Eco 1050 Second Exam
2) The textbook rejects the cost-plus-markup theory of price setting because A) business firms do not describe their price-setting procedures as cost-plus procedures. B) competitors and monopolists set prices in different ways. C) it cannot explain the prices we actually observe. D) it ignores the role of government in regulating prices.
C
3) Did Mother Teresa create positive externalities when she helped the poor of Calcutta? A) No, because the poor continued to exist and her efforts were largely unsuccessful. B) No, because she fully calculated all the benefits of her activities. C) Yes, because her activities have inspired and benefited countless others whom Mother Teresa could not have known about or taken into account. D) Yes, because her activities had nothing to do with the search for economic profit.
C
3) Economics assumes people A) tend to compete more in markets than they do in government. B) tend to cooperate more in markets than they do in government. C) try to advance their own projects in market and government processes. D) try to pursue the public interest but find over time that only private interests matter.
C
3) If a professor gives up her job to open a shoe store, which of the following costs would an accountant tend to ignore? A) The $1,500 per month lease for the shoe store. B) The $150 per month electricity bill. C) The $4,000 per month of income forgone by not being employed as a professor. D) The $200 business license, which, of course, is a sunk cost.
C
3) When firms in an industry are selling similar products, and they agree to share the market, A) each firm earns a profit even though marginal cost is greater than marginal revenue. B) each firm secures a net revenue about as large as it would have received if it were the only seller. C) they try to keep each firm's price above its marginal cost. D) they tend to produce higher prices and larger output.
C
5) For social cooperation to be promoted, an effective system of property rights will be one in which people A) behave cautiously and considerately because their rights are not clear. B) enjoy most rights in common with all other members of the society. C) know exactly what their rights are and don't expect them to change significantly. D) know their rights are always dependent upon continuing majority approval.
C
5) How does the textbook distinguish between coercion and persuasion? Coercion induces cooperation by A) making only a majority better off, persuasion by making everyone better off. B) making nearly everyone better off, persuasion by making only a few people better off. C) threatening to reduce people's options, persuasion by promising to increase their options. D) using force, persuasion by using rational argument.
C
6) Direct controls imposing identical emission limits on all polluters are A) efficient if emissions can be accurately monitored, which is seldom possible. B) equitable because all polluters bear equal costs. C) likely to require a great deal of high-cost pollution reduction. D) more efficient and equitable than a system of fines because fines matter less to large than to small polluters.
C
6) Fill in the blank: Your textbook authors suggest ________ is the goal of a price-searching firm. A) just getting by B) maximizing sales C) maximizing net revenue D) maximizing total revenue
C
6) In the economic way of thinking, profit and loss can be eliminated only by A) appropriate and effective price controls. B) careful and detailed government regulation of business. C) a total elimination of uncertainty. D) taxation.
C
7) According to your text, controversies about negative externalities are almost always conflicts between the legitimate expectations of citizens and the A) desire of individuals for greater profits. B) desire of politicians to be reelected. C) legitimate expectations of other citizens. D) mindless urge for more material goods.
C
7) Fill in the blanks: One is ________ likely to invest in human capital the ________ person's rate of time preference. A) most; higher B) less; lower C) more; lower D) least; lower
C
1) Economic theory assumes elected and appointed government officials A) place their personal or private welfare ahead of the public interest. B) place the public interest ahead of any personal or private interests of their own. C) are free to pursue the public interest because they aren't constrained by competition. D) respond to the anticipated costs and benefits to themselves of decisions contemplated.
D
1) Economists use the term externalities to refer to A) consequences people ignore in their decision making. B) any cost associated with an action. C) foreign imports or exports. D) the behavior in which people actually engage as distinct from their alleged reasons for acting as they do.
A
10) The property rights of commissioners appointed to the Food and Drug Administration encourage them to A) call for additional testing of a new drug even when a delay in approval is liable to cost more lives than additional testing is likely to save. B) make decisions in the interest of drug manufacturers. C) make decisions in the interest of physicians and patients. D) rush new drugs onto the market before they have been adequately tested.
A
1) When firms set prices by adding a fixed percentage markup to marginal costs, they are likely A) concerned with the rate of profit rather than its net amount. B) earning a satisfactory rather than a maximum profit. C) exploiting their customers. D) searching for the most advantageous prices to set on the basis of limited information.
