Econ Final Study

The best alternative that was not taken is a) a consequence of supply b) a decision's opportunity cost c) a scarce resource d) an attribute of demand e) a market mechanism

B

A monopoly will maximize profits at the level of output at which a. MR=MC b. MR-AFC c. MC = ATC d. MC = P

A

A perfectly competitive firm faces a horizontal demand curve because it is a. a price taker b. a price maker c. a large firm in a small industry d. one of few firms in the market

A

A perfectly elastic demand curve is a. A horizontal straight line b. A vertical straight line c. A downward sloping straight line d. An upward sloping straight line

A

According to the Law of Demand a) price and quantity demanded are negatively related b) price and quantity supplied are positively related c) when price falls, quantity demanded decreases d) price and quantity supplied are negatively related e) price and quantity demanded are positively related

A

All of the following are true about a monopolist EXCEPT: a. the demand curve for its product is perfectly elastic b. it produces a product with no co close substitutes c. its demand curve is the same as the market demand for the industry d. it is single a single seller of a good or service.

A

All of the following represent transactions in the resource market except a) households buy goods and services from firms b) businesses pay rent on land used in their operations c) households earn wages from firms d) businesses pay interest on capital to households e) businesses hire labor from households

A

As output increases, average fixed cost (AFC): a. Decreases b. Remain Constant c. Increase d. Initially decrease and the increase

A

Elasticity of supply is the ratio of: a. The percent change in quantity supplied to the percent change in price. b. The absolute change in quantity supplied to the absolute change in price. c. The percent change in the price to the percent change in quantity supplied. d. The percent change in quantity supplied to the absolute change in price.

A

If a monopolist is producting at an output rate at which P=ATC, then a. its economic profit will be zero b. its economic profit will be positive c. it is maximizing its profits d. it is minimizing its losses

A

If demand for a product increased, we could predict equilibrium price would a) increase and equilibrium quantity would increase b) increase and equilibrium quantity would decrease c) increase, but equilibrium quantity would not change d) decrease and equilibrium quantity would increase e) decrease and equilibrium quantity would decrease

A

If supply is perfectly elastic, the supply curve is a. Horizontal b. Vertical c. Any straight line supply curve d. Any supply curve intersecting a demand curve, which is unit elastic

A

If the relationship between the variables does not have a constant slope, a) the line will not be straight b) the line will be horizontal c) the line will be upward sloping d) the line will be vertical e) the line be downward sloping

A

In economics, land would include all of the following except a) buildings b) minerals c) water d) forests e) gas and oil deposits

A

Prices are determined a) by the forces of supply and demand in a market-based system b) solely by producers c) by how many units of the good or service firms are willing to produce d) by the government in a market economy e) by how many units of the good or service consumers are willing to purchase

A

Suppose ramen noodles are an inferior good, and gourmet pasta is a normal good. Then if consumers' income rise, demand for ramen noodles will _____ and demand for gourmet pasta will _____. a) decrease; increase b) be unchanged; be unchanged c) increase; decrease d) increase; increase e) decrease; decrease

A

Suppose that population increases by 10% and GDP increases by 5%. Which statement is correct? a) GDP per capita has fallen because GDP increased by less than population b) the standard of living has remained constant c) GDP per capita has fallen because GDP decreased d) it is impossible to tell the effect on per capita GDP e) the standard of living has increased

A

The concave shape of the production possibilities frontier indicates a) increasing opportunity costs b) productive inefficiency c) changes in the supplies of resources d) scarcity e) tradeoffs

A

Total revenue divided by quantity is a. average revenue b. marginal revenue c. quantity revenue d. price revenue

A

Total variable cost: a. Increase as output increase. b. Is constant as output increases c. Decreases as output increases d. None of the above

A

Which of the following conditions is true for a monopolist? a. MR<P b. MR= P c. MR = AFC d. MR < AVC

A

Which of the following is a characteristic of perfect competition? a. easy entry and exit b. few firms c. differentiated products d. None of the above

A

Which of the following is likely to be provided by a local government? a) Police protection b) National defense c) border patrols d) interstate highways e) unemployment compensation

A

Which of the following is not a transfer payment? a) the military contracts with suppliers for replacement parts for aircraft carriers b) a worker displaced by foreign competition receives funds for retraining programs c) an elderly patient receives Medicare payments d) A retired worker receives a social security check e) a laid-off worker receives unemployment compensation

