ECON FINAL HOMEWORK QUESTIONS

Which of the following would be classified as a situation where a third-party benefits from a market transaction by others? a) Two firms trading pollution credits to avoid cutting their toxic emissions. b) Allowing a mining company to use a natural lake to discharge waste. c) City buying 10,000 trees for green space renewal projects. d)Increased levels of air pollution in neighborhoods near a football stadium.

C) city buying 10,000 trees for green space renewal projects.

I'MABigCorp. produces and sells kitchen wares. Last year, it produced 7,000 can openers and sold each one for $6. To produce the 7,000 can openers, the company incurred variable costs of $28,000 and a total cost of $45,000. I'MABIGCorp.'s average fixed cost to produce the 7,000 can openers was a) $2.43 b) $2.25 c) $1.23 d) $1.50

a) $2.43

"If I didn't have class tonight, I would save the $4 campus parking fee and spend four hours at work where I earn $10 per hour." The opportunity cost of attending class this evening is: a) $44 b) $40 c) $0 d) $4

a) $44

Andy views beer and pizza as complements to one another. If the price of pizza decreases, economists would expect: a) Andy's demand for pizza to increase. b) Andy's quantity of pizza demanded to decrease. c) Andy's demand for pizza to decrease. d) Andy's demand for beer to increase.

a) Andy's demand for pizza to increase.

An individual who wants others to pay for public goods, but plans to use those goods for their own purposes, is often referred to as a ____________________. a) free rider b) excludable c) nonexcludable d) tax evader

a) free rider

A situation of _________________________ arises when one group receives a higher share of total income or wealth than others. a) inequality b) quintiles c) poverty d) poverty entrapment

a) inequality

Why is there scarcity? a) Because theory dictates it b) Because our unlimited wants exceed our limited resources c) Because the opportunity set determines this d) Because human wants are limited

b) Because our unlimited wants exceed our limited resources

If an increase in the price of Good X causes a decrease in the demand for Good Y, we can conclude that: a) Goods X and Y are substitute goods. b) Goods X and Y are complement goods. c) the price of Good Y will increase. d) Goods X and Y are normal goods.

b) Goods X and Y are complement goods.

_____________________ that are issued by government agencies are a form of validation that a worker has completed a certain type of education or passed a certain test. a) Service contract licenses b) Occupational licenses c) Occupational insurance licenses d) Industrial licenses

b) Occupational licenses

In the case of insurance, _______________ arises because the buyers of insurance have more information about _____________________than the insurance company does. a) fundamental laws; actuarial fairness b) adverse selection; the risk group they belong to c) moral hazard; their risk rating d) actuarial prices; their high-risk or low-risk status

b) adverse selection; the risk group they belong to

A positive externality arises in a situation where a third party, outside the transaction, a) fails to allocate resources efficiently. b) benefits from a market transaction by others. c) suffers from a market transaction by others. d) pays a pollution tax to balance social costs.

b) benefits from a market transaction by others.

Specialization: a) leads to greater self-sufficiency. b) can lead to an increase in overall production. c) is always the result of an inefficient use of resources d) allows workers to develop skills by working on a large number of tasks

b) can lead to an increase in overall production.

When __________________, a firm will supply a higher quantity at any given price for its output, and the supply curve will shift to the right. a) equilibrium is achieved b) costs of production fall c) prices rise d) there is a population increase

b) costs of production fall

It is said that in a perfectly competitive market, raising the price of a firm's product from the prevailing market price of $179.00 to $199.00, ________________________. a) will cause the firm to recover some of its opportunity costs b) could likely result in a notable loss of sales to competitors c) is a sure sign the firm is raising the given price in the market

b) could likely result in a notable loss of sales to competitors

One strategy insurance companies have adopted to reduce moral hazard is to require an injured party to pay a _______________ . a) contribution b) deductible c) actuarial fairness d) premium

b) deductible

If you are highly asthmatic, then having high levels of industrial air pollutants waft over your house every day a) is positively a voluntary exchange. b) would be a negative externality. c) is a voluntary exchange. d) would be an external voluntary exchange.

b) would be a negative externality

__________ is something valuable that a lender would have a right to________________ if the loan is not repaid. a) A guarantee; sell b) A guarantee; seize and retain c) Collateral; seize and sell d) Collateral; sue for

c) Collateral; seize and sell

After widespread press reports about the dangers of contracting "mad cow disease" by consuming beef from Canada, the likely economic effect on the U.S. demand curve for beef from Canada is: a) a shift of the demand curve for beef to the right. b) a movement down along the demand curve for beef to the right. c) a shift of the demand curve for beef to the left. d) no change; only the supply curve for beef is likely to be affected.

c) a shift of the demand curve for beef to the left.