D
1) Your textbook argues that in a market system income is earned and "distributed" A) in the process of its creation. B) as a result of the supply and demand for productive services. C) in ways that might not be considered "fair" in all cases. D) in all of the above ways.
D
10) Is there any difference between fining people who put contaminants into the atmosphere and charging fees for putting contaminants into the air? A) Not if the fee and the fine are the same per quantity of contaminant. B) Not if the fee per quantity of contaminant is the same as the fine multiplied by the probability of "getting caught." C) Only in the language or rhetoric, but not in the incentives the laws create. D) Yes, because a fee constitutes social authorization while a fine expresses social disapproval.
D
10) The marginal cost to a grocer of selling avocados, which would have to be thrown away if they are not sold immediately, is approximately A) the overhead cost per avocado sold. B) the price of replacing the inventory. C) their wholesale purchase price. D) zero.
D
10) The term capital in economic theory refers to A) any privately owned resource. B) bonds, stocks, and similar financial assets. C) money available for lending or spending. D) produced goods used to produce future goods.
D
13) Sellers are sure the demand for their product is relatively inelastic at the price currently being charged A) could increase their net revenue by raising the price. B) could increase their total revenue by lowering the price. C) would decrease their net revenue if they raised the price. D) would decrease their total revenue if they raised the price.
A
14) A national taco chain offers in-house customers free refills on drinks. It is A) attempting to increase total profit. B) selling its meals below cost. C) selling drinks below cost. D) engaging in predatory pricing.
A
10) Who gains from a law requiring people who want to enter the taxicab business to prove they are thoroughly competent, honest, and reliable before they can obtain a license? A) Local people who use taxicabs frequently and regularly B) Local people who use taxicabs only occasionally C) Out-of-town visitors who use taxicabs D) Owners of taxicab licenses
D
11) A cartel is A) a chain of retail stores. B) a consent decree prohibiting specific anti-competitive practices. C) an automatic mark-up policy frequently used by retail establishments. D) an organization of sellers or buyers aiming to control competition.
D
11) If the baseball team can sell 6000 box-seat tickets when they set the price at $10 and 7000 box-seat tickets when they lower the price to $8, the marginal revenue per ticket between 6000 and 7000 tickets is A) $60,000. B) $9. C) $2. D) minus $4.
D
11) Legislators in a democracy are more likely to support special interests than the broad interests of citizens generally because A) incumbents have such powerful advantages in election campaigns. B) money plays such a large role in political campaigns. C) they cannot know what the public interest requires in the absence of market information. D) they pay attention to the people paying attention to them.
D
11) The best time to purchase the stock of a corporation capable of generating large earnings in the future is when A) everyone expects its future earnings to be larger than they are now. B) the price of the stock is lower than it has been in recent years. C) the price of the stock is higher than it has been in recent years. D) you alone expect its future earnings to be larger than they are now.
D
12) Because everybody lives under uncertainty, everybody is A) less than perfectly informed. B) ignorant of something. C) a speculator. D) all of the above.
D
12) In 2002 some politicians and many representatives of the steel and iron-ore mining industries in the U.S. complained foreign steel producers were illegally "dumping" steel and contributing to a potential unemployment problem. According to the economic way of thinking, their argument is questionable because A) it is not at all clear what the appropriate or correct price of steel is. B) it is not at all clear what the appropriate or correct cost of steel is. C) it is not at all clear that such an activity increases total unemployment in the U.S. D) all of the above are true.
D
12) What is the main rationale economists provide for assigning government the responsibility of protecting people against foreign aggressors? A) Most people are patriotic only when the government is involved. B) "National defense" must by necessity be nationalized. C) People will not risk their lives unless government requires them to do so. D) Private providers could not exclude non-payers from the benefits.
D
12) Which of the following is most likely to occur if a price-takers' market displaces a price-searchers' market? A) Costs will be higher. B) Efficiency will be less. C) Net revenue will be larger. D) Output will be larger.
D
13) The majority of the members of the U.S. Congress want to retain the so-called Fairness Doctrine as a control over television and radio broadcasters because A) competition by itself cannot produce fairness. B) government oversight is required to assure equal time for conflicting points of view. C) television and radio are local monopolies to a large extent. D) the doctrine gives more power and influence to members of Congress.