A

Which of the following will not change the demand for coffee? a) a decrease in the price of coffee b) an increase in the income of coffee consumers c) an increase in the popularity of coffee with consumers d) a decrease in the price of a complement for coffee e) an increase in the price of a substitute for coffee

A

Macroeconomics is the study of a) how individual consumers and firms interact in markets b) how nations decide what to produce c) how scarce resources are allocated among competing uses d) major spending and producing units in the economy e) issues that are testable and verifiable rather than subjective

A or D

A patent provides legal protection for an invention for a. 7 years b. 11 years c. 20 years d. as long as the invention is valuable

C

A monopolist charges a price that is ____________ and produces ______________than a perfect competitor. a. lower; less b. high; less c. higher; more d. lower; more

B

A product is an inferior good if a) when the product's price falls, people buy more of it b) when income falls, people increase their demand for the product c) when the product's price falls, the demand curve shifts to the right d) when the product's price falls, people buy less of it e) when income falls, people decrease their demand for the product

B

Average variable cost equals: a. Total fixed cost plus total variable cost b. Average total cost minus average fixed cost c. Average total cost plus average variable cost d. Total cost minus average cost

B

If an increase in the price of a product from $100 to $200 per unit leads to a decrease in the quantity demanded from 10 to 8 units, then demand is a. Elastic b. Inelastic c. Unit Elastic d. Inferior

B

If supply for a product decreased, we would predict equilibrium price would a) increase but equilibrium quantity would not change b) increase and equilibrium quantity would decrease c) increase and equilibrium quantity would increase d) decrease and equilibrium quantity would increase e) decrease and equilibrium quantity would decrease

B

If the demand for oranges is unit elastic, the price elasticity of demand for oranges is: a. Zero b. One c. Two d. Infinity

B

If the relationship between two variables is inverse, we know a) a line graph representing the relationship must be convex b) a line graph representing the relationship will be downward sloping c) a line graph representing the relationship must have a constant slope d) a line graph representing the relationship must be concave e) a line graph representing the relationship will be upward sloping

B

In a perfectly competitive industry a. each firm is a price maker b. no buyer of seller can influence the market price c. there is apt to be a shortage of sellers of output d. firms can never make an economic profit

B

Suppose steak and potatoes are complementary goods and the price of steak increases. Which of the following is false? a) the demand for potatoes will decrease b) the demand for steak will decrease c) the demand curve for potatoes will shift to the left d) the quantity demanded of steak will decrease e) consumers will move up and to the left along the demand curve for steak

B

Suppose that a period of economic prosperity raises consumers' incomes, and improvements in technology lower the cost of producing laptop computers. (Assume laptop computers are a normal good.) What is likely to happen to the equilibrium quantity of laptop computers? a) the effect on the quantity cannot be determined b) it will increase c) it will increase, then decrease d) it will remain the same e) it will decrease

B

The measure of sensitivity of the quantity demanded of one good to a change in the price of another good is _______ elasticity. a. Multiple good b. Cross price c. Own price d. Other good

B

The short run is a period of time: a. Equal or less than six months b. During which at least one resource is fixed c. During which at least one resource may be varied d. during which all resources are fixed

B

Under perfect competition, the firm must decide a. the best price to charge for its product b. the best rate of output it should produce. c. the optimal level of advertising to engage in. d. the optimal level of quantity and the packaging that will maximize profits.

B

When Burger Barn hires one worker, 20 customers can be served in an hour. When Burger Barn hires two workers, 50 customers can be served in an hour. The marginal product (MP) of the second worker is ______ customers served per hour. a. 15 b. 30 c. 40 d. 25

B

When TR is increasing as a monopolist's output increases, a. MR is negative b. MR is positive c. MR=0 d. MR may be positive or negative

B

Which elasticity is consistent with an inelastic demand curve? a. 0 b. 0.5 c. 1 d. 1.5

B

Which of the following are barriers to entry? a. Economies of Scale b. Patents and copyrights c. control of resources d. All of the above

B

Which of the following is not a simplifying assumption used in Production Possibilities Frontier models? a) The total quantity of resources available is fixed. b) Current market prices are used c) Only two goods are produced d) The level of technology and human capital does not change e) All resources are fully employed

B

Which pair comes from an elastic demand curve? a. A one percent increase in price leads to one percent decrease quantity demanded. b. A one percent increase in price leads to a five percent decrease in quantity demanded c. A six percent decrease in price leads to one percent increase in quantity demanded. d. A three percent increase in price leads to half percent decrease in quantity demanded.