Any given demand or supply curve is based on the ceteris paribus assumption that ______. a) no one knows which variables will change and which will remain constant b) what is true for the individual is not necessarily true for the whole c) all else is held equal d) everything is variable

c) all else is held equal

If the price that a firm charges is higher than its _______________ cost of production for that quantity produced, then the firm will earn profits. a) fixed b) variable c) average d) marginal

c) average

The _____________________ curve will always lie below the curve for average cost because average cost includes _____________ in the numerator of the calculation. a) marginal cost; fixed costs b) marginal cost; total costs c) average variable cost; fixed costs d) average variable cost; total costs

c) average variable cost; fixed costs

The model that economists use for illustrating the process of individual choice in a situation of scarcity is the _________________, sometimes also called the opportunity set, a diagram which shows what choices are possible. a) income cap b) original budget c) budget constraint d) consumption set

c) budget constraint

In a market-oriented economy, the amount of a good that is produced is primarily decided by the interaction of: a) all consumers. b) producers and government planning committees. c) buyers and sellers. d) producers and input suppliers.

c) buyers and sellers

An insurance policyholder must pay a _______________ for each ______________ service, before insurance covers the rest. a) deductible; uninsured b) copayment; insured c) copayment; uninsured d) deductible premium; insured

c) copayment; insured

An inferior good is a product: a) for which there is no demand b) that has an upward sloping demand curve c) for which demand decreases as income increases d) for which demand increases as income increases

c) for which demand decreases as income increases

When quantity demanded decreases in response to a change in price: a) there is a movement down along the demand curve. b) the demand curve shifts to the right. c) there is a movement up along the demand curve. d) the demand curve shifts to the left.

c) there is a movement up along the demand curve.

______________ include all of the costs of production that increase with the quantity produced. a) Average costs b) Fixed costs c) Variable costs d) Average variable costs

c) variable costs

A perfectly competitive industry is a) not even close to possible b) a realistic assumption c) very rare d) very common

c) very rare

If accounting profits for a firm are 20% of output, and the opportunity cost of financial capital is 8% of output, then what do the firm's economic profits equal? a) 10% of output b) 8% of output c) 6% of output d) 12% of output

d) 12% of output

An _________________ is calculated by subtracting the firm's costs from its total revenues, _______________________. a) accounting profit; including opportunity cost b) economic profit; excluding opportunity cost c) opportunity cost; including economic profit d) accounting profit; excluding opportunity cost

d) accounting profit; excluding opportunity cost

The marginal revenue curve for a monopolist _________ the market demand curve. a) always rises above b) always runs parallel c) always is the same d) always lies beneath

d) always lies beneath

___________ requires an insurance policyholder to pay a percentage of a loss, and the insurance company pays the remaining cost. a) An insurance policy b) Insurance c) Government regulation d) Coinsurance

d) coinsurance

All but one of the following is a mechanism intended to provide reassurance against imperfect information. Which is it? a) collateral b) cosigner c) reputation d) financial capital markets

d) financial capital markets

The general pattern that consumption of the first few units of any good tends to bring a higher level of _______ to a person than consumption of later units is a common pattern. a) sunk cost b) marginal cost c) marginal benefit d) utility

d) utility

In countries like _____________ the command economy predominates. a) South Africa and Kenya b) Cuba and North Korea c) Germany and France d) China and Vietnam

a) Cuba and North Korea

When the quantity of environmental protection is low so that pollution is extensive, then there are usually__________________to reduce pollution and the __________________. a) a lot of cheap and easy ways; marginal benefits of doing so are quite high b) a few inexpensive and easy ways; average benefit is slightly higher c) a lot of expensive and innovative methods; marginal benefits are quite high d) only a few expensive and innovative methods; average benefits are higher