D
20) Which of the following clearly restricts the competitive market process? A) Predatory pricing tactics B) Legal restrictions on entry C) Hostile takeovers D) Selling below cost
B
16) Suppose Factory A emits 15,000 units of "Yuck" monthly, Factory B emits 30,000 units, and Factory C emits 45,000 units. Also suppose A's cost of reducing the emission is $1 per unit, B's cost is $2 per unit, and C's cost is $3 per unit. If the EPA wishes to reduce total emissions down to 45,000 units per month, which of the following is the lowest-cost method? A) Leave Factory C alone, and force both A and B to each reduce their emissions to zero units per month. B) Leave Factory A and B alone, and force C to reduce emissions to zero units per month. C) Leave Factory A alone, and force both B and C to each reduce their emissions to 15,000 units per month. D) All of the above would be accomplished at the same cost.
A
16) Suppose a single-parent father with four children receives these welfare benefits from the government each month: $400 in cash, $200 in food stamps, and $100 in medical benefits. If the father takes a job paying $1000 per month he will lose all these benefits and will also pay $100 in income and social security taxes. His earnings from the job are consequently being taxed at an effective marginal rate of A) 80%. B) 60%. C) 40%. D) 20%.
A
17) Why are prices for groceries and household items typically higher at a 24-hour convenience store compared to stores open from 6 am to 11 pm? A) Shoppers' options are generally fewer in the middle of the night. B) The elasticity of demand of the middle-of-the-night shopper is typically higher than the mid-day shopper's elasticity. C) The owners of the 24-hour stores are typically more selfish than the others. D) The owners of the 24-hour stores are more interested in maximizing net revenue compared to the others.
A
18) Someone who owns stock in a drug company that suddenly and unexpectedly reveals it has found an effective vaccine against AIDS will make a profit on the stock A) at once. B) only if she hangs on to the stock for a number of years. C) only if she sells the stock. D) only when the dividends actually start to increase.
A
19) Which of the following is not one of the obstacles mentioned in the text to a successful system of price discrimination? Inability to A) evade legal restrictions on discrimination. B) identify differences in demand among customers. C) prevent customers from reselling the product. D) prevent resentment from arising among the people who pay more.
A
2) A reduction in the price charged for luncheon specials by a downtown cafeteria will A) affect the demand (curve) for that cafeteria's luncheons if its competitors react. B) have no effect on the demand for lunch at other downtown restaurants. C) increase the cafeteria's gross revenue from lunch business. D) increase the cafeteria's net revenue from lunch business if the demand is elastic.
A
2) Does a person who works in a brothel sell productive services? A) Yes, if the service is demanded. B) Yes, but only in states where brothels are legal. C) No, because the service is immoral. D) No, because the service does not help the overall economy.
A
21) According to your textbook authors, laws restricting competitors A) restrict competition. B) reduce greed. C) promote economic fairness. D) improve the alternatives available to customers.
A
4) Complete the sentence. An entrepreneur advances a project only if the expected marginal benefit exceeds the expected marginal cost, A) and so does a government bureaucrat. B) but a government bureaucrat advances a project only if the marginal cost exceeds the marginal benefit. C) but a government bureaucrat is in no position to determine the cost of his own action. D) but a government bureaucrat has no concern about the benefit of his own action.
A
4) Most of the income received by families and individuals in the United States arises from the ownership of A) capabilities embodied in human beings. B) corporations. C) industrial, commercial, and residential real estate. D) stocks, bonds, and other financial instruments.
A
4) People will tend to "internalize externalities" when A) responsibility for the consequences of actions is more clearly assigned to the actors. B) spillover costs and benefits become more common and widespread. C) they calculate more carefully the marginal costs and marginal benefits of their decisions. D) they feel less empathy for others.
A
4) The basic rule for maximizing net revenue is: Charge a price, or set of prices, so that A) expected marginal revenue equals expected marginal cost. B) expected marginal revenue exceeds expected marginal cost. C) expected marginal revenue is equal to or less than expected marginal cost. D) marginal revenue turns out in practice to be equal to or less than marginal cost.
