ECON 4 Final Review

Farmers can generally sell as large a quantity of their crop as they wish, as long as they are willing to accept the prevailing market price. True/False

True

In a perfectly competitive scenario, a firm's marginal revenue is equal to price, so the profit-maximizing quantity is where P = MC. True/False

True

In the long run, all factors of production are variable. True/False

True

Issuing fishing and hunting licenses are options for dealing with tragedy of the commons. True/False

True

Overharvesting common resources such as seaweed and wildflowers is referred to as "tragedy of the commons." True/False

True

The profit-maximizing choice for a monopolist is to produce at a quantity where MR = MC. True/False

True

The types of monopoly are based on the barriers of entry they exploit. True/False

True

Utilities such as water, natural gas, telecommunications and electricity are typically monopolies. True/False

True

Protectionist policies make imported goods more __________ for consumers. affordable expensive

expensive

The effect of a market exchange on a third party outside the exchange is called a(n): outlyer. externality. collateral impact.

externality

Imposing trade barriers will cause the average level of wages in an economy to: fall. rise. insufficient information to determine.

fall.

Taking social costs into account will shift the demand curve. True/False

false

Under monopsony, employers hire _____ workers and pay a _____ wage than employers in a perfectly competitive market. fewer; lower more; higher fewer; higher more; lower

fewer; lower

Which of the following are ways a business can differentiate its products or services (choose all that apply): packaging distribution quality consumer perception

packaging distribution quality consumer perception

Union member earn roughly ______ than nonunion workers. 2% more the same as 20% more

20% more

_______ occurs when circumstances have allowed several large firms to have all or most of the sales in an industry. Collusion A monopoly An oligopoly A cartel

An oligopoly

Which of the following represent barriers to entry? Control of a resource. Legal restrictions on competition. Economies of scale. Industry competition. National security. Technological superiority.

Control of a resource. Legal restrictions on competition. Economies of scale. Technological superiority.

A firm pursuing a predatory pricing strategy will generally maintain the discounted pricing after competition is eliminated. True/False

False

A limitation of the perfectly competitive market structure is that potential new entrants generally face barriers to market entry. True/False

False

A natural monopoly is one that is based on control of a natural resource. True/False

False

A patent gives an inventor the exclusive right to make, use or sell the invention for his or her lifetime. True/False

False

American agricultural subsidies have no effect on farmers in other countries. True/False

False

As is true in a monopoly market structure, barriers to entry shield monopolistically competitive firms from new entrants. True/False

False

Barriers to entry restrict a monopolist's ability to earn significant economic profits. True/False

False

Both the gender and race earnings gaps have been essentially closed. True/False

False

For a monopolist, the profit-maximizing level of output is the same as the revenue-maximizing level of output. True/False

False

For firms in a perfectly competitive market, both marginal revenue and marginal cost are constant across changes in quantity. True/False

False

Free trade has no income redistribution effects. True/False

False

History teaches us that market forces can eliminate discrimination. True/False

False

In the short run, the perfectly competitive firm will react to losses by reducing fixed costs. True/False

False

Monopolists are productively efficient. True/False

False

Pollution is not considered an externality. True/False

False

Predatory pricing is a legal way of deterring potential competitors. True/False

False

Prisoner's Dilemma reasoning supports development and maintenance of public goods. True/False

False

Protectionist policies allow a country to maximize the benefits of comparative advantage. True/False

False

The U.S. economy is considered to be an example of a perfectly competitive market structure. True/False

False

The cost of protectionist policies is paid by producers. True/False

False

The first rule of labor markets is some employees are worth more than others. True/False

False

Two of the characteristics of a perfectly competitive market structure are many firms that are producing highly differentiated products. True/False

False

Union membership in the United States is higher than in most of the developed nations. True/False

False

Externalities can be positive or negative. True/False

True

When a firm operating in a perfectly competitive market is experiencing losses, it should continue operations if: P < AVC P = AVC P > AVC

P > AVC

A city park is an example of a public good. True/False

True

A firm's profit-maximizing choice of output will occur where MR = MC. True/False

True

A monopolist faces no significant competition. True/False

True

A monopsony faces the market supply curve for labor. True/False

True

A policy requiring that imports meet specific safety standards is a non-tariff barrier to trade. True/False

True

Collusion is a violation of antitrust law. True/False

True

When there is market power on both the supply and demand sides of the labor market, the market is: in equilibrium. a bilateral monopoly. a monopsony.

a bilateral monopoly.