a) a lot of cheap and easy ways; marginal benefits of doing so are quite high

The problem of _________________ arises when an antique dealer knows more about the quality of an item than the potential buyer, and as a result the buyer with less knowledge must worry about ending up at a ________________. a) adverse selection; disadvantage b) adverse information; lemon c) imperfect selection; lemon d) imperfect information; disadvantage

a) adverse selection; disadvantage

Some economists argue that if privately owned firms were required to pay the social costs of their pollution, the result would be: a) all of the answers b) the price of goods will rise c) each would create less pollution d) each would lower production to decrease pollution levels

a) all of the answers

A public good is a good that is _____________________, and thus is difficult for market producers to sell to individual consumers. a) nonexcludable and nonrivalrous b) excludable and rivalrous c) excludable or rivalrous d) unexcludable or unrivaled

a) nonexcludable and nonrivalrous

When reference is made to the _________________________ , it means the specific amount of income needed for a basic standard of living. a) poverty line b) income line c) poverty trap d) income gap

a) poverty line

In circumstances dealing with poverty, the term _________________________ means taking income from those with higher incomes and providing income to those with lower incomes. a) redistribution b) minimum wage c) estate tax d) safety net

a) redistribution

There is a skating rink in your city that is open to anybody to use at any time. They even provide skates for people who don't own any. This is an example of a good that is a) rivalrous and nonexcludable b) rivalrous and excludable c) nonrivalrous and excludable d) nonrivalrous and nonexcludable

a) rivalrous and nonexcludable

______________________ include both the private costs incurred by firms and also costs incurred by third parties outside the production process. a) Social costs b) Market costs c) Private costs d) External costs

a) social costs

The ________________ arises when a price changes because consumers have an incentive to consume less of the good with a relatively higher price and more of the good with a relatively lower price. a) substitution effect b) preferences effect c) backward-bending supply curve d) income effect

a) substitution effect

A decrease in consumer preference for a product, other things being equal, will cause: a) market demand to shift to the right b) market demand to shift to the left c) a decrease in supply d) quantity demanded is not a price function

b) market demand to shift to the left

In a _______________________, most economic decisions about what to produce, how to produce it, and for whom to produce it are made by buyers and sellers. a) microeconomy b) market-oriented economy c) command economy d) macroeconomy

b) market-oriented economy

A ____________________ is a promise that the buyer's money will be refunded under certain conditions. a) insurance policy b) money-back guarantee c) warranty d) service contract

b) money-back guarantee

The demand curve for a typical good has a: a) negative slope because the good has less "snob appeal" as its price falls. b) negative slope because some consumers switch to other goods as the price rises. c) negative slope because consumer incomes fall as the price of the good rises. d) inverse slope because as the price goes up, the good has more profitability.

b) negative slope because some consumers switch to other goods as the price rises.

In order for a good to be classified as _____________________, when one person uses the good, others are also able to use it. a) unexcludable b) nonrivalrous c) unrivalrous d) nonexcludable

b) nonrivalrous

Following the assumption that firms maximize profits, how will the price and output policy of an unregulated monopolist compare with ideal market efficiency? a) output will be too small and its price too low. b) output will be too small and its price too high. c) output will be too large and its price too low. d) output will be too large and its price too high.

b) output will be too small and its price too high.

The term _______________ refers to a firm operating in a perfectly competitive market that must take the prevailing market price for its product. a) business entity b) price taker c) price setter d) trend setter

b) price taker

When a firm invests in new technology, the _____________________ that the firm receives are _____________________. a) social benefits; only a portion of the overall private benefits b) private benefits; only a portion of the overall social benefits c) social benefits; about one-third of the overall private benefits d) private benefits; about three-quarters of the economic benefits

b) private benefits; only a portion of the overall social benefits

A demand curve shows the relationship between price and ______________ on a graph. a) costs b) quantity demanded c) quantity produced d) economies of scale

b) quantity demanded

When economists talk about supply, they are referring to a relationship between price received for each unit sold and the ________________. a) market price b) quantity supplied c) demand schedule d) demand curve

b) quantity supplied

When the level of insurance premiums that someone pays is equal to the amount that an average person in that risk group would collect in insurance payments, the level of insurance a) complies with fundamental law b) reaches actuarial fairness c) will be adverse to profits d) will be actuarially sound

