Final Econ 202 Exam
The antitrust act that says, "Every contract, combination in the form of trust or otherwise, or conspiracy, in restraint of trade or commerce among the several states, or with foreign nations, is hereby declared to be illegal" is the
a. Sherman Act.
79. Which of the following was declared illegal by the Sherman Act of 1890?
a. a conspiracy in restraint of trade
48. The Herfindahl index is obtained by
a. adding the squares of the market shares of each firm in the industry.
90. Natural monopolies exist because of
a. economies of scale.
30. If government regulators want a natural monopolist to earn only zero economic profits, then they will set a price
a. equal to average total cost (ATC).
31. If average total costs for a natural monopoly are declining where they intersect demand, and government regulators set the price equal to marginal cost, then the firm will
c. likely suffer a loss.
61. The Sherman Act of 1890
c. made monopolization of trade a misdemeanor.
100. Suppose that in an industry of ten equal-sized firms, two of the firms plan to merge. The Justice Department will probably __________ the merger, because it would cause the Herfindahl index to rise by __________.
c. oppose; more than 100
74. The natural monopolist might have the incentive to decrease cost under
c. output regulation.
72. If natural monopolies are regulated to produce where there is resource-allocative efficiency, they produce where
c. price equals marginal cost.
"Exclusive dealing" is
c. selling to a retailer on the condition that the retailer not carry any rival products.
14. The Robinson-Patman Act of 1936 prohibited
c. suppliers from offering price discounts to large retailers unless they also offered discounts to all other retailers.
The antitrust legislation that declares illegal "unfair methods of competition in commerce" is
c. the Federal Trade Commission Act.
41. The capture theory of regulation contends that
c. the regulatory agency is eventually "captured" by the special interests of the industry being regulated.
The Federal Trade Commission Act of 1914 declared illegal
c. unfair or overly aggressive methods of competition.
67. The Robinson-Patman Act of 1936
d. prohibited suppliers from offering special discounts to large chain stores without offering them to everyone else.
Which of the following is an example of government regulation of a natural monopoly distorting incentives?
e. a, b, and c
89. If the four-firm concentration ratio in an industry is 80 percent, and the top four firms hold equal market shares, the Herfindahl index for the industry is
e. cannot be determined without further information
69. The Wheeler-Lea Act of 1938
e. empowered the FTC to deal with false and deceptive acts or practices.
Economists insist that government regulation
e. has benefits that may be greater than, less than, or equal to the costs.
28. Which of the following is usually considered a natural monopoly?
e. none of the above
Price Controls
government-imposed limits on the prices that producers may charge in the market Price controls are used in order to regulate the prices and ensure that they do not become extremely overpriced. Ex: The government set a limit that a grocery store cannot charge more than $7 for a gallon of milk.
Say the following two events occur at the same time: 1) an increase in the price of steel, an input in the production of cars; 2) an increase in the price of gasoline, a complement of cars. The following two events would lead to a(n) _________ in the market price and a(n) __________ in the market quantity of cars.
indefinite change; decrease
Say the following 2 events occur at the same time: 1) a decrease in the price of steel, an input in the production of cars; 2) a decrease in the price of gasoline, a complement of cars. The following two events would lead to a(n) _________ in the market price and a(n) __________ in the market quantity of cars.
indefinite change; increase
Say the following two events occur at the same time: 1) a decrease in the price of milk, an input in the production of cheese; 2) a decrease in the price of bagels, a complement of cheese. The following two events would lead to a(n) _________ in the market price and a(n) __________ in the market quantity of cheese.
