more efficient allocation of resources. B) leads to a less efficient allocation of resources. C) occurs because households or firms do not act in their own self‐interest. D) occurs because government officials do not act in their own self‐interest.

B) leads to a less efficient allocation of resources.

In the long run, a monopoly A) will usually earn zero economic profits. B) may earn positive economic profits due to entry barriers. C) will never exit the industry. D) results in an efficient outcome.

B) may earn positive economic profits due to entry barriers

When______substitutes exist, a monopolist has ____power to raise price. A) more;more B) more; less C) fewer; less D) no; infinite

B) more; less

Refer to Figure 13.11. The figure shows a ________ monopoly. A) patent B) natural C) strategic resource D) profit-maximizing

B) natural

In 1890 the United States Congress A) created the Interstate Commerce Commission. B) passed the Sherman Antitrust Act. C) passed the Rule of Reason Act. D) created the Federal Trade Commission

B) passed the Sherman Antitrust Act.

In the ________ the courts enunciated a rule declaring a particular action or outcome to be an intrinsic violation of antitrust law. A) rule of reason B) per se rule C) Wheeler‐Lea Act D) consent decree rule

B) per se rule

Refer to Figure 13.4. This firms marginal revenue will be positive at: A) prices above $20 B) prices above $10 C) all prices D) prices between $4 and $8

B) prices above $10

Refer to Figure 13.3. The firms marginal revenue will be negative at: A) price about $5 B) prices below $5 C) all prices D) prices between $4 and $8

B) prices below $5

Imperfect competition: A) means there is no competition in the market B) results in less efficient market outcomes C) should always be regulated by the government D) All of the above are correct

B) results in less efficient market outcomes

A coffee manufacturers raises the price of its coffee by 12%, and the quantity demanded of its coffee falls by only 5%. This firm has: A) no monopoly power in the output market B) some market power C) some output power D) not been able to prevent its competitions from competing with it on price

B) some market power

Related to the Economics in Practice on page 287. The key issue surrounding the U.S. Supreme Court case of American Needle v. NFL was A) whether the acquisition of Reebok International by the NFL violated the Sherman Act. B) whether the NFLʹs exclusive deal with Reebok violated U.S. antitrust laws. C) if American Needle could sign an exclusive deal with the NFL. D) if the NFL could legally prevent American Needle from signing exclusive deals with other major sports leagues

B) whether the NFLʹs exclusive deal with Reebok violated U.S. antitrust laws.

A country has 50 million people, 30 million of whom are adults. Of the adults, 5 million are not interested in working, another 5 million are interested in working but have given up looking for work, and 5 million are still looking for work. Of those who do have jobs, 5 million are working part time but would like to work full time, and the remaining 10 million are working full time. What is this country's unemployment rate? A. 10 percent B. 25 percent C. 16.7 percent D. 40 percent

B. 25 percent

Which of the following is a case of cyclical unemployment? A. Glenn quit his job to move to another state. B. Garrett lost his job after the company closed during last year's recession. C. Gwyneth is still seeking a job that will use her skill in statistics. D. Grace is an accountant temporarily unemployed since tax season has ended.

B. Garrett lost his job after the company closed during last year's recession.

Why has technology lowered frictional unemployment over time? I. Many people who used to be frictionally unemployed are now employed in the technology sector II. The internet has made it easier and faster for people to search for jobs that require their particular skill sets III. The internet has made job postings easier and faster for employers A. I and II only B. II and III only C. I and III only D. I, II, and III

B. II and III only

Both unions and minimum wages: A. increase the quantity of labor demanded and reduce unemployment B. decrease the quantity of labor demanded and increase unemployment C. increase the quantity of labor supplied and reduce unemployment D. decrease the quantity of labor supplied and increase unemployment

B. decrease the quantity of labor demanded and increase unemployment

Suppose you spent $10,000 in 2010 remodeling your house, which you originally built for $200,000 in 2000. As a result, GDP in 2010 would

B. increase by $10,000.

The S&P 500: A. consists of 500 stocks and 500 bonds from the world's largest companies. B. is an index that tracks the stock prices of 500 large companies. C. comprises the stocks of at least 500 of the smallest (S) but most profitable (P) companies in the world. D. is Spain's largest stock exchange, consisting of 500 of the largest European companies.

B. is an index that tracks the stock prices of 500 large companies.

The most likely influence of the internet on the rate of frictional unemployment has been to: A. raise it B. lower it C. have no effect on it D. it is impossible to tell

B. lower it

One important "secret" to picking stocks is to: A. find a highly respected fund manager to pick them for you. B. pick a lot of them. C. only invest in no-fee funds. D. choose the best-performing stock and put the majority of your investments in that one stock.

B. pick a lot of them.

The efficient market hypothesis states that: A. in financial markets, both buyers and sellers will be equally informed. B. the price of assets already reflects all publicly available information. C. financial markets are, on average, more efficient than product markets. D. arbitrage is impossible in financial markets.

B. the price of assets already reflects all publicly available information.

Stock markets' reactions to the Chernobyl nuclear power plant meltdown was a lesson that: A. it is not possible to profit from nonpublic information. B. the prices of assets quickly adjust to new information. C. investors are slow to respond to new information. D. prices are sticky in the short run.

B. the prices of assets quickly adjust to new information.

Cyclical unemployment is: A. persistent, long-term unemployment caused by long-lasting shocks or permanent features of an economy that make it more difficult for some workers to find jobs. B. unemployment correlated with the business cycle. C. natural unemployment. D. short-term unemployment caused by the ordinary difficulties of matching employee to employer.

B. unemployment correlated with the business cycle.

Which of the following does NOT contribute directly to the persistence of structural unemployment? A. unions B. work tests C. unemployment benefits D. employment protection laws

B. work tests

Maria has an absolute advantage in baking both cookies and bread.

Both Maria and Jorge bake cookies and bread, but Maria spends less time baking each batch of cookies and each loaf of bread than Jorge does. Which of the following is TRUE? Maria has an absolute advantage in baking both cookies and bread. Jorge has an absolute advantage in baking both cookies and bread. Jorge has a comparative advantage in baking both cookies and bread. Maria has a comparative advantage in baking both cookies and bread.

Brazil has both a comparative advantage and an absolute advantage in sugar cane production.

Brazil can produce one unit of sugar cane for one unit of labor and one iPod for eight units of labor, and China can produce one unit of sugar cane for two units of labor and one iPod for four units of labor. Which of the following is TRUE? Brazil has both a comparative advantage and an absolute advantage in sugar cane production. Brazil has a comparative advantage in sugar cane production and an absolute advantage in iPod production. Both countries have a comparative in sugar cane production. China has an absolute advantage in production of both goods.

Brazil has both a comparative advantage and an absolute advantage in sugar cane production.

Which of these statements explains why price ceilings result in lost gains from trade?

Buyers and sellers want to trade, but the threat of fines or jail time prevents them from doing so.

Passive Investing:

Buying a group of stocks that mimic a broad market index

A production possibilities frontier shows: A. the goods that a country will be able to produce in the future if it continues to grow. B. the uninhabited territory of a country that is full of new possibilities. C. all combinations of goods that a country can produce given its productivity and supply of inputs. D. the supply and demand for a good in a country.

Brazil can produce one unit of sugar cane for one unit of labor and one iPod for eight units of labor, and China can produce one unit of sugar cane for two units of labor and one iPod for four units of labor. What are each country's opportunity costs of producing iPods? A. Brazil: 1/8 unit of sugar cane; China: 1/2 unit of sugar cane B. Brazil: 1/2 unit of sugar cane; China: 1/2 unit of sugar cane C. Brazil: 8 units of sugar cane; China: 2 units of sugar cane D. Brazil: 4 units of sugar cane; China: 2 units of sugar cane

Consumer surplus is the amount that consumers: A. actually pay for a good. B. are willing to pay for a good plus the amount that they actually pay for it. C. are willing to pay for a good minus what they actually pay for it. D. are willing to pay for a good.

Differences in wages between countries reflect differences in: A. absolute advantage. B. exchange rates. C. productivity. D. union density.

If the demand for good A increases when the price of good B increases, then good A and good B are: A. complements to each other. B. both inferior goods. C. substitutes for each other. D. not related.

In 2011, revolutions and uprisings spread across North Africa and the Middle East, where a lot of oil is pumped. How did this affect the oil market? A. Supply increased, causing the price to fall. B. Supply increased, causing the price to rise. C. Supply decreased, causing the price to rise. D. Supply decreased, causing the price to fall.

Roses grown in Kenya travel to Amsterdam and ultimately to your local flower shop because: A. customers are willing to pay more for roses that pass through Amsterdam. B. of the trade agreement between the government of Kenya and Amsterdam. C. markets coordinate the specialization and trade necessary for the flower industry to function. D. the World Rose Commission coordinates the different elements of the rose industry.

Suppose a farm hires two workers: Jason and Jose. In one hour, Jason can pick 30 apples or one pound of cherries. In one hour, Jose can pick 20 apples or one pound of cherries. Based on this information: A. Jason has an absolute advantage in picking cherries. B. Jose has an absolute advantage in picking cherries. C. Jason has an absolute advantage in picking apples. D. Jose has an absolute advantage in picking apples.

The benefits of specialization and trade include all of the following, EXCEPT: A. the division of knowledge that raises productivity. B. economies of scale. C. the protection of domestic firms against foreign competition. D. allowing countries to produce at the lowest opportunity costs.

The reason why Martha Stewart does not iron her own clothes is that: A. she has never learned how to iron. B. she has a comparative advantage in ironing. C. her opportunity cost of ironing exceeds the person's wages providing the ironing service. D. she does not have an absolute advantage in ironing.

The theory of comparative advantage implies that specialization and trade: A. increase production but decrease consumption. B. increase consumption but decrease production. C. increase both production and consumption. D. decrease both prod

Refer to Figure 13.8. If the government regulates Armstrong Cable so they can earn only a normal return, the price would be set at A) $12.00. B) $12.50. C) $13.00. D) $16.00.

C) $13.00

Refer to Figure 13.7. The profit‐maximizing price for the Memory Companyʹs high school yearbook is A) $0. B) $9. C) $16. D) $20

C) $16

Refer to Scenario 13.1. If Fun Cable Company were to be awarded the exclusive right to provide cable service on Catalina Island, what price would it charge per household per month? A) $5.00 B) $27.50 C) $30.00 D) $55.00

C) $30.00

Voss Calculator Company has a monopoly on the sale of graphing calculators. If it sells two of these calculators its total revenue is $500, and if it sells three calculators its total revenue is $800. The marginal revenue of the third calculator sold is: A) $100 B) $150 C) $300 D) $800

C) $300

XYZ Computer Company has a monopoly on the sale of a specialize color printer. If it sells two of these printers, its total revenue is $1,000 and if it sells three, its total revenue is $1,300. The marginal revenue of the third color printer sold is: A) $100 B)$150 C) $300 D) $1,300

C) $300

Refer to Figure 13.3. The firms total revenue will be maximized at a price of A) $8 B) $6 C) $5 D) $4

C) $5

Refer to Figure 13.7. The Memory Companyʹs maximum level of profit is A) ‐$1,800. B) ‐$1,200. C) ‐$800. D) $0

C) -$800

Refer to Figure 13.10. If the government imposed a price ceiling of $12 on this firm, the firm would sell to A) 1,000 subscribers and earn a profit of $4,000. B) more than 2,500 subscribers so that price would equal average total cost. C) 2,500 subscribers but would require a subsidy of $1,250 to stay in business. D) 2,200 subscribers and would require a subsidy of $2,200 to stay in business.

C) 2,500 subscribers but would require a subsidy of $1,250 to stay in business.

Refer to Table 13.1. If a monopoly faces the demand schedule given in the table, at what level of output is its total revenue maximized? A) 200 B) 300 C) 500 D) 600

C) 500

Refer to Figure 13.9. From societyʹs point of view the efficient level of electricity production is ________ megawatts. A) 500 B) 600 C) 800 D) 1200

C) 800

Which of the following statements is TRUE of a monopolist? A) A monopoly faces the same pressures to cut costs as a competitive firm does. B) A monopoly must use the most efficient technology or firms that do will drive it out of business. C) A monopoly is protected from competition by barriers to entry. D) A monopoly faces the same pressures to innovate as a competitive firm does

C) A monopoly is protected from competition by barriers to entry.

variable costs

costt that do vary with output

Related to the Economics in Practice on page 280: Which of the following statements about the cable industry is(are) TRUE? A) The cable industry is an example of a monopolistically competitive industry. B) Cable service involves low fixed costs and high marginal costs. C) Cable companies often bundle programs in order to maximize their profits. D) All of the above are correct

C) Cable companies often bundle programs in order to maximize their profits

________ present(s) a barrier to entry in the DVD player market. A) Economies of scale B) Ownership of a scarce resource C) Network externalities D) A government franchise

C) Network externalities

Refer to figure 13.1. The demand curve for insulin is most likely represented by: A) Panel A B) Panel B C) Panel C D) Panel D

C) Panel C

The ________ Act declared monopoly and trade restraints illegal. A) Clayton B) Federal Trade Commission C) Sherman D) Cellar‐Kefauver

C) Sherman

In 1911 two major antitrust cases were brought before the Supreme Court involving A) Eastman Kodak and Standard Oil. B) American Tobacco and United States Steel. C) Standard Oil and American Tobacco. D) United Shoe Machinery and United States Steel

C) Standard Oil and American Tobacco

We consider _____ LEAST likely to be a firm in an imperfectly competitive industry: A) a McDonalds in Houston, Texas B) HawaiianTel Telephone Company C) a corn farmer in Ohio D) the only locally owned and operated bank in Portland, Oregon

C) a corn farmer in Ohio

For a perfectly competitive firm, the marginal revenue curve has ____ point(s) in common with the firms demand curve A) one B) no C) all D) Indeterminate from the given information

C) all

A monopolist who has a horizontal ATCschedule and perfectly price discriminates A) leaves buyers a decreased but still positive amount of consumer surplus. B) increases the amount of consumer surplus that is lost to the buyers and not gained by the monopolist. C) appropriates all consumer surplus as profit. D) does not change the amount of consumer surplus that buyers had before the monopolist perfectly price discriminated.