b) reaches actuarial fairness

Why would a bank require a borrower to have collateral or a cosigner before agreeing to lend funds? a) discourages some borrowers from asking for a loan b) reduces risk associated with imperfect information c) both act like a service contract in the goods market d) complicates the process to discourage risking borrowers

b) reduces risk associated with imperfect information

The group of government programs that provide assistance to the poor and the near-poor is synonymous with which of the following? a) antipoverty net b) safety net c) safety quintiles d) poverty net

b) safety net

Nearly all supply curves share a basic similarity: they slope ________________. a) down from left to right b) up from left to right c) up from right to left d) down from right to left

b) up from left to right

A ______________ is a promise to fix or replace the good, at least for a certain period of time. a) money-back guarantee b) warranty c) insurance policy d) service contract

b) warranty

The term ___________________ is used to describe the common pattern whereby each marginal unit of a consumed good provides less of an addition to utility than the previous unit. a) marginal income utility b) marginal utility pattern c) diminishing marginal utility d) decreasing marginal utility

c) diminishing marginal utility

In the first chapter of The Wealth of Nations, Smith introduces the idea of the __________, which means the way in which the work required to produce a good or service is divided into a number of tasks that are performed by different workers. a) modern economy b) interconnected economy c) division of labor d) task economy

c) division of labor

Market failure describes a situation in which the market itself ______________________ in a way that balances social costs and benefits. a) remains outside the transaction b) avoids externalities c) fails to allocate resources efficiently d) incurs the costs outside the production process

c) fails to allocate resources efficiently

An insurance company is likely to believe that having a major accident is a signal of being a _____________, and thus try to _________________. a) moral hazard; deny this driver further coverage b) medium-risk driver; reduce the amount of this driver's coverage c) high-risk driver; raise this driver's insurance premiums d) high-risk driver; compel the driver to take defensive driving courses

c) high-risk driver; raise this driver's insurance premiums

A Lorenz curve refers to a graphic illustration of the share of population on the _________________________ and the cumulative percentage of total income received on the _________________________. a) vertical axis; horizontal axis b) right quintile; left quintile c) horizontal axis; vertical axis d) left quintile; right quintile

c) horizontal axis; vertical axis

When it is costly or impossible to exclude someone who hasn't paid to use a particular good from using it, then that good is classified as being a) public good b) free rider c) nonexcludable

c) non excludable

Payments made to an insurance company in return for a policy of insurance are called _________________ . a) risk expenditures b) risk expenses c) premiums d) deductibles

c) premiums

A firm that holds a monopoly position in the market place is a) a price taker b) monopolistically competitive c) a price maker

c) price maker

For a positive externality, _____________________ than the social benefits. a) private benefits of an action are less b) social benefits of an action are more c) private benefits of an action are more d) social costs of an action are less

c) private benefits of an action are less

As depicted in _________________________________, it is necessary to give up some of one good to gain more of the other good. a) utility b) scarcity c) the production possibilities frontier d) allocative efficiency

c) the production possibilities frontier

If a society decides to reduce the level of economic inequality, which of the following sets of tools can it use? a) trying to assure that a ladder of opportunity is widely available b) a tax imposed on the value of inheritances c) the three mains sets of tools it can use include all of the other options d) redistribution from those with high incomes to those with low incomes

c) the three mains sets of tools it can use include all of the other options

If incomes rise for both low-income and high-income workers, but rise less for the high- income workers a) then poverty will rise and inequality will fall b) then poverty will rise and inequality will rise c) then poverty will fall and inequality will fall d) then poverty will fall and inequality will rise

c) then poverty will fall and inequality will fall

If a rise in incomes is the same proportion for both low-income and high-income workers, a) then poverty will rise and inequality will rise b) then poverty will rise and inequality will remain unchanged c) then poverty will fall and inequality will remain unchanged d) then poverty will fall and inequality will fall

c) then poverty will fall and inequality will remain unchanged

If the income level falls for low-income workers, but remains unchanged for high-income workers, a) then poverty will rise and inequality will fall b) then poverty will fall and inequality will rise c) then poverty will rise and inequality will rise d) then poverty will fall and inequality will fall

