Economics quiz questions

If the price of a good increases by 10% and the quantity demanded changes by 15% then the price elasticity of demand is equal to

1.5

antitrust policy refers to government:

Attempts to prevent the acquisition of monopoly power

If the demand curve is perfectly horizontal, then

Consumer surplus will be zero

in an oligopoly, collision between firms usually leads to higher profits than noncooperative behavior. In spite of this truth, overt collusion doesn't usually occur because: I. it is illegal II. there is an incentive for each firm to cheat on a collusive agreement III. an oligopolistic firm will typically prefer lower profits for itself if the only way to make higher collective profits in the industry is to improve the profit position of its rivals

I and II

in the short run, fixed cost:

Is constant

the marginal revenue received by a firm in a perfectly competitive market:

Is the change in total revenue divided by the change in output

a perfectly competitive firm is a:

Price taker

The price elasticity of demand for cell phones has been estimated to be 0.1 in the short run. If the government of China restricts access to rare earth metals (raw materials used in cell phone production), causing the price of cell phones (for which rare earth metals are an input in production) to increase, how will that affect total consumer expenditure of cell phones in the short run, all other things equal?

Quantity demanded will not change much, but total revenue will rise

an outward shift of the US economy's production possibility frontier could represent

US economic growth

Ralph is offered a free ticket to a Yankees game - a ticket he cannot resell. His opportunity cost of going to the baseball game is:

Whatever Ralph would have done had he not gone to the game

The larger the output, the more output over which the fixed cost is distributed. Called the _____ effect, the leads to a ______ average fixed cost as output rises a. spreading lower b. diminishing returns; lower c. spreading; higher d. diminishing returns; higher

a. spreading lower

accounting profits is the difference between _____ and _____ a. total revenues; total costs b. total sales; total revenues c. marginal costs marginal revenues d. total profits; total costs

a. total revenues; total costs

a technological improvement has been developed in the production of mangos. At the same time, scientists have discovered that mangos have significant health benefits. This will result in:

an increase in the equilibrium quantity and an uncertain effect on the equilibrium price of mangos

The market for wheat in North Dakota is considered to be competitive. This means there are ____ buyers and _____ sellers of corn in North Dakota a. few; many b. many; many c. many; few d. few; few

b. Many; many

the amount by which total utility ______ when an additional unit of a good is consumed is the _____ a. increases; income effect b. changes; marginal utility c. changes; average utility d. decreases maximum utility

b. changes marginal utility

OnFernando de Noronha, a small tourist island in Brazil, an additional minute of high-speed Internet service would likely have a ____ marginal utility that in Boston, while in Boston, quiet evenings would carry a ___ marginal utility than on a small island paradise a. lower; lower b. higher; higher c. lower; higher d. higher; lower

b. higher; higher

Assuming that diminishing marginal utility applies to both goods, if a consumer buys more plastic storage containers from Ikea and fewer hangers from Costco, the ____ utility of storage containers will ____, and the ____ utility of hangers will a. total; fall; marginal; rise b. marginal; fall; marginal; rise c. marginal; rise; total; rise d. marginal; fall; marginal; fall

b. marginal; fall; marginal; rise

which of the following does NOT describe the condition of a perfectly competitive market a. a great number of buyers b. that firms attempt to maximize their total revenue c. a standardized product d. easy entry into and exit from the market

b. that firms attempt to maximize their total revenue

suppose we observe an increase in both the price of ping pong tableland the quantity of ping pong tables bought and sold. Which of the following would explain this observation? a. a decrease in the demand for ping pong tables b. a violation of the law of demand c. an increase in the demand for ping pong tables d. an increase in the supply of ping pong tables

c. an increase in the demand for ping pong tables

According to the law of demand, if the price of steak in Vermont _______, the quantity of steak demanded in Vermont will _______ a. is below equilibrium, increase b. is above equilibrium, decrease c. increase, decrease d. increases, increase

c. increases, decrease

You own an orange juice stand in a competitive market, and so you are a price taking firm. Which event would MOST likely increase your market power? a. a booming economy increases the demand of orange juice and attracts entry into the market b. the average total cost curve for firms in the industry becomes horizontal c. you acquire exclusive rights to harvest oranges from all domestic citrus orchards d. government abolishes the system of patents and copyrights

c. you acquire exclusive rights to harvest oranges from all domestic citrus orchards