Monopolists ____ allocatively efficient. are are not

are not

In a perfectly competitive labor market, firms can hire all the labor they want at: a price above the market wage. at the market wage. below the market wage.

at the market wage

If the price that a firm charges is lower than its ________ of production, the firm will suffer losses. average cost marginal cost fixed cost variable cost

average cost

If, in a perfectly competitive market, P = (a firm's) ATC, then the firm: earns an economic profit. breaks even. is operating at a loss.

breaks even

A _____ refers to a group of firms colluding with one another to produce at the monopoly output and sell at the monopoly price. prisoner's dilemma cartel game theory duopoly

cartel

When firms act together (without a formal agreement) to reduce output and maintain high prices, it is called: a cartel. collusion.

collusion.

Free trade generally increases (select all that apply): consumer surplus. producer surplus. social surplus.

consumer surplus. social surplus.

Protectionism is associated with a(n) __________ in economic efficiency. decrease increase no impact

decrease

Each additional unit sold by a monopolist will _____ the overall market price, and as more units are sold, this _____ applies to more and more units. increase; higher decrease; lower

decrease; lower

The marginal product of labor _____ as the employer hires additional workers. increase/decreases

decreases

For a perfectly competitive firm, the marginal revenue curve is identical to the firm's: demand curve. supply curve. net revenue.

demand curve

In the market for golf balls, manufacturers offer an array of products that are: distinctly different in a particular way. virtually identical from a competitive standpoint. not competitive goods.

distinctly different in a particular way

The demand curving facing a monopolistic competitor is: flat. the market demand curve. upward-sloping. downward-sloping

downward-sloping

A marginal cost curve tends to be ____ at low levels of output and ____ at higher levels of output. downward-sloping; upward-sloping upward-sloping; downward-sloping

downward-sloping; upward-sloping

The demand curve facing a monopolistically competitive firm is more ______ than that facing a monopolist. elastic inelastic

elastic

Adding pollution control measures into the the cost of production will result in a (check all that apply): higher price lower price greater quantity of production increase in demand. decrease in quantity of production. reduction in pollution.

higher price decrease in quantity of production. reduction in pollution

Protectionism for infant industries __________ domestic users of the product. imposes costs on results in lower prices for

imposes costs on

If a firm in a perfectly competitive market is producing at a quantity where MR > MC, than it can increase profit by: reducing output. increasing output.

increasing output

If the CEO of major corporation is playing prisoner's dilemma then, from his or her perspective, the gains to be had from cooperation are: smaller than the rewards from pursuing self-interest. larger than the rewards from pursuing self-interest.

larger than the rewards from pursuing self-interest.

Relative to a firm in a perfectly competitive industry, a monopolist produces: less, at a higher average cost and price. more, at a higher average cost and price. less, at a lower average cost and higher price.

less, at a higher average cost and price.

Employment will be _____ in an imperfectly competitive industry than it is in a perfectly competitive industry. higher/lower

lower

Market-oriented environmental tools achieve any desired reduction in pollution at a _______ cost to society than command-and-control legislation. higher lower

lower

In the framework of monopolistic competition, the objective of advertising is to: make a firm's perceived demand curve more elastic. make a firm's perceived demand curve more inelastic. increase demand for the firm's product or service.

make a firm's perceived demand curve more inelastic. increase demand for the firm's product or service.

Utilities such as water, natural gas, telecommunications and electricity are typically monopolies. Maker/Taker

maker

In an imperfectly competitive market, the value of a worker's marginal product is equal to: product price. marginal revenue product. insufficient information to determine.

marginal revenue product.