B

A monopolist will not earn any economic profits when a. AVC is a minimum b. AFC is very high c. ATC lies above the demand curve d. ATC lies below the demand curve

C

A natural monopoly usually arises when a. there are diseconomies of scale in an industry b. the government allows unrestricted access to a market. c. there are large economies of scale relative to the industry demand. d. companies band together to form a larger company

C

All firms in a perfect competition industry a. are price makers b. produce differentiated products c. produce identical products d. lose money

C

Another term economists use for factors of production is a) outputs b) sales c) inputs d) expenses e) revenues

C

Economic profit is defined as: a. Total revenue of the firm b. Total revenue - explicit costs c. Total Revenue - Explicit costs - implicit costs d. Explicit costs + implicit costs

C

For a perfect competitor, price equals a. marginal revenue only b. average revenue only c. both average revenue and marginal revenue d. neither marginal revenue nor average revenue

C

If income elasticity of a good is greater than one, then we can confidently conlcude that the good is a _____________________good: a. Positive b. Inferior c. Luxury d. Low Price

C

If supply for a product increased, we would predict equilibrium price would a) increase and equilibrium quantity would increase b) increase and equilibrium quantity would decrease c) decrease and equilibrium quantity would increase d) increase but equilibrium quantity would not change e) decrease and equilibrium quantity would decrease

C

If the cross-price elasticity of demand is -3, then a. The good are substitute b. One good is the Price elastic c. The goods are complements d. One good is an inferior good

C

If the price of coffee increases, this would be illustrated graphically as a a) shift to the left of the supply curve for coffee b) movement off the supply curve and to the left c) movement up and to the right along the supply curve for coffee d) shift to the right of the supply curve for coffee e) movement down and to the left along the supply curve for coffee

C

If you purchase the same gallons of the gasoline per week regardless of changes in gasoline price, your demand for gasoline is: a. Perfectly elastic b. Elastic c. Perfectly Ineslastic d. Ineslastic

C

Selling a produt at different prices when the price difference is unrelated to costs is a practice known as a. price fixing b. price monopolization c. price discrimination d. price differentiation

C

The minimum efficient scale is a. The minimum point on the total cost curve b. The minimum point on the marginal cost curve c. The lowest output at which LRAC is minimized d. The point at which there are diseconomies of scale

C

Total cost is calculated as a. FC + MC b. (FC) x (MC) c. VC + FC d. (VC) x (output)

C

Under perfect competition, a firm that sets its price slightly above the market price would: a. make lower profits that the other firms, but the amount would depend on the elasticity of demand. b. make a normal rate of return, but on reduced revenues. c. lose all of its customers d. earn higher profits as long as the other firms continues to charge the market price.

C

Which of the following is correct? a) demand will decrease if the price of a substitute increases b) demand will increase if income increases and the product is an inferior good c) demand will decrease if income increases and the product is an inferior good d) demand will decrease if income increases and the product is a normal good e) demand will increase if the price of a complement increases

C

A firm in a competitive industry faces the following short-run cost and revenue conditions: ATC= $8; AVC=$4; and MR = MC = $6. This firm should a. expand production and keep price constant b. decrease production and raise its price c. shut down d. continue to operate at the same price and output level in the short run

D

An increase in the cost of raw materials will increase: a. Marginal cost b. Total Cost c. Average Total Cost d. All of the above

D

For a perfectly comeptitive firm, the short-run break even point occurs at the level of output where: a. P>MR=MC b. MR = P>PC C. MR < P = MC d. P= MC= ATC

D

For a perfectly competitive firm, which of the following is NOT true? a. the average revenue curve, the demand and the marginal revenue curves are identical. b. The total revenue curve begins at the orgin and slopes upward as output increases. c. the slope of the total revenue curve is equal to the product price. d. the total revenue curve is horizontal

D

If a firm sells 5 units of output at $10 per unit and 6 units of output when price is reduced to $9, its marginal revenue from selling the sixth unit is: a. $9 b. $40 c. $540 d. $4

D

If a good is inferior, then the income elasticity of demand for that good is a. Positive and greater than one b. Zero c. Between zero and one d. Negative

D

If a monopolist is producing the quantity at which marginal revenue exceeds marginal cost, it should a. continue to produce this amount if it wants to maximize profiits b. reduce output if it wants to maximize profits c. reduce price and keep output unchanged if it wants to maximize profits d. Increase output if it wants to maximize profits

D

If a monopolist raises its price, a. it raises the barriers to entry b. the quantitiy demanded increases c. the quantity demanded remains the same d. the quantity demanded decreases