A
7) Compared with price searchers' markets, price takers' markets are likely to result in A) less advertising. B) less competition. C) lower output. D) more profit.
A
7) Entrepreneurs are people who A) accept ultimate responsibility for the projects they undertake. B) are hired by others to manage business enterprises. C) are hired by others to organize business enterprises. D) own the resources used in the production process.
A
8) Selling a newspaper at retail for ten cents when it cost twenty cents wholesale may be profitable if A) people who come in to buy a newspaper often make other purchases also. B) the wholesaler is also losing money. C) there are no substitutes for newspapers available. D) there is about to be a newspaper strike.
A
9) Economist's can justify supporting education through taxation on which of the following grounds? A) Education generates spillover benefits. B) Low-income people could not otherwise afford education. C) Most economists are educators. D) Public education is more efficient than allowing education to be provided by the market.
A
18) Sudden and extensive changes in property rights make social cooperation less effective by A) encouraging excessively conservative attitudes. B) inducing people to save for the future rather than spending now. C) making planning more difficult. D) reducing the power of government to manage the economy.
C
1) Interest is to saver as A) interest is to debtor. B) profit is to entrepreneur. C) tuition is to student. D) commission is to committee.
B
1) Pick the producer who would come closest to operating in a perfectly competitive environment. A) Grim, the mortician B) Green, the barley farmer C) Gristle, the butcher D) Grippe, the doctor
B
11) Generally speaking, resources are used more wastefully and carelessly when A) users obtain the resources through the market process. B) users do not have to pay the opportunity cost for using resources. C) users use resources to only advance the projects they are interested in. D) users privately own resources.
B
11) The purpose of the "draft" developed by owners' associations in many professional sports is to A) assure all players at least a minimum salary. B) control competition among owners for the services of players. C) control competition among players. D) control competition between players and owners.
B
15) Colleges offer tuition scholarships even when they are running budget deficits because colleges A) are public service institutions. B) can often earn additional net income by offering tuition scholarships. C) hope to receive contributions later from the recipients of scholarships. D) set tuition levels and establish scholarship policies without considering the monetary advantages.
B
15) We all use the services of speculators as information in reaching our own economic decisions A) because speculators are aggressive about marketing the information they produce. B) because we all use prices, which are set by bids and offers based on predictions of the future. C) if we buy or sell commodities through an organized exchange. D) if we play the stock market.
B
16) A judicial system for resolving disputes creates benefits even for people who never use it because A) people are compelled to obey court decisions whether they want to or not. B) judicial decisions generate uniform rules, which everyone can count on. C) silence gives consent. D) the social contract entitles everyone to share in the benefits from goods produced by government.
B
16) Are the owners of taxicabs in New York City earning large profits because the city severely restricts the number of licenses? A) No, because the city also regulates fares. B) No, because the cost of owning a license absorbs the potential profit. C) Yes, because the number of licenses has not been increased for 50 years. D) Yes, because if they were not the number of taxicabs would decline and profits would rise.
B
17) An increase in the level of government price supports for wheat will not make wheat farming more profitable because A) by definition government actions cannot affect profits. B) it raises the cost of growing wheat as well as the revenue. C) profit is the consequence of certainty and government policies are inherently uncertain. D) the demand for wheat is inelastic.
B
17) People who buy futures on the commodity market are A) agreeing to accept a specified quantity in the future at whatever price prevails then. B) agreeing to pay a price agreed upon now for future delivery of a commodity. C) buying now and promising to deliver the commodity in the future. D) said to be "on the spot market."
B
19) When your textbook authors say competition "can be recognized only in motion pictures, not in still photographs," they mean A) Hollywood is a competitive industry; portrait photography is non-competitive. B) competition is better described as a process, rather than a fixed state of affairs. C) competitors don't sit still. D) competition didn't exist before the advent of motion picture technology.
B
2) How does the text distinguish between the market and government? A) The market is based on competition; the government is based on cooperation. B) The market is based on prices; the government is based on policies. C) The market is based on individualism; the government is based on socialism. D) In none of the above ways.
B
2) Typically a firm's economic profit will be A) greater than its accounting profit. B) less than its accounting profit. C) equal to its accounting profit. D) equal to its accounting profit minus its tax liability.