C) appropriates all consumer surplus as profit

Which of the following is NOT an example of price discrimination? A) airlines charging lower prices to travelers who stay over a Saturday night B) student discounts at movie theaters C) back‐to‐school sales D) discounted coffee for senior citizens at restaurants

C) back‐to‐school sales

Which of the following are NOT barriers to entry? A) government franchises B) patents C) consent decrees D) economies of scale

C) consent decrees

The ________ is(are) empowered to impose a number of ________ if it(they) find(s) antitrust law violations. A) Antitrust Division of the Justice Department; fines B) Interstate Commerce Commission; fines C) courts; remedies D) Federal Trade Commission; remedies

C) courts; remedies

In 1914 the United States Congress A) passed the Sherman Antitrust Act. B) passed the Rule of Reason Act. C) created the Federal Trade Commission. D) created the Per Se Rule.

C) created the Federal Trade Commission

The demand for food will likely be price______ while the demand for Brand X Burger will likely be price _____. A) inelastic; elastic B) elastic; inelastic C) inelastic, elastic D) inelastic; inelastic

C) inelastic, elastic

41) The XYZ Computer Company monopolizes the production of a specialized color printer. The XYZ Computer Company will find it profitable to reduce output as long as marginal revenue is A) greater than marginal cost. B) equal to marginal cost. C) less than marginal cost. D) positive.

C) less than marginal cost

Monopolistic competition is an industry market structure with: A) a single firm in which the entry of new firms is blocked B) a small number of firms each large enough to impact the market price of its output C) many firms each able to differentiate their products D) many firms each too small to impact the market price of its output

C) many firms each able to differentiate their products

On way that perfect completion and monopoly differ is that in: A) perfect competition, there is not difference between firm and industry demand B) perfect completion, there is only one firm in the industry C) monopoly, the firm faces the market demand curve D) monopoly, the firm produces less than the total market quantity supplied

C) monopoly, the firm faces the market demand curve

Relative to a monopolized industry, a competitively organized industry produces ________ output, charges ________ prices, and earns ________. A) more; higher; only a normal profit B) more; lower; economic profits C) more; lower; only a normal profit D) less; higher; economic profits

C) more; lower; only a normal profit

A monopolist can choose both price and quantity simultaneously. The amount of output that it supplies depends ________ curve. A) only on its marginal cost B) only on its demand C) on its marginal cost and its demand D) on its average cost and its demand

C) on its marginal cost and its demand

Monopolists differ from perfectly competitive firms: A) on the cost and demand sides of the profit equation B) on the cost side of the profit equation alone C) on the demand side of the profit equation alone D) on neither the cost not demand sides of the profit equation

C) on the demand side of the profit equation alone

For a monopolist, if total revenue increases as output increases, the marginal revenue is: A) greater than the prices B) zero C) positive D) negative

C) positive

The Exclusive Gift Company monopolizes the sale of gold hula hoops. The company is currently setting marginal revenue equal to marginal cost and selling 50 gold hula hoops at a price of $5,000 each. Total costs for the company are $300,000 of which fixed costs are $100,000. You are hired as an economic consultant to this company. You should advise this monopolist to A) shut down in the short run and exit the industry in the long run. B) produce in the short run and expand capacity in the long run. C) produce in the short run but exit the industry in the long run if conditions do not change. D) shut down in the short run but expand capacity in the long run if conditions do not change.

C) produce in the short run but exit the industry in the long run if conditions do not change.

The classic examples of natural monopolies over the years have been in A) agriculture. B) auto manufacturing. C) public utilities. D) retail trade.

C) public utilities.

The biggest problem with the Sherman Antitrust Act of 1890 was that it was unclear what A) ʺtying contractsʺ were. B) ʺprice discriminationʺ was. C) specific acts were to be considered ʺrestraints of trade.ʺ D) ʺsubstantially lessen competitionʺ meant.

C) specific acts were to be considered ʺrestraints of trade

When the demand curve is a downward sloping straight line, the quantity at which the demand curve intersects the horizontal (quantity) axis is _____ the quantity at which the marginal revenue curve intersects the horizontal (quantity) axis. A) equal to B) less than C) twice D) four times

C) twice

If the adult population of a country is 200 million, 90 million are employed, and 10 million are unemployed, 10 million are discouraged workers this country's unemployment rate is: A. 5% B. 9.1% C. 10% D. 18.2%

C. 10%

In your country, there are 27 million people in the labor force, 24 million are employed, and 3 million are discouraged workers. What is the unemployment rate in your country? A. 33.3% B. 12.5% C. 11.1% D. 10.0%

C. 11.1%

The type of unemployment that is associated with recessions and declines in economic activity is ______________. A. Frictional unemployment B. Structural Unemployment C. Cyclical Unemployment D. Seasonal Unemployment

C. Cyclical Unemployment

Which of the following is the best example of frictional unemployment? A. John, a coal miner, was laid off because of a lack of demand for workers in his industry. He is looking into new opportunities in computer programming, but they require him to gain some new skills. B. Allison, a recent high school graduate with high aspirations, is seeking a job as the CEO of a Fortune 500 company. C. Heather recently graduated with her doctorate in economics. She is searching for a job that matches her skills. D. Peter, a highly skilled construction worker, lost his job when the recession began. He is looking for work, but demand in the construction industry is still low.

C. Heather recently graduated with her doctorate in economics. She is searching for a job that matches her skills.

Which of the following is the best example of cyclical unemployment? A. Matt is a house painter in northern Michigan. During the winter months he is unemployed B. Maggie recently graduated with her doctorate in economics. She is searching for a job that matches her skills C. Martin, a highly skilled construction worker, lost his job when the recession began. He is looking for work, but demand in the construction industry is still low D. Michael, a recent high school graduate with high aspirations, is seeking a job as the CEO of a Fortune 500 company

C. Martin, a highly skilled construction worker, lost his job when the recession began. He is looking for work, but demand in the construction industry is still low

Which type of unemployment is likely to be higher when real GDP growth is lower? A. structural unemployment B. frictional unemployment C. cyclical unemployment D. natural unemployment

C. cyclical unemployment

All of the following are reasons for the financial crisis of 2007-2008 EXCEPT A. increases in the leverage ratios for financial intermediaries. B. excessive securitization of liabilities. C. excessive confidence about the stock market. D. collapse of the shadow banking system.

C. excessive confidence about the stock market.

Technological advance, globalization, and changing tastes are considered reasons for _______________ unemployment. A. frictional B. cyclical C. structural D. permanent

C. structural

Over the past few decades, the US economy has switched from a primarily manufacturing economy to a service economy. Many individuals working in manufacturing positions lost their jobs, and many new jobs opened up in services. For those who lost jobs in manufacturing, this is an example of: A. industry unemployment B. frictional unemployment C. structural unemployment D. cyclical unemployment

C. structural unemployment

CH 8 #43 In the above diagram it is assumed that: A. some costs are fixed and other costs are variable. B. all costs are variable. C. the law of diminishing returns determines the shape of the cost curve. D. marginal product first falls, but ultimately rises as output is increased.

CH 8 #44 Refer to the above diagram. Economies of scale: A. are evident over the entire range of output. B. occur over the 0Q1 range of output. C. begin at output Q3. D. occur only over the Q1Q3 range of output.

CH 8 #45 Refer to the above diagram. Diseconomies of scale: A. begin at output Q1. B. occur over the Q1Q3 range of output. C. begin at output Q3. D. are in evidence at all output levels.

CH8 #29 In the above figure, curves 1, 2, 3, and 4 represent the: A. ATC, MC, AFC, and AVC curves respectively. B. MC, AFC, AVC, and ATC curves respectively. C. MC, ATC, AVC, and AFC curves respectively. D. ATC, AVC, AFC, and MC curves respectively

Cartels are difficult to maintain in the long run because: A. they are illegal in all industrialized countries. B. individual members may find it profitable to cheat on agreements. C. it is more profitable for the industry to charge a lower price and produce more output. D. entry barriers are insignificant in oligopolistic industries.

Why might it be a good thing for the United States if more people in India and China start dying of cancer and heart disease instead of malnutrition and preventable disease?

Companies will invest more in curing cancer and heart disease.

Comparing a pure monopoly and a purely competitive firm with identical costs, we would find in long-run equilibrium that the pure monopolist's: A. price, output, and average total cost would all be higher. B. price and average total cost would be higher, but output would be lower. C. price, output, and average total cost would all be lower. D. price and output would be lower, but average total cost would be higher.

Competitive firms want to produce the quantity such that A. P = MC. B. P > MC. C. P > AC. D. P < AC.

Dow Jones:

Composed of 30 leading American companies

Concentration ratios measure the: A. geographic location of the largest corporations in each industry. B. degree to which product price exceeds marginal cost in various industries. C. percentage of total sales accounted for by the four largest firms in the industry. D. number of firms in an industry.

refers to the condition that given similar steady states,a country with a higher output level tends to grow more slowly.

Conditional convergence

buyers, as long as demand is less elastic than supply

Consider the market for gasoline, a good with a relatively low elasticity of demand. Who will bear the majority of a tax imposed on gasoline? sellers, as long as supply is more elastic than demand it depends on the tax rate at the time the gasoline is sold buyers, as long as demand is less elastic than supply no one; the tax burden will be borne equally by both buyers and sellers Score: 1 of 1

Costs to an economist: A. consist only of explicit costs. B. may or may not involve monetary outlays. C. never reflect monetary outlays. D. always reflect monetary outlays.

Counterfeit brands carry labels from companies that did not actually make the product in question (for example, a purse not made by Gucci but carrying a Gucci label). With what kind of monopoly are the makers of these items trying to compete? A. one with hard to duplicate inputs B. one with laws preventing entry C. one with economies of scale D. one with patents

the decrease in private consumption and investment that occurs when government borrows more.

Crowding-out

If prices rise, what happens to producer surplus (all other things being equal)? A. It falls, because it encourages competition, which reduces profits. B. It falls, because fewer people buy goods. C. It stays the same, because the forces increasing the surplus counteract the forces reducing it. D. It rises, because each producer is getting more surplus per good sold.

The ability to produce a good at a lower opportunity cost than another producer is called: A. an opportunity advantage. B. economies of scale. C. an absolute advantage. D. a comparative advantage.

Two persons each produce two identical goods. Which of the following is true about their absolute and comparative advantages in the production of these two goods? A. Both persons can always have both an absolute and comparative advantage in both goods. B. One person can have neither an absolute nor a comparative advantage in either good. C. One person can have a comparative advantage in both goods but not an absolute advantage in both goods. D. One person can have an absolute advantage in both goods but not a comparative advantage in both goods.

When the price of wood is high: A. the quantity demanded of wood will be unaffected. B. the quantity demanded of wood will also rise. C. consumers will be more likely to use wood in its least valuable uses. D. consumers will be more likely to use wood in its most valuable uses.

38) Refer to Figure 13.5. The profit‐maximizing price for this firm is A) $5. B) $7. C) $9. D) $11.

D) $11

Hi Phi Sound Unlimited has a monopoly over the installation of surround sound systems. If Hi Phi Unlimited's total revenue from installing 20 sounds sound systems is $30,000 and its total revenue from installing 21 sound systems is $33,800, what is the marginal revenue of the twenty-first sound system? A) -$2,000 B)-$1,000 C) $2,000 D) $3,800

D) $3,800

When monopolists perfectly price discriminate, they A) charge different prices to different buyers. B) attempt to capture consumer surplus as profit. C) can eliminate the deadweight loss to society of a monopoly. D) All of the above are correct.

D) All of the above are correct.

When a monopolistʹs marginal profit is negative, then it follows that A) MR > ATC. B) MR = MC. C) MR > MC. D) MR < MC.

D) MR < MC.

The criterion introduced by the Supreme Court in 1911 to determine whether a particular action was illegal or legal within the terms of the Sherman Act is called the A) Interstate Commerce Rule. B) Clayton Act Rule. C) Federal Trade Commission Rule. D) Rule of Reason.

