econ final
A characteristic of a purely competitive labor market would be: A. many firms competing in hiring workers. B. firms hiring different types of labor. C. wage-maker behavior by the firms. D. price-maker behavior by the firms.
A
A firm sells a product in a purely competitive market. The marginal cost of the product at the current output of 1000 units is $2.50. The minimum possible average variable cost is $2.00. The market price of the product is $2.50. To maximize profit or minimize losses, the firm should: A. continue producing 1000 units. B. produce less than 1000 units. C. produce more than 1000 units. D. shut down.
A
A major prediction of the kinked-demand curve model is: A. price stability in oligopolies. B. price instability in oligopolies. C. stability of production costs in oligopolies. D. stable purchasing behavior by consumers over time.
A
A progressive tax is such that: A. tax rates are higher the greater one's income. B. the same tax rate applies to all income receivers, so that the rich pay absolutely more taxes than the poor. C. entrepreneurial income is exempt from taxation. D. the revenues it yields are spent on transfer payments.
A
About what percentage of the population in the United States lived in poverty in 2009? A. 14 percent B. 24 percent C. 34 percent D. 44 percent
A
Assume the owners of the only gambling casino in Wisconsin spend large sums of money lobbying state government officials to protect their gambling monopoly. Economists refer to these expenditures as: A. rent-seeking. B. socially optimal pricing. C. perfect price discrimination. D. diseconomies of scale in production.
A
Earnings from wealth: A. contribute to income inequality. B. are the major source of family income. C. are becoming more equal in the society. D. are primarily the result of advanced education.
A
If the demand curve facing a firm is perfectly elastic, then: A. its marginal revenue will equal price. B. its marginal revenue schedule will decrease at an increasing rate. C. its marginal revenue schedule decreases twice as fast as the demand curve. D. it can increase its total revenue by lowering the price of its product.
A
If the exchange rate between the U.S. dollar and the Japanese yen is $1 = 200 yen, then the dollar price of the yen is: A. $.005. B. $.05. C. $.50. D. $5.
A
If you must pay $5000 in taxes on a $25,000 taxable income and $7000 on a $30,000 taxable income, then the marginal tax rate on the additional $5000 of income is: A. 40 percent and the average tax rate is about 23 percent at the $30,000 income level. B. 50 percent and the average tax rate is about 40 percent at the $30,000 income level. C. 40 percent and the average tax rate is about 25 percent at the $25,000 income level. D. 30 percent, but average tax rates cannot be determined from the information given.
A
In 2009, an unattached individual would be defined as living in poverty if his or her income was less than: A. $10,956. B. $11,243. C. $14,654. D. $15,726.
A
In the long run, the representative firm in monopolistic competition tends to have: A. excess capacity. B. economic profits. C. limited product differentiation. D. a perfectly elastic demand curve.
A
In the short run, a monopolist's profits: A. may be positive, negative, or zero. B. are positive because of the monopolist's market power. C. are positive if the monopolist's elasticity of demand is less than 1. D. are positive if the monopolist's selling price is above average variable cost.
A
Monopolistic competition is characterized by firms: A. producing differentiated products. B. making economic profits in the long run. C. producing at optimal productive efficiency. D. producing where price equals marginal cost.
A
Other things equal, in which of the following cases would economic profit be the greatest? A. An unregulated monopolist who is able to engage in price discrimination B. An unregulated, nondiscriminating monopolist C. A regulated monopolist charging a price equal to average total cost D. A regulated monopolist charging a price equal to marginal cost
A
Productive efficiency refers to: A. cost minimization, where P = minimum ATC. B. production, where P = MC. C. maximizing profits by producing where MR = MC. D. setting TR = TC.
A
Since 1970, the distribution of personal income in the United States has: A. moved toward greater inequality. B. moved toward greater equality. C. remained about the same. D. fluctuated considerably.
A
Successful price discrimination requires that: A. buyers with inelastic demand be charged higher prices than buyers with elastic demand. B. buyers with inelastic demand be charged lower prices than buyers with elastic demand. C. all buyers be charged the same price regardless of their elasticity of demand. D. all buyers have the same price elasticity of demand.
