ECON midterm

Suppose 18 units of output are supplied in the market. How much lower is the average total cost of production for one firm compared to two firms? One firm can supply 18 units of output for __$?___ less per unit in average total cost than two firms.

$1.00 less per unit

If Daniel sells 200 hamburgers at a price of $4.00, and his average cost of producing 200 hamburgers is $3.50, what is his profit

$100

Q27: Suppose the figure illustrates the demand and marginal revenue curves for a firm that sells dress shirts in a monopolistically competitive market. Let MC be the marginal cost curve. To maximize profits, how much should the firm produce and what price should it charge?

$44, 8 units (point is on the demand curve, directly above the intersection of the MC and MR curves)

Q74: To maximize profits, how much should the firm produce and what price should it charge

$44, 8 units (point on the D curve directly above the intersection of MR and MC)

The cost of (BUYING/CONSUMING) a book is the price you pay to buy the book, but the cost of (BUYING/CONSUMING) a book would include the time spent reading the book.

1. buying 2. consuming

At a price of $0.50, how many more or fewer cups of lemonade do Caroline and Emily sell when the temperature is 100 degrees than when the temperature is 80 degrees? A. 15 B. -2 C. 0 D. 10

10

How many inches are in one foot?

12

Which of the following, if true, would strengthen the argument that Airline B is a possible turnaround candidate? -A. Airline B's debt expressed as a percentage of equity is one of the lowest in the industry. -B. The country's government had earlier bailed out banks and automobile companies that were considered too-big-to-fail. -C. Airline B's lenders are open to idea of converting their loans to equity in the airline. -D. Airline A was able to post profits after reporting losses in the previous years. -E. About 25 percent of the assets listed in Airline B's balance sheet consist of goodwill that accrued from a prior acquisition.

C. Airline B's lenders are open to idea of converting their loans to equity in the airline

Which of the following statements is true? A. Some individuals experience scarcity because they have not learned to live within their means. B. While resources are scarce, most people don't own resources and therefore do not face a scarcity of them. C. All individuals face a scarcity of time and need to make choices how to allocate it. D. Most individuals face a scarcity of time, but few experience a scarcity of other resources

C. All individuals face a scarcity of time and need to make choices how to allocate it.

What criteria would you use to determine if the restaurant is a monopoly? A. The ability to set prices, the persistence of economic profits, and the availability of any complements. B. The persistence of economic profits, the availability of close substitutes, and a high price elasticity of demand. C. The ability to ignore the actions of other firms, the persistence of economic profits, and the availability of close substitutes. D. The availability of any substitutes, the ability to set prices, and the persistence of normal profits

C. The ability to ignore the actions of other firms, the persistence of economic profits, and the availability of close substitutes.

A monopolistically competitive firm doesn't produce where P = MC like a perfectly competitive firm because: A. P exceeds MR for a monopolistically competitive firm, and it's MR that must equal MC for profit maximization. B. the approach to profit maximization used by monopolistically competitive firms is fundamentally different from the approach used by firms in other markets. C. perfectly competitive firms face downsloping demand curves and monopolistically competitive firms do not. D. perfectly competitive firms know the price with certainty while monopolistically competitive firms do not

A. P exceeds MR for a monopolistically competitive firm, and it's MR that must equal MC for profit maximization.

Your opportunity cost of attending a game compared with the opportunity cost facing a college student 17 years ago is: A. higher, because more games are televised today. B. lower, because games are usually viewed on high-definition television today. C. lower, because of social media. D. higher, because the cost of cable TV is higher today

A. higher, because more games are televised today.

If you were a member of the organization, what reply best represents clear economic thinking? This attitude... A. ignores the fact that the cost of helping that one person has an opportunity cost of what those funds could have been used for to help other people. B. acknowledges the importance of considering all the alternatives. C. recognizes the fact that since the organization is a charity, there is an opportunity cost based on the square root of other peoples' needs. D. is the most logical because it is focussed on helping even one person

A. ignores the fact that the cost of helping that one person has an opportunity cost of what those funds could have been used for to help other people.

Black markets may arise: A. in reaction to binding price ceilings. B. in reaction to non-binding price floors. C. in reaction to excessive consumer surplus. D. in reaction to insufficient producer surplus. E. both a and b.