c) then poverty will rise and inequality will rise

Which of the following would be classified as a positive externality? a) removing government education subsidies for public schools b) a surcharge for ambulance service is shifted to property taxes c) reselling outdated textbooks to under-funded public schools d) converting a derelict empty lot to a public vegetable garden

d) converting a derelict empty lot to a public vegetable garden

____________________________ occur when the marginal gain in output diminishes as each additional unit of input is added. a) Diminishing marginal costs b) Diminishing average returns c) Diminishing variable returns d) Diminishing marginal returns

d) diminishing marginal returns

_________________________ is the level where half of all families had more than that level and half had less. a) quintile b) third quintile c) first quintile d) median

d) median

When people have insurance against a certain event, the notion that those people are less likely to guard against that event occurring is called a _____________________ . a) moral risk b) risk c) hazard risk d) moral hazard

d) moral hazard

______________________ describes a situation where a third party, outside the transaction, suffers from a market transaction by others. a) A spillover b) A market failure c) Positive externality d) Negative externality

d) negative externality

When Morty leased his new car, he was required by law to _________ to ______________ of financial loss caused by a vehicle collision. a) receive a free service contract; eliminate any chance b) pledge collateral; reduce the chance c) pay extra for a warranty; eliminate the risk d) purchase insurance; reduce the risk

d) purchase insurance; reduce the risk

Gomer decides to spend an hour playing basketball rather than studying. His opportunity cost is: a) nothing, because he enjoys playing basketball more than studying. b) nothing, because he had a free pass into the sports complex to play basketball. c) the increase in skill he obtains from playing basketball for that hour. d) the benefit to his grades from studying for an hour

d) the benefit to his grades from studying for an hour

According to the law of supply: a) there is an inverse relationship between price and quantity demanded. b) there is a direct relationship between price and the quantity supplied. c) there is a direct relationship between price and quantity demanded. d) there is an inverse relationship between price and the quantity supplied.

d) there is an inverse relationship between price and the quantity supplied.

Whatever the firm's quantity of production, _____________ must exceed total costs if it is to earn a profit. a) variable costs b) average costs c) marginal costs d) total revenue

d) total revenue

___________ include all spending on labor, machinery, tools, and supplies purchased from other firms. a) Total costs b) Total profit margins c) Total revenues d) Total profits

a) Total costs

In economics, a firm that faces no competitors is referred to as a) a monopoly b) an oligopoly c) an oligopolizor d) a perfect competitor

a) a monopoly

Which one of the following is the most accurate description of a monopolist? a) a sole producer of a product for which good substitutes are lacking in a market with high barriers to entry b) a large, multinational firm that produces a single product in a narrow product class c) a firm that is very large relative to all its competitors within a narrow product class d) a sole producer of a narrowly defined product class, such as brown, Grade A eggs produced in Eagle County, Colorado

a) a sole producer of a product for which good substitutes are lacking in a market with high barriers to entry

Which of the following results in a rightward shift of the market demand curve for labor? a) an increase in demand for the firm's product b) a decrease in the firm's product price c) a decrease in labor productivity d) an increase in the wage rate

a) an increase in demand for the firm's product

In order to determine ____________, the firm's total costs must be divided by the quantity of its output. a) average cost b) variable costs c) diminishing marginal returns d) fixed costs

a) average cost

The slope of the _________________ is determined by the relative price of the two goods, which is calculated by taking the price of one good and dividing it by the price of the other good. a) budget constraint b) opportunity set c) utility level d) personal preference

a) budget constraint

The term __________________ describes a situation where the quantity of output rises, but the average cost of production falls. a) economies of scale b) diminishing marginal returns c) diseconomies of scale d) marginal cost output

a) economies of scale

When __________________ exist, doubling of all inputs will result in more than doubling output, which means ______________________. a) economies of scale; a larger factory can produce at a lower average cost than a smaller company. b) economies of scale; a smaller factory can produce at a lower average cost than a larger company. c) low labor inputs; larger scale of production leads to higher costs. d) labor inputs; economies-of-scale curve is U-shaped.

a) economies of scale; a larger factory can produce at a lower average cost than a smaller company.