A
Suppose capital is readily substitutable for labor and that the price of capital falls. We can conclude that the: A. substitution effect will tend to reduce the demand for labor. B. output effect will tend to reduce the demand for labor. C. demand for labor will necessarily decline. D. demand for labor will necessarily increase.
A
Suppose that Teresa Thomas obtains 12 units of utility from the last dollar of income she receives, while Richard Voote obtains 7 units of utility from the last dollar of his income. Both have identical marginal-utility-of-income-curves. Those who: A. favor an equal distribution of income would advocate redistributing income from Richard to Teresa. B. favor an equal distribution of income would advocate redistributing income from Teresa to Richard. C. favor an equal distribution of income would be content with the distribution of income between Teresa and Richard. D. do not favor an equal distribution of income would argue that any redistribution between Teresa and Richard would increase total utility.
A
T-Shirt Enterprises is selling in a purely competitive market. Its output is 300 units, which sell for $1 each. At this level of output, marginal cost is $1 and average variable cost is $1.50. The firm should: A. produce zero units of output. B. decrease output to 250 units. C. continue to produce 300 units. D. increase output to 350 units.
A
Taxes and transfer payments: A. reduce the degree of income inequality. B. increase the degree of income inequality. C. have no effect upon the location of the Lorenz curve. D. make the Lorenz curve a straight 45-degree line.
A
The demand curve faced by a monopolistically competitive firm: A. is more elastic than the monopolist's demand curve. B. is less elastic than the monopolist's demand curve. C. will shift outward as new firms enter the industry. D. is more elastic than the demand curve faced by the purely competitive firm.
A
The largest source of tax revenue for the U.S. federal government is: A. personal income taxes. B. property taxes. C. corporate income taxes. D. sales and excise taxes.
A
The long-run supply curve would be upsloping in: A. an increasing-cost industry. B. a decreasing-cost industry. C. a constant-cost industry. D. a variable-cost industry.
A
The marginal revenue product of labor in a competitive market decreases as a firm increases the quantity of labor used because of the: A. law of diminishing returns. B. law of diminishing marginal utility. C. homogeneity of the product. D. free mobility of resources.
A
The more inelastic the demand for a resource, the: A. less elastic its marginal revenue product curve. B. more elastic its marginal revenue product curve. C. greater the potential for resource substitution. D. greater the productivity of the resource.
A
The nondiscriminating pure monopolist's demand curve: A. is the industry demand curve. B. shows a direct or positive relationship between price and quantity demanded. C. tends to be inelastic at high prices and elastic at low prices. D. is identical to its marginal revenue curve.
A
The sales tax is a regressive tax because the: A. percentage of income paid as taxes falls as income rises. B. administrative costs associated with the collection of the tax are relatively high. C. percentage of income paid as taxes is constant as income rises. D. tax tends to reduce the total volume of consumption expenditures.
A
What will the elasticity of resource demand be if unit wages rise by 8 percent and the number of employed workers falls by 5 percent? A. 0.63 B. 1.60 C. 2.90 D. 4.00
A
Which is true of normal profits? A. They are necessary to keep a firm in the industry in the long run. B. They are zero under pure competition in the long run. C. They are excluded from a firm's costs of production. D. They are greater than the opportunity cost to the firm.
A
Which of the following statements is most consistent with the benefits-received principle of taxation? A. A childless couple should not be required to pay taxes for the support of public schools. B. Prosperous corporations should pay substantial taxes even if they use few government goods and services. C. The best tax is the income tax. D. People with high incomes should pay more taxes than people with low incomes.
A
Which of the following taxes is most likely to be shifted? A. General sales taxes B. Flat-rate state income taxes C. Progressive federal income taxes D. Property taxes on an owner-occupied residence
A
Which would decrease a firm's demand for a particular resource? A. A decrease in the productivity of the resource B. A decrease in the price of the particular resource C. An increase in the demand for the firm's product D. An increase in the price of the product the resource produces
A
A monopolistically competitive firm is producing at an output level in the short run where average total cost is $4.50, price is $4.00, marginal revenue is $2.50, and marginal cost is $2.50. This firm is operating: A. with a profit in the short run. B. with a loss in the short run. C. at the break-even level of output in the short run. D. at an efficient level of output in the short run.
B
A single buyer is called a(n): A. monopolist. B. monopsonist. C. oligopolist. D. labor union.