A. in reaction to binding price ceilings.

Is the monopoly a natural monopoly? The firm... A. is a natural monopoly because it can supply the entire market at lower average total cost than can two or more firms. B. is not a natural monopoly because its demand curve is not infinitely elastic. C. is not a natural monopoly because it experiences diseconomies of scale. D. is a natural monopoly because its demand curve is downward sloping. E. is a natural monopoly because it has the potential to earn economic profits

A. is a natural monopoly because it can supply the entire market at lower average total cost than can two or more firms.

It would be more moral to reduce pollution, A. taking the cost into account because money spent on pollution reduction is not available for other worthy activities. B. taking the cost into account because the total cost of reducing pollution is likely enormous. C. not taking the cost into account because pollution reduction is typically associated with large benefits. D. not taking the cost into account because pollution is potentially harmful to our health. E. taking the cost into account because reducing pollution often reduces economic growth

A. taking the cost into account because money spent on pollution reduction is not available for other worthy activities.

The economic profit is equal to: A. the difference in price and long-run average cost multiplied by the quantity produced. B. the price multiplied by the quantity produced. C. the long-run average cost multiplied by the quantity produced. D. the difference in price and long-run average cost

A. the difference in price and long-run average cost multiplied by the quantity produced.

Why are the analysts quoted in the article using "monopoly" in this context? In this sense, the analysts mean that: A. the iOS operating system is a significant barrier to other firms competing with Apple in the smartphone industry. B. consumers have benefited more from using the iOS operating system than from using other operating systems. C. Apple has economies of scale that are so large that few other firms can compete with it. D. The analyst's use of the term is incorrect. After all, every smartphone has an operating system with unique features

A. the iOS operating system is a significant barrier to other firms competing with Apple in the smartphone industry

Suppose that you are the economic adviser to a presidential candidate who is trying to decide whether she should support a proposal that Congress impose such regulations on the prices of pharmaceuticals and medical devices. You need to prepare a report discussing the relevant factors the candidate should consider. Use the concepts of opportunity cost and trade-offs to discuss some of the main issues you would include in your report. The presidential candidate should consider

A. whether implementing price regulations could interfere with the operation of the market system. B. the public would be trading off lower prices today for less effective health care in the future. C. whether implementing price regulations on pharmaceuticals and medical devices might lead to Congress imposing price regulations on other goods and services. D. All of the above Answer: D

What is the role of an entrepreneur? A. to operate a business that produces a good or service B. to take risks C. to bring together the factors of production—labor, capital, and natural resources D. all of the above

All of the above

Refer to the figure to the right. Note that P and Q are the profit-maximizing price and quantity. This firm was first in the market. It is currently earning what?

An economic profit (point lies above all 3 of MC, ATC, MR)

A perfectly competitive market is a market that meets the conditions of: A. (1) many buyers and sellers, (2) all firms selling identical products, and (3) significant barriers to new firms entering the market. B. (1) many buyers and sellers, (2) all firms selling identical products, and (3) no barriers to new firms entering the market. C. (1) many buyers and sellers, (2) all firms selling differentiated products, and (3) no barriers to new firms entering the market. D. (1) few buyers and sellers, (2) all firms selling identical products, and (3) no barriers to new firms entering the market

B. (1) many buyers and sellers, (2) all firms selling identical products, and (3) no barriers to new firms entering the market

When is a firm a monopoly, or are monopolies only theoretical concepts that do not exist? A. Monopolies don't exist, just about every product has substitutes. B. A firm is a monopoly if its economic profits are not competed away in the long run. C. Monopolies don't exist because many markets have barriers to entry. D. A firm is a monopoly if it cannot ignore other firms' prices. E. A firm is a monopoly if it earns economic profits at least in the short run.

B. A firm is a monopoly if its economic profits are not competed away in the long run.

Why might price regulations reduce the number of new drugs and medical devices that firms offer for sale? A. Firms decrease the number of new drugs and medical devices they offer for sale in order to spite the government for imposing regulations on them. B. By reducing firms' potential profits from selling new drugs and medical devices, price regulation may reduce the incentive firms have to devote resources to the research and development necessary to develop these products. C. Price regulations reduce the demand for new drugs and medical devices, and therefore firms reduce the number they offer for sale. D. All of the above

B. By reducing firms' potential profits from selling new drugs and medical devices, price regulation may reduce the incentive firms have to devote resources to the research and development necessary to develop these products.

Can economic analysis provide a final answer to the question of whether the government should intervene in markets by imposing price ceilings and price floors? Why or why not? A. Economic analysis can provide such an answer because it seeks to address both positive and normative questions such as "what is" and "what ought to be." B. Economic analysis cannot provide such an answer because it seeks to address positive questions such as "what is." C. Economic analysis can provide such an answer because it seeks to address positive questions such as "what is." D. Economic analysis cannot provide such an answer because it seeks to address normative questions such as "what ought to be." E. Economic analysis can provide such an answer because it seeks to address normative questions such as "what ought to be."

B. Economic analysis cannot provide such an answer because it seeks to address positive questions such as "what is."

Would the only restaurant that sells British food in Palo Alto, or any other city, be considered a monopoly? A. It would be according to both the broad and narrow definitions. B. It could be according to the broad definition, but would not be according to the narrow definition. C. It would not be according to either D. It could be according to the narrow definition, but would not be according to the broad definition.