B
20) Hardcover books usually cost much more to purchase than do otherwise identical paperback editions of the same book because A) hardcover books typically last longer. B) the demand for hardcover books is typically less elastic than the demand for paperback books at the same price. C) the marginal cost of producing hardcover books typically rises as output increases. D) the marginal cost of producing paperback books typically falls as output increases.
B
21) If a commercial airline starts offering maxi-saver fares at huge discounts to passengers who purchase tickets at least 30 days in advance and agree to stay over a Saturday night, what is the most likely effect upon first-class passenger service? A) First-class fares will rise somewhat to compensate for the loss on other fares. B) The demand for first-class service may fall somewhat because the price of a substitute good has decreased substantially. C) The marginal cost of first-class service will rise somewhat because the total cost must be allocated among all passengers. D) The marginal revenue from first-class service will rise somewhat because first-class service is now more clearly a superior good.
B
3) Income accrues to people who supply productive services, which means services that A) add to the monetary income of the society. B) are in demand. C) contribute to social welfare. D) result in tangible or durable products.
B
3) Sellers who lower their prices and consequently sell a larger quantity earn more A) gross (or total) revenue as a result. B) gross revenue only if the demand is elastic. C) net and gross revenue if the demand is inelastic. D) net revenue (revenue minus cost) as a result.
B
4) A physician who laid off her nurse and receptionist and performed their tasks herself would probably A) decrease her accounting profit but increase her economic profit. B) decrease her profit from the economist's point of view even if she increased her accounting profit. C) increase both her accounting and economic profit if her practice was a busy one. D) wind up with lower labor costs unless the layoff greatly increased the demand for her professional services.
B
4) Government licensing of occupations or trades A) has usually been established over the objections of sellers in the licensed industry. B) is often controlled by firms in the licensed industry to prevent competition. C) is prohibited by the U.S. Constitution. D) usually protects the public against poor quality products.
B
6) A free rider in economic theory is someone who does not contribute toward covering the cost of goods which he desires because he A) has a comparative advantage in defraying the cost of other goods. B) knows his paying or not paying will make no difference in their availability to him. C) regards all such costs as deadweight costs. D) regards all such costs as transaction costs.
B
6) According to the textbook, people add to their stock of human capital by A) divesting of their personal assets. B) investing in their personal skills. C) rearranging their pension portfolios. D) attempting to systematically reduce, rather than expand upon, their human capabilities.
B
7) From which of the following goods is it most difficult to exclude free riders? A) Afternoon swimming lessons at the YMCA B) The St. Patrick's Day Parade in Boston C) Bungy jumping at the state fair grounds D) Grandstand seating at the Daytona 500
B
8) An economist might emphasize that our everyday use of natural resources is the product of knowledge by saying: A) "Money is the root of all that is good about the world." B) "Usable oil comes from our minds' innovations." C) "A bird in the hand is worth two in the bush." D) "You're fired."
B
9) A price searcher faces the following demand function: At $7, 6, 5, 4, and $3, the quantity demanded is 300, 400, 500, 600, and 700 units respectively. If the firm's marginal cost is $100 at any level of output, it would maximize net revenues by A) producing 400 units and charging $6. B) producing 500 units and charging $5. C) producing 600 units and charging $4. D) producing 700 units and charging $3.
B
9) According to your authors, entrepreneurial innovation is similar to arbitrage because both activities ultimately involve A) obtaining inputs at relatively high prices and selling the output at lower prices. B) obtaining inputs at relatively low prices and selling the output at higher prices. C) the absence of uncertainty. D) the presence of perfect and complete information.
B
9) Sellers turn so frequently to government in efforts to protect themselves from competition because government A) can be influenced by monetary payments. B) can use coercion against competitors. C) has rather consistently forced firms to compete when they preferred not to. D) is charged with protecting the public interest.
B
19) Why do few avocados rot, even though in some seasons of the year far more avocados are harvested than in other seasons of the year? A) Consumers realize it would be inefficient to let avocados rot. B) Growers vary their advertising efforts with the season of the year. C) Prices fluctuate sharply as supplies increase or decrease. D) The taste for avocados varies proportionately to the supply.
