Econ

Which of the following is an example of an oligopoly practicing product differentiation?

A car manufacturing company uses advertising to create an upscale image for its product

Why is consistent economic growth an aspirational goal for all economies?

A consistent growth rate can increase the GDP of a country significantly due to the power of compounding.

GDP is a useful metric in evaluating __________.

A country's growth and comparative growth trajectories across countries.

Which of these conditions can remove the main advantage of a natural monopoly?

A decrease in barriers to entry

If the Consumer Price Index in a country was 186.5 at the end of last year and 179.8 at the end of this year, the country experienced which of the following?

A deflation rate of 3.4 percent

How does a financial market influence economic growth?

A financial market helps promote liquidity in the economy

Which of the following situations has increasing returns to scale?

A larger cell phone provider can serve more customers per cell tower than a smaller provider

Which of the following voting systems is free from the Condorcet paradox?

A majority rules system with only two candidates

Which of the following statements about price floors is correct?

A price floor limits how low a price can be charged for a product or service.

A family cannot afford food, water, housing, or sanitation. This situation is best described by which of the following?

Absolute poverty

The program serves a defined population.

Advanced healthcare coverage

Which of the following is NOT a reason that a consumer may be more likely to purchase a product that is heavily advertised?

Advertising is often more helpful than personal experience when determining the quality of a good.

Which of the following is NOT an item that induces price discrimination?

Airline tickets

An improvement in the available technology may result in _______________.

All

Capital costs in a country decreases. Which of the following will occur due to this shift in factor price?

All

In the Prisoner's Dilemma, the outcome in which both players defect is _________.

All

Many argue that the existence of brands are beneficial to consumers. Which of the following arguments supports this view?

All

National income provides an indication of _______________

All

What is a consequence of a rise in the CPI?

All

Which of the following could shift a firm's labor demand curve?

All

Which of the following is a characteristic of monopolistic competition?

All

Which of the following is a form of collusion among oligopolies?

All

Which of the following is a possible contributor to racial wage differentials?

All

Which of the following is a source of product differentiation?

All

Which of the following is the characteristic of monopolistic competition?

All

Which of the following products are likely to exhibit network externalities?

All

Which of the following statements describes a long-run supply curve of a market.

All

Which of these is a problem with government regulation of natural monopolies?

All

Why are price controls often used in the electricity distribution industry?

All

When we cannot produce more of any good without giving up some other good that we value more highly, we have achieved ___________.

Allocative efficiency

Which of the following is a negative consequence of price controls?

Artificially low prices cause demand to outstrip supply, leading to shortages

Which of these is true about the backward-bending supply curve of labor theory?

At low wage levels the substitution effect dominates the income effect

Which of the following problems is NOT helped by advertising?

Brand loyalty decreasing competition among similar products.

Consider the example of used cars. The seller knows whether the car is a lemon (worth $2,000) or a cherry (worth $8,000), but they buyer does not. Why is this an example of adverse selection?

Buyers won't pay $8,000 due to the chance of a lemon, but only lemons will sell below that price

A factory is an example of which type of factor of production?

Capital.

Which of the following is a public good?

Clean air

Negative Cross Price Elasticity (Cross Elasticity) of Demand between two goods indicates that the two goods are ________.

Compliments

Which of the following is NOT a cause of government failure?

Consumer spending

Which of the following is NOT a problem created by advertising?

Consumers' lack of information about a product's price or quality.

What is the relationship between aggregate demand and consumption?

Consumption influences aggregate demand.

Firms in an oligopoly can always increase their profits by colluding and acting as a monopoly. Why does this strategy often fail?

Each firm can make itself better off by being the first to defect and increase production

Which of the following are variable costs?

Employee wages and raw materials

In the long run, which one of the following is true about monopolistic competition in the long run?

Firms cannot gain positive economic profit

Suppose a market is perfectly competitive, and firms are currently experiencing negative profits. Which chain of events is most likely to occur in the long run?

Firms will leave the market, supply will decrease, and economic profits will rise to zero

A measure of income distribution is:

Gini Index

Which of the following best describes a cost-push inflation scenario?

Global wheat supplies are destroyed, and wheat is a necessary input for toaster pastries

A green beans producer expects an increase in demand for green beans, so he decides to raise his price above the market price to capitalize on this increase in demand. If the market for green beans is perfectly competitive, what will happen?