B. It could be according to the broad definition, but would not be according to the narrow definition.

Why is the demand curve referred to as a marginal benefit curve? A. It shows the difference between the highest price a consumer is willing to pay and the lowest price a firm would be willing to accept. B. It shows the willingness of consumers to purchase a product at different prices. C. It shows the willingness of firms to supply a product at different prices. D. It shows the price consumers actually pay to consume a product. E. It shows the difference between the highest price a consumer is willing to pay and the marginal benefit of consumption

B. It shows the willingness of consumers to purchase a product at different prices.

Even though Sri Lankan tea was priced competitively, sales in Myanmar turned out to be far lower than expected. Which could explain this? A. The tea exported from Sri Lanka is of the highest quality. B. People in Myanmar are willing to pay more for their domestic tea brands than for foreign brands. C. Myanmar exported a substantial amount of its annual tea production that year. D. The Myanmar government hiked the minimum wage for labor. E. Sri Lankan tea exports to other Asian countries like India and China have also not been very successful.

B. People in Myanmar are willing to pay more for their domestic tea brands than for foreign brands.

Which of the following, if true, would weaken the argument that Airline A is a good candidate for investment? A. In anticipation of increased demand, Airline A has set aside funds for buying medium sized jets for short-haul routes. B. The bulk of Airline A's profits came from "other income" which included the sale of some of its fleet. C. Airline A plans to reduce flights to sectors where the traffic volume is low. D. The company's cost per passenger mile traveled is different from a typical cost per mile traveled in the commuter rail industry. E. A look at the stock price and the balance sheet of Airline A reveals that the company's stock is trading below its book value.

B. The bulk of Airline A's profits came from "other income" which included the sale of some of its fleet.

What positive externalities might exist from infrastructure spending? -A. Spending on roads/bridges/highways will increase the profits of companies building them -B. Likely productivity increase for businesses using the infrastructure. -C. Infrastructure spending will enhance the image of the government to its citizens and potential voters. -D. The article is incorrect: Infrastructure spending does not result in positive externalities, as citizens indirectly pay for the infrastructure through higher taxes

B. There is likely to be an increase in productivity for any business that uses the infrastructure.

Which of the following is a characteristic of perfectly competitive markets? A. The barriers to new firms entering the market will be natural ones. B. There will be no barriers to new firms entering the market. C. There will be many firms in the market selling a differentiated product. D. There will be many buyers but only a few firms, all of whom will charge the same price. E. There will be only a few buyers but many firms, all of whom are small relative to the market

B. There will be no barriers to new firms entering the market.

Which of the following best describes scarcity? A. Wants can't be fulfilled, all goods must be rationed. B. Unlimited wants exceed limited resources available C. Markets can't properly allocate resources. D. Prices of goods are very high

B. Unlimited wants exceed the limited resources available.

There are about 400 wineries in California's Napa Valley. Suppose the owner of one of the wineries—Jerry's Wine Emporium—raises the price of his wine by $5.00 per bottle. If the industry is perfectly competitive, the reaction of consumers would be to: A. buy more of Jerry's wine. B. buy wine from another winery. C. buy some, but less of, Jerry's wine. D. stop drinking wine.

B. buy wine from another winery.

For a monopolistically competitive firm, such as Foot Locker, the best strategy to earn economic profits is: A. producing identical products because that results in market power. B. product differentiation because that results in a downward-sloping demand curve. C. brand management because that results in a low average cost curve. D. homogeneity because that results in lower marginal costs

B. product differentiation because that results in a downward-sloping demand curve.

When the government imposes price floors or price ceilings, A. some people win, some people lose, and there is an increase in economic efficiency. B. some people win, some people lose, and there is a loss of economic efficiency. C. everyone wins, goods and services distribution is more just, and there is an increase in economic efficiency. D. everyone wins, goods and services distribution is more just, and there is a loss of economic efficiency

B. some people win, some people lose, and there is a loss of economic efficiency.

What is the definition of monopoly? A. A monopoly is a firm that is created and regulated by the government. B. A monopoly is a firm that is the only seller of a product that can ignore the fixed cost of production. C. A monopoly is a firm that is the only seller of a product in a given industry. D. A monopoly is a firm that earns large economic profits. E. All of the above

C. A monopoly is a firm that is the only seller of a product in a given industry.

Which of the following, if true, would suggest that the labor union's threat of not resuming work is credible? A. Most firms cannot take advantage of economies of scale because the industry is highly fragmented. B. Most of Nutco's employees are migrant female workers who are willing to work for slightly lower wages. C. The demand for labor in this industry has increased due to an increase in the demand for Ecotopian cashews abroad. D. Due to the occupational hazards of cashew-processing, the Ministry of Labor closely monitors the working conditions in this industry. E. The yield of cashews this year was low due to unfavorable climatic conditions.

