ECON 212 Test 3

For a monopolistically competitive firm, profit is maximized when:

MC = MR.

An unregulated natural monopolist would produce to the point at which:

MR = MC.

In imperfect labor markets:

MRP is not equal to VMP.

A firm will invest in additional capital goods as long as the:

MRPk exceeds the interest rate.

Which of the following characteristics does monopolistic competition NOT have in common with the model of perfect competition?

Products of individual firms are different.

A bond's yield is:

the current annual return to a bond.

Banks and other financial institutions offer small business loans based on all of the following, EXCEPT:

the willingness of venture capitalists to fund the business.

Bonds are BEST described as a type of:

debt capital.

A decrease in the demand for human capital will _____ its rate of return and ____ the amount of investment.

decrease; decrease.

An increase in the supply of human capital will _____ its rate of return and ____ the amount of investment.

decrease; increase.

When Doritos brand tortilla chips spends money for television commercials, it intends to shift the:

demand curve to the right and make demand less elastic.

Industrial agglomeration:

describes geographical clusters of firms within an industry that choose to locate close to one another.

The discovery of natural gas in the American Midwest should lead to a(n) _____ in the price of land because of a(n) _____ of land.

increase; increase in demand

The goal of investment in human capital is to increase labor's:

productivity.

In general, which is TRUE about the focus of different countries' university educational systems?

European programs focus on a specific field of study, while American programs offer more breadth of topics.

In a competitive labor market, firms should hire workers up to the point where the:

market wage equals the MRP.

A regulatory agency has imposed marginal cost pricing on a natural monopolist. We should expect that the natural:

monopolist will eventually go out of business.

Robotic manufacturing has made labor demand for factory workers:

more elastic.

In long-run equilibrium for monopolistically competitive firms, which of the following will hold?

P > MC = MR and P > minimum point on LRATC curve

Which of the following statements is TRUE about the relationship between a firm's demand curve under perfect competition and monopoly?

Under perfect competition, the demand curve is perfectly elastic; under monopoly, the demand curve has elastic, unit-elastic, and inelastic portions.

When regulating a natural monopoly, average cost pricing is more effectively used than marginal cost pricing because average cost pricing:

allows the firm to earn a normal rate of return on investment, while marginal cost pricing will lead to economic losses.

All of the following would be included in on-the-job training EXCEPT:

an economics principles class.

An example of x-inefficiency is:

an executive, at corporate expense, hiring a limousine to travel one block. whenever it is raining.

If the public utility commission allows the water company to earn a normal profit, then it is enforcing a(n):

average cost pricing rule.

Profits are BEST described as the rewards that are earned for:

combining resources and assuming risks to produce products.

A periodic fixed payment made to a bondholder expressed as a percent of the face value is the bond's:

coupon rate.

Industrial agglomeration occurs because of what economic phenomenon?

economies of scale

If Edna lives next door to a nightclub and the loud music disturbs her sleep, the Coase theorem suggests that an efficient agreement can be reached if:

either one of the parties has a well-defined property right.

Which of the following would NOT lead to greater educational investment?

increase in the cost of education caused by lower college subsidies.

If the discount rate _____, the present value today _____.

increases; decreases

Which of the following actions can help increase the stability of a cartel?

increasing government protection

A firm will take on more investment projects as:

interest rates fall.

If an oligopolistic firm attempts to increase its price:

it faces an elastic demand curve.

If an oligopolistic firm believes that its competitors would match a price decrease, but not match a price increase, its demand curve is:

kinked, being steeper below the going price.

Economic rent is the payment to which factor of production:

land.

Academic studies have found that the economic returns to education are:

large and positive.

According to human capital theory, younger workers have a:

lower opportunity cost of going to college, so they will be more likely to attend college.

Due to the ______________ characteristic of a public good, the total demand for a public good is found by the _______________ summation of individual demands.

nonrival; vertical.

When positive externalities are present, the social demand curve lies to the _______ of the private demand curve and the private market _________________ the good.

right; underproduces.

If new technology improves worker productivity, then the marginal physical product of labor will:

rise, shifting demand for labor to the right.

Which of the following would NOT be an investment in human capital?

operating a day care center.

Forgoing paid employment to obtain a university degree is a(n):

opportunity cost.

Compared with firms in competition, firms in monopolistic competition in the long run:

produce less and sell at a higher price.

In economics, the rewards earned by entrepreneurship are called:

profits.

A financial services firm might hire a college graduate who majored in something other than finance, because graduating has the discipline to be a good employee. This is an example of:

signaling.

If the marginal cost pricing rule is used to regulate the natural monopolist, the monopolist:

sustains an economic loss.

In economics, firms continue to invest until:

the marginal revenue product of capital equals the cost of capital.

The stability of a cartel is enhanced if:

the participating members have similar cost structures.

The differences between venture capital and private equity primarily involve:

timing, volume, and risk.

The short-run demand curve for plant workers in a large petrochemical plant would be:

very inelastic.