Economists tend to believe that to change people's behavior, you must:

change people's incentives

when two firms in an industry agree to fix the price of a product at a given level, it is called

collusion

the law of demand implies that

consumers will buy more at lower prices

Which statement about the difference between monopoly and perfect competition is INCORRECT? a. monopolist is a price maker, whereas a perfect competitor is a price taker b. a monopoly can earn positive economic profits in the long run, whereas a perfect competition cannot c. A monopoly changes a higher price and produce a small quantity than a competitive market with the same demand and cost structure d. a monopoly can earn economic profits in the long run because it produces more and charges a higher price than a perfect competitor does

d. a monopoly can earn economic profits the long run because it produces more and charges a higher price than a perfect competitor does

Terrence makes headphones for mobile devices. When 20 headphones are produced in the short run, the average variable cost is $5, and the average total cost is $8 per set. Terrence's: a. marginal cost is equal to its average fixed cost b. marginal cost is less than $3 per set c. marginal cost is $3 per set d. average fixed cost is $3 per set

d. average fixed cost is $3 per set

willy consumes post-it notes and paper and is maximizing his utility in his consumption of the two goods. The price of post-it notes rises. After the change in price, Willy should fewer ____ post-it notes and _____ paper a. more; less b. more; more c. fewer; less d. fewer; more

d. fewer; more

Catherine has a linear demand curve for cotton candy. If she wants to see her consumer surplus ____, she would like to see a(n)_____ in the market price fo cotton candy a. increase; increase b. decrease; decrease c. increase; decrease d. not change; decrease

d. increase, decrease

Which statement is TRUE? a. the fact that firms adjust prices in response to other firms adjusting their price is proof of tacit collusion b. Tacit collusion is legal in the US c. Once and industry has achieved tacit collusion, producers will earn monopoly profits d. it is difficult to determine how much tacit collusion exists in a particular industry; hence, tacit collusion remains hard to prosecute in the US

d. it is difficult to determine how much tacit collusion exists in a particular industry; hence, tacit collusion remains hard to prosecute in the US

Which statement is true? a. monopolies are usually economically efficient because they have economic profits with which to work b. monopolies produce too much and charge too much, from the standpoint of efficiency c. monopolies are characterized by inefficiency but not by deadweight loss d. monopolies produce too little and charge too much, from the standpoint of efficiency

d. monopolies produce too little and charge too much, from the standpoint

the price elasticity of demand for a good will tend to be smaller: a. if it relatively expensive b. if it is a common item c. the longer the time available to adjust the price changes d. the fewer substitute goods are available

d. the fewer substitute goods are available

If the long-run market supply curve for a perfectly competitive market is downward sloping, then this industry exhibits ____ costs

decreasing

diminishing marginal returns occur when:

each additional unit of a variable factor adds less to total output than the previous unit

models are useful because they enable economists to:

emphasize basic relationships by abstracting from the complexities of everyday life

one government policy sometimes used to address natural monopolies to:

impose a price ceiling to reduce economic profit

all points outside the production possibility frontier are

infeasible

a choice made at the margin:

is a choice regarding whether to do a little more or a little less of an activity

the _____ is the increase in output that is produced when a firm hires an additional worker

marginal product

google is often cited as an example of a company that grew into a monopolist through

network externalities

the purpose of antitrust policy is to

prevent the exercise of monopoly power

the elasticity of demand measures the responsiveness of quantity demanded to changes in

price

suppose the price of heating oil increases by 10%, and the quantity of heating oil demanded in Montauk drops by 5% per day. The demand for heating oil in Montauk is

price inelastic

an increase in the price of strawberries causes strawberry jam producers and consumers to expect that the price of strawberry jam will rise in the future. In the market for strawberry jam, both the equilibrium price and the equilibrium quantity increase. It must be the case that

the demand for strawberry jam increased by more than the supply of strawberry jam decreased

The price elasticity of demand for gasoline tends to be rather inelastic as:

there are few or no available substitutes

many parking lots have specially located spaces for individuals with disabilities. Further, the provision of special parking passes for those with disabilities often requires that there be more spaces available than can be used at any given time. As a result, many of these parking spaces, which take space that could be used for regular parking, are often vacant. This scenario illustrates the

trade-off between efficiency and equity

Economists refer to the satisfaction a person derives from the consumption of goods and services as:

utility

scarcity occurs in economics because

we often do not have sufficient resources to achieve our objectives