D) Rule of Reason

Although patents are a ________, they also provide ________. A) collusive agreement; for free entry of new firms B) collusive agreement; an incentive for invention and innovation C) barrier to entry; for free entry of new firms D) barrier to entry; an incentive for invention and innovation

D) barrier to entry; an incentive for invention and innovation

The shape of monopolists total revenue schedule is: A) straight line with positive slope passing through the origin B) straight line with negative slope C) curve bowed in to the quantity (horizontal) axis D) curve bowed out from the quantity (horizontal) axis

D) curve bowed out from the quantity (horizontal) axis

In 2000 Microsoft was A) punished for violating the U.S. Antitrust laws by a fine exceeding one million dollars. B) ordered to dispose of all of its subsidiary companies. C) required to make its patents, trademarks, and trade secrets available to competitors. D) found guilty of violating U.S. Antitrust laws

D) found guilty of violating U.S. Antitrust laws

From societyʹs viewpoint, a monopolist produces too little because price is A) less than marginal cost. B) less than average cost C) greater than average cost. D) greater than marginal cost

D) greater than marginal cost

Because of a patent, Alcoa is the only manufacturer of soda cans with a stay‐put tab. Alcoa can earn a profit on the sale of soda cans with stay‐put tabs A) in the short run but not in the long run because new firms will enter the industry in the long run. B) only in the long run because government regulations prevent monopolists from earning profits in the short run. C) in the long run but not the short run because the monopolist will face competition in the short run. D) in the long run because entry into the industry by new firms is blocked until the patent expires.

D) in the long run because entry into the industry by new firms is blocked until the patent expires

The Antitrust Division of the Justice Department A) is composed of five members appointed by the president and confirmed by the Senate for terms of seven years. B) can issue cease‐and‐desist orders to offenders. C) has established a set of trade regulations that make clear what practices it deems unfair and subject to action. D) initiates action against antitrust law violators and decides which cases to prosecute

D) initiates action against antitrust law violators and decides which cases to prosecute

Relative to a competitively organized industry, a monopoly produces ________ output, charges ________ prices, and earns ________. A) more; higher; economic profits B) less; lower; economic profits C) less; lower; only a normal profit D) less; higher; economic profits

D) less; higher; economic profits

From a monopolist to sell one more unite, it must: A) raise the price of only the last unite produced B) lower the prices of only the last unite produced C) raise the prices of the last as well as all previous units produced D) lower the prices of the last as well as all previous units produced

D) lower the prices of the last as well as all previous units produced

42) A profit‐maximizing monopolist will produce output where A) marginal revenue is zero. B) marginal cost is minimized. C) marginal cost is equal to price. D) marginal revenue is equal to marginal cost

D) marginal revenue is equal to marginal cost

An industry that realizes such large economies of scale in producing its product that single‐firm production of that good or service is most efficient is called a(n) ________ monopoly. A) fixed cost B) economies of scale C) patent D) natural

D) natural

It would be inefficient to break up a ________ monopolyA) government created B) price‐fixing C) cartelized D) natural

D) natural

We call a firm a(n) ________ when its LRACcurve is still declining when the LRAC intersects the market demand curve. A) perfect competitor B) monopolistic competitor C) oligopolist D) natural monopolist

D) natural monopolist

DeBeersʹ diamond monopoly results from A) economies of scale. B) a patent. C) a government franchise. D) ownership of a scarce factor of production.

D) ownership of a scarce factor of production

A bill pending before the Kansas State Legislature would prohibit private companies from selling health insurance and make the state the single payer of health care bills. Private health insurance companies that have made above normal profits have spent large sums of money trying to prevent the legislature from passing this bill into law. This is an example of A) government failure. B) collusion. C) an externality. D) rent‐seeking behavior.

D) rent‐seeking behavior.

AARP lobbies aggressively for the interests of retired persons. For example, AARP has been instrumental in obtaining medical benefits for senior citizens. Such behavior on the part of AARP is called ________. A) government failure. B) discrimination. C) consumer loss. D) rent‐seeking behavior.

D) rent‐seeking behavior.

Related to the Economics in Practice on page 287. In American Needle v. NFL, the U.S. Supreme Court essentially ruled that A) American Needle violated U.S. antitrust laws. B) Reebok violated no U.S. antitrust laws with its exclusive apparel licensing deal with the NFL. C) each team in the NFL does not compete with each other with respect to business dealings. D) the NFL does not compete with other major sports leagues when it comes to business dealings.

D) the NFL does not compete with other major sports leagues when it comes to business dealings.

If a monopolist earns positive economic profits in the long run A) new firms will enter the market. B) the monopolist expands production. C) the industry supply curve shifts to the right. D) the monopolist will not change its current behavior.

D) the monopolist will not change its current behavior

When a demand curve is downward sloping straight line, the slop of the marginal revenue curve is ____ the demand curve. A) always equal to the slope of B) the same of the slope of C) half as steep as D) twice as steep as

D) twice as steep as

How long will it take an investment of $10,000 in a mutual fund that consistently earns an annual rate of return of 5 percent to double in value? A. 5 years B. 350 years C. 70 years D. 14 years

D. 14 years

What is the problem with employment protection laws? A. They encourage workers to change jobs more frequently B. They are costly for governments to maintain C. Employers have difficulty keeping qualified workers D. Employers are reluctant to hire new workers

D. Employers are reluctant to hire new workers

Based on the efficient market hypothesis, which of the following mutual funds has the better chance of beating the market in the long run? A. a passive fund that simply attempts to mimic a financial index such as the S&P 500 B. a low-fee fund that is actively managed by a highly respected fund manager C. a portfolio of stocks that you choose, since nobody has more incentive to manage your money correctly than you do D. Forget about it—it is nearly impossible to choose a fund that will systematically outperform the market.

D. Forget about it—it is nearly impossible to choose a fund that will systematically outperform the market.

Which of the following raises structural unemployment? I. higher union membership II. more unemployment benefits III. higher minimum wages A. I and II only B. II and III only C. I and III only D. I, II, and III

D. I, II, and III

More potential sellers ______ the elasticity of ______ firm-level demand. A. increase; short-run B. decrease; short-run C. increase; long-run D. decrease; long-run

Which of the following is true of the effects of employment protection laws? A. They reduce the unemployment rates among young and minority workers. B. They reduce the duration of unemployment. C. They make labor markets more flexible in adjusting for changes in market conditions. D. They create employment security for workers with a job.

D. They create employment security for workers with a job.

Discouraged workers are workers who have: A. not given up looking for work but are not available for work. B. given up looking for work and are not available for work. C. not given up looking for work and still would like a job. D. given up looking for work but would still like a job.

D. given up looking for work but would still like a job.

Structural unemployment is a bigger problem in Europe than in the United States because of: A. technological differences. B. oil prices. C. drug use. D. labor market regulations.

D. labor market regulations.

According to the Bureau of Labor Statistics, ____________ would be counted as unemployed. I. a discouraged worker II. a worker who is over qualified for their work III. a worker who has a part time job but wanted a full time job A. I and II only B. II and III only C. I, II, and III only D. none of the answers are correct

D. none of the answers are correct

Minimum wage laws and unions tend to: A. raise wages and lower unemployment. B. lower wages and raise unemployment. C. lower wages and lower unemployment. D. raise wages and raise unemployment.

D. raise wages and raise unemployment.

Diseconomies of scale arise primarily because: A. the short-run average total cost curve rises when marginal product is increasing. B. of the difficulties involved in managing and coordinating a large business enterprise. C. firms must be large both absolutely and relative to the market to employ the most efficient productive techniques available. D. beyond some point marginal product declines as additional units of a variable resource (labor) are added to a fixed resource (capital).

Diseconomies of scale: A. pertain to the long run. B. pertain to the short run. C. are synonymous with diminishing returns. D. are synonymous with increasing returns.

Scarcity raised the price of natural rubber, creating the incentive to invent a substitute.

During World War II, natural rubber (from rubber trees) became incredibly scarce. Some even feared its complete exhaustion. The development of synthetic rubber staved off this doomsday scenario. Explain why, just when the Allies needed it most, this turn in good fortune was likely not a coincidence? The opportunity cost of planting more rubber trees was high. They lacked the incentive to create higher-producing natural rubber trees. Natural rubber went out of fashion because of the superior quality of synthetic rubber. Scarcity raised the price of natural rubber, creating the incentive to invent a substitute.

"good institutions can eliminate economic trade-offs."

Each of the following ideas is central to economics, EXCEPT: "prices rise when the government prints too much money." "good institutions can eliminate economic trade-offs." "people react to incentives." "specialization and trade benefit everyone."

Economies of scale are indicated by: A. the rising segment of the average variable cost curve. B. the declining segment of the long-run average total cost curve. C. the difference between total revenue and total cost. D. a rising marginal cost curve.

Economy Wide Shocks:

Ex: changing from manufacturing to service industries, technology replacing jobs, globalization, etc.

Under a binding price ceiling, we expect the quality of a good to

Fall

True/ False The condition for profit‐maximization for competitive firms and monopolies is the same: marginal revenue equals marginal cost. Hence, monopolies are efficient.

False

True/False The monopolistʹs total revenue curve is represented graphically by a positively sloped line.

False

(Figure: Cars and Boats) Refer to the figure. A country needs 4 units of labor to produce one car and 3 units of labor to produce one boat, and the country has 120 units of labor. Which of the figures represents this country's PPF?

Figure B

downward

Firm with market power faces a _____ sloping demand curve.

If the price of the AIDS drug Combivir was driven down to marginal cost by competition A. fewer people would use Combivir. B. there would be less incentive to invest in creating the next AIDS drug. C. deadweight loss would increase. D. GlaxoSmithKline's profits would increase.

The opportunity cost of going to graduate school is low when jobs are hard to find

Fluctuations in graduate school enrollment correlate positively with fluctuations in unemployment. What is the most likely reason why? Even if you have a job, the salary will be low, so going to graduate school is worth the effort. The opportunity cost of going to graduate school is low when jobs are hard to find. When jobs are easy to find, there are strong incentives to go to grad school. When jobs are difficult to find, the opportunity cost of going to grad school is high

Which of the following statements is TRUE? I. The War on Drugs has increased revenues in the illegal drug industry. II. The War Drugs has increased the costs of selling drugs, causing a decrease in the supply of drugs. III. The War on Drugs has caused the price of drugs to increase. IV. The quantity demanded of illicit drugs is elastic

I, II, and III only

If a firm decides to produce no output in the short run, its costs will be: A. its marginal costs. B. its fixed plus its variable costs. C. its fixed costs. D. zero.

If a firm doubles its output in the long run and its unit costs of production decline, we can conclude that: A. technological progress has occurred. B. economies of scale are being realized. C. the firm is encountering diminishing returns. D. diseconomies of scale are being encountered.

If a firm is confronted with economic losses in the short run, it will decide whether or not to produce by comparing: A. marginal revenue and marginal cost. B. price and minimum average variable cost. C. total revenue and total cost. D. total revenue and total fixed cost.

Monopolistic competition is characterized by a: A. few dominant firms and low entry barriers. B. large number of firms and substantial entry barriers. C. large number of firms and low entry barriers. D. few dominant firms and substantial entry barriers.

If a nondiscriminating pure monopolist decides to sell one more unit of output, the marginal revenue associated with that unit will be: A. equal to its price. B. the price at which that unit is sold less the price reductions which apply to all other units of output. C. the price at which that unit is sold plus the price increases which apply to all other units of output. D. indeterminate unless marginal cost data are known.

taxing sardine tins at a rate of $1 per tin.

If a tin of sardines creates a noxious odor for non-sardine-eaters equivalent to $1 per tin, the government could correct the odorous externality and achieve an efficient outcome by banning sardines. taxing sardine tins at a rate of $1 per tin. capping total sardine consumption at 1000 tins per day. subsidizing sardines tins at a rate of $1 per tin.

If all monopolistically competitive firms in the industry have profit circumstances similar to the firm shown above: A. new firms will enter the industry. B. some firms will exit the industry. C. all firms will exit the industry. D. no firms will exit the industry.

If an oligopolist is faced with a marginal revenue curve that has a gap in it, we may assume that: A. it is colluding with its rivals to maximize joint profits. B. its demand curve is kinked. C. it is selling a standardized product. D. it is selling a differentiated product.

The commodity in question has a perfectly elastic supply curve.

If consumers pay 100 percent of a commodity tax, what could one conclude? Neither side has a perfectly elastic curve but the supply side is more elastic than the demand side. The commodity in question has a perfectly elastic supply curve. Suppliers have more effective lobbying in Washington than consumers. The commodity in question has a perfectly elastic demand curve.

Demand will decrease, quantity supplied will decrease, and price will decrease.

If hipsters decide that Pabst Blue Ribbon has become cliché and they seek out a more iconic beverage, what will happen in the market for PBR? Demand will decrease, quantity supplied will decrease, and price will decrease. Demand will decrease, quantity supplied will increase, and price will decrease. Supply will decrease, quantity demanded will decrease, and price will decrease. Demand will decrease, quantity demanded will decrease, and price will increase.

equilibrium price will decrease but equilibrium quantity will increase.

If market supply increases: equilibrium price and quantity will both decrease. equilibrium price will increase but equilibrium quantity will decrease. equilibrium price and quantity will both increase. equilibrium price will decrease but equilibrium quantity will increase.

true

If most of the timber in the United States goes to housing construction that makes the supply of U.S. housing more inelastic. Choose: True or False

increases

If output effect > price effect, the firm ____ production

It rises, because each producer is getting more surplus per good sold.