B
As the area between the Lorenz curve and diagonal gets larger, the Gini ratio: A. rises to reflect greater equality. B. rises to reflect greater inequality. C. falls to reflect greater inequality. D. falls to reflect greater equality.
B
Assume that in a monopolistically competitive industry, firms are earning economic profit. This situation will: A. reduce the excess capacity in the industry as firms expand production. B. attract other firms to enter the industry since the barriers to entry are low. C. cause firms to standardize their product to limit the degree of competition. D. make the industry allocatively efficient as each firm seeks to maintain its profits.
B
If the dollar price of the yen rises, then: A. the yen price of dollars also rises. B. the dollar depreciates relative to the yen. C. the yen depreciates relative to the dollar. D. the dollar will buy fewer U.S. goods.
B
One major barrier to entry under pure monopoly arises from: A. the availability of close substitutes for a product. B. ownership of essential resources. C. the price taking ability of the firm. D. diseconomies of scale.
B
Overall, the U.S. tax system (combined federal, state, and local) is: A. highly progressive. B. slightly progressive. C. slightly regressive. D. highly regressive.
B
Purely competitive firms are assumed to: A. advertise. B. be price takers. C. sell where marginal cost is minimized. D. confront demand curves that are perfectly inelastic.
B
Suppose that Jane earns $10,000 in year 1 and $100,000 in year 2, while Jim earns $100,000 in year 1 and $10,000 in year 2. Is there income equality for the two individuals? A. The annual data indicate equality, but the two-year data indicate inequality. B. The annual data indicate inequality, but the two-year data indicate equality. C. Both the annual and the two-year data indicate equality. D. Both the annual and the two-year data indicate inequality.
B
Suppose that government imposes a specific excise tax on product X of $2 per unit and that the price elasticity of demand for X is unitary (coefficient = 1). If the incidence of the tax is such that consumers pay $1.80 of the tax and the producers pay $.20, we can conclude that the: A. supply of X is highly inelastic. B. supply of X is highly elastic. C. demand for X is highly inelastic. D. demand for X is highly elastic.
B
The Gini ratio is determined by: A. adding the area between the Lorenz curve and the diagonal to the total area below the diagonal. B. dividing the area between the Lorenz curve and the diagonal by the total area below the diagonal. C. multiplying the area between the Lorenz curve and the diagonal by the total area below the diagonal. D. subtracting the area between the Lorenz curve and the diagonal from the total area below the diagonal.
B
The domestic opportunity cost of producing 100 barrels of chemicals in Germany is one ton of steel. In France, the domestic opportunity cost of producing 100 barrels of chemicals is two tons of steel. In this case: A. France has a comparative advantage in the production of chemicals. B. Germany has a comparative advantage in the production of chemicals. C. mutual gains from trade can be obtained if Germany imports chemicals from France and France imports steel from Germany. D. mutual gains from trade can be obtained if Germany exports steel to France and France exports chemicals to Germany.
B
The elasticity of demand for labor varies: A. directly with changes in the interest rate. B. directly with labor's share of the total cost of the product. C. inversely with the elasticity of demand for the final product. D. inversely with the ease of substituting labor for other productive factors.
B
The marginal cost of a productive resource is equal to the price of the resource if a firm is: A. a price taker in the output market. B. a price taker in the resource market. C. able to influence the price of the product by producing more or less of it. D. able to influence the price of the factor by buying more or less of it.
B
The necessity to maintain incentives to work and incentives to produce output would be a point made by an individual making the case for: A. income equality. B. income inequality. C. maximization of total utility. D. maximization of marginal utility.
B
The percentage of total before-tax income received by the highest 20 percent of households in 2009 was about: A. 21 percent. B. 50 percent. C. 61 percent. D. 82 percent.
B
The percentage of total before-tax income received by the lowest 20 percent of households in 2009 was about: A. 1.8 percent. B. 3.4 percent. C. 8.7 percent. D. 22.9 percent.
B
The production of agricultural products such as wheat or corn would best be described by which market model? A. Monopolistic competition B. Pure competition C. Pure monopoly D. Oligopoly
B
What do economies of scale, the ownership of essential raw materials, and patents have in common? A. They must all be present before price discrimination can be practiced. B. They are all barriers to entry. C. They all help explain why a monopolist's demand and marginal revenue curves coincide. D. They all help explain why the long-run average cost curve is U-shaped.