A firm's ___________ consist of expenditures that must be made before production starts that typically, over the short run, _______________ regardless of the level of production. a) fixed costs; do not change b) variable costs; are constantly changing c) fixed costs; are consistently changing d) variable costs; do not change

a) fixed costs; do not change

The economies-of-scale curve is a long-run average cost curve, because a) it allows all factors of production to change. b) only marginal costs are allowed to change. c) fixed costs cannot be changed. d) only variable costs are allowed to change.

a) it allows all factors of production to change.

The term _________________ refers to the additional utility provided by one additional unit of consumption. a) marginal utility b) added utility c) utility d) Giffen utility

a) marginal utility

________________________ arises where many firms are competing in a market to sell similar but differentiated products. a) Monopolistic competition b) Oligopolistic competition c) Perfect competition

a) monopolistic competition

Marcella operates a small, but very successful art gallery. All but one of the following can be classified as a variable cost arising from the physical inputs Marcella requires to operate her business. Which is it? a) physical space for the gallery b) accountant's fees for preparing tax returns c) costs of purchasing art work to sell in the gallery d) wages paid to three part-time employees

a) physical space for a gallery

If the quality differences of similar products are mostly imperceptible to the average consumer's eyes, which of the following will most likely play a major role in influencing the decisions of purchasers? a) price of competing products b) geographic origin of products c) purchaser's opportunity cost d) size of competing products

a) price of competing products

The lesson of __________ is to forget about the money that's irretrievably gone and instead to focus on the marginal costs and benefits of future options. a) sunk costs b) marginal analysis c) budget constraints d) marginal utility

a) sunk costs

Which of the following is considered to be a tell-tale signal that the point with the highest total utility has been found? a) the marginal utility per dollar is the same for both goods b) the marginal utility per dollar is controlled by trade-offs c) the demand curves are flatter reducing quantity d) the quantities demanded change so total utility rises

a) the marginal utility per dollar is the same for both goods

_____________ is calculated by taking the quantity of everything that is sold and multiplying it by the sale price. a) Total revenue b) Average profit margin c) Total cost d) Total profits

a) total revenue

The marginal cost curve is generally ______________, because diminishing marginal returns implies that additional units are ________________________. a) upward-sloping; more costly to produce b) downward-sloping; more costly to produce c) upward-sloping; less costly to produce d) downward-sloping; less costly to produce

a) upward-sloping; more costly to produce

If a paper mill shuts down its operations for three months so that it produces nothing, its __________________ will be reduced to zero? a) variable costs b) opportunity costs c) fixed costs d) total cost

a) variable costs

In a free market economy, firms operating in a perfectly competitive industry are said to have only one major choice to make. Which of the following correctly sets out that choice? a) what quantity to produce b) what quality to produce c) what price to charge d) what quantity of labor is needed

a) what quantity to produce

In economics, the demand for a good refers to the amount of the good that people: a) will buy at various prices b) will buy at alternative income levels c) would like to have if the good were free d) need to achieve a minimum standard of living

a) will buy at various prices

The slope of the demand curve for a monopoly firm is a) upward sloping b) downward sloping c) vertical, parallel to the y-axis d) horizontal, parallel to the x-axis

b) downward sloping

The _________ is the only price where quantity demanded is equal to quantity supplied. a) horizontal axis intercept b) equilibrium price c) vertical axis intercept d) market price

b) equilibrium price

In a command economy, the __________ either makes most economic decisions itself or at least strongly influences how the decisions are made. a) firm b) government c) market d) business sector

b) government

Why are some producers forced to sell their products at the prevailing market price? a) price takers find market analysis is too costly b) high degree of similarity to competitor's products and small part of market c) they can increase output without affecting quality

b) high degree of similarity to competitor's products and small part of market

Why would a typical U.S. business fail to take the social costs of pollution into consideration during the development of their operating strategies? a) it is following the principle of voluntary exchange of benefits b) it isn't required to pay any of the cost of cleaning up its pollution c) government regulated the limits for how much pollutant can be emitted d) the range of flexible, market-oriented pollution control policies are flawed

b) it isn't required to pay any of the cost of cleaning up its pollution

Most real-world choices aren't about getting all of one thing or another, instead, most choices involve _________________, which involves comparing the benefits and costs of choosing a little more or a little less of a good. a) utility b) marginal analysis c) opportunity costs d) benefit analysis