If prices rise, what happens to producer surplus (all other things being equal)? It stays the same, because the forces increasing the surplus counteract the forces reducing it. It falls, because it encourages competition, which reduces profits. It falls, because fewer people buy goods. It rises, because each producer is getting more surplus per good sold.

place a tax or put a limit on the exports of U.S. fertilizer.

If the U.S. government wanted to use strategic trade protectionism for U.S.-produced fertilizer it would place a tax or put a limit on the exports of U.S. fertilizer. place high taxes on foreign-made fertilizer. place a trade quota on foreign-made fertilizer. subsidize U.S. producers of fertilizer.

elastic demand.

If the absolute value of the price elasticity of demand for a good is 1.5, the good has a(n) inelastic demand. elastic demand. unit elastic demand. unit inelastic demand.

revenues decrease when the price goes up.

If the demand for a good is elastic, then revenues decrease regardless of the direction of the price change. revenues decrease when the price goes up. any change in price is matched by an equal and opposite percentage change in quantity, so revenues stay the same. revenues increase when the price goes up.

substitutes for each other

If the demand for good A increases when the price of good B increases, then good A and good B are: not related . substitutes for each other. complements to each other. both inferior goods.

try to lower the price of heroin.

If the demand for heroin is inelastic and heroin users get the money to pay for heroin by committing crimes, policymakers who want to reduce crime should tax heroin. try to lower the price of heroin. try to raise the price of heroin. make it harder to find heroin.

If the firms in an oligopolistic industry can establish an effective cartel, the resulting output and price will approximate those of: A. a purely competitive producer. B. a pure monopoly. C. a monopolistically competitive producer. D. an industry with a low four-firm concentration ratio.

If the marginal cost of production at Firm 1 is less than the marginal cost of production at Firm 2, but the overall costs of production are lower on average at Firm 2, then A. Firm 2 should produce all of the output. B. Firm 1 should produce all of the output. C. Firm 1 should produce output up to the point that its marginal costs of production are equal to the marginal costs of Firm 2. D. Firm 2 should produce additional output up to the point that its average costs are less than its marginal costs.

low and the product will be overproduced.

If the price of a good does not take into account all of the relevant costs of its production, then the price of that good is too low and the product will be underproduced. low and the product will be overproduced. high and the product will be overproduced. high and the product will be underproduced.

0.25

If the price of aluminum increases 4 percent, and the quantity supplied increases by 1 percent, what is the price elasticity of supply? -4.0 3.0 4.0 0.25

import cotton.

If the world price of cotton is less than the price that would occur domestically without trade, then a country will export cotton. decrease its demand for cotton, and increase its demand for cotton substitutes. increase its demand for cotton, and decrease its demand for cotton substitutes. import cotton.

hold an auction

If there are 100 tickets to a concert and 200 fans that would like to go to the concert, each placing a slightly different value on the tickets, is it more efficient to hold an auction for the tickets or to hold a random drawing for the tickets? hold a random drawing hold an auction Both are equally efficient. It is impossible to say which is more efficient.

true

If two linear demand curves run through a common point, then at any given quantity the curve that is flatter is more elastic. Choose: True or False

true

If two linear supply curves run through a common point, then at any given quantity the curve that is flatter is more elastic. Choose: True or False

elastic; there were more substitutes for trash collection

In 2005, Ireland began taxing residents on how much garbage they threw away in an effort to promote recycling. In response, residents began burning trash (which is environmentally more harmful and resulted in an increase in burn victims as people accidentally set themselves on fire). This story suggests that the elasticity of demand for trash collection was more ______ than lawmakers believed because ______ than previously thought. inelastic; the tax took up a smaller part of residents' budget elastic; there were more substitutes for trash collection elastic; the tax took up a larger part of residents' budget inelastic; there were fewer substitutes for trash collection

Supply decreased, causing the price to rise.

In 2011, revolutions and uprisings spread across North Africa and the Middle East, where a lot of oil is pumped. How did this affect the oil market? Supply increased, causing the price to rise. Supply increased, causing the price to fall. Supply decreased, causing the price to rise. Supply decreased, causing the price to fall.

In Chicago's Southside (and other places) auto mechanics (who work outside the formal sector, without a business license, advertising, or even a garage) will do work for gang members without charging them. In exchange, gang members chase away other mechanics who wish to operate in the area. These auto mechanics have monopoly power; what type of source does it come from? A. barriers to entry B. hard to duplicate inputs C. innovation D. economies of scale

Searching for food in one direction means an ant cannot search in another direction.

In The Economics of Nonhuman Societies, economist Gordon Tullock describes the economics hidden in biology (e.g., ants and bees). One of the lessons of the book is opportunity cost. In what way does an animal, such as an ant, face opportunity costs? Searching for food in one direction means an ant cannot search in another direction. Because an ant starves if it does not find food, it has a strong incentive to search. An ant suffers a large initial cost to find food. Ants face increasing marginal costs while searching for food in one direction as they ge

The deadweight loss of the tax will be higher in Northern Virginia.

In Virginia, the state taxes automobiles. In Northern Virginia, there is ample public transportation, and many neighborhoods are very walkable. In the rest of the state, there is less public transportation, and neighborhoods are more spread out. Other things equal, which of the following is likely to be an effect of the car tax? The car tax will raise relatively more money in Northern Virginia. The deadweight loss of the tax will be higher in the rest of the state. The deadweight loss will be the same throughout the state. The deadweight loss of the tax will be higher in Northern Virginia.

In a perfectly competitive market, each firm produces A. the same quantity. B. a potentially different quantity. C. as much quantity as possible. D. as little quantity as possible.

In a purely competitive industry: A. there will be no economic profits in either the short run or the long run. B. economic profits may persist in the long run if consumer demand is strong and stable. C. there may be economic profits in the short run, but not in the long run. D. there may be economic profits in the long run, but not in the short run.

false

In a successful economy, no firm should ever go bankrupt. Bankruptcy is a signal of a market failure. Choose: True or False

In answering the next question(s), assume a graph in which dollars are measured on the vertical axis and output on the horizontal axis. 11. Refer to the above information. For a purely competitive firm, total revenue: A. graphs as a straight, upsloping line. B. is a straight line, parallel to the vertical axis. C. is a straight line, parallel to the horizontal axis. D. graphs as a straight, downsloping line.

In answering the next question(s), assume a graph in which dollars are measured on the vertical axis and output on the horizontal axis. Refer to the above information. For a purely competitive firm, marginal revenue: A. graphs as a straight, upsloping line. B. is a straight line, parallel to the vertical axis. C. is a straight line, parallel to the horizontal axis. D. graphs as a straight, downsloping line.

In answering the next question(s), assume a graph in which dollars are measured on the vertical axis and output on the horizontal axis. Refer to the above information. For a purely competitive firm: A. marginal revenue will graph as an upsloping line. B. the demand curve will lie above the marginal revenue curve. C. the marginal revenue curve will lie above the demand curve. D. the demand and marginal revenue curves will coincide.

Monopolistic competition resembles pure competition because: A. both industries emphasize nonprice competition. B. in both instances firms will operate at the minimum point on their long-run average total cost curves. C. both industries entail the production of differentiated products. D. barriers to entry are either weak or nonexistent.

The opportunity cost of teaching an introductory course is higher for full professors than for graduate students.

In many universities, graduate students are employed to teach introductory undergraduate courses, even though the full professors at these universities have more experience and could potentially teach these courses better. Which of the following best explains why universities choose to hire graduate students instead of full professors to teach their introductory courses? The opportunity cost of teaching an introductory course is higher for graduate students than for full professors. Graduate students are cheaper. Introductory classes are the best place for graduate students to build their teaching skills. The opportunity cost of teaching an introductory course is higher for full professors than for graduate students.

In the long run a pure monopolist will maximize profits by producing that output at which marginal cost is equal to: A. average total cost. B. marginal revenue. C. average variable cost. D. average cost.

In the long-run, a profit-maximizing monopolistically competitive firm sets it price: A. above marginal cost. B. below marginal cost. C. equal to marginal revenue. D. equal to marginal cost.

above

In the presence of external costs, the social cost curve lies ______ the supply curve. below sometimes above and sometimes below with above

In the short run the individual competitive firm's supply curve is that segment of the: A. average variable cost curve lying below the marginal cost curve. B. marginal cost curve lying above the average variable cost curve. C. marginal revenue curve lying below the demand curve. D. marginal cost curve lying between the average total cost and average variable cost curves.

In which of the following industry structures is the entry of new firms the most difficult? A. pure monopoly B. oligopoly C. monopolistic competition D. pure competition

In which of the following market models do demand and marginal revenue diverge? A. pure monopoly, oligopoly, and monopolistic competition B. pure monopoly, oligopoly, and pure competition C. pure monopoly only D. oligopoly only

In which of the following market structures is there clear-cut mutual interdependence with respect to price-output policies? A. pure monopoly B. oligopoly C. monopolistic competition D. pure competition

If prices rise, what happens to producer surplus (all other things being equal)?

It rises, because each producer is getting more surplus per good sold.

12; $900 million

It takes approximately _______ years and _______ to bring a new drug to the market. 6; $20 billion 2; $100,000 4; $5 million 12; $900 million

Jill; Jack

In the Alfred Hitchcock Presents episode "Mail Order Prophet," a man receives mysterious letters that accurately predict the movements of certain stocks. After being correct several times in a row, the man, upon the letter's request, sends money to the market prophet in exchange for his latest stock tip. At the end of the episode we learn the "prophet" is actually a con man who sends a letter to many people with half predicting a stock will increase and the other half predicting it will decrease. How does this Hitchcock episode illustrate one particular theory of Warren Buffet's wealth?

Like the letters in the story, Buffet happened to be right several times in a row.

Local supply is ___ elastic than the global supply

Long-run equilibrium for a monopolistically competitive firm where economic profits are zero results from: A. rising marginal costs. B. a perfectly elastic product demand curve. C. relatively easy entry. D. product differentiation and development.

Trade-offs: Gaining some enjoyment is worth giving up some safety.

Manuel insists he places an infinite value on his life. Stefan is suspicious of this claim and points out to Manuel that he sometimes eats ice cream when broccoli would be much better for him. What Big Idea is Stefan using? Thinking on the Margin: "Infinite value" is too much to be on the margin. Trade-offs: Gaining some enjoyment is worth giving up some safety. Incentives: No one is paying Manuel to be healthy. The Power of Trade: Manuel could not make his own ice cream, though he could grow his own broccoli; Manuel must be trading for ice cream.

Marcie quit her job as a preschool teacher, which paid an annual salary of $28,000, and became a street food vendor. She used $8,000 out of her savings account that paid a 4 percent annual interest rate to buy a street cart to sell food. In her first year of operations, she spent $10,000 on food and supplies (napkins, cups, plates, etc.) and earned total revenue of $45,000. Marcie's accounting profit is ______ and economic profit is ______. A. $28,000; $20,000 B. $35,000; -$1,000 C. $27,000; $17,000 D. $35,000; $6,680

Marginal revenue for a purely competitive firm: A. is greater than price. B. is less than price. C. is equal to price. D. may be either greater or less than price.

Martha has an absolute advantage in ironing.

Martha Stewart can iron 20 shirts per hour. Her housekeeper can iron 12 shirts per hour. From this information alone, we can infer that: the housekeeper has a comparative advantage in ironing. Martha has a comparative advantage in ironing. the housekeeper has an absolute advantage in ironing. Martha has an absolute advantage in ironing.

Martha Stewart can iron 20 shirts per hour. Her housekeeper can iron 12 shirts per hour. From this information alone, we can infer that:

Martha has an absolute advantage in ironing.

There are few new mobile home foundations constructed.

total surplus

Monopolies reduce...

Other factors matter besides safety, such as comfort, cost, and fuel economy.

Most people do not buy the safest car they can find. Why not? Other things equal, people prefer cars that are less safe. Consumers are unaware of the risks of different cars and car companies trick people into buying the unsafe cars. The statement is false. People do buy the safest car they can find. Other factors matter besides safety, such as comfort, cost, and fuel economy.

Mutual interdependence means that each oligopolistic firm: A. faces a perfectly elastic demand for its product. B. must consider the reactions of its rivals when it determines its price policy. C. produces a product identical to those of its rivals. D. produces a product similar but not identical to the products of its rivals.

greater (because there are more substitutes)

Narrow definition of commodity leads to ____ elasticity

long run than in the short run because long-run supply is more elastic.

New housing takes some time to build, so rent control creates larger shortages in the short run than in the long run because long-run supply is more elastic. long run than in the short run because long-run supply is more elastic. long run than in the short run because short-run supply is more elastic. short run than in the long run because short-run supply is more elastic.

Which of the following factors causes a demand curve to become more elastic over time

New substitutes for the product are discovered

Nonprice competition refers to: A. competition between products of different industries, for example, competition between aluminum and steel in the manufacture of automobile parts. B. price increases by a firm that are ignored by its rivals. C. advertising, product promotion, and changes in the real or perceived characteristics of a product. D. reductions in production costs that are not reflected in price reductions.

Nothing unusual would happen.

OUTPUT MARGINAL REVENUE MARGINAL COST 0 --- --- 1 16 10 2 16 9 3 16 13 4 16 17 5 16 21 Refer to the above data. At the profit-maximizing output the firm's total cost is: A. $48. B. $32. C. $80. D. $64.