C. The demand for labor in this industry has increased due to an increase in the demand for Ecotopian cashews abroad.

Can't we measure the product's benefit to consumers by just looking at the product's price?

Consumer surplus is unmeasured because when a consumer purchases a product, we can only infer the maximum they are willing to pay for the product must be as large or larger than the price. In the case of digital goods, we don't know exactly the maximum that each consumer is willing to pay because the price of many digital goods is zero.

What do economists mean when they use the Latin expression ceteris paribus? A. Prior to an event B. The thing speaks for itself. C. The whole is just the sum of the parts. D. All else equal.

D. All else equal.

"I have yet to meet anybody who got rich by buying a book, though quite a few people got rich by writing one." On the basis of the analysis in this chapter, which of the following statements is true? A. Some people may earn profits if they act quickly on a book's advice. B. If the advice was really valuable, it wouldn't be printed in a book. C. If the advice in a book is good, and people follow it, then competition will eliminate the profits from following the advice. D. All of the above

D. All of the above are true.

Does this article indicate that gasoline-powered cars and gasoline are substitutes or complements? A. Complements, because they are used for the same purpose. B. Substitutes, because the more consumers buy of one good, the less they will buy of the other good. C. Substitutes, because the more consumers buy of one good, the more they will buy of the other good. D. Complements, because they are used together

D. Complements, because they are used together.

Scarcity is central to the study of economics because it implies that: A. society must make decisions at the margin. B. wants are unlimited. C. economic agents are rational. D. every choice involves an opportunity cost

D. Every choice involves an opportunity cost.

What does increasing marginal opportunity costs mean? -A. Production is not occurring on the production possibilities frontier. -B. Increasing the production of a good requires smaller and smaller decreases in the production of another good. -C. Increasing the production of a good requires decreases in the production of another good. -D. Increasing the production of a good requires larger and larger decreases in the production of another good. -E. The economy is unable to produce increasing quantities of goods and services

D. Increasing the production of a good requires larger and larger decreases in the production of another good

Which of the following is not a step that economists use in developing a useful economic model? A. Formulate a testable hypothesis. B. Revise the model if it does not explain the data well. C. Use economic data to test the hypothesis. D. Make a value judgement about the merits of the hypothesis. E. Decide on the assumptions to be used in developing the model.

D. Make a value judgement about the merits of the hypothesis

Does this "fierce competition" mean that the demand curves for Nescafé coffee and KitKat chocolate bars are horizontal? -A. No. "Fierce competition" does not imply a horizontal demand curve because the chocolate bars sold by different firms are identical. -B. Yes. "Fierce competition" implies a horizontal demand curve. -C. No. "Fierce competition" does not imply a horizontal demand curve because horizontal demand curves are found only in monopolistically competitive markets. -D. No. "Fierce competition" does not imply a horizontal demand curve because horizontal demand curves are found only in perfectly competitive markets

D. No. "Fierce competition" does not imply a horizontal demand curve because horizontal demand curves are found only in perfectly competitive markets.

Which of the following would support the taxation policy proposed by the research group (imposing tax on limestone production)? A. Limestone producers in this region pay very high income taxes. B. Scientists have recently developed cost-effective and easy-to-install sound filtering systems for limestone plants. C. The limestone industry provides employment opportunities to a significant percentage of unskilled laborers in the region. D. Recent environmental research reveals that the dust from the limestone quarrying site has severely contaminated the water at a nearby lake. E. This country is the largest exporter of limestone

D. Recent environmental research reveals that the dust from the limestone quarrying site has severely contaminated the water at a nearby lake

An increase in demand causes an increase in the equilibrium price. The increase in equilibrium price will then cause an increase in supply (TRUE/FALSE)

false

Mattress company Sealy has claimed that "after years of simulated use, we maintained support 4 times better than other leading brands." If Sealy succeeds in convincing consumers that its claim is correct, its demand curve would become (MORE/LESS) elastic

less

The more cell phones in use, the more valuable they become to consumers. This is an example of: A. what happens when a firm is granted a patent. B. natural monopoly. C. what happens when a firm has control of a key resource. D. network externalities

network externalities.

The distinction between substitutes and complements is

substitute goods are used for the same purposes while complementary goods are used together.

Economic surplus is the sum of consumer surplus and producer surplus. (TRUE/FALSE)

true

Firms often rely on market experiments to calculate the price elasticity of demand for a new product. (TRUE/FALSE)

true

Assuming that Panera's clean food strategy doesn't affect the demand for its turkey sandwiches, the increase in costs will shift (UP/DOWN) Panera's marginal and average (COST/REVENUE) curves. As a result, the price it charges for turkey sandwiches will (INCREASE/DECREASE) and the quantity it sells will (FALL/RISE)

up, cost, increase, fall

Best Goods, one of the leading department store chains, offers goods at low prices. It recently opened many new stores across the country. After successfully setting up stores in most major cities, Best Goods faced substantial opposition in the city of Joberg, where lobbyists for smaller general stores (local businesses) opposed its entry. These lobbyists argued that Best Goods would put many local stores out of business and would also increase income inequality and unemployment in the city. Which of the following, if true, would strengthen the stand of the lobbyists?