b) marginal analysis

The term _____________ is used to describe the additional cost of producing one more unit. a) average cost b) marginal cost c) fixed costs d) variable cost

b) marginal cost

In order to calculate marginal cost, the change in ______________ is divided by the amount of change in quantity. a) either total cost or variable cost b) decreasing marginal returns c) either total cost or average cost d) increasing marginal returns

c) either total cost or variable cost

The term "constant returns to scale" describes a situation where a) a larger-scale firm can produce at a lower cost than a smaller-scale firm. b) the quantity of output rises and the average cost of production falls. c) expanding all inputs changes the average cost of production. d) expanding all inputs does not change the average cost of production.

c) expanding all inputs does not change the average cost of production.

Economic profit can be derived from calculating total revenues minus all of the firm's costs, a) including its marginal revenue. b) excluding its opportunity costs. c) including its opportunity costs. d) excluding its marginal revenue.

c) including its opportunity costs

Scarcity implies that: a) at the current market price, consumers are willing to purchase more of a good than suppliers are willing to produce b) consumers would be willing to purchase the same quantity of a good at a higher price. c) it is impossible to completely fulfill the unlimited human desire for goods and services with the limited resources available. d)consumers are too poor to afford the goods and services available

c) it is impossible to completely fulfill the unlimited human desire for goods and services with the limited resources available.

Kate's 24-Hour Breakfast Diner menu offers one item, a $5.00 breakfast special. Kate's costs for servers, cooks, electricity, food, etc. average out to $3.95 per meal. Her costs for rent, insurance cleaning supplies and business license average out to $1.25 per meal. Since the market is highly competitive, Kate should a) keep the business open in the short-run, and plan to expand the business in the long-run. b) raise her prices above the perfectly competitive level set by the market. c) keep the business open in the short-run, but plan to go out of business in the long-run. d) lay-off her staff, break her lease, and close the business down immediately.

c) keep the business open in the short-run, but plan to go out of business in the long-run.

In the ____________, households work and receive payment from firms. a) financial investment market b) financial capital market c) labor market d) savings market

c) labor market

In the ______________, the perfectly competitive firm will react to losses by ______________________. a) short run; exit market b) long run; increase capital inputs c) long run; exit market d) short run; increase production

c) long run; exit market

Deregulation occurs when a government eliminates or scales back rules relating to all but one of the following. Which one is it? a) prices that can be charged b) quantities that can be produced c) natural monopoly d) conditions of entry in a certain industry

c) natural monopoly

Government _____________ regulations specify that inventors will maintain exclusive legal rights to their respective inventions for _______________. a) copyright; a limited time b) trademark; an unlimited time c) patent; a limited time d) trade secret; an unlimited time

c) patent; a limited time

Firms operating in a market situation that creates ______________________, sell their product in a market with other firms who produce identical or extremely similar products. a) perfect monopoly b) an oligopoly c) perfect competition d) a free-market

c) perfect competition

The use of sharp, temporary price cuts as a form of ________ would enable traditional US automakers to discourage new competition from smaller electric car manufacturers. a) natural monopoly b) monopolistic competition c). predatory pricing d) oligopolistic competition

c) predatory pricing

The downward slope of the demand curve again illustrates the pattern that as _____________ rises, ______________ decreases. a) price, quantity supplied b) quantity demanded, price c) price, quantity demanded d) quantity supplied, quantity demanded

c) price, quantity demanded

Why would labor be treated as a variable cost? a) they are costs incurred in the act of producing that will decrease with quantity produced b) labor costs are an input cost that firms are unable to change in the short run c) producing larger quantities of a good or service generally requires more workers d) they are made before production starts and vary according to the specific line of business

c) producing larger quantities of a good or service generally requires more workers

_____________ refers to the total number of units that are purchased at that price. a) quantity b) supply c) quantity demanded d) market quantity

c) quantity demanded

If a graph is used to compare total revenue and total cost of a perfectly competitive firm, then the horizontal axis of the graph will represent the __________ and the vertical axis will represent ________________________________. a) total costs measured in dollars; quantity of goods produced b) quantity produced; both total revenue and total costs, measured in dollars. c) quantity produced; total revenue and total variable costs, measured in dollars. d) price, measured in dollars; quantity of goods produced

c) quantity produced; both total revenue and total costs, measured in dollars.