A monopolist faces _______ demand curve. horizontal market upward-sloping vertical

market

In a perfectly competitive scenario, _____ determine(s) the market price. a dominant producer market supply and demand individual producers

market supply and demand

Pollutions charges are an example of: command-and-control environmental regulation. market-oriented environmental tools.

market-oriented environmental tools.

The perceived demand curve for a group of competing oligopoly firms will appear kinked as a result of their commitment to: match price increases, but not price cuts. position themselves at opposite ends of the competition spectrum. match price cuts, but not price increases.

match price cuts, but not price increases.

Shopping malls typically lease retail space to a large number of clothing stores. When this group of retailers competes to sell similar but not identical products, they engage in what economists call: a cartel. collusion. monopolistic competition. perfect competition.

monopolistic competition.

A labor union operates like a _______ in a labor market. regulator monopsony monopoly

monopoly

A sole employer in a small town would be a: monopoly. monopsony.

monopsony

Saving a job through protectionism typically costs __________ the actual worker's salary. approximately the same as much more than much less than

much more than

When the quantity demanded is less than the minimum quantity it takes to be at the bottom of the long-run average cost curve, the situation calls for: government subsidy. legal monopoly. market exit. natural monopoly.

natural monopoly.

When a perfectly competitive market is in long-run equilibrium: firms have an incentive to enter the market. firms have an incentive to leave the market. no firm has an incentive to enter or leave the market.

no firm has an incentive to enter or leave the market

Command-and-control environmental regulation offers __________ to improve the quality of the environment beyond the standards set by law. an incentive no incentive

no incentive

A free rider problem can arise when a good or service is: excludable. nonexcludable.

nonexcludable

The U.S. soft drink industry is a classic example of a(n) ________ market structure. perfect competition monopolistic competition monopolistic oligopolist

oligopolist

When exit occurs in a monopolistically competitive industry the perceived demand and marginal revenue curves will shift to the right. perceived demand and marginal revenue curves will shift to the left. perceived demand curve will shift to the left. marginal revenue curve will shift to the left.

perceived demand and marginal revenue curves will shift to the right

In market structure terms, monopoly is the opposite of: monopolistic competition. oligopoly. perfect competition.

perfect competition

If a firm operating in a perfectly competitive market can sell a virtually unlimited quantity at the prevailing market price, the firm faces a(n) _____ demand curve. elastic unitary elastic perfectly elastic

perfectly elastic

In places where there are many low-skilled immigrants, the effects of immigration on taxes are generally _____ at the federal level and _____ at the state and local levels. positive; positive negative; negative positive; negative negative; positive

positive; negative

Perfectly competitive firms are said to be: price makers price takers

price takers

A pharmaceutical firm that has been awarded patent protection for a drug has created a monopoly for that product by: __________. regulating demand for the product. restricting entry into the market. restricting competitive advertising. restricting product development.

restricting entry into the market

In a perfectly competitive market, the demand for labor is: the marginal price of labor the marginal product of labor the marginal product of labor x P marginal revenue

the marginal product of labor x P

In a monopolistically competitive market, positive economic profits attract competition, which: shifts an existing firm's demand curve and margin revenue curve to the left. which shifts an existing firm's demand curve and marginal revenue curve to the right. has no affect on the original firm's demand curve.

shifts an existing firm's demand curve and margin revenue curve to the left.

Protectionism: creates new jobs. causes a net loss in jobs. shifts jobs, with no new jobs created.

shifts jobs, with no new jobs created.

For a perfectly competitive firm, the marginal cost curve is identical to the firm's: demand curve. supply curve. average total cost curve. average variable cost curve.

supply curve

A(n) __________ is a tax that governments impose on imported goods and services. import quota non-tariff barrier tariff

tariff

The demand for labor is considered a "derived" demand; that is, it is dependent on: the hiring firm's demand for labor. the demand for the hiring firm's products. the price of the hiring firm's products.

the demand for the hiring firm's products.

Firms operating in a perfectly competitive industry are said to have only one major choice to make: what price to charge. what quantity to produce.

what quantity to produce