A. Best Goods created 15,000 jobs in the last year. B. The quality of goods offered at Best Goods is usually the same quality as those offered at local stores. C. Many consumers prefer to shop in local stores because they offer goods on credit. D. The level of unemployment in Joberg is low. E. Retail profits grew only by two percent this year. Answer: B

Which of the following countries has an economy where households and firms make the what/how/who decisions? A. Canada B. North Korea C. Cuba D. The Soviet Union

A. Canada

Recent medical research revealed that the presence of gluten in oats can cause celiac disease in the elderly. Since the elderly are an important consumer segment in this market, industry experts predicted a fall in the price of commercially-available oats. However, after the publication of the research, the price of oats actually increased. The industry experts most likely assumed which of the following?

A. Elderly individuals who are concerned about celiac disease would consult with their doctors before altering their diets. B. Celiac disease is the most important health concern for the elderly. C. Commercially-available oats provide no significant health benefits. D. In general, the elderly were not aware of the recent research concerning gluten and celiac disease. E. The elderly are greater consumers of oats than any other market segment Answer: D

Which of the following statements is correct? -A. Even though the dollar value of the total benefits of reducing SO2 emissions was much greater than the costs, the SO2 cap-and-trade system had effectively ended by 2013. -B. Because the dollar value of the total benefits of reducing SO2 emissions were much greater than the costs, Congress passed legislation to further lower the cap on SO2 emissions in 2013. -C. Even though the dollar value of the total benefits of reducing SO2 emissions were much lower than the costs, Congress passed legislation to further lower the cap on SO2 emissions in 2013. -D. Because the dollar value of the total benefits of reducing SO2 emissions were much lower than the costs, the SO2 cap-and-trade system had effectively ended by 2013

A. Even though the dollar value of the total benefits of reducing SO2 emissions was much greater than the costs, the SO2 cap-and-trade system had effectively ended by 2013.

When a firm's demand curve slopes downward and the firm decides to cut price, which of the following happens? A. It sells more units but receives lower revenue per unit. B. It sells fewer units and receives lower revenue per unit. C. It sells more units and receives higher revenue per unit. D. It sells fewer units but receives higher revenue per unit.

A. It sells more units but receives lower revenue per unit.

Luke's Express Diner is the only place that sells burgers in a remote town in Arizona. As one of the long-time residents of the town, Bertha Hayes contends that the burgers at Luke's are priced a bit too high. She claims that this is because the diner enjoys monopoly power in the town. Her neighbor, Ruth Ernes, disagrees that the diner is in a position to over-price products due to monopoly power because she herself knows a lot of people who don't like the food there. Which of the following, if true, will weaken Bertha's argument?

A. Monopolies in the area have damaged economic efficiency. B. The diner is highly rated by food critics and is a very popular eating place in the town. C. Luke's Express Diner cut prices when a nearby coffee shop cut prices on its sandwiches. D. The local government issues a limited number of restaurant licenses every year. E. Luke's Express Diner recently increased the price of a burger due to an increase in meat prices, but burger sales remained unchanged. C

If infrastructure spending generates a positive externality, what effect should this have on government policy? Will voters be more or less likely to support government spending programs on infrastructure? -A. More likely: investment in infrastructure will result in greater economic growth + higher future incomes. -B. Less likely, only those who build the infrastructure are likely to receive any benefit from the program. -C. More likely, economic efficiency can always be achieved with programs that generate positive externalities. -D. Taxpayers won't support any government spending programs that increase taxes, regardless of externalities -E. This country is the largest exporter of limestone

A. More likely, because investment in infrastructure will result in greater economic growth and higher future incomes.

Does Apple have a monopoly on smartphones? A. No, Apple is not the only producer of smartphones in the market, so it does not have a monopoly on smartphones. B. No, even though Apple has a patent on iOS, other firms can copy and sell their own versions of the operating system. C. Yes, since few large firms are able to maintain a dominant position in the market due to Apple's popularity, it has a monopoly on smartphones. D. Yes, since Apple can ignore the pricing decisions of other producers in the smartphone market, it has a monopoly on smartphones

A. No, Apple is not the only producer of smartphones in the market, so it does not have a monopoly on smartphones

The market for laundry detergents in a country has several players, each with a slightly differentiated product. Squeaky Clean Inc., produces and sells 20,000 tons of household laundry detergent in this market at a price of $4 per pack. Alex Dawson, the operations manager of the firm, thinks that a 50-cent increase in the price per pack of the laundry detergent will increase the firm's profits. The marketing manager, Rick Arnold, however feels that an increase in price will adversely affect the demand for its product and profits will actually decline. Which of the following, if true, will strengthen Alex's argument?