indefinite change; increase
For a union to be successful in increasing the total wage bill received by its members by forcing up the wage rate, the demand curve for labor needs to be
inelastic
If the percentage change in quantity demanded is less than the percentage change in price for good Y then the demand curve for good Y is
inelastic
If for good Z income elasticity is less than 1 but greater than zero, then demand for good Z is income __________, and good Z is a(n) __________ good. Question options: unit elastic; normal inelastic; inferior elastic; normal elastic; an inferior inelastic; normal
inelastic; normal
Economists believe that people's wants are
infinite
Refer to EXHIBIT 14-7. The marginal factor cost of increasing employment from 20 to 30 workers
is $14
The profit-maximizing monopolistic competitor produces where price
is greater than both marginal cost and marginal revenue
Productive efficiency implies that
it is impossible to obtain gains in one area without losses in another
Refer to the exhibit. If price P1 is a price floor then
it is the lowest price that can legally be charged in the market for good X
Demand for labor is affected by Question options: marginal revenue nonpecuniary aspects wage rates in other labor markets marginal physical product training costs
marginal revenue marginal physical product
Efficiency is consistent with
maximizing net benefits and equating marginal benefits and marginal costs
The cost of sensors used in making digital cameras falls, while a successful ad campaign makes digital cameras more fashionable. As a result, the equilibrium relative price of digital cameras ________ and the equilibrium quantity ________.
may increase, decrease, or stay the same; increases
Supply Price
the price at which producers will supply that quantity The supply price is the price at which producers will supply that quantity.
If there is a shortage of parking spaces in the downtown business district, ________.
the price of parking downtown is below its equilibrium price.
If there is a surplus of wheat on the market,
the price of wheat will fall.
Market Clearing Price
the price that clears the market where there is no excess quantity demanded or supplied and the price at which the demand curve intersects the supply curve. The point where the supply and demand curve intersect is called the market clearing price.
Other factors held constant, as the price of an iPad rises:
the quantity demanded for iPads falls.
If the price of corn is rises, we would expect:
the quantity of corn supplied to rise.
As the wage rate rises, Question options: the supply of labor rises. the quantity demanded of labor rises. the quantity supplied of labor rises. the demand for labor falls. a and d
the quantity supplied of labor rises.
The market demand for singing dolls is initially made up of 50 buyers. Suppose there is a decrease in the number of buyers by 10. Holding everything else constant, one would expect:
the quantity supplied to decrease.
Since most colleges and universities charge the same tuition to every student regardless of what time students choose to take their classes
the schools must develop some type of non-price rationing device ; it follows that some classes will likely have shortage of seats while other classes may have a surplus of seats
The lower the elasticity of demand for labor,
the smaller the cutback in labor for a given wage increase.
It is certain that the equilibrium quantity will rise when:
the supply curve and the demand curve both shift to the right.
The general and likely purpose of a (labor) strike is to convince management that
the supply curve of labor is what the union says it is.
It is certain that the equilibrium price will rise when:
the supply curve shifts to the left and the demand curve shifts to the right.
It is certain that the equilibrium price will fall when:
the supply curve shifts to the right and the demand curve shifts to the left.
Cartels often dissolve because
their members often cheat on the cartel agreements because they have incentive to
If the price of gasoline rises, then:
there is an upward movement along the demand curve for gasoline.
The key behavioral assumption of the cartel theory is that oligopolists in the industry act as if Question options: all firms in the industry are the same size. all firms in the industry are price takers. there is a dominant firm in the industry and many fringe firms. there is only one firm in the industry. none of the above
there is only one firm in the industry
Economic profit is calculated as follows: Question 9 options: Implicit Costs - Total Revenue (Explicit Costs + Implicit Costs) - Total Revenue Total Revenue - (Explicit Costs + Implicit Costs) Total Revenue - Implicit Costs
Total Revenue - (Explicit Costs + Implicit Costs)
Accounting profit is calculated as follows: Question 6 options: Total Revenue - Implicit Costs Explicit Costs - Total Revenue Total Revenue - Explicit Costs Implicit Costs - Total Revenue
Total Revenue - Explicit Costs
Profit is calculated as follows: Question 7 options: Logrithmic Revenue Total revenue - Total cost Logrithmic Cost Total cost - Total revenue
Total revenue - Total cost
A decrease in demand, with no change in supply, will lead to ________ in equilibrium quantity and ________ in equilibrium price.
a decrease; a decrease
A decrease in supply, with no change in demand, will lead to ________ in equilibrium quantity and ________ in equilibrium price.
a decrease; an increase
A decrease in demand and a decrease in supply will lead to ________ in equilibrium quantity and ________ in equilibrium price.
a decrease; an indeterminate change
Inferior Good
a good for which, other things equal, an increase in income leads to a decrease in demand Inferior goods decrease in demand when people increase their income. Ex: Apartments are considered inferior goods because they are less in demand when people have a raise in income.