B
Which of the following best reflects the ability-to-pay philosophy of taxation? A. Taxes on residential property B. Progressive income taxes C. Excise taxes on gasoline D. Excise taxes on coffee
B
Which of the following taxes is least likely to be shifted? A. A state excise tax on the sellers of football tickets B. A personal income tax C. A general sales tax on retailers who sell foodstuffs and clothing D. A federal excise tax on the producers of whiskey
B
A Lorenz curve showing perfect equality in the distribution of income: A. coincides with the horizontal axis. B. coincides with the vertical axis. C. is a straight line with a 45-degree angle. D. is a curve bowed to the southwest.
C
A nondiscriminating pure monopolist is generally viewed as: A. productively efficient but allocatively inefficient. B. productively inefficient, but allocatively efficient. C. both productively and allocatively inefficient. D. both productively and allocatively efficient.
C
An increase in the demand for computers leads to an increase in demand for computer programmers. This situation arises because: A. programmers minimize the costs of production. B. the supply of programmers has decreased. C. the demand for programmers is a derived demand. D. of producer sovereignty in resource markets.
C
Appreciation of the Canadian dollar will: A. intensify an existing disequilibrium in Canada' balance of payments. B. make Canada's exports less expensive and its imports more expensive. C. make Canada's exports more expensive and its imports less expensive. D. make Canada's exports and imports both more expensive.
C
Based on 2009 data on the distribution of personal income: A. 7 percent of all households receive $100,000 and above. B. 17 percent of all households receive $100,000 and above. C. 20 percent of all households receive $100,000 and above. D. 26 percent of all households receive $100,000 and above.
C
Compared to a purely competitive firm, a monopsonist will pay: A. a higher wage rate to its workers. B. lower wages but hire more workers than the purely competitive firm. C. lower wage rates and hire fewer workers than the purely competitive firm. D. lower wages while hiring the same quantity of workers as the purely competitive firm.
C
Exclusive unionism has the economic effect of: A. strengthening the bargaining position of an industrial union. B. weakening the bargaining position of a craft union. C. decreasing the supply of labor. D. increasing the demand for labor.
C
Government borrowing: A. is the primary means of financing public expenditures. B. provides a stimulus to government spending with no opportunity cost. C. may crowd out private sector investment. D. is prohibited by the U.S. Constitution.
C
If country A has a comparative advantage in the production of good X over country B, then: A. country A should not trade with country B. B. the domestic opportunity cost of producing X in country A is higher than in country B. C. the domestic opportunity cost of producing X in country A is lower than in country B. D. the domestic opportunity cost of producing X in country A is higher or lower than in country B.
C
In pure competition, the average revenue of a firm always equals: A. marginal cost. B. average total cost. C. marginal revenue. D. total revenue.
C
In the short run, the monopolistically competitive firm will experience: A. an economic profit, and also one in the long run. B. a normal profit, but in the long run only an economic profit. C. economic profits or losses, but in the long run only a normal profit. D. economic profits or losses, but in the long run only an economic profit.
C
Laws and government actions designed to prevent monopoly and promote competition are the focus of: A. social regulation. B. industrial regulation. C. antitrust policy. D. incomes policy.
C
Mutual interdependence means that: A. product differentiation exists, that is, firms produce close substitutes but not identical products. B. each seller faces a completely inelastic demand curve. C. each firm must consider the possible reactions of rivals when establishing price policy. D. when a pure monopolist chooses a price, it also necessarily chooses some specific level of output.
C
One of the major causes of income inequality is the difference in: A. unemployment benefits. B. transportation. C. education. D. housing.
C
Pure monopolists: A. maximize MR. B. are price takers. C. sell where P > MC. D. confront demand curves that are perfectly inelastic.
C
The ability-to-pay principle of taxation: A. has been declared unconstitutional because it deprives individuals of property without due process of law. B. suggests that people should pay taxes in proportion to the benefits they derive from public goods and services. C. suggests that the tax burden should vary directly with people's income and wealth. D. suggests that the tax burden should vary inversely with people's income and wealth.