He will make nothing

Which of the following is an issue addressed by behavioral economics?

How consumers with bounded rationality make decisions.

Which of the following is NOT a factor in the principal-agent problem?

Incentives for the principal

Disposable income can be defined as:

Income left after deducting taxes and government fees.

What is an example of a tax that can be imposed by federal, state, and local authorities?

Income tax

Which of the following is not a potential consequence of increased resource demand?

Increased marginal productivity.

Which of the following is NOT a characteristic of a perfectly competitive market?

Increasing returns to scale

A worker begins his career at a firm as a clerk and works his way up to become president of the firm. This is best described as what kind of mobility?

Intragenerational mobility

Which of the following is an advantage of the CPI over the GDP deflator?

It is a more accurate reflection of the changes in the cost of living

What is a likely consequence for a member of OPEC if it decides to defect and produce more oil than the amount set by the cartel?

It will make a higher profit today, but face lower prices and lower profits in the long run

The Gini index is calculated using ratios of areas derived from what curve?

Lorenz curve

A competitive employer will hire additional labor as long as:

MRPL exceeds the wage rate

According to the Bertrand model, what is the ultimate outcome of duopoly competition?

Market price equals marginal cost, and the result is the same as perfect competition

____________ examines the behavior individual consumers and firms within the market, including assessment of the role of preferences and constraints.

Microeconomics

Which of these individuals was NOT an influential founder of economics in the 19th Century?

Milton Friedman

Which of the following is NOT true about how monopolies maximize profit?

Monopolies can choose any combination of output and quantity

Will an industry with increasing returns to scale be more or less likely to be an oligopoly than an industry with decreasing returns to scale?

More likely, because it is more difficult for small competitors to enter the market

What is the primary activity of unions?

Negotiating

Which of these is NOT a condition for implementing an effective form of price discrimination?

None of these answers

Which of the following is true about output and revenue?

Output impacts revenue.

A _____ graph shows the maximum production level for one commodity for any production level of the other commodity.

PPF

In the Prisoner's Dilemma, the outcome in which both players cooperate is _________.

Pareto optimal

Which of the following is NOT a common cause of deadweight loss?

Perfect markets

Which of the following is NOT a drawback to measuring poverty via a poverty line?

Poverty lines cannot derive absolute value within a system

Which of the following is an informal method of collusion that is generally exempt from legal repercussions?

Price leadership

The market rent of an apartment is $900. Imagine the city government passes a law that landlords cannot charge more than $800 for an apartment. What will happen?

Prices will decline, demand will rise, supply will fall, and there will be a shortage

A good that is excludable and rival would belong to which category of goods?

Private goods

How does a monopoly market differ from a perfectly competitive market outcome?

Quantity is lower and prices are higher

Suppose inflation averages 2% over the course of five years. How will real GDP compare to nominal GDP?

Real GDP will be lower than nominal GDP

Imagine a firm. At its profit-maximizing output, its marginal revenue is $50, its average total cost is $120, and its average variable cost is $70. In the short-run, what will the firm do?

Shut down

The biases in the CPI can overstate inflation, because they do which of the following?

Tend to omit quality improvements, consumer response to changes in price, and new goods and services

Which one of these statements is NOT correct?

The National Bureau of Economic Research predicts economic cycles.

What is macroeconomics?

The analysis of the interactions between agents in the economy as a whole.

The distinction between real GDP and nominal GDP is important to determine which of the following?

The change in real production

Under what circumstance should regulation NOT be used to deal with a monopoly?

The cost of regulation is likely to be higher than the social cost of a monopoly

A demand curve traces ___________.

The different levels of consumption of a good that occur when the good's price changes

An expansion in the business cycle ends when which of the following occurs?

The economy hits a trough and enters into a recession.

Which of the following is NOT a criteria for price discrimination?

The firm must be able to recognize differences in supply.

A town provides public transportation in the form of 350 bicycles. The bicycles are placed around town and free for anyone to use. However, within four days all of the bicycles are stolen for private use. This is an example of:

The free-rider problem

Which of the following makes it difficult for firms to cooperate in an oligopoly market?

The incentive to deflect

Which of the following is an example of government regulation?

The legal prohibition of an act with negative externalities

Which of the following is equivalent to the marginal revenue product of labor?

The marginal product of labor multiplied by the price of output

Which of the following does NOT result from granting a temporary monopoly to a firm or individual through a patent?