OUTPUT MARGINAL REVENUE MARGINAL COST 0 --- --- 1 16 10 2 16 9 3 16 13 4 16 17 5 16 21 Refer to the above data. At the profit-maximizing output the firm's total revenue is: A. $48. B. $32. C. $80. D. $64.

OUTPUT MARGINAL REVENUE MARGINAL COST 0 --- --- 1 16 10 2 16 9 3 16 13 4 16 17 5 16 21 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: A. 2. B. 3. C. 4. D. 5.

OUTPUT MARGINAL REVENUE MARGINAL COST 0 --- --- 1 16 10 2 16 9 3 16 13 4 16 17 5 16 21 Refer to the above data. The firm's: A. economic profit is $12. B. economic profit is $16. C. loss is $14. D. economic profit is $3.

predatory Pricing

Occurs when a firm cuts prices to prevent entry or drive a competitor out of the market, so that it can charge monopoly prices later

tying

Occurs when a manufacturer bundles two products together and sells them for one price

Resale Price Maintenance

Occurs when a manufacturer imposes lower limits on the prices retailers can charge.

Oligopolistic firms engage in collusion to: A. minimize unit costs of production. B. realize allocative efficiency, that is, the P = MC level of output. C. earn greater profits. D. increase production.

Oligopolistic industries are characterized by: A. a few dominant firms and substantial entry barriers. B. a few dominant firms and no barriers to entry. C. a large number of firms and low entry barriers. D. a few dominant firms and low entry barriers.

all those man hours would have been spent working if not for the doodle.

On June 13, 2011, writer Sebastian Anthony at Extreme Tech wrote, "During the two days that the Les Paul [Google] doodle was online, those 740 million visitors spent 26 seconds more on the Google home page than normal. That's a total of almost 10.7 million man hours spent playing with the Les Paul Google Doodle. Assuming the average Google user earns $25/hour, the doodle cost companies around the world $268 million in lost productivity." Mr. Anthony's mistake is ignoring opportunity costs. He is doing this by assuming all those man hours would have been spent working if not for the doodle. labor has no incentive to work. all the Google visitors are at work. that labor is not making a marginal decision.

0.7; inelastic

On October 1, 2009, the Nintendo Wii's Japanese price dropped from ¥25,000 to ¥20,000. In the three months after the price drop, Japanese sales of the Wii were approximately 1,040,000. Twelve months earlier, over the same interval at the high price, sales totaled 890,000. Using the midpoint method, what is the absolute value of the price elasticity of demand of a Wii console? Is it an elastic or inelastic good? 1.43; elastic 0.7; inelastic 1.43; inelastic 0.7; elastic

false

On average, the gain in value from speculation is less than the loss in value. Choose: True or False

internalize some of its costs

On the Price Is Right, Bob Barker (and now Drew Carey) encourages people to "Help control the pet population. Have your pets spayed or neutered." An overly large pet population leads to many stray animals that are not only depressing but are also prone to spread disease. Concerning pet ownership, Barker and Carey are attempting to do what? employ Pigouvian taxes internalize some of its benefits use the Coase Theorem internalize some of its costs

Most people do not buy the safest car they can find. Why not?

Other factors matter besides safety, such as comfort, cost, and fuel economy.

Other things equal, if more firms enter a monopolistically competitive industry: A. the demand curves facing existing firms would shift to the right. B. the demand curves facing existing firms would shift to the left. C. the demand curves facing existing firms would become less elastic. D. losses would necessarily occur.

Other things equal, if the prices of a firm's variable inputs were to fall: A. one could not predict how unit costs of production would be affected. B. marginal cost, average variable cost, and average fixed cost would all fall. C. marginal cost, average variable cost, and average total cost would all fall. D. average variable cost would fall, but marginal cost would be unchanged.

Saved the lives of hundreds of convicts

Paying the captains of prisoner transport ships for each convict who arrived in Australia instead of for each convict who boarded the ship: shows that people care more about morality than about their self-interest. made no difference. increased volume of slave trafficking saved the lives of hundreds of convicts

Active Investing:

Picking individual stocks

False

Poor countries are at a distinct disadvantage when it comes to economic production; they get outcompeted in everything since they do not have a comparative advantage in anything. False True

are speculative markets designed so that prices can be interpreted as probabilities and used to make predictions.

Prediction markets incentivize random guessing about the future. are widely subsidized by the government to improve information-gathering. are not very reliable sources of information. are speculative markets designed so that prices can be interpreted as probabilities and used to make predictions.

Price discrimination refers to: A. selling a given product for different prices at two different points in time. B. any price above that which is equal to a minimum average total cost. C. the selling of a given product at different prices that do not reflect cost differences. D. the difference between the prices a purely competitive seller and a purely monopolistic seller would charge.

false (price floors increase quality ridiculously)

Price floors and price ceilings both result in lost gains from trade and decreases in the quality of the product. (true/false)

Price is constant or given to the individual firm selling in a purely competitive market because: A. the firm's demand curve is downsloping. B. of product differentiation reinforced by extensive advertising. C. each seller supplies a negligible fraction of total supply. D. there are no good substitutes for its product.

Price times quantity minus total cost equals A. total revenue. B. fixed costs. C. marginal revenue. D. profit.

true

Prices are important in a market economy because they allocate goods into their highest- valued uses. Choose: True or False

Prices are likely to be least flexible: A. in oligopoly. B. in monopolistic competition. C. where product demand is inelastic. D. in pure competition.

-Transmission and distribution remained natural monopolies. -Electricity is difficult to store. -Booming economy required importing electricity from other states. -Inelastic demand curves

Problems with California deregulating wholesale electricity prices in 1998.

is the amount that buyers are willing and able to buy at a particular price.

Quantity demanded:

is the amount that buyers are willing and able to buy at a particular price.

Quantity demanded: shows how much sellers are willing and able to sell at different prices. is the amount that sellers are willing and able to sell at a particular price. shows how much buyers are willing and able to buy at different prices. is the amount that buyers are willing and able to buy at a particular price.

Refer to the above diagram, which pertains to a purely competitive firm. Curve A represents: A. total revenue and marginal revenue. B. marginal revenue only. C. total revenue and average revenue. D. total revenue only.

meant the government prevented the entry of new competitors to maintain high ticket prices.

Regulation of airline fares

markets coordinate the specialization and trade necessary for the flower industry to function.

Roses grown in Kenya travel to Amsterdam and ultimately to your local flower shop because: the World Rose Commission coordinates the different elements of the rose industry. of the trade agreement between the government of Kenya and Amsterdam. markets coordinate the specialization and trade necessary for the flower industry to function. customers are willing to pay more for roses that pass through Amsterdam.

Suppose you find that the price of your product is less than minimum AVC. You should: A. minimize your losses by producing where P = MC. B. maximize your profits by producing where P = MC. C. close down because, by producing, your losses will exceed your total fixed costs. D. close down because total revenue exceeds total variable cost.

have an excellent track record in predicting political events.

The Iowa Electronic Markets are where farmers buy and sell futures contracts. create biased predictions because it does not use price signals. predicted that Obama would lose the election for president in 2008. have an excellent track record in predicting political events.

The MR = MC rule can be restated for a purely competitive seller as P = MC because: A. each additional unit of output adds exactly its price to total revenue. B. the firm's average revenue curve is downsloping. C. the market demand curve is downsloping. D. the firm's marginal revenue and total revenue curves will coincide.

The MR = MC rule: A. applies only to pure competition. B. applies only to pure monopoly. C. does not apply to pure monopoly because price exceeds marginal revenue. D. applies both to pure monopoly and pure competition.

tariff.

The U.S. price of sugar is higher than the world price of sugar due primarily to a quota. local content requirement. tariff. subsidy.

Zimbabwe experienced inflation at a rate of billions of percent per month.

The Zimbabwean government printed money as fast as it could for years. As a result: Zimbabwe experienced inflation at a rate of billions of percent per month. prices fell rapidly in Zimbabwe. the Zimbabwean economy grew rapidly. Zimbabwe experienced mild inflation.

Invisible Hand Property 2

The balance of industries

Walmart.

The biggest retail contributor to the 1990s productivity boom was Walgreen's. Kroger. Walmart. Target.

the price of assets already reflects all publically available information.

The efficient market hypothesis

how easy it is to substitute the good for another.

The fundamental determinant of the elasticity of demand for a good is the opportunity cost of producing the good. the value that consumers place on one more unit of the good. the number of consumers in the market. how easy it is to substitute the good for another.

True

The government can create monopolies by legally requiring its citizens to buy from a particular seller. Choose: True or False

These policies at least partially offset each other, because a subsidy is a negative tax.

The government subsidizes driving by building roadways, but it also taxes driving though gasoline taxes. Which of the following is TRUE? These policies at least partially offset each other, because a subsidy is a negative tax. Road building expenditures must be less than gasoline tax revenues. These policies compound each other because a subsidy is the same thing as a tax. Deadweight losses from road subsidies exceed deadweight losses from gasoline taxes.

greater

The greater the elasticity of demand or supply the ____ will be the deadweight loss

The greatest use of our limited resources occurs when A. the price of all goods is the same. B. profits in every industry are the same. C. the price of goods varies. D. profits vary by industry.

Suppose a doctor spends half of the year in the United States and the other half in Canada and works in both places. How does his production get allocated between U.S. and Canadian GDP?

The value of the services produced in the United States gets counted in U.S. GDP, and the value of the services produced in Canada gets counted in Canadian GDP.

$3,612.50

Three major means of collusion by oligopolists are: A. cartels, informal understandings, and price leadership. B. market sharing, mutual interdependence, and product differentiation. C. cartels, kinked-demand pricing, and product differentiation. D. informal understandings, P = MC pricing, and mutual interdependence.

The mutual interdependence that characterizes oligopoly arises because: A. the products of various firms are homogeneous. B. the products of various firms are differentiated. C. a small number of firms produce a large proportion of industry output. D. the demand curves of firms are kinked at the prevailing price.

is higher for people who are employed than for the unemployed

The opportunity cost of committing a crime and spending 5 years in jail: is the same for everyone. equals the fines and legal fees. is zero because the costs of jail are paid for by the government. is higher for people who are employed than for the unemployed.

Fluctuations in graduate school enrollment correlate positively with fluctuations in unemployment. What is the most likely reason why?

The opportunity cost of going to graduate school is low when jobs are hard to find.

The opportunity cost of teaching an introductory course is higher for full professors than for graduate students.

The practice of price discrimination is associated with pure monopoly because: A. it can be practiced whenever a firm's demand curve is downsloping. B. monopolists have considerable ability to control output and price. C. monopolists usually realize economies of scale. D. most monopolists sell differentiated products.

The principle that a firm should produce up to the point where the marginal revenue from the sale of an extra unit of output is equal to the marginal cost of producing it is known as the: A. output-maximizing rule. B. profit-maximizing rule. C. shut-down rule. D. break-even rule.

each of these developments.

The recent pace of globalization has been increased through: increased speed of communication. the integration of world markets. declining transportation costs. each of these developments.

The relationship between the marginal cost and the average total cost schedule is such that: A. the behavior of one schedule does not affect the other. B. if ATC exceeds MC, MC must be rising. C. if MC is declining, ATC may be either declining or rising. D. if MC is declining, ATC must also be declining.

less elastic the demand

The steeper a linear demand curve is the less elastic the demand. more elastic the demand. higher the price of the good. more normal the good.

Anonymity on the Internet has lowered the cost of rudely confronting people. What has happened to the supply of rude confrontations?

The supply has increased, shifting down and to the right.

production can be expanded without causing a big increase in the price of its inputs.

The supply of a good tends to be more elastic if the good is considered a necessity good. production can be expanded without causing a big increase in the price of its inputs. an increase in production has only a minimal impact on demand for the good. a change in the price of the good causes only a small change in the quantity supplied.

inelastic.

The supply of ancient Egyptian papyrus manuscripts is probably hyperelastic. inelastic. unit elastic. elastic.

*The "you can't take it with you" effect* (People with serious illnesses are relatively insensitive to the price of life saving medicine.) *The "other people's money" effect* (If third parties are paying for the medicine, people are less sensitive to price.)

The two effects can make the elasticity of demand for pharmaceuticals more inelastic:

demand curve at the quantity level corresponding to the unit.

The value of a unit of a good is given by the height of the demand curve at the quantity level corresponding to the unit. demand curve at equilibrium. supply curve at equilibrium. supply curve at the quantity level corresponding to the unit.

True/ False The monopolistʹs profit-maximizing price will be above marginal cost, because at the profit maximizing level of output the monopolistʹs marginal revenue curve lies below its demand curve

True

True/ False: In imperfect completion, competition takes place on more dimensions than in perfect competition

True

True/ False: The demand for Tyson chicken is more elastic than the demand for meat

True

True/False In perfect competition, price is equal to marginal revenue while in monopoly price is greater than marginal revenue

True

True/False No supply curve exists for a monopoly in the sense that a supply curve exists for a perfectly competitive firm

True

True/False Public choice theory states that government officials act in their own self-interest when setting policies and regulations.

True

True/False The Clayton Act was passed, in part, to strengthen the Sherman Act.