Normal Good
a good for which, other things equal, an increase in income leads to an increase in demand When income increases, there is an increase in the demand for a normal good. Ex: Bob's dad got a raise, now Bob's father would like to buy a home.
Deadweight Loss
a loss of total surplus that occurs because the quantity of a good that is bought and sold is below the market equilibrium quantity A deadweight loss occurs when a surplus is lost because the quantity bought and sold is below the market equilibrium quantity.
A monopsony, as compared to a perfectly competitive firm, pays __________ wage and hires __________ labor.
a lower; less
Suppose the demand curve for good Z is downward sloping. If the price of good Z decreases because of a shift in the supply of good Z, this will cause:
a movement along the demand curve of good Z.
The movement from point A to point B is a movement from
a productive efficient point to another productive efficient point
For consumers, pizza and hamburgers are substitutes. A rise in the price of a pizza causes ________ in the equilibrium price of a hamburger and ________ in the equilibrium quantity of hamburgers.
a rise; an increase
An ambiguous change in price and a decrease in quantity are most likely caused by:
a shift to the left in supply and a shift to the left in demand.
An increase in the price and an ambiguous change in quantity is most likely caused by:
a shift to the left in supply and a shift to the right in demand.
Many public utilities burn oil to generate electricity. If the price of oil increases, we would expect there to be:
a shift to the left in the supply curve of electricity and a higher price for electricity.
Consider two competing motorcycle manufacturers, Harley-Davidson and Honda. If Harley-Davidson raises the price of its motorcycles, we can expect:
a shift to the right in the demand curve for Hondas and higher prices for Hondas.
Consider gas stations where customers pay inside before they pump gasoline. If they introduce a new technology where customers pay at the pump, thus decreasing production costs, there will be:
a shift to the right in the supply curve and lower gas prices.
With a constant opportunity cost between goods A and B the PPF for goods A and B would be
a straight line
A demand schedule is:
a table showing how much of a good consumers will buy at different prices.
Jake is an excellent barber. However all customers who come to him for a haircut must buy a bottle of shampoo. This type of arrangement is known as
a tie-in sale
Refer to Exhibit 28-2. The union wants management to believe the supply curve of labor is S'S instead of SS. What does supply curve S'S represent?
It represents a situation where management cannot hire workers for less than W2, and if the firm wants to hire more than Q3 workers it will have to pay more than W2.
A firm will maximize its profits by hiring factors up to the point at which Question options: MR = MC, if the firm is a monopolist, monopolistic competitor, or oligopolist. P = MC, if the firm is a perfect competitor. MRP = MFC. VMP = MFC, if the firm is a price searcher (monopolist, etc.). a and b
MRP = MFC.
If a monopsonist is hiring factors, it will choose to hire that quantity at which __________ and pay a wage rate that is __________.
MRP = MFC; less than labor's MRP
MRP = MFC; equal to labor's MRP the supply curve of labor intersects the demand curve for labor; equal to labor's MRP MR = MC; equal to labor's MRP MRP = MFC; less than labor's MRP
MRP = MFC; less than labor's MRP
Suppose that, as incomes in your community increase, the demand for taxi service increases and the demand for bus service decreases. From this, we can conclude that
Taxi service is a normal good; bus service is an inferior good.