The patent provides an incentive to produce original creative works.

Which of the following would cause substitution bias?

The price of HP computers declines while the price of Dell computers remains the same

The relationship between the quantity of inputs used and the quantity of output is known as _________.

The production function.

When oligopoly firms collude to increase profits, what happens to the market equilibrium?

The quantity supplied by the two firms goes down and the price goes up

Which inequality index measures the distributional entropy of resources across the population?

Theil index

Which of these statements is NOT true about oligopolies?

They always act independently

Which of the following is a good reason to try to raise money for a firm in a capital market?

To raise long-term finance so the business can improve its profitability.

Complete the sentence with the most suitable pairs of words: (1) is the only sustainable way to consume outside the PPF curve and (2) allows us to shift the PPF curve outward in the long run.

Trade (1); technology (2)

Which of these variables has a negative relationship with GDP growth?

Unemployment

Which of the following statements is NOT true of firms in a monopolistically competitive market in the short run?

Unlike a true monopoly, firms maximize profits at the point where MR=MC

When is it appropriate for a government to provide a subsidy?

When a transaction has positive externalities

At what point does a monopolistic competitive firm stop making economic profit?

When the demand curve and average total cost curve are tangent

When is a merger between two companies good for competition?

When they do not gain an excessive market share

Which of following factors is the primary reason for the Great Divergence in the United States?

Widening wage gap between middle and top earners.

Which of the following is an example of a payroll tax?

Withholding tax

If the price elasticity of demand for a good is relatively elastic, then ___________.

a change in the price causes a large change in quantity demanded

The production function gives the relationship between:

a given combination of inputs and all possible levels of output

The law of diminishing returns states that ______________.

adding more of one factor of production eventually yields smaller increases in output

The process by which the price and quantity of goods or services in a given market is altered due to one party having information that the other party cannot have at reasonable cost is:

adverse selection

Taking advantage of a price difference between two or more markets: striking a combination of matching deals that capitalize upon the imbalance; the profit made between price differences is:

arbitrage

An ad valorem tax is ______________.

charged based on the value of the good or service being sold

Which type of good is excludable and non-rivalrous?

club goods

An incentive when a promise of some sort of punishment if the wrong decision is made is a/an ______________ incentive.

coercive

Raw materials, agricultural and other primary products as objects of large-scale trading in specialized exchanges is a:

commodity

Which type of good is non-excludable and rivalrous?

common goods

GDP per capita is most useful for

comparing the average wealth of one country to another.

In the Cournot model of duopoly competition, firms __________.

compete on quantity and not price

If demand is inelastic then, most of the tax burden levied on the suppliers of a good will be paid by __________.

consumers

Paying corporate and payroll taxes are the responsibility of the ___________.

corporation

Making good, thorough, or careful use of resources; not consuming extra. Especially, making good use of time or energy is considered:

efficient

A measure of the amount of information and noise present in a signal is:

entropy

Business cycles typically follow this pattern ________________.

expansion, peak, contraction, trough.

Taxation is the primary means of __________________

financing the government.

The circular flow diagram illustrates the exchange between __________.

firms and households

Government policy that attempts to influence the direction of the economy through changes in government spending or taxes is:

fiscal policy

What are two methods of calculating GDP?

income and expenditure approach

The more inelastic consumers or producers are relative to the other group the ________ their relative tax burden.

larger

In an example of a moral hazard, an individual with dental insurance will be _________.

less likely to brush her teeth

Monopolies choose to produce the quantity of output at which _________.

marginal revenue equals marginal cost

A firm's profit-maximizing quantity is found at the intersection of ____ and ____ .

marginal revenue; marginal cost

In a perfectly competitive market there are ____ barriers to entry and _____ barriers to exit for firms in the long-run.

no; no.