True

a lot of; a lot of

Wealthy countries tend to have ______ physical capital per worker and _______ human capital per worker. a lot of; a lot of little; a lot of a lot of; little no; a lot of

With greater use of antibiotics bacteria become increasingly resistant to them, increasing the likelihood of people dying from drug-resistant bacteria.

What negative externality does antibiotic use create? When drug companies increase the price of antibiotics, some people can no longer afford to buy antibiotics, putting them at increased risk of death. Because drug companies use very few workers in their production process, there is a larger than necessary demand for unemployment insurance and other social programs. The taxes on companies that produce antibiotics are passed on to consumers in the form of higher prices. With greater use of antibiotics bacteria become increasingly resistant to them, increasing the likelihood of people dying from drug-resistant bacteria.

expensive

When a country adopts free trade and becomes a net exporter of a good, that good becomes more ______ for domestic consumers

When a firm is on the inelastic segment of its demand curve, it can: A. increase total revenue by reducing price. B. decrease total costs by decreasing price. C. increase profits by increasing price. D. increase total revenue by more than the increase in total cost by increasing price.

buyers compete with other buyers, raising prices, and sellers compete with sellers, lowering prices.

When a market is competitive: everybody competes with everybody else. buyers compete with sellers to try to get lower prices. buyers compete with sellers and sellers compete with one another, but buyers do not compete with one another. buyers compete with other buyers, raising prices, and sellers compete with sellers, lowering prices.

When a monopolistically competitive firm is in long-run equilibrium: A. P = MC = ATC. B. MR = MC and minimum ATC > P. C. MR > MC and P = minimum ATC. D. MR = MC and P > minimum ATC.

demanders cannot signal their needs to suppliers.

When a price ceiling is in effect suppliers get too strong of a signal from demanders about their needs. demanders cannot signal their needs to suppliers. all of demanders' needs are met at the lower price, so there is no need to signal anything to suppliers. demanders have no incentive to signal their needs to suppliers.

producers bear the majority of the tax burden.

When demand is more elastic than supply, consumers bear all of the tax burden. producers bear the majority of the tax burden. consumers bear the majority of the tax burden. producers and consumers bear an equal amount of the tax burden.

Governments may improve the situation by changing incentives.

When markets don't align self-interest with social interest: individual benefits will exceed societal benefits. markets will still manage to reach an efficient outcome. governments may improve the situation by changing incentives. societal costs will always exceed individual benefits.

must rise.

When people spend more money without an increase in the supply of goods, prices: may rise or fall. must stay the same. must fall. must rise.

When resources move from a low-profit industry into a high profit industry A. the value of production falls. B. the profits of the low-profit industry fall and the profits of the high-profit industry rise. C. the profits of the low-profit industry rise and the profits of the high-profit industry fall. D. the Invisible Hand Property 2 is violated.

incomes fall during a recession, and oil is a normal good.

When there is a recession, the price of oil tends to fall because: the prices of substitutes for oil rise during recessions. the supply of oil increases during a recession, due to technological change. incomes fall during a recession, and oil is a normal good. people drive more during recessions while looking for employment.

decreases.

With a tax on producers, supply shifts in an indeterminate direction. remains in the same location. decreases. increases.

Which of the following best expresses the law of diminishing returns? A. Because large-scale production allows the realization of economies of scale, the real costs of production vary directly with the level of output. B. Population growth automatically adjusts to that level at which the average product per worker will be at a maximum. C. As successive amounts of one resource (labor) are added to fixed amounts of other resources (capital), beyond some point the resulting extra output will decline. D. Proportionate increases in the inputs of all resources will result in a less-than-proportionate increase in total output.

speculation

Which of the following do price ceilings not cause? bribes search costs speculation waiting in line

Your neighbors fix up their homes, which raises property values on the entire street.

Which of the following is an example of an external benefit? Your neighbor's rooster wakes you up every morning before your alarm clock goes off, reducing the amount of sleep you get at night. You get a raise that increases your pay 20 percent. Your neighbors fix up their homes, which raises property values on the entire street. Researchers at Johnson & Johnson are working on a cure for cancer.

secondhand smoke

Which of the following is an example of an external cost? the cost you pay your plumber to install a new hot water heater increased gas prices for drivers of SUVs your high electric bill that results from leaving your lights on all night secondhand smoke

Which of the following is characteristic of a purely competitive seller's demand curve? A. Price and marginal revenue are equal at all levels of output. B. Average revenue is less than price. C. Its elasticity coefficient is 1 at all levels of output. D. It is the same as the market demand curve.

Which of the following is correct? A. Both purely competitive and monopolistic firms are "price takers." B. Both purely competitive and monopolistic firms are "price makers." C. A purely competitive firm is a "price taker," while a monopolist is a "price maker." D. A purely competitive firm is a "price maker," while a monopolist is a "price taker."

Which of the following is correct? A. There is no relationship between MP and MC. B. When AP is rising MC is falling, and when AP is falling MC is rising. C. When MP is rising MC is rising, and when MP is falling MC is falling. D. When MP is rising MC is falling, and when MP is falling MC is rising.

Which of the following is incorrect? Imperfectly competitive producers: A. face downsloping demand curves. B. do not compete with one another. C. can alter their output by changing price. D. find that, when they reduce price, their total revenue increases by less than the new price.

Which of the following is most likely to be a fixed cost? A. shipping charges B. property insurance premiums C. wages for unskilled labor D. expenditures for raw materials

Which of the following is most likely to be a variable cost? A. fuel and power payments B. interest on business loans C. rental payments on IBM equipment D. real estate taxes

Which of the following is not a basic characteristic of monopolistic competition? A. the use of trademarks and brand names B. recognized mutual interdependence C. product differentiation D. a relatively large number of sellers

Which of the following is not a characteristic of pure competition? A. price strategies by firms B. a standardized product C. no barriers to entry D. a larger number of sellers

McDonald's hamburgers

Which of the following probably has the most elastic demand? gasoline toilet paper McDonald's hamburgers prescription medications

I and III only

Which of the following results from a tariff on imported goods? I. domestic production increases II. domestic consumption increases III. government revenues increase I and II only I and III only II and III only I, II, and III

Which of the following statements concerning a monopolistically competitive industry is correct? A. If there are short-run losses, firms will leave the industry and the demand curves of the remaining firms will shift to the right. B. If there are short-run economic profits, firms will enter the industry and the demand curves of existing firms will shift to the right. C. If there are short-run losses, firms will leave the industry and the demand curves of the remaining firms will shift to the left. D. If there are short-run economic profits, firms will leave the industry and the demand curves of the remaining firms will shift to the right.

Which of the following statements is correct? A. Economic profits induce firms to enter an industry; losses encourage firms to leave. B. Economic profits induce firms to leave an industry; profits encourage firms to leave. C. Economic profits and losses have no significant impact on the growth or decline of an industry.

Trade raises the price of goods for both trading partners.

Which of the following statements regarding trade is NOT true? Trade raises the price of goods for both trading partners. Trade makes people better off when preferences differ. Trade increases productivity through specialization and production according to comparative advantage. Trade increases productivity through specialization and the division of knowledge.

decreases in product quality

Which of the following would NOT happen as the result of a price floor? misallocation of resources decreases in product quality lost gains from trade a surplus of the good

Buyers and sellers want to trade, but the threat of fines or jail time prevents them from doing so.

Which of these statements explains why price ceilings result in lost gains from trade? Buyers and sellers want to trade, but the threat of fines or jail time prevents them from doing so. Buyers want to trade, but sellers are indifferent at the lower prices. Neither buyers nor sellers want to trade subject to a price ceiling resulting in lost gains from trade. Sellers want to trade, but buyers prefer the lower prices.

international producers and domestic consumers

Who does protectionism hurt? domestic consumers only international producers and domestic consumers domestic producers only international producers only

With respect to the pure monopolist's demand curve it can be said that: A. the stronger the barriers to entry, the more elastic is the monopolist's demand curve. B. price exceeds marginal revenue at all outputs greater than 1. C. demand is perfectly inelastic. D. marginal revenue equals price at all outputs.

is more elastic than

World supply of a good ______ domestic supply. has indeterminate elasticity compared with is less elastic than is equally elastic to is more elastic than

national spending identity:

Y= C (consumption) + I (investment) + G (government purchases) + Nx (export minus imports)

factor income approach to GDP formula:

Y= Wages + Rent + Interest + Profit

The efficient equilibrium is to plant the garden, but you would not do so since your private costs exceed your private benefits.

You are considering planting a garden of beautiful flowers in your front yard. It would cost you $45 in time and materials to plant it. You would get $40 worth of benefits from the garden and your neighbor, who walks by your front yard every day, would get $10 worth of benefits from it. Which of the following is TRUE? Your private benefits exceed your private costs, so you would plant the garden. The efficient equilibrium is to plant the garden, but you would not do so since your private costs exceed your private benefits. The efficient equilibrium is to not plant the garden, but you would do so anyway since the social benefits exceed your private costs. The external benefits are not significant enough to affect the efficiency of this equilibrium.

The Zimbabwean government printed money as fast as it could for years. As a result:

Zimbabwe experienced inflation at a rate of billions of percent per month.

Zoey receives a big raise at work and decides to buy additional Precious Moments figurines. Which of the following statements is TRUE?

Zoey considers Precious Moments figurines to be a normal good.

Zoey receives a big raise at work and decides to buy additional Precious Moments figurines. Which of the following statements is TRUE? Zoey's demand for Precious Moments figurines increased because they are relatively less expensive. Zoey considers Precious Moments figurines to be an inferior good. Zoey considers Precious Moments figurines to be a normal good. Zoey's demand for Precious Moments figurines decreased.

Zoey considers Precious Moments figurines to be a normal good.

Zoey receives a big raise at work and decides to buy additional Precious Moments figurines. Which of the following statements is TRUE? Zoey considers Precious Moments figurines to be an inferior good. Zoey's demand for Precious Moments figurines decreased. Zoey's demand for Precious Moments figurines increased because they are relatively less expensive. Zoey considers Precious Moments figurines to be a normal good.

Wage subsidies

___ ____ can be used to increase employment of low wage workers

prices

____ integrate markets and motivate entrepreneurs

Prisoners' dilemma

a "game" between two captured criminals that illustrates why cooperation is difficult even when it is mutually beneficial

(Figure: Supply Shift 2) Refer to the figure. What would cause the supply curve to shift from S1 to S2?

a $20 tax on each unit of output

What would cause the supply curve to shift upwards from S1 to S2? A $20 subsidy on each unit of output a $40 subsidy on each unit of output a $40 tax on each unit of output a $20 tax on each unit of output

a $20 tax on each unit of output

Sugar

a commodity talked about in the book that has heavy tariffs when being imported into the United States

explicit cost

a cost that requires a money outlay

The slope of the production possibilities frontier at a given point indicates ______.

a country's opportunity cost of production.

What would cause the supply curve to shift right from S1 to S2 as shown in the diagram?

a decrease in the wages paid to union workers who produce the output

A decrease in demand refers to

a leftward shift of the demand curve

Oligopoly

a market in which control over the supply of a commodity is in the hands of a small number of producers and each one can influence prices and affect competitors

trade quota

a restriction on the quantity of foreign goods that can be imported; imports that exceed the quota amount are forbidden or heavily taxed

Nash equilibrium

a situation in which economic participants interacting with one another each choose their best strategy given the strategies that all the others have chosen

Dominant strategy

a strategy that is best for a player in a game regardless of the strategies chosen by the other players

tariff

a tax on imports

Which of the following is a concern among economists regarding the aging of the U.S. population? a) Since older people are less likely to work, an aging population will lead to a decreased labor force participation rate in the United States and lower tax revenues. b) Since older people typically consume different goods (more health care and prescription drugs, less pizza and beer), an aging population will lead to increased structural unemployment in certain areas of the economy (such as the pizza and beer industries). c) Since older people typically consume less, the aging of the population will lead to lower consumption and thus lower GDP. d) Since older people are more likely to favor increasing Medicare and prescription drug benefits, an aging population will alter political support for such programs.

a) Since older people are less likely to work, an aging population will lead to a decreased labor force participation rate in the United States and lower tax revenues.

Which of the following is true of the effects of employment protection laws? a) They create employment security for workers with a job. b) They make labor markets more flexible in adjusting for changes in market conditions. c) They reduce the unemployment rates among young and minority workers. d) They reduce the duration of unemployment.

a) They create employment security for workers with a job

Over the past few decades, the U.S. economy has switched from a primarily manufacturing economy to a service economy. Many individuals working in manufacturing positions lost their jobs, and many new jobs opened up in services. For those who lost jobs in manufacturing, this is an example of a) structural unemployment b) industry unemployment c) frictional unemployment d) cyclical unemployment

a) structural unemployment

The most basic U.S. employment law stipulating that an employee may quit and employer may fire at any time and for any reason is called a) the employment at will doctrine. b) the Equal Employment Opportunity Act. c) the employee privacy law. d) affirmative action.

a) the employment at will doctrine.

A monopolist earning short-run economic profit determines that at its present level of output, marginal revenue is $23 and marginal cost is $30. Which of the following should the firm do to increase profit? a. Raise price and lower output. b. Lower price and lower output. c. Raise price and raise output. d. Lower price and raise output. e. Lower output but leave price unchanged.

a. Raise price and lower output.