Which act banned anti-competitive mergers that occurred as a result of one company acquiring the physical assets of another company. Question options: The Robinson-Patman Act (1936) The Wheeler-Lea Act (1938) The Celler-Kefauver Antimerger Act (1950) The Clayton Act (1914) The Federal Trade Commission Act (1914) The Sherman Act (1890)
The Celler-Kefauver Antimerger Act (1950)
Which act made tying contracts and exclusive dealings illegal? Question options: The Sherman Act (1890) The Celler-Kefauver Antimerger Act (1950) The Clayton Act (1914) The Federal Trade Commission Act (1914) The Robinson-Patman Act (1936) The Wheeler-Lea Act (1938)
The Clayton Act (1914)
Refer to Exhibit 5-1, which shows supply and demand for freeway space at both 8 a.m. and 11 p.m. Which toll creates equilibrium at 11 p.m.? Question options: P2 P1 0 it is not constant
0
If the top four firms account for $85 billion in sales and total industry sales are $250 billion
0.34
If the top four firms account for $85 billion in sales and total industry sales are $250 billion, it follows that the four-firm concentration ratio is Question options: 0.34 1.34 0.66 1.66
0.34
The opportunity cost of one unit of Y in country A is Question options: 2 units of X. 10 units of X. 1 unit of X. 0.75 units of X.
1 unit of X
Suppose you manage a corner grocery store. If peanut butter is an inferior good, what do you suppose would happen to the price and quantity sold of peanut butter as incomes fall during an economic recession?
The price and quantity would both increase.
Equilibrium Price
The price at which the amount of goods producers supply meets the amount of goods consumers demand. The equilibrium price is established when the consumers demand is equivalent to the sellers supply.
Suppose that supply increases and demand decreases. What is the most likely effect on price and quantity?
The price will decrease, but quantity may increase, decrease, or stay the same.
In the market for grass-fed beef, what would cause a price increase?
The prices of grass and corn increase.
Law of Supply
The principle that suppliers will normally offer more for sale at higher prices and less at lower prices The law of supply states that a supplier offers a larger quantity at a higher price. Ex: 20 apples for $20 and 40 apples for $40.
Surplus
A situation in which the quantity supplied is greater than the quantity demanded When too much product is produced it is called a surplus. Ex: 80 pairs of shoes are needed, 100 are produced.
Supply Curve
A supply curve is a visual representation of the price of a product and the quantity being sold. A curve that shows the relationship between the price of a product and the quantity of the product supplied.
Demand Schedule
A table that lists the various quantities of a product or service that someone is willing to buy over a range of possible prices A demand schedule is a table that lists the price of something determined on the quantity purchased.
Which of the following is not correct about contestable markets? Question 5 options: Firms exiting the market can easily dispose of their fixed assets by selling them elsewhere. There is easy entry into and costless exit from the market. New firms entering the market can produce the product at the same cost as current firms. Firms already in the market have technological advantages.
Firms already in the market have technological advantages.
When the quantity of cars supplied is larger than the quantity of cars demanded the equilibrium price of cars will tend to:
Decrease
A decrease in buyers' income in the market for radios will _______ the market price and ________ the market quantity of radios, a normal good.
Decrease; decrease
A decrease in the price of coffee will _______ the market price and ________ the market quantity of tea, a substitute for coffee.
Decrease; decrease
An increase in buyers' income in the market for second hand clothing will _______ the market price and ________ the market quantity of second hand clothing, an inferior good.
Decrease; decrease
An increase in the price of bagels will _______ the market price and ________ the market quantity of cream cheese, a complement of bagels.
Decrease; decrease
A decrease in the price of corn, an input in the production of ethanol, will _________ the market price and ________ the market quantity of ethanol.
Decrease; increase
When the price of wine increases, the quantity of wine demanded:
Decreases
12. In the Utah Pie antitrust case, the Supreme Court ruled against Utah Pie because the company was just using the antitrust laws to harm its competition.
F
14. The capture theory of regulation holds that regulators use their influence and power to support the well being of the regulatory agency itself.
F
2. The Wheeler-Lea Act of 1938 was designed to close the merger loophole that remained in the Clayton Act.
F
3. The Herfindahl index of a monopoly is 1,000.
F
8. Under profit regulation, a natural monopolist has an incentive to be very careful about minimizing costs.
F
Economists are nearly unanimous in their belief that small firms in highly competitive markets with many rivals are more likely to innovate than are firms with larger maket shares.
F
Consumer surplus is greater for a monopolistic firm. Question 1 options: True False
False
Which of the following is a possible objective of labor unions?
"Employment for all union members", "Maximizing the total (union) wage bill", and "Maximizing income for a limited number of union members".