Which of the following must be true when a monopoly is maximizing profit?

p(q)+qp'(q)=c'(q)

Imagine an indifference curve for two goods that consists of a vertical line and a horizontal line that meet to form a right angle. The two goods are __________.

perfect complements

The threshold of poverty, below which one's income does not cover necessities:

poverty line

Competitive firms are __________.

price takers who choose output levels but not prices

Which type of good is excludable and rivalrous?

private goods

Horizontal equity is most closely aligned with ______________ taxes.

proportional

The use of modern economic tools to study problems that traditionally are in the province of political science is:

public choice theory

A good that is both non-excludable and non-rivalrous in that individuals cannot be effectively excluded from use and where use by one individual does not reduce availability to others is a:

public good

The amount of goods and services that can be bought with a unit of currency or by consumers is:

purchasing power

A period of reduced economic activity is:

recession

Collusion takes place when __________.

rival companies cooperate for their mutual benefit

Tax collection is done by ________ and the appropriation of

the IRS; Congress

Moral hazard occurs when _________.

the entity that makes decisions about what risks to take is not the entity that bears the costs

According to economic theory, wages are correlated with _____________.

the marginal revenue product of labor

The price elasticity of demand measures the responsiveness of _____________.

the quantity demanded of a good to a change in its price

What is a cost that changes with the change in volume of activity of an organization?

variable cost

Health, safety, happiness and prosperity; well-being in any respect is:

welfare

Assume a cell phone costs $50. When the price increases to $75, demand falls from 5000 to 3000. Use the midpoint method to find the price elasticity of demand. Note: in economics, elasticity is generally reported as a positive number.

1.25

Which of the following scenarios will necessarily result in a producer surplus?

A producer sells a computer for $600, but was willing to take $400 for it.

Which of the following scenarios most closely resembles the tragedy of the commons?

A river becomes extremely polluted from factory runoff

Which of the following is NOT a reason for market failure?

Abundance of public goods

Who is credited with being the Founding Father of Economics and wrote The Wealth of Nations ?

Adam Smith

Which of the following inputs is NOT considered variable in the short run?

All

Which of the following must be true for a perfectly competitive market to achieve equilibrium?

All

Which of the following situations would contribute to economic profit earned in uncompetitive markets?

All

Which of these statements is true about supply and producer surplus?

All

Which of these determines the location of the production possibilities frontier?

All of these answers

What is the theory of utility based on?

An assumption

Which of the following will cause movement along the demand curve?

An increase in price.

Which of the following is an example of an individual who is not involved in a transaction but is bearing some cost?

An individual exposed to secondhand smoke

Which of the following statements regarding the relationship between a good's price and the quantity demanded is true?

An individual's purchasing power helps define how much of a good she wants at a given price.

All things being equal, when suppliers become willing to charge less, what happens to consumer surplus?

Consumer surplus increases

If the price elasticity of demand for a product is 2.5 and its price has increased by 3%, we can conclude that the quantity demanded:

Decreased by 7.5%

Factory A is able to produce 1,000 units of output at a cost of $10,000 and 2,000 units of output for $22,000. What is Factory A experiencing?

Diminishing returns to scale

Which of the following lists the three main properties of indifference curve?

Downward sloping, convex to the origin, and do not intersect

WHERE can economic theory be applied?

Economic theory and analysis may be applied throughout society, including business, finance, health care, and government.

Which of the following best explains the role of mathematics in accomplishing the goals of the study of economics?

Economics is a social science that assesses the relationship between the consumption and production of goods and services in an environment of finite resources.

Why is the study of economics relevant?

Economics is the scientific study of the way in which humans make choices about production, consumption and wealth when faced with scarce resources.

Total cost is equal to ___________.

Fixed cost plus variable cost

Suppose you own a profitable tailoring company that hires two workers who can make ten shirts per day combined. You decide to double the amount of capital and labor and see that the total number of shirts produced each day has increased to 22. This implies that your company is exhibiting __________.

Increasing returns to scale

Why will a firm not exit an industry even if it is not making a profit?

It can still cover the variable costs of production.

Which of the following are the two characteristics of a private good?

It is excludable and rival.

How does the aggregate demand curve for a public good relate to individual demand curves?

It is the vertical sum of all individuals' demand curves.

Which of the following is NOT true about long run costs?

Long run costs have fixed factors of production.

_____________ analyzes the entire economy and the issues affecting it.

Macroeconomics

Which of the following statements regarding the Principle of Diminishing Marginal Utility is NOT true?

Marginal utility must eventually decline to zero.

Tom has $10. The cost of each pen is $2, while the cost of a pencil is $1. Tom will purchase the two goods to maximize utility. Tom buys 3 pens and 4 pencils. If the price of pens were to fall to $1 each, Tom would buy _______.

More pens

"Because firms in this type of market structure have no market power, they are price-takers and cannot affect the market price for their goods." What market structure does this statement describe?

Perfect competition

In which of the following market structures do firms have no control over the price of goods and services?