C
The average tax rate is: A. equal to the marginal tax rate if the tax is progressive. B. the total tax rate minus the marginal tax rate. C. the ratio of total taxes paid to total taxable income. D. the tax rate that applies to incremental dollars of income.
C
The burden of taxes in the United States is: A. lower than in all other countries of the world. B. higher than in all other countries of the world. C. on the low end when compared to other industrialized countries of the world. D. on the high end when compared to other industrialized countries of the world.
C
The demand curve for a monopolistically competitive firm has a: A. positive slope and the marginal revenue curve has a negative slope. B. positive slope and the marginal revenue curve has a positive slope. C. negative slope and the marginal revenue curve has a negative slope. D. negative slope and the marginal revenue curve has a positive slope.
C
The equality-efficiency trade-off would be most closely associated with which one of the following statements? A. The rich get richer and the poor get poorer. B. The only way to create income equality is to take from the rich and give to the poor. C. If cutting the income pie in more equal slices tends to shrink the pie, what amount of shrinkage will society tolerate? D. People are less concerned with the larger question of income distribution than they are with the more specific issue of income inadequacy.
C
The equations for the demand and supply curves for a particular product are P = 10 − .4 Q and P = 2 + .4 Q, where P is price and Q is quantity expressed in units of 100. After an excise tax is imposed on the product, the supply equation is P = 3 + .4 Q. Government's revenue from this tax is: A. $750. B. $1500. C. $875. D. $800.
C
The greater the degree of inequality in the size distribution of income, the more bowed will be the Lorenz curve toward the: A. upper left-hand corner. B. upper right-hand corner. C. lower right-hand corner. D. lower left-hand corner.
C
The greater the elasticity of supply of and demand for a good, the: A. smaller will be the efficiency loss of an excise tax on the good. B. more likely the good will be a public good rather than a private good. C. larger will be the efficiency loss of an excise tax on the good. D. larger will be the proportion of an excise tax on the good that will be shifted forward to consumers.
C
The incidence of a tax pertains to: A. the degree to which it alters the distribution of income. B. how easy it is to evade the tax. C. who actually bears the burden of a tax. D. the progressiveness or regressiveness of tax rates.
C
The individual firm's short-run supply curve is the part of its: A. average total cost curve that is upsloping. B. average variable cost curve that is upsloping. C. marginal cost curve lying above its average variable cost curve. D. marginal cost curve lying above its average total cost curve.
C
The largest category of federal spending is for: A. health care. B. science, space, and technology. C. pensions and income security. D. national defense.
C
The reason that unskilled construction workers typically receive higher wages than retail sales clerks is best explained by: A. discrimination. B. geographic immobilities. C. compensating differences. D. noncompeting labor groups.
C
There is no control over price by firms in: A. oligopoly. B. pure monopoly. C. pure competition. D. monopolistic competition.
C
When compared with the purely competitive industry with identical costs of production, a monopolist will produce: A. more output and charge the same price. B. more output and charge a higher price. C. less output and charge a higher price. D. less output and charge the same price.
C
Which is true for a purely competitive firm in short-run equilibrium? A. The firm is making only normal profits. B. The firm's marginal cost is greater than its marginal revenue. C. The firm's marginal revenue is equal to its marginal cost. D. A decrease in output would lead to a rise in profits.
C
Which of the following is an exhaustive governmental outlay? A. A federal $5,000 subsidy check to an Illinois farmer B. A Temporary Assistance to Needy Families payment made by the State of New York C. A NASA payment to Boeing Corporation for space hardware D. A federal old age insurance payment to a retired coal miner
C
Which statement applies to the Social Security system? A. Benefits are paid on the basis of need. B. It provides cash assistance and services to families with dependent children. C. It is financed by payroll taxes on employees and employers. D. Benefit levels vary throughout the nation because the system is administered by the individual states.
C
With respect to local finance: A. death and gift taxes are the major source of revenue and most expenditures are for hospitals and health services. B. the corporate income tax is the major source of revenue and natural resource development is the major type of expenditure. C. property taxes are the basic source of revenue and education is the major type of expenditure. D. sales and excise taxes are the major source of revenue and highway construction and maintenance is the major type of expenditure.