Labor unions generally favor
"import restrictions", "strict immigration laws", and "increasing the minimum wage".
To increase the wages of its members, a labor union might attempt to
"lower the elasticity of demand for its labor" and "increase the demand for union labor".
The traditional (or orthodox) view of labor unions is that they
"negatively impact productivity and efficiency" and "drive an artificial wedge between the wages of comparable labor in the union and nonunion sectors of the labor market".
In your text there is an exhibit that shows (for selected industries) the median weekly earnings of workers represented by labor unions and the median weekly earnings of workers not represented by labor unions. The point to be made by this comparison is that in some cases,
"nonunion workers earn more than union workers (which is different from what most people expect)" and "union workers earn more than nonunion workers".
If a labor union can affect __________, it can affect its wage-employment tradeoff.
"the availability of substitutes for the product it produces" and "availability of substitute factors".
In collective bargaining,
"union members act together as a single unit" and "the objective of the union is to increase its bargaining power with management".
Refer to exhibit 22-2. What is the variable total cost of producing 120 units of outputs?
$1.00
Refer to exhibit 22-2. The dollar amounts that go in blanks (a) and (B) are
$1.00 and $0.75
If the absolute price of a new car is forty-thousand dollars and the relative price of a laptop computer in terms of cars is 1/40 of a car it follows that the absolute price of the laptop is
$1000
Consider the following information about a business Diane opened last year: price = $15, quantity sold = 25,000; implicit cost = $155,000; explicit cost = $260,000. What was Diane's accounting profit? Question options: $40,000 $115,000 -$40,000 $220,000 Not enough information
$115,000
Refer to Exhibit 28-7. The marginal factor cost of increasing employment from 40 to 50 workers is
$18
Refer to exhibit 22-2. What is the average total cost of producing 90 units of outputs?
$2.11
Refer to EXHIBIT 14-12. As the firm increases employment from 3 to 4 workers, its marginal factor cost (MFC) is
$26
Refer to exhibit 23-7. At the profit-maximizing output level average total cost is
$5.00
Refer to exhibit 23-7. What is the profit at 60 units of output?
$60
Inefficient Allocation of Sales Among Sellers
(a result of price floors) those who would be willing to sell the good at the lowest price are not always those who manage to sell it Inefficient Allocation of Sales Among Sellers happens when someone who is willing to sell the good for a lower price doesn't sell much of the product. Ex: Sally was willing to sell the product for $5, Wilma was willing to sell the product for $10. Wilma ended up getting all of the sales.
An increase in the price of sugar (an ingredient for soft drinks) and an increased concern about tooth decay caused by the consumption of soft drinks will result in which of the following in the soft drink market?
Equilibrium quantity will decrease, but equilibrium price may decrease, increase, or stay the same.
Monopolistic competitors produce an output smaller than the one that would minimize its unit costs of production. This is called Question 2 options: Diminished Productive Capacity Productive Efficiency Excess Capacity Theorem Resource Allocation Efficiency
Excess Capacity Theorem
_____ the cost incurred when an actual payment is made. Question 1 options: Parabolic Cost Logrithmic Cost Explicit Cost Implicit Cost
Explicit Cost
Oligopolies are built on these main assumptions: Question 3 options: High barriers to entry There are few buyers and many sellers There are many buyers and few sellers Each firm produces and sells a non-homogeneous or differentiated product Low barriers to entry Each firm produces and sells a homogeneous or differentiated product
High barriers to entry There are many buyers and few sellers Each firm produces and sells a homogeneous or differentiated product
Wedge
How much the government receives as a result of taxing the labor force The economic wedge is dependent on how much the government decides to tax the labor force. Ex: The government decides to tax the labor force 20% of their income, that's how much the economic wedge is.
Question 8 Saved _____ the cost that represents the value of resources used in production for which no actual payment is made. Question 8 options: Explicit Cost Implicit Cost Logrithmic Cost Parabolic Cost
Implicit Cost
An __________ in the quantity of resources will shift the PPF outward, while a __________ in the quantity of resources will shift the PPF inward. Question options: Increase; increase Increase; decrease Decrease; decrease Decrease; increase
Increase; decrease
An increase in the price of corn, an input in the production of ethanol, will _________ the market price and ________ the market quantity of ethanol.