Patent laws promote technical progress in all of the following ways except one. Which is the exception? a. They allow other firms to copy successful products as soon as they are marketed. b. They prevent duplication of inventions. c. They provide a stimulus to innovation. d. They provide the inventor with a temporary monopoly. e. They increase a firm's incentive to incur the up-front costs of developing new products.

a. They allow other firms to copy successful products as soon as they are marketed.

A monopolist maximizes total revenue at the quantity where marginal revenue equals zero. a. True b. False

a. True

A natural monopoly is based on economies of scale.

a. True

On a graph, to determine the price a profit-maximizing monopolist would charge, find the quantity at which MC and MR intersect and read up to the demand curve. a. True b. False

a. True

raise labor productivity

according to the wealth of nations, what is the best way to increase wages?

paying unemployed workers who find a job

active labor market policy

Countries are on the catching-up growth path primarily through

adoption of simple ideas.

factors that affect labor force participation rate:

age demographics birth control taxes and subsidies

determinants of savings:

age demographics temporary changes in income changes in tax having more patience in

all those man hours would have been spent working if not for the doodle.

Collusion

an agreement among firms in a market about quantities to produce or prices to charge

(Figure: Supply and Demand 2) What happens as a result of the change in demand in the diagram?

an increase in both the equilibrium price and the equilibrium quantity

In the week before Hurricane Katrina, the price of flashlights rose in New Orleans because of

an increase in demand

For a normal good, higher income results in:

an increase in demand.

(Figure: Shifting Demand) In the diagram, which of the following factors would cause the demand curve to shift from D1 to D2?

an increase in income if this is an inferior good

which of the following factors would cause the demand curve to shift left from D1 to D2? a decrease in the price of a complement good an increase in the population an increase in the price of a substitute good an increase in income if this is an inferior good

an increase in income if this is an inferior good

would cause the demand curve to shift from D1 to D2?

an increase in income if this is an inferior good

If the income elasticity of demand of a good is negative, we can conclude that the good is

an inferior good

price

and what has to hold for the price floor to work

futures

are contracts to buy or sell specified quantities of a commodity or financial instrument at a specified price with delivery set at a specified time in the future.

In his book, The Wealth of Nations, Adam Smith claimed that individuals:

are motivated by self-interest.

Which of the following is the best example of cyclical unemployment? a) Allison, a recent high school graduate with high aspirations, is seeking a job as the CEO of a Fortune 500 company. b) Peter, a highly skilled construction worker, lost his job when the recession began. He is looking for work, but demand in the construction industry is still low. c) John is a house painter in northern Michigan. During the winter months, John is unemployed. d) Heather recently graduated with her doctorate in economics. She is searching for a job that matches her skills.

b) Peter, a highly skilled construction worker, lost his job when the recession began. He is looking for work, but demand in the construction industry is still low.

All of the following are counted as employed persons EXCEPT a) a part-time worker. b) a discouraged worker. c) an employee working overtime every day. d) an underemployed person.

b) a discouraged worker

The most likely influence of the Internet on the rate of frictional unemployment has been to a) have no effect on it. b) lower it. c) It is impossible to tell. d) raise it.

b) lower it

Which of the following is an example of an active labor market policy? a) worker unions b) paying unemployed workers who find a job c) minimum wage laws d) extending unemployment benefits

b) paying unemployed workers who find a job

The phrase "persistent long-term unemployment" means a) that the unemployment problem has lasted for a long time. b) that a substantial fraction of the unemployed have been so for more than one year and that this problem has lasted for a long time. c) that a substantial fraction of the unemployed have been so for more than one year. d) that a small fraction of the unemployed have been so for more than one year but that this problem has not lasted for a long time.

b) that a substantial fraction of the unemployed have been so for more than one year and that this problem has lasted for a long time.

loanable funds market, which group best represents the demand side of the market

borrowers

The total revenue for the firm in Exhibit 9-3, a monopolist that maximizes profit while charging all customers the same price, is a. $2,574 b. $2,808 c. $2,100 d. $1,638 e. $3,300

b. $2,808

In Exhibit 9-2, the average revenue of the fourth unit is a. $12 b. $3 c. $4 d. -$4 e. $0

b. $3

Which of the following is true of marginal revenue for a monopolist that charges a single price? a. P = MR because there are no close substitutes for the monopolist's product. b. P > MR because the monopolist must decrease price on all units sold in order to sell an additional unit. c. P < MR because the monopolist must decrease price on all units sold in order to sell an additional unit. d. AR = MR because there are no close substitutes for the monopolist's product. e. P = MR only at the profit-maximizing quantity.

b. P > MR because the monopolist must decrease price on all units sold in order to sell an additional unit.

Which of following is true of monopoly and not of perfect competition? a. Profit is maximized where marginal cost equals marginal revenue b. The industry demand curve is also the firm's demand curve c. Normal profits are made only if average total cost equals average revenue d. Profit is maximized in the elastic portion of the demand curve e. the firm has no control over the market price

b. The industry demand curve is also the firm's demand curve

The U.S. Postal Service a. has as much monopoly power now as it had 100 years ago b. has lost much of its market power due to new competitors and new technologies c. has increased its prices by less than the rate of inflation during the past 25 years d. is more mechanized and more computerized than its potential competitors e. is a perfectly competitive firm

b. has lost much of its market power due to new competitors and new technologies

The demand curve a monopolist faces a. is more elastic than a perfectly competitive firm's demand curve b. is the market demand curve c. is as elastic as a perfectly competitive firm's demand curve d. is not affected by the prices of complements e. will not shift in response to a change in consumer tastes

b. is the market demand curve

A monopolist's demand curve a. is horizontal at the market price b. lies above its marginal revenue curve c. is the same as its marginal cost curve d. indicates that the firm must raise price to sell additional units e. lies above the marginal cost curve at all levels of output

b. lies above its marginal revenue curve

Suppose Arf n' Barf restaurant has a monopoly on restaurant food in a certain small town. Their rent, which is one of several fixed costs they pay whether they sell food or not, has gone up. In the short run, the Arf n' Barf should a. pay the higher rent and increase menu prices b. pay the higher rent and leave menu prices unchanged c. pay the higher rent and lower prices d. go out of business e. shut down

b. pay the higher rent and leave menu prices unchanged

In the short run, how will a profit-maximizing monopolist react if its marginal cost suddenly increases? It will a. lower price to expand revenue possibilities b. restrict output to extract a higher price from customers c. maintain the current price if profit is still positive d. increase plant size to lower marginal cost e. decrease plant size to lower marginal cost

b. restrict output to extract a higher price from customers

Which of the following is not a condition required for a monopolist to price discriminate? a. the demand curve facing the firm must be downward-sloping b. the firm must exhibit strong economies of scale c. there must be different groups of buyers with different price elasticities of demand d. the firm must be able to prevent reselling of the product e. the firm must have some market power

b. the firm must exhibit strong economies of scale

Which of the following would not bar entry into a market? a. control by a single firm of an essential resource b. the necessity of taking risks when starting a firm c. patents d. economies of scale e. government regulations limiting the number of firms in an industry

b. the necessity of taking risks when starting a firm

The yearly shortage of Super Bowl tickets implies that the price of Super Bowl tickets is:

below the equilibrium price.

The Solow production function can shift upward because of

better ideas.

If quantity supplied equals 85 units and quantity demanded equals 80 units under a price control, then it is a

binding price floor

If quantity supplied equals 85 units and quantity demanded equals 80 units under a price control, then it is a

binding price floor.

In the short run, the monopolist depicted in Exhibit 9-13 should a. shut down because P < AVC at some output levels b. shut down because P < ATC at all output levels c. continue producing because P > AVC at some output levels d. continue producing because P > ATC at all output levels e. continue producing because monopolists never shut down

c. continue producing because P > AVC at some output levels

A profit-maximizing monopolist never produces along the ________ portion of the demand curve because marginal revenue is ________ there. a. elastic; positive b. elastic; negative c. inelastic; negative d. inelastic; positive e. inelastic; zero

c. inelastic; negative

For a monopolist, marginal revenue is a. equal to price b. greater than price c. less than price d. represented by a horizontal curve e. equal to average revenue

c. less than price

The demand curve facing a monopolist a. is kinked at the market price b. is perfectly elastic c. lies above its marginal revenue curve d. lies below its marginal revenue curve e. is the same as its marginal revenue curve

c. lies above its marginal revenue curve

What is the relationship between price elasticity of demand and the monopolist's revenue? a. marginal revenue is maximized where demand is unit elastic. b. average revenue is maximized where demand is unit elastic. c. marginal revenue is negative where demand is inelastic. d. average revenue is negative where demand is inelastic. e. marginal revenue is lowest where demand is unit elastic.

c. marginal revenue is negative where demand is inelastic.

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

c. may allow monopolies to earn profit in the long run

In the Solow model production function, Y = F(A, K, eL), K stands for

capital

If the money supply and the velocity of money are fixed, then increases in real GDP:

cause decreases in the price level.

Economists believe people make decisions by:

comparing marginal costs with marginal benefits

When the price of wood is high:

consumers will be more likely to use wood in its most valuable uses.

The equilibrium quantity is the quantity at which:

consumers' willingness to pay equals producers' willingness to sell.

sunk costs

cost that once incurred can never be recovered

costs are minimized when MC1 (<,>,=) MC2

fixed costs

costs that do not vary with output

An important difference between a perfectly competitive firm and a monopolist is that a. the perfectly competitive firm tends to be larger b. only the monopolist attempts to maximize profit c. only the perfectly competitive firm maximizes profit d. the perfectly competitive firm faces a horizontal demand curve and the monopolist faces a downward-sloping demand curve e. only the monopolist maximizes profit at the quantity where marginal cost equals marginal revenue

d. the perfectly competitive firm faces a horizontal demand curve and the monopolist faces a downward-sloping demand curve

The effect of better unemployment benefits is a ________ in the price of unemployment

decrease

If the demand curve is inelastic a price ________ causes a(n) ________ in revenues

decrease; decrease

If the demand curve is elastic a price ________ causes a(n) ________ in revenues

decrease; increase

An increase in the future expected price of a storable good ________ supply.

decreases

A Solow growth model features ______ returns to human capital, ceteris paribus.

decreasing

taking an action under uncertainty

definition of the Austrian perspective

normal good is

demand incrases when income increases

When a price ceiling is in effect

demanders cannot signal their needs to suppliers.

no, they just change the form of competition

do price controls eliminate competition?

does minimum wage do what it was intended to do?

does trade directly increase productivity?

In Exhibit 9-2, the marginal revenue of the fourth unit is a. $12 b. $3 c. $4 d. -$4 e. $0

e. $0

The profit-maximizing output and price for the firm in Exhibit 9-3, which charges the same price to all customers, are a. 117 and $14 b. 150 and $22 c. 150 and $14 d. 117 and $22 e. 117 and $24

e. 117 and $24

Which of the following describes the market structure of monopoly? a. many firms with some control over price, and considerable product differentiation b. many firms with no control over price, producing identical products with no differentiation c. a few firms with some control over price, producing similar products which are close substitutes d. a few firms with no control over price, producing highly differentiated products e. a single firm producing all of the output for the industry

e. a single firm producing all of the output for the industry

In Exhibit 9-15, deadweight loss to consumers from a monopolist that does not price discriminate is represented by area a. ecf b. eda c. dacb d. dafc e. abf

e. abf

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

e. average variable cost is greater than price at all output levels

Which of the following is not necessary for price discrimination to occur? a. a downward-sloping demand curve facing the firm b. control over price by the firm c. the firm can easily distinguish groups with different price elasticities d. the firm can easily prevent resale of the good by lower-price customers e. economies of scale exist

e. economies of scale exist

Which of the following would probably not be considered a natural monopoly? a. a municipal water company b. the local telephone industry c. the cable television industry d. natural gas and electric companies e. the automobile industry

e. the automobile industry

The main reason a monopolist can earn long-run economic profit, whereas a perfectly competitive firm cannot, is that a. monopolists operate under economies of scale b. perfectly competitive firms have opportunity costs c. demand for the monopolist's output is inelastic d. demand for the monopolist's output is elastic e. there are no barriers to entry in perfect competition

e. there are no barriers to entry in perfect competition

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

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

The principle of diminishing returns in capital implies that a country that lost much of its capital during a war will

experience a higher growth rate than before the war

Barriers to entry

factors that increase the cost to new firms of entering an industry.

Among countries with similar Solow steady states, poorer countries tend to grow ______ rich countries.

faster than

broken down as a result of bank panics

financial intermediation

When the minimum price that can be legally charged is above the market price, we say there is a price

floor

price

for a firm in a competitive industry, marginal revenue is equal to what?

greater than 0

for normal goods, income elasticity is...

1) surpluses 2) lost gains from trade (deadweight loss) 3) wasteful increases in quality 4) A misallocation of resources

four effects of price floors

Communal property creates a

free rider problem

Which type of unemployment is an outcome of economist Joseph Shumpeter's creative destruction process within an industry?

frictional unemployment

The reason why Martha Stewart does not iron her own clothes is that:

her opportunity cost of ironing exceeds the person's wages providing the ironing service.