Perfect competition

What is the price-to-quantity relationship typically depicted in a supply curve?

Positive correlation between price and quantity supplied.

We can expect the cross price elasticity of demand between tea and coffee to be ________.

Positive, indicating substitute goods

Why is perfectly inelastic supply is depicted as a vertical line?

Price can vary while quantity stays at the same level

The steps economists follow in order to study data and build principles (including Identify the Problem, Gather Data, and Form a Hypothesis) is called:

Scientific Method

Which of the following is not a requirement of cost-benefit analysis?

Selecting the least expensive project.

Which of the following BEST summarizes how the market demand curve compares to the individual demand curve?

The market demand curve represents a summation of individual demand curves, where quantity is summed for every given price.

Which of these is NOT a factor that affects demand?

The market structure

Which of the following is NOT required for an outcome to be productively efficient?

The outcome is allocatively efficient.

Where is equilibrium located on a supply/demand chart?

The point where the demand line and the supply line intersect.

What is the Law of Supply?

The quantity supplied will increase with an increase in price.

If the market price decreases for a good or service, holding all else constant, what happens to supply?

The supply curve remains unchanged; quantity will adjust as a movement along the supply curve.

A payroll tax will fall more heavily upon the employee (producer) than the employer (consumer) if which of the following is true?

The supply of labor is more inelastic than the demand for labor

The consumer surplus that an individual derives from a product is different for different consumers for which of the following reasons?

The utility of an item is perceived differently by every consumer

Why do individuals free ride?

They are able to benefit from the public good without paying for it.

How are the supply schedule and supply curve similar?

They provide the same information.

Economic costs include _______________.

accounting costs plus opportunity costs

A model of market economy that shows the flow of dollars between households and firms is a/an:

circular flow

A graph depicting the relationship between the price of a certain commodity and the amount of it that consumers are willing and able to purchase at that given price is a:

demand curve

An impact, positive or negative, on any party not involved in a given economic transaction or act is a/an:

externality

Something that motivates an individual to perform an action is a/an:

incentive

An increase in the general level of prices or in the cost of living is:

inflation

A good for which demand increases more quickly than income is a _______________.

luxury good

The additional cost from taking a course of action is a/an:

marginal cost

A commodity which is judged that an individual or society should have on the basis of some concept of need, rather than ability and willingness to pay is a:

merit good

Imagine an indifference curve for two goods that is a straight line with the same x- and y-intercepts. The two goods are __________.

perfect substitutes

The quantity of payment or compensation given by one party to another in return for goods or services is:

price

A government-imposed price control or limit on how high a price is charged for a product is a:

price ceiling

A numerical measure of the responsiveness of the quantity supplied of a product to a change in the price of the product alone is:

price elasticity of supply

In order to maximize possible utility, consumers will consume to a point that lies ____________.

where the indifference curve is tangent to the budget line

Suppose GDP was 10 trillion in 2000 (in 2000 dollars) and 15 trillion in 2010 (in 2010 dollars). If the country experienced 20% inflation over those ten years, what was the 2000 GDP expressed in 2010 dollars?

$12 trillion

If the nominal GDP is $3 trillion and the GDP deflator is 120, then what is the real GDP?

$2.5 trillion

Suppose a firm produces widgets in a perfectly competitive market. The market price is $3 per widget. As the firm moves from producing its 10th to its 11th widget, what will the marginal revenue be?

$3

Suppose a T-shirt firm can make 100 shirts at a total cost of $450. If producing 101 t-shirts costs $456, what is the marginal cost of the 101st unit?

$6

On a demand and supply curve graph, consumer surplus is found (1)____ and (2)____. Producer surplus is found (3)____ and (4)____.

(1) under the demand curve; (2) above equilibrium price; (3) above the supply curve; (4) under equilibrium price

Assume a pizza costs $10. When the price increases to $12, demand falls 10%. What is the own-price elasticity of demand? Note: in economics, elasticity is generally reported as a positive number even when it is negative.

0.5

Anthony earns $110,000 per year. The first $50,000 is taxed at 20%; the next $50,000 is taxed at 40% and any amount greater than $100,000 is taxed at 60%. What is the average tax (1) and the marginal tax (2)?

32.73% (1); 60% (2)

Imagine that a newspaper that employs five journalists is able to publish 50 articles a week. It then hires a sixth journalist and its production increases to 54 articles per week. What is the marginal product of labor?

4 articles