A supply curve is a graphical illustration of the relationship between price, shown on the vertical axis, and _________________, shown on the horizontal axis a) ceteris paribus b) demand c) quantity supplied d) demand shift

c) quantity supplied

In the event that Only1Corp. obtains control of all the natural gas producers in the US, it would most likely a) acquire rights for its investors to produce and sell their products b) have a patent giving it exclusive legal rights to make, use, and sell for a limited time. c) raise prices, cut production, and realize positive economic profits. d) have legal protection to prevent copying its methods of production for commercial use.

c) raise prices, cut production, and realize positive economic profits.

Fixed costs are important because, at least in the ___________, the firm _______________. a) long run; can alter them b) long run; cannot alter them c) short run; cannot alter them d) short run; can alter them

c) short run; cannot alter them

In the ________________, if profits are not possible, the perfectly competitive firm will seek out the quantity of output where __________________________. a) short run; fixed costs can be reduced b) long run; increasing production c) short run; losses are smallest d long run; fixed costs can be eliminated

c) short run; losses are smallest

If a firm's revenues do not cover its average variable costs, then that firm has reached its ________________. a) opportunity margin b) marginal point c) shutdown point d) price taking point

c) shutdown point

Which of the following occurs simultaneously with an income effect? a) Giffen good effect b) backward-bending supply curve c) substitution effect d) preferences effect

c) substitution effect

Which of the following should typically be ignored because spending has already been made and cannot be changed? a) marginal costs b) average marginal costs c) sunk costs d) variable costs

c) sunk costs

Which of the following is generally accepted as a valid criticism of the production of useful goods and services? a) economic freedom b) the black market c) government involvement d) environmental pollution

d) environmental pollution

If the price is below the equilibrium level, then the quantity demanded will exceed the quantity supplied. This is known as ________________. a) a price ceiling b) excess supply c) ceteris paribus d) excess demand

d) excess demand

If a competitive firm experiences a shift in costs of production that decreases marginal costs at all levels of output, a) producing less at any market price will off-set marginal cost. b) the firm's marginal cost curve will shift to the left. c) the firm's demand curve will also shift to the left. d) expanding output levels at any given price will be profitable.

d) expanding output levels at any given price will be profitable.

The term _____________ describes a situation where a ________________ causes a reduction in the buying power of income, even though actual income has not changed. a) intertemporal budget; lower price b) intertemporal budget; higher price c) substitution effect; lower price d) income effect; higher price

d) income effect; higher price

Which of the following is most likely to be a monopoly? a) local bathroom fixtures shop b) local television broadcaster c) local fast-food restaurant d) local electricity distributor

d) local electricity distributor

____________ refers to the additional revenue gained from selling one more unit. a) Total revenue b) Accounting profit c) Economic profit d) Marginal revenue

d) marginal revenue

As a person receives more of a good, the _______________ from each additional unit of the good declines. a) budget constraint b) utility c) sunk costs d) marginal utility

d) marginal utility

The basic difference between macroeconomics and microeconomics is: a) microeconomics concentrates on individual markets while macroeconomics focuses primarily on international trade. b) microeconomics concentrates on the behaviour of individual consumers while macroeconomics focuses on the behaviour of firms. c) microeconomics explores the causes of inflation while macroeconomics focuses on the causes of unemployment. d) microeconomics concentrates on the behaviour of individual consumers and firms while macroeconomics focuses on the performance of the entire economy.

d) microeconomics concentrates on the behaviour of individual consumers and firms while macroeconomics focuses on the performance of the entire economy.

Philosophers draw a distinction between positive statements, which describe the world as it is, and ___________________s, which describe how the world should be. a) opportunity cost b) trade-off c) budget constraint d) normative statement

d) normative statement

A monopolist is able to maximize its profits by a) setting the price at the level that will maximize its per-unit profit. b) producing maximum output where price is equal to its marginal cost. c) setting output at MR = MC and setting price at the demand curve's highest point. d) producing output where MR = MC and charging a price along the demand curve.

d) producing output where MR = MC and charging a price along the demand curve.