C
"A more equal distribution of income in the United States would result in greater total consumer satisfaction." This statement is based on the concept that: A. income inequality is unfair. B. income inequality is undemocratic. C. income equality stimulates efficiency. D. incomes are subject to diminishing marginal utility.
D
A feature of monopolistic competition is: A. a patent-protected product. B. homogeneous or standardized products. C. considerable control over price. D. nonprice competition.
D
A monopoly is most likely to emerge and be sustained when: A. output demand is relatively elastic. B. firms have U-shaped average total cost curves. C. fixed capital costs are small relative to total costs. D. economies of scale are large relative to market demand.
D
Government programs that replace earnings lost when people retire or are temporarily unemployed would be considered to be: A. noncash transfers. B. an earned-income tax credit. C. part of public assistance programs. D. part of social insurance programs.
D
If an oligopolist's demand curve has a "kink" in it, then: A. the oligopolist's marginal cost curve has a break in it. B. the oligopolist need not fear entry into the industry by new firms. C. the oligopolist's competitors will not react to its price changes, either up or down. D. over some interval, a change in the oligopolist's marginal cost will not cause a change in the oligopolist's profit-maximizing price.
D
In long-run equilibrium, a profit-maximizing firm in a monopolistically competitive industry produces the quantity of output where: A. AC = P, MR = MC = P. B. AC < P, MR = MC = P. C. AC < P, MR + MC < P. D. AC = P, MR = MC < P.
D
In monopolistic competition, there is: A. allocative efficiency. B. productive efficiency. C. both allocative and productive efficiency. D. neither allocative nor productive efficiency.
D
Many people believe that monopolies charge any price they want to without affecting sales. Instead, the output level for a profit-maximizing monopoly is determined by: A. Marginal cost = Demand. B. Marginal revenue = Demand. C. Average total cost = Demand. D. Marginal cost = Marginal revenue.
D
Marginal revenue product describes the: A. output produced by the last unit of input employed. B. revenue received for the last unit of output produced. C. price a consumer paid for the last unit of output produced. D. revenue received for the output produced by the last unit of labor employed.
D
Mutual interdependence would tend to limit control over price in which market model? A. Monopolistic competition B. Pure competition C. Pure monopoly D. Oligopoly
D
One feature of pure monopoly is that the demand curve: A. is vertical. B. is horizontal. C. slopes upward. D. slopes downward.
D
Pure competition produces a socially optimal allocation of resources in the long run because: A. marginal cost equals marginal revenue. B. marginal cost equals average total cost. C. marginal revenue equals price. D. marginal cost equals price.
D
The major reason that presidents of major corporations receive an average salary of over $1 million a year and truck drivers receive an average salary of about $55,000 a year can best be explained by: A. discrimination. B. lack of job information. C. compensating differences. D. noncompeting labor groups.
D
To practice long-run price discrimination, a monopolist must: A. be a natural monopoly. B. charge one price to all buyers. C. permit the resale of the product by the original buyers. D. be able to separate buyers into different markets with different price elasticities.
D
When firms in an industry reach an agreement to fix prices, divide up market share, or otherwise restrict competition, they are using the strategy of: A. interindustry competition. B. limit pricing. C. price leadership. D. collusion.
D
Which is not a commonly heard argument for protectionism? A. A strong national defense requires that some military products be produced domestically. B. Infant industries need short-run, but not long-run, protection from foreign competition. C. Specialization along the lines of comparative advantage can lead to greater economic instability for a nation. D. When other nations' economies grow, they typically import fewer goods and services.
D
Which phrase would be most characteristic of pure monopoly? A. Close substitutes B. Efficient advertiser C. Price taker D. Single seller
D
Which would definitely not be an example of price discrimination? A. A theater charges children less than adults for a movie. B. Universities charge higher tuition for out-of-state residents. C. A doctor charges for services according to the income of patients. D. An electric power company charges less for electricity used during hours when production costs are lower.
D
With respect to state finance, for most states: A. estate taxes are the major source of revenue and most expenditures are for health services. B. corporate income taxes are the major source of revenue and natural resource development is the major type of expenditure. C. property taxes are the basic source of revenue and education is the major type of expenditure. D. sales and excise taxes are the major source of revenue and education is the major type of expenditure.
D