C
2) A negative externality clearly occurs when A) a person's action unintentionally benefits other people. B) a person behaves in the public interest. C) a person's action unintentionally imposes costs on other people. D) a person couldn't care less about anybody else.
C
16) Fill in the blanks: A price discriminating firm will tend to charge a ________ price for the category of customer with the ________ elasticity of demand. A) lower; lower B) higher; lower C) lower; higher D) 100 percent markup; infinite
B or C
10) The ability of employers to increase their net revenue by paying low wages is limited primarily by A) federal and state legislation. B) the fact that net revenue is maximized when marginal revenue equals marginal cost. C) the other opportunities available to employees. D) the right of labor unions to strike.
C
12) According to your textbook, the following is the prime cause of traffic congestion: A) Population growth B) The American automobile industry C) Most roadway space is not priced. D) A lack of commitment to public transportation expansion
C
12) If employers were required by law to increase the wages paid to secretaries by 40 percent, which consequence could we most confidently predict? A) More secretaries would be employed. B) Secretaries would begin to earn more than they are worth to their employers. C) The marginal value of secretaries would increase by about 40 percent. D) The total amount of wages paid to secretaries would decrease.
C
13) Traffic congestion is an example of a negative externality because A) motorists take into account all benefits while driving. B) motorists take into account all costs while driving. C) a motorist's cost of driving spills over and affects other motorists. D) a motorist's benefit from driving spills over and affects other motorists.
C
14) According to your textbook, pollution is a major social and political concern because A) it is inefficient. B) it is always immoral. C) people disagree about rights, which are extremely difficult to resolve. D) the environment is on the verge of ecological catastrophe.
C
15) According to economic theory, the political process tends to A) benefit every participant equally. B) harm every participant equally. C) concentrate benefits in the hands of special interest groups and disperse the costs throughout the uninformed voters.
C
15) At a Mufflers-R-Us repair shop customers have the opportunity to wait in a room with chairs, a television, magazines, coffee and donuts. The economic way of thinking suggests the muffler shop is A) selling mufflers below cost. B) selling the additional goods and services below cost. C) attempting to increase its total profit D) engaging in unfair trade practice because it provides the goods and services free of charge.
C
15) What is meant by the marginal tax rate? A) The highest rate that can be extracted. B) The lowest rate that will still meet the government's revenue requirements. C) The percentage of additional income that is taken by taxes. D) The rate paid by businesses that are just barely able to survive.
C
18) Movie theaters usually set lower prices for children than for adults because A) children can be served at lower costs. B) they expect to make up the loss on the sale of refreshments. C) they think the price elasticity of demand for movie tickets is quite elastic for children at the regular or adult price. D) they want to get young people into the habit of attending movies.
C
13) Which of the following explains the increase in income inequality since 1980? A) A widening gap between the wages of skilled and extensively-educated workers and the wages of those with fewer skills and less education B) A rise in the number of single-parent families at low income levels and a rise in two-parent two-earner families at higher income levels C) An increase in the supply of less-skilled workers combined with an increase in demand for more highly-skilled workers D) All of the above.
D
13) Who among the following is speculating? A) The senior citizen who decides to get a flu shot in November B) The Midwesterner who puts fuel-line antifreeze in the tank on news of a deep freeze C) The college work-study student who gambles his pay at the local casino D) All of the above.
D
14) Of the following cancer patients, who is speculating? A) The one who follows their doctor's advice and elects chemotherapy B) The one who goes against their doctor's advice and rejects chemotherapy C) The one who gets a second opinion, but not a third opinion D) All of the above.
D
14) Price discrimination by sellers is usually observed only in situations where A) low-price customers can easily resell to high-price customers. B) prices are set by competing monopolies. C) sellers are bigots. D) sellers can effectively identify customers by their demand for the product.
D
14) Which of the following explains the increase in income inequality since 1980? A) A widening gap between the wages of skilled and extensively-educated workers and the wages of those with fewer skills and less education B) A rise in the number of single-parent families at low income levels and a rise in two-parent two-earner families at higher income levels C) An increase in the supply of less-skilled workers combined with an increase in demand for more highly-skilled workers D) All of the above.