Compared with producing the 20 millionth barrel of oil, the cost of producing the 40 millionth barrel of oil is:

higher

relationship between relationship risk an interest rate

higher the risk the higher the reward

they provide an incentive

how do prices solve the great economic problem?

the slope

how do you find opportunity cost using a PPF?

comparative advantage

how does trade increase productivity?

the rule of 70 applies to:

how fast growth rate will double

Economies of scale

how is it possible for monopoly prices to be < competitor prices

equation for leverage ratio and equity:

how much you have left to pay over how much you have paid

percent change in quantity demanded for good 1/percent change for quantity demanded of good 2

how to calculate Cross-price elast of demand

percent change in quantity demanded/percent change in income

how to calculate Income elasticity of demand

change in quantity demand/average quantity

how to calculate change in quantity demand

percent change of demand/(|Elasticity of demand| + Elasticity of supply)

how to calculate percent change from a shift in demand

percent change of supply/(|Elasticity of demand| + Elasticity of supply)

how to calculate percent change from a shift in supply

area of triangle (right triangle)

how to calculate the value of lost gains from trade (deadweight loss)

area of triangle (left triangle)

how to calculate the value of wasted resources from restriction on trade

consumption/labor

how to calculate wage

consumer surplus + producer surplus

how to find total welfare

Each industry should produce the "right" quantity.

how to minimize cost across industries

proximate reasons for growth:

human and physical capital (factors of production)

Output effect

if P > MC, increasing output raises profits

move in opposite directions

if elastic revenue and price...

inelastic

if the absolute value of the elasticity demand is less than 1

NO or False

if the question asks if something is good or bad, the answer is....

revenue stays the same when price changes

if unit elastic revenue and price...

wasted resources on the left, deadweight loss on the right

in a graph showing wasted resources and lost gains (deadweight loss) which triangle is which? (left or right)

Many companies pay their sales employees based on commissions—the more they sell, the more they get paid. This practice highlights the role of:

incentive

inferior good is when

income increases and demand decreases

When there is a recession, the price of oil tends to fall because:

incomes fall during a recession, and oil is a normal good.

Inflation tends to cause wages to:

increase

Suppose you spent $10,000 in 2010 remodeling your house, which you originally built for $200,000 in 2000. As a result, GDP in 2010 would

increase by $10,000.

as trade becomes more widespread, specialization _______, which in turn ______________ productivity

increases; increases

implicit cost

is a cost that does not require an outlay of money (opportunity cost)

(Figure: Computers and Books) According to the figure, the opportunity cost of producing books:

is higher for country A than for country B.

no, because profits are zero

is there incentive to either leave or enter the industry when P = AC? why or why not?

elasticity of supply

measures how responsive the quantity supplied is to the a change in price.

Income elasticity of demand

measures the response of Qd to a change in consumer income

Cross-price elasticity of demand

measures the response of demand for one good to changes in the price of another good

price floor

minimum price allowed by law

Price ceilings

misallocate resources because consumers who buy the product may not be the ones who value it the most

people who want bigger homes and are willing to pay more cant because of price ceilings

misallocation of resources for price control (rent control)

Money illusion is:

mistaking changes in nominal prices for changes in real prices.

If minimum wages are higher relative to the median wage, then minimum wage will affect

more people and create more unemployment.

Monopolistic Competition

most common market

A typical worker in India works with ______ physical capital than a typical worker in the United States

much less

When people spend more money without an increase in the supply of goods, prices:

must rise.

an investment fund that pools money from many investors and invests that money in the stocks of many firms

mutual fund

Domain name registration industry

name a constant cost industry, shown with a downward sloped supply curve

subway

name a natural monopoly

The law of demand suggests a ______ relationship between price and ______

negative, quantity demanded

The identity of the quantity of theory tells that the money supply times the velocity of money equals:

nominal GDP.

Zoey receives a big raise at work and decides to buy additional Precious Moments figurines.

normal good

many people can consume them at once.

not rivalrous

broken window fallacy

o fallacy that Destroying things and then rebuilding them might increase economic activity in the area affected (by drawing resources from elseZXhere. why destruction, and the money spent to recover from destruction, is actually not a net benefit to society/economy

if P > MC, increasing output raises profits

output effect

(econ 5) Refer to the four panels in the figure. Which of the panels shows a competitive firm making an economic loss

panel A

investing in a mutual fund that tries to mimic the S&P 500

passive investing

The government could buy the patent for a little more than monopoly profits ... then rip it up

patent buyout

increase the incentive to research and develop new products but also increase monopoly power once the products are created.

patents

Adam Smith wrote, "It is not from the benevolence of the butcher, the brewer, or the baker, that we expect our dinner, but from their regard to their own interest." He meant that:

people work for the benefit of others because it benefits them to do so.

1) Product being sold is similar across sellers. 2) There are many buyers and sellers, each small relative to the total market. 3) There are many potential sellers

perfectly elastic demand curve is a reasonable assumption under what three conditions?

determinants of investment:

permanent change in technology optimistic in economy

that a substantial fraction of the unemployed have been so for more than one year and that this problem has lasted for a long time.

persistent long-term unemployment

tractors cell phones computers

physical capital

John Stossel's investment strategy of ______ beat 90 percent of the experts' portfolios.

picking stocks by throwing darts at a newspaper's stock page

Which of the following is NOT a good institution?

political turnover

GDP per capita is a country's GDP divided by its

population.

What's the downside? Higher taxes - they also create DWL Difficulty in determining the right price Possible corruption

possible downsides of patent buyouts

Which of the following does NOT shift demand?

price

Which of the following does NOT shift demand? income population price expectations

price

is a maximum price allowed by law.

price ceiling

below

price ceiling has to be (above/below) price equilibrium

rent control

price ceiling on rental housing

bribes, search costs, waiting in line

price ceilings

shortage

price ceilings are associated with (shortage/surplus)

rent control

price ceilings are associated with what?

rent controls are

price ceilings on rental housing

_________ results in lost gains from trade when Buyers and sellers want to trade, but the threat of fines or jail time prevents them from doing so.

price cielings

(econ 6) Refer to the figures. The market is characterized by demand curve D2 and supply curve S1. The firms in the industry are earning ________, which will cause the

profit; supply curve to shift to S2

The elasticity of demand measures how sensitive the

quantity demanded is to a change in price

According to the quantity theory of money, a change in the money supply affects:

real GDP in the short run but not in the long run.

theory of comparative advantage

reasoning behind this theory: te greater the advantage a country has in producing A, the greater the cost to it of producing B

If the CPI was 100 in 2000 and 120 in 2010 and the price of a gallon of milk was $4.00 in 2000 and $4.80 in 2010, then the real of price milk between 2000 and 2010:

remained the same.

Inflation is painful to stop because stopping it:

requires decreasing the growth rate of the money supply, which typically leads to lower growth overall.

Which good below might be expected to have the most inelastic demand curve

salt

Paying the captains of prisoner transport ships for each convict who arrived in Australia instead of for each convict who boarded the ship:

saved the lives of hundreds of convicts.

income not spent on consumption goods.

savings

A decrease in the interest rate leads to an increase in the opportunity cost of saving.

savings is upward sloping

The process of bundling loans together and selling them on the market as financial assets is called

securitization

structural unemployment

If the cross-price elasticity of demand of two goods is positive, we can conclude that the two goods are

substitutes

If the demand for good A increases when the price of good B increases, then good A and good B are:

substitutes for each other

If the demand for good A increases when the price of good B increases, then good A and good B are:

substitutes for each other.

If the recent financial crisis raises awareness about the dangers of not saving, leading to an increase in overall savings rates across the country, the loanable funds market will experience an increase in the ______ loanable funds and ______ in equilibrium interest rates.

supply of; a decrease

Imagine a free market in equilibrium. After a sudden decrease in demand (but before the price can adjust), the market experiences a:

surplus

The product-variety externality

surplus consumers get from the introduction of new products

A binding price floor leads to a(n)

surplus.

Imagine a free market in equilibrium. After a sudden decrease in demand (but before the price can adjust), the market experiences a

surplus.

When the quantity supplied of a good exceeds the quantity demanded, there is a(n):

surplus.

comparative advantage

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

absolute advantage

the ability of a country to produce a good using fewer inputs than another country

Economies of scale

the advantages of large-scale production that reduce AC as quantity increases.

The demand curve for Froot Loops breakfast cereal is very elastic because

there are many good substitutes for Froot Loops

production consumption point

the black dot on the ppf graph that shows the outcome of trade WITHOUT production

no investor can persistently outperform the stock market indexes.

the efficient markets hypothesis

The most basic U.S. employment law stipulating that an employee may quit and employer may fire at any time and for any reason is called

the employment at will doctrine.

According to the quantity theory of money, the primary cause of inflation is:

the growth rate of the money supply.

the high-skilled worker

The better Martha Stewart is at running her business:

the higher her opportunity cost of ironing her own shirts.

the opportunity cost of teaching an introductory course is higher for full professors than for graduate students.

concentration ratio

the percentage of the market's total output supplied by its four largest firms.

short run

the period before exit or entry can occur

market power

the power to raise price above marginal cost without fear that other firms will enter the market.

Stock markets' reactions to the Chernobyl nuclear power plant meltdown was a lesson that

the prices of assets quickly adjust to new information.

The demand curve for oil shows

the quantity demanded of oil at different prices of oil

A supply and/or demand graph typically shows

the quantity of the good on the horizontal axis and the price of the good on the vertical axis

the (national) expenditure approach measures:

the total amount spent on the goods produced by a country in a year

the income approach measures:

the total incomes earned by households in a nation in a year

theory of comparative advantage

theory that says that to increase its wealth a country should produce the goods it can make at low cost and buy the goods it can make only at high costs

supply of goods is bought by the buyers with highest willingness to pay, supply of goods is sold by sellers with lowest costs, between buyers and sellers, no unexploited gains from trade or any wasteful trades

three conditions that explain why free market is efficient

Solow estimated that better ideas are responsible for about ______ of the U.S. standard of living

three-fourths

Alex smokes a pack of cigarettes per day even though he knows that he may face poor health down the road because of his smoking habit.

time preference

Shortages in economic markets are inefficient because

time spent waiting in line is wasted time, and hence a wasted resource

great economic problem

to arrange our limited resources to satisfy as many of our wants as possible

if supply decreases then it shifts

to the left (goes upwards)

If market incentives to produce are too weak, the market will end up producing:

too little of the good.

fixed cost +variable cost

total cost =

Price x Quantity

total revenue = ________

accounting profit

total revenue minus explicit cost

economic profit

total revenue minus total cost including implicit cost

Specialization

trade allows for ___. this increases productivity and trade. Goods and services are produced in better quality, quantity and speed when people focus on producing a few things instead of making everything they want by themselves.

preferences

trade makes people better off when ____ differ

the mainstream perspective and the Austrian perspective

two different perspectives on entrepreneurship

patent buyout, prizes

two solutions to monopolies/patents

Unemployment Rate:

unemployed / labor force

Cyclical unemployment is:

unemployment correlated with the business cycle.

(Figure: Supply and Demand 1) At a market quantity of 5, the shaded region in the figure represents:

unexploited gains from trade.

deadweight loss

value of lost gains from trade

A perfectly inelastic supply curve is a

vertical line indicating that even a very large increase in price won't increase the quantity supplied

perfectly inelastic

vertical line when talking about supply

Because while trade restrictions save visible jobs, they destroy jobs that are just as real but harder to see

when economy is struggling, why is it bad to place trade restrictions in response to shocks?

when firms dont have influence over the price of their product

when is an industry most competitive?

absolute advantage, comparative advantage

when people fear that a country can be outcompeted in everything, they are making a common mistake, namely confusing ____ with ____

law of supply (ceteris paribus)-

when price of a product increases, quantity supplied increases

it increases

when productivity increases, what happens to wage?

shortage

when quantity demanded exceeds the quantity supplied

long run, enter P> AC and ext P<AC

when should you enter or exit a market?

price ceiling

when the maximum price that can be legally charged is below the market price we say that there is a ____ _____

domestic producers gain and us consumers lose

who gains and who loses when tariff is implemented?

Ludwig von Mises

who said it: "If a man drinks wine and not water I cannot say he is acting irrationally. At most I can say that in his place I would not do so. But his pursuit of happiness is his own business, not mine."

Murray Rothbard

who said it: It is no crime to be ignorant of economics, which is, after all, a specialized discipline and one that most people consider to be a 'dismal science.' But, it is totally irresponsible to have a loud and vociferous opinion on economic subjects while remaining in this state of ignorance.

Friedrich Hayek

who said it: The curious task of economics is to show to men how little they really know about what they imagine they can design.

because trade increases availability of knowledge

why does trade increase productivity?

because although both firms would be better off if both stick to the cartel agreement, each firm has incentive to renege on the agreement

why is it difficult for oligopoly firms to form cartels and honor their agreements

because it frees up resources that can be used to produce other goods and services

why is reduction of US production of sugar a benefit of eliminating tariff?

because children end up working as prostitues and drug lords (more dangerous and illegal activities)

why should we not restrict trade with countries with child labor?

because productivity of labor determines wage

why would a country's wage be lower than anothers?

TR > VC they are better off staying open

why would it make sense to continue running a business even if P < AC (ski resort example)

The quantity demanded is the quantity that buyers are

willing and able to buy at a given price

increases

with international trade, consumer surplus _____ from when there was only domestic trade

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