Increase; decrease
A decrease in buyers' income in the market for second hand clothing will _______ the market price and ________ the market quantity of second hand clothing, an inferior good.
Increase; increase
A decrease in the price of bagels will _______ the market price and ________ the market quantity of cream cheese, a complement of bagels.
Increase; increase
An increase in buyers' income in the market for radios will _______ the market price and ________ the market quantity of radios, a normal good.
Increase; increase
An increase in the price of coffee will _______ the market price and ________ the market quantity of tea, a substitute for coffee.
Increase; increase
When the price of wine decreases, the quantity of wine demanded:
Increases
What causes a bowed-outward PPF? Question options: Increasing opportunity costs Comparative advantage Productive inefficiency Scarcity
Increasing opportunity costs
The law of __________ opportunity costs states that as more of a good is produced, the opportunity costs of producing that good __________. Question options: Increasing; decreasing Increasing; increase Decreasing; decrease Decreasing; increasing
Increasing; increase
When the price of wine decreases, the demand for wine:
Stays the same
A decrease in the price of butter will _________ the demand for margarine, a substitute for butter.
Decrease
Consider the following information about a business Diane opened last year: price = $15, quantity sold = 25,000; implicit cost = $155,000; explicit cost = $260,000. What was Diane's economic profit? Question options: $40,000 $115,000 -$40,000 $220,000 Not enough information
-$40000
If the price of good X is $90 and the price of good Y is $30 it follows that the relative price of one unit of good Y is __________ units of good X
.33
The opportunity cost of one unit of Y in country B is Question options: 1 unit of X. 0.5 units of X. 2 units of X. 20 units of X.
.5 units of X
If there are six firms in an industry and the market shares of the firms are 30 percent, 25 percent, 20 percent, 11 percent, 10 percent and 4 percent, the Herfindahl index is Question options: 8,600 86 10,000 2,162 2,046
2,162
If quantity demanded rises by 10 percent as price falls by 4 percent, the price elasticity of demand equals Question options: 0.40 2.50 14.00 0.04
2.50
The opportunity cost of moving from point B to A is
20
Refer to exhibit 22-1. The numbers that go in blanks (A) and (B) are
20 and 30
An industry has five firms. Each of the four firms in the industry has a market share of 22%. The last firm has a market share of 12%. Calculate the Herfindahl Index of the industry. Question options: 2080 88% 1936 100%
2080
If there are six firms in an industry and the market shares of the firms are 30 percent; 25 percent; 20 percent; 11 percent; 10 percent and 4 percent; the Herfindahl index is Question options: 2162. 2046. 8600. 10000. 86.
2162.
A supply surplus in the market for lettuce will _______ the equilibrium price of lettuce.
Decrease
83. If an industry consists of 25 firms holding equal market shares, the Herfindahl index is
400
Which of the following comes closest to being a monopsony?
A coal company who employees all of the workers in a given town
Refer to exhibit 23-7. The perfectly competitive profit-maximizing firm will produce ___________ units of output
60
An industry has five firms. Each of the four firms in the industry has a market share of 22%. The last firm has a market share of 12%. Calculate the four firm concentration ratio of the industry. Question options: 1936 2080 88% 100%
88%
Which of the following best describes demand?
A change in quantity demanded is a movement along the demand curve, and a change in demand is a shift in the demand curve.
Assuming that hardcover books are a normal good, which of the following could cause a decrease in demand for hardcover books?
A decrease in incomes
Inefficient Low Quality
A form of inefficiency in which sellers offer low-quality goods at a low price even though buyers would prefer a higher quality at a higher price; often a result of a price ceiling. Inefficient low quality happens when a good is bad quality and is sold at a low price, but people want a better quality good and are willing to pay more money. Ex: People want a good charger and are willing to pay $20 for it, but only poor chargers are made and cost $5.
In the market for corn tortilla chips, what would cause a price increase?