A. The current prices of most of Squeaky Clean's products are lower than the prices of competing brands. B. The demand for industrial detergents is likely to increase in the near future. C. Squeaky Clean has recently launched a new range of car washes. D. Shares of Squeaky Clean are being actively traded in the stock market. E. A market survey shows that a close rival has now overtaken Squeaky Clean in quarterly sales. Answer: A

What is the focus of a command-and-control approach to reducing pollution? -A. The government imposing quantitative limits on the amount of pollution firms are allowed to generate. -B. The government imposing taxes intended to bring about an efficient level of output in the presence of externalities. -C. The government offering subsidies intended to bring about an efficient level of output in the presence of externalities. -D. The government trading emissions allowances to pollute for cash payments

A. The government imposing quantitative limits on the amount of pollution firms are allowed to generate.

Is it likely that the production possibilities frontier in this situation would be a straight line: A. The production possibilities frontier would likely be bowed out because not all resources are equally well suited to produce both consumption and capital goods. B. The production possibilities frontier would likely be bowed out because resources are likely equally well suited to produce both consumption and capital goods. C. The production possibilities frontier would likely be a straight line because not all resources are equally well suited to produce both consumption and capital goods. D. The production possibilities frontier would likely be a straight line because resources are likely equally well suited to produce both consumption and capital goods

A. The production possibilities frontier would likely be bowed out because not all resources are equally well suited to produce both consumption and capital goods.

Does Jeff Bezos face scarcity? A. Yes, because even though billionaires' financial resources enable them to afford a much greater array of goods and services than those less wealthy, their financial resources are not infinite. B. No, because billionaires can have anything that money can buy. C. No, because if a billionaire cannot get the goods and services they want, someone else can get it for them. D. Yes, because there is a limit to the income even billionaires can earn.

A. Yes, because even though billionaires' financial resources enable them to afford a much greater array of goods and services than those less wealthy, their financial resources are not infinite.

Can this change in opportunity cost account for the decline in college football attendance? Briefly explain. A. Yes, because these changes increase the opportunity cost of watching football games in person. B. No, because opportunity costs do not involve an actual payment of money. C. Yes, because sports fans are rarely rational. D. No, because the price of the game ticket is the only thing that matters

A. Yes, because these changes increase the opportunity cost of watching football games in person.

An unexpected frost in the orange groves of California would cause: A. a decrease in the supply of orange juice, increasing the equilibrium price. B. an increase in the demand for orange juice, increasing the equilibrium price. C. a decrease in the demand for orange juice, decreasing the equilibrium price. D. an increase in the supply of orange juice, decreasing the equilibrium price.

A. a decrease in the supply of orange juice, increasing the equilibrium price

A black market is: A. a market in which buying and selling occur at prices that violate government price regulations. B. a market in which there are non-binding price controls. C. a market in which participants exchange goods and services without using money. D. a market in which there is no deadweight loss. E. a market in which buying and selling occur at legal prices.

A. a market in which buying and selling occur at prices that violate government price regulations.

Substitutes exist for just about every product, so can a firm ever really be a monopoly? A firm can: A. be a monopoly if it can ignore the actions of other firms. B. be a monopoly if it faces no government regulations. C. never be a monopoly. D. be a monopoly if it earns economic profits in the short run. E. be a monopoly if it is a price taker

A. be a monopoly if it can ignore the actions of other firms.

With a downward-sloping demand curve, marginal revenue is below price: A. because the firm must lower its price to sell additional units. B. since P = TR/Q and MR = ΔTR/ΔQ. C. since the slope of the demand curve is marginal revenue, and the slope is negative. D. the marginal revenue firms receive is always less that the price they charge due to selling costs

A. because the firm must lower its price to sell additional units.

After tax is imposed, total production of limestone declines by the amount the environmental research group had estimated. This convinces them that limestone production is now socially efficient. Which of the following conclusions can most reasonably be drawn from the given information? A. Social cost of reducing the production level = economic benefit of the goodwill generated as a result of this. B. The reduced production caused unemployment in the region to reach unprecedented levels. C. The marginal private cost of producing limestone at this quarry is now equal to the marginal social cost as estimated by the research group. D. Production in the cement industry, a major consumer of limestone, has decreased by 5 percent. E. Since the demand for limestone is highly inelastic, limestone manufacturers are able to shift the entire burden of the tax to consumers

C. The marginal private cost of producing limestone at this quarry is now equal to the marginal social cost as estimated by the research group.

"The case said the XYZ Company was in a very competitive industry . . . and the case said that the company had all the business it could handle." Given this information, what price do you think Tobias argued the company should charge? A. A price below the market price. B. A price above the market price. C. The market price.