D

If fixed cost at Q= 100 is $130, than a. Fixed Cost at Q= 0 is $0 b. Fixed Cost at Q= 200 is $260 c. Fixed Cost at Q= 0 is less than $130 d. Fixed cost at Q= 200 is $130

D

If the economy is currently producing at a point inside its Production Possibilities Frontier, a) more resources must be discovered in order for production to increase b) alternate products must be sacrificed in order for production to increase c) human capital must improve in order to production to increase d) production can increase if resources are used more efficiently e) technology must improve in order for production to increase

D

If total cost rises from $60 to $100 as output increases from 15 to 20 units, the marginal cost of the twentieth unit is: a. 100 b. 5 c. 40 d. 8

D

If total exports are larger than total imports, a) the circular flow is likely to shrink b) net exports are zero c) the leakage from the circular flow due to the international sector is larger than the injection d) the country is running a trade surplus e) the country must export more than it imports of every type of good

D

In a perfectly competitive industry, the industry demand curve a. must be horizontal b. must be vertical c. is upward sloping d. is downward sloping

D

Marginal cost typically: a. Increases as output increases b. Decreases as output increases c. First increases then decreases as output increases d. First decreases then increases as output increases

D

The demand curve a monopoly faces is: a. horizontal b. vertical c. upward sloping d. downward sloping

D

When the price of orange juice increases a) the demand for orange juice increases b) the quantity demanded of orange juice increases c) the demand curve for orange juice shifts to the left. d) the quantity demanded of orange juice decreases e) the demand for orange juice decreases

D

Which of the following is a determinant of price elasticity of demand? a. the number of consumers buying the product b. Technology c. Input Prices d. The availability of substitute

D

Which of the following is likely to be a variable cost for the firm, in the long run? A. Wages paid to workers. b. lease payment on a factory c. The cost of equipment d. All of the above

D

Which of the following statements about the perfect competitor is INCORRECT? a. the perfectly competitive firm is always a price taker b. the perfect competitor sells a homogeneous commodity c. if an individual firm raises price, it will lose business d. The products made by a perfectly competitive firm have no close substitutes.

D

A product is a normal good if a) when the product's price falls, people buy more of it b) when the product's price falls, people buy less of it c) when income falls, people increase their demand for the product d) when the product's price falls, the demand curve shifts to the right e) when income falls, people decrease their demand for the product

E

Gross Domestic Product is a) total business sales b) the total government spending at all levels per year c) the total amount an economy spends on all purchases in a given year d) the total tax revenue the government collects e) the market value of all finals goods and services produced in a given year

E

If one owner bears the full responsibility for the firm's success or failure, this implies the firm is a) an initial public offering b) a partnership c) one that pays dividends d) a corporation e) a sole ownership

E

The distinction between GDP and GDP per capita is a) GDP is more useful for comparing economies of differing size than GDP per capita b) GDP is more useful over time if the population is growing than GDP per capita c) GDP per capita is adjusted for changes in prices and GDP isn't d) GDP is adjusted for changes in prices and GDP per capita isn't e) GDP per capita divides GDP over the population

E

Which of the following types of taxes do state of California utilize? a) Property taxes b) Sales taxes c) Income taxes d) a and b are both correct e) b and c are both correct

E

Along a linear demand curve, price is inelastic at high prices and elastic at low prices.

False

Assuming that demand for a product is stable, an increase in price will lead to an increase in consumer surplus.

False

Fixed costs are the same in the short-run as they are in the long-run

False

If a product has a large number of excellent substitute, demand for the product is most likely to be very inelastic.

False

If supply curve is a vertical line, then supply is perfectly elastic.

False

If the price of apples increases by 10% and quantity demanded falls by 5%, then the elasticity od emand for apples is 2.

False

If the price of elasticity of demand for tires is 0.8, then demand for tire is elastic

False

Implicit costs involve a direct cash payment for the use of a resource.

False

The income elasticity of demand is positive for inferior goods

False

Two goods are complements if the income elasticity of each good is negative

False

When marginal product is zero, total product is decreasing

False

The cross price elasticity of demand for substitute is positive

True

The price of goods multiplies by the quantity sold is its total revenue

True

Decreasing marginal product implies increasing marginal cost

True

If a firm experiencing diseconomies of scale, its long-run average cost curve is upward sloping

True

If the price goes up on an inelastic demand curve, total revenue will rise.

True

Marginal cost curve intersects the average total cost at its minimum

True