D
15) Who among the following is exercising their right to pollute? A) The group of campers burning a fire in a designated fire pit at a state forest campsite B) The Sunday morning churchgoer whose auto emits carcinogens from its exhaust pipe C) The publicly-owned and federally-regulated coal-fired electric utility D) All of the above.
D
16) People who "sell short" are selling goods A) at below-market prices. B) of poor quality. C) to purchasers who cannot afford to pay for them. D) they do not yet own.
D
17) Do policies that alter the distribution of income also entail a change in property rights? A) It is impossible to tell because of the uncertainty such policies create. B) Not if they are confined to changing relative prices. C) Not if they redistribute income without confiscating anyone's wealth. D) They do so necessarily.
D
18) If the wheat harvest next summer in Canada will be much less than had been expected, there will tend to be A) a decrease in the price of wheat futures and an increase in the current cash price of wheat in the US. B) a decrease in the price of wheat futures and in the current cash price of wheat in the US. C) an increase in the price of wheat futures and a decrease in the current cash price of wheat in the US. D) an increase in the price of wheat futures and in the current cash price of wheat in the US.
D
20) A commodity speculator who thinks next fall's corn harvest will actually be much larger than most people now anticipate will want to A) buy corn now for sale in September. B) buy September corn futures. C) buy land suitable for growing corn. D) sell September corn futures.
D
5) The uncertainty and ambivalence surrounding government policies toward competition stems from A) conflict between the goals of preserving competition and protecting competitors. B) the influence producers are able to exert on agencies charged with enforcing laws governing business practices. C) uncertainty about the actual effects of various measures intended to promote competition. D) all of the above.
D
5) Which statement below is true for a price searcher? A) Marginal revenue can only be positive. B) Marginal revenue can only be negative. C) Marginal revenue can only be zero. D) Marginal revenue can be positive, negative, or zero.
D
6) A cartel arrangement is likely to be successful for its members only if it can A) assign sales to specific members. B) keep new firms from entering the industry. C) prevent firms not in the cartel from marketing close substitutes. D) do all of the above.
D
7) When laws and regulations prohibit firms from selling at "prices less than cost," A) consumers benefit. B) they are rarely enforced; therefore, competition is allowed to decline in the retailing industry. C) they help maintain competition by eliminating one important advantage of large firms. D) they must define "cost" arbitrarily since no firm has an incentive to sell below cost.
D
8) Entrepreneurs engage in A) arbitrage. B) innovation. C) imitation of other successful entrepreneurs. D) all of the above.
D
8) Percentage markups are characteristically lower in supermarkets than in convenience stores because A) convenience stores must charge high markups to compensate for low volume. B) marginal revenue is greater in supermarkets than in convenience stores. C) supermarkets can take advantage of quantity discounts. D) the demand curves of customers patronizing supermarkets tend to be more elastic.
D
8) The demand for government regulation of sellers most often originates with A) consumers. B) economists. C) politicians. D) sellers.
D
8) What important function does adjudication perform in the process of reducing negative externalities? A) It allocates the revenue from negative externalities to the people who have been damaged. B) It arbitrates between beneficiaries of negative externalities and the people who must bear their costs. C) It decides whether punitive or merely compensatory damages will be awarded. D) It discovers who has which rights.
D
9) In the economic way of thinking, A) suppliers compete against other suppliers. B) demanders compete against other demanders. C) suppliers cooperate with demanders. D) all of the above are true.
D
9) The Audubon Society currently allows three oil companies to extract natural gas on its Rainey Wildlife Sanctuary because A) natural gas is more valuable than wildlife conservation. B) oil interests actually own the Audubon Society. C) the government required the leasing of natural gas rights under its power of eminent domain. D) the sanctuary is the private property of the Audubon Society.
D
13) Which of the following is clearly being sold below cost? A) 2-for-the-price-of-one theatre tickets B) Senior-citizens discounts on meals at the local diner C) The free software included in the purchase of a new personal computer D) The magazine subscription offering 30% off the regular newsstand price E) None of the above.
E
14) Which confers a set of property rights? A) A driver's license B) A land contract C) A passing score on a C.P.A. exam D) A successful election campaign E) All of the above.
E
5) Which is an example of "capital"? A) A carpenter's skills B) A singer's voice C) A judge's unblemished reputation D) A blast furnace E) All of the above.
E