C. The market price.

If a network externality is present for a product, then A. producers may be more likely to supply the product to avoid market failure. B. producers may be less likely to supply the product because it is less unique. C. consumers may be more likely to buy the product because it is more useful. D. producers may be more likely to supply the product to create path dependence. E. producers may be less likely to supply the product to avoid switching costs.

C. consumers may be more likely to buy the product because it is more useful.

Financial statements mandated by the Securities and Exchange Commission: -A. eliminate information costs because managers present accurate information. -B. eliminate information costs because these statements report economic profit. -C. don't eliminate information costs because some firms may be too new to have much information. -D. don't eliminate information costs because they don't use generally accepted accounting principles. -E. don't eliminate information costs, these statements don't report liabilities

C. don't eliminate information costs because some firms may be too new to have much information.

Despite the fact that few firms sell identical products in markets where there are no barriers to entry, economists believe that the model of perfect competition is important because: A. this is the type of market that our business laws protect and promote. B. economists prefer studying theoretical markets instead of actual markets. C. it is a benchmark—a market with the maximum possible competition—that economists use to evaluate actual markets that are not perfectly competitive. D. all markets eventually become perfectly competitive.

C. it is a benchmark—a market with the maximum possible competition—that economists use to evaluate actual markets that are not perfectly competitive.

The distinction between a normal and an inferior good is: A. when income increases, demand for a normal good decreases while demand for an inferior good increases. B. normal goods are used for the same purposes while inferior goods are used together. C. when income increases, demand for a normal good increases while demand for an inferior good falls. D. normal goods are used together while inferior goods are used for the same purposes

C. when income increases, demand for a normal good increases while demand for an inferior good falls.

When new firms enter a monopolistically competitive market, the economic profits of existing firms: A. will remain unchanged because they sell differentiated products. B. will increase because their average cost of production will decrease. C. will decrease because their demand curves will shift to the left. D. will decrease because their demand curves will become more inelastic. E. will decrease because their demand curves will shift to the right

C. will decrease because their demand curves will shift to the left.

The law of demand holds in the market for three goods, X, Y, and Z. An increase in the price of X causes an increase in the price of Y. A decrease in the price of X causes a decrease in the demand for Z. Which of the following conclusions is most strongly supported by the information given above? A. Y and Z are inputs in the production of X. B. X and Y are substitutes. C. The slope of the demand curve for X is zero. D. Z is a substitute for input X in the production of Y. E. Y and Z are complements

D. Z is a substitute for input X in the production of Y.

With a downward-sloping demand curve, average revenue is equal to price: A. since average revenue is the slope of the demand curve. B. because the firm must lower its price to sell additional units. C. because the downward slope is constant. D. actually, average revenue is always equal to price, whether demand is downward sloping or not.

D. actually, average revenue is always equal to price, whether demand is downward sloping or not.

If the industry is monopolistically competitive, the reaction of consumers: A. would be to switch to a lower-priced wine. B. would be to stop drinking wine. C. would be to buy none of Jerry's wine. D. could be to remain loyal to Jerry's and pay the higher price

D. could be to remain loyal to Jerry's and pay the higher price.

A market is perfectly competitive if: -A. it has many buyers and many sellers, all of whom are selling differentiated products, with no barriers to new firms entering the market. -B. it has many buyers and a few sellers, all of whom are selling differentiated products, with barriers to new firms entering the market. -C. it has many buyers and a few sellers, all of whom are selling identical products, with no barriers to new firms entering the market. -D. it has many buyers and many sellers, all of whom are selling identical products, with no barriers to new firms entering the market. -E. it has many buyers and one firm, which produces a product with no close substitutes, with barriers to new firms entering the market.

D. it has many buyers and many sellers, all of whom are selling identical products, with no barriers to new firms entering the market.

Looking forward to ten years from now, you would expect Panera's economic profit per restaurant to be: A. the same because the market Panera serves will remain stable. B. the same because Panera's product is so unique. C. higher because Panera will become more productive. D. lower because more firms will imitate Panera.

D. lower because more firms will imitate Panera.

To maximize profit, a monopolistically competitive firm produces output up to the point where: A. demand equals average cost. B. demand equals marginal cost. C. marginal revenue equals demand. D. marginal revenue equals marginal cost

D. marginal revenue equals marginal cost.

Is this firm maximizing profits if it chooses to produce 7 units of output? Explain. If the firm chooses to produce 7 units of output, then it is: A. not maximizing profit because marginal cost is less than demand, so the firm should produce more. B. maximizing profit because marginal cost is equal to marginal revenue. C. not maximizing profit because marginal cost is greater than marginal revenue, so the firm should produce more. D. not maximizing profit because marginal cost is greater than marginal revenue, so the firm should produce less. E. maximizing profit because marginal cost is greater than marginal revenue.

D. not maximizing profit because marginal cost is greater than marginal revenue, so the firm should produce less.

Do producers tend to favor price floors or price ceilings? Why? Producers favor: A. price floors because, when binding, price floors decrease price below the equilibrium and increase producer surplus. B. price floors because, when non-binding, price floors increase price above the equilibrium and may increase producer surplus. C. price floors because, when binding, price floors increase price above the equilibrium and decrease deadweight loss. D. price floors because, when binding, price floors increase price above the equilibrium and may increase producer surplus. E. price ceilings because, when binding, price ceilings increase price above the equilibrium and may increase producer surplus.

D. price floors because, when binding, price floors increase price above the equilibrium and may increase producer surplus.

Marginal benefit is: A. the additional cost of producing one more unit. B. the difference between the highest price a consumer is willing to pay and the price the consumer actually pays. C. a legally determined maximum price that sellers may charge. D. the additional benefit from consuming one more unit.

D. the additional benefit from consuming one more unit.

Perfectly competitive firms should produce the quantity where: A. the difference between fixed costs and variable costs is as large as possible. B. the market price is as high as possible. C. their individual price is as high as possible. D. the difference between total revenue and total cost is as large as possible. E. their individual price is equal to the market price.

D. the difference between total revenue and total cost is as large as possible.

When the demand curve shifts to the right... A. the equilibrium price will increase and the equilibrium quantity will decrease. B. the equilibrium price and quantity will both decrease. C. the equilibrium price will decrease and the equilibrium quantity will increase. D. the equilibrium price and quantity will both increase.

D. the equilibrium price and quantity will both increase.

If the demand (in perfect comp.) for oranges increases, then the market: A. will supply additional oranges because government bureaucrats will order additional orange production. B. will supply additional oranges because producers are price takers. C. will not supply additional oranges because consumers are not willing to pay higher prices for fruit. D. will supply additional oranges because producers seek the highest return on their investments. E. will not supply additional oranges because oranges produced by different sellers are identical.

D. will supply additional oranges because producers seek the highest return on their investments.

As new firms enter the market, a monopolistically competitive firm can maintain profits by: A. discovering new ways of differentiating its product. B. securing tax breaks and/or subsidies from government. C. finding new ways of lowering the cost of producing its product. D. All of the above. E. A and C only

E. A and C only.

What are the implications of marginal opportunity costs on the shape of the production possibilities frontier? A. PPF will be bowed inward. B. PPF will have a positive slope. C. PPF will be a straight line. D. PPF will have a negative slope. E. PPF will be bowed outward

E. Bowed outward

Which of the following, if true, will strengthen Bertha's argument? A. Luke's Express Diner recorded a 5 percent decline in net profits this year as compared to the previous year. B. Like most other restaurants in town, Luke's Express Diner offers specials and regular discounts to attract customers. C. The number of people in town who eat out has increased over the last ten years. D. The ratio of returning customers to new ones at Luke's is high. E. The ratio of the burger's price to the cost of producing the burger is high

E. The ratio of the burger's price to the cost of producing the burger is high.

What goods and services will be produced, how will the goods and services be produced, and who will receive the goods and services are determined: A. in centrally planned economies by the government. B. in market economies by the decisions of households and firms interacting in markets. C. in centrally planned economies partly by the decisions of buyers and sellers interacting in markets and partly by the government. D. in mixed economies by the decisions of buyers and sellers interacting in markets. E. both a and b are true

E. both a and b are true.

In perfectly competitive markets, prices are determined by: A. consumers because firms individually are very small relative to the market. B. consumers because firms sell identical products. C. firms because they each have market power. D. firms because they sell differentiated products. E. the interaction of market demand and supply because firms and consumers are price takers

E. the interaction of market demand and supply because firms and consumers are price takers.

Is the following statement correct or incorrect? "According to the model of perfectly competitive markets, the demand for wheat should be a horizontal line. But this can't be true: When the price of wheat rises, the quantity of wheat demanded falls, and when the price of wheat falls, the quantity of wheat demanded rises. Therefore, the demand for wheat is not a horizontal line."

Incorrect. The commentator is confusing the market demand for wheat with the demand line facing the representative firm.

Q61: where does the firm achieve productive efficiency?

Intersection between ATC and MC

Does it indicate that gasoline-powered cars and hybrids are substitutes or complements?

Substitutes, because the more consumers buy of one good, the less they will buy of the other good.

Refer to the figure to the right. What will happen if there is entry into the market? (demand curve will shift LEFT/RIGHT)

The demand curve will shift to the left.

Which one is best suited to find the quantity demanded at a price of $4.00?

The demand schedule

In the long run, if Kim's restaurant continues to be the only one in town selling and they earn economic profits, is the restaurant a monopoly?

Yes