A fungus kills much of the corn crop in Nebraska.
Demand Price
A given quantity is the price at which consumers will demand that quantity The demand price is the price at which consumers will demand a certain quantity.
Substitutes
A good or service that may be used in place of another good or service; examples include tap water for bottled water (or vice versa) and movies for concerts (or vice versa). A substitute is used when the price of something goes up, people buy essentially the same product but a different brand. Ex: Pantene goes from $4 to $5, so the family changes from Pantene to Herbal Essences.
License
A government issued right to operate a business In order to own and operate a business, a person must obtain a business license. Ex: The woman obtained a business license in order to be a certified business within the government.
Demand Curve
A graph of the relationship between the price of a good and the quantity demanded. A demand curve shoes the relationship between the price and quantity demanded visually.
Price Floor
A legal minimum on the price at which a good can be sold The minimum price that a company can charge for a certain product is called a price floor. Ex: A company must at least sell their product for $3 in order to meet the price floor.
Assuming that yarn and knitting needles are complements, which of the following would cause an increase in the demand for yarn?
A lower price of knitting needles
Assuming that pretzels are a substitute for popcorn, which of the following would cause a decrease in the demand for pretzels?
A lower price of popcorn
Competitive Market
A market with a large number of buyers and of sellers, such that no single buyer or seller is able to influence the price or any other aspect of the market -- no one has any market control. In a competitive market there are so many buyers and sellers that one single party does not have a large impact on the market.
Equilibrium
A situation in which the market price has reached the level at which quantity supplied equals quantity demanded; The point at which quantity demanded and quantity supplied are equal When supply and demand are equivalent it is called equilibrium. Ex: 1000 pairs of shoes are needed, 1000 shoes are produced.
Perfect competition is a theory built on the assumption that: Question 8 options: There are many sellers and many buyers, none of which is large in relation to total sales or purchases. Each firm produces and sells a homogeneous product. Buyers and sellers have all relevant information about prices, product quality, sources of supply, and so forth. Firms have easy entry and exit. All of the above.
All of the above.
Assuming that paperback books are an inferior good, which of the following could cause a decrease in demand for paperback books?
An increase in incomes
Assuming that ice cream is a normal good, which of the following could cause an increase in the demand for ice cream?
An increase in the price of substitutes for ice cream, such as frozen yogurt
Buying a good at a low price and selling it for a higher price is called Question 10 options: Profit-Maximization Arbitrage Price discrimination Dead-weight Loss
Arbitrage
Which of the following best describes the law of demand?
As the price of a DVD rental rises, fewer DVDs are rented.
An increase in buyers' income will _________ the demand for public transportation, an inferior good.
Decrease
The theory of monopoly is built on all of the following except: Question 4 options: There is one product with no close substitutes Barriers to entry are high There is one seller Barriers to entry are low
Barriers to entry are low
_____ is an entity that employs factors of production to produce goods and services to be sold to consumers, other firms, and the government. Question 4 options: Producers Business Firm Companies Firm
Business Firm
At any moment the equilibrium price in the market for cars will be determined by ________ .
Buyers and the sellers of cars
At any moment the equilibrium price in the market for tablet computers will be determined by ________ .
Buyers and the sellers of tablet computers
Which of the following is true?
Buyers prefer lower prices to higher prices ceteris paribus
Refer to Exhibit 28-l. Four demand curves for labor are displayed: D1, D2, D3, and D4. Which provides the most pronounced wage-employment tradeoff?
D4
An increase in the price of gasoline will _________ the demand for cars, a complement of gasoline.
Decrease
A person who can produce a good at a lower cost than another person is said to have a __________ in the production of the good. Question options: Productive efficientcy Specialization Comparative advantage Productive inefficientcy
Comparative advantage
PW is the price that exists in the market before a tariff is imposed and PW + T is the price that exists in the market after a tariff is imposed. The tariff results in a net loss to society equal to area(s) Question options: DBE + FCG. EBCF. DBE + EBCF. FCG + EBCF. none of the above
DBE + FCG.
The demand for gasoline is rising. Which of the following statements describes a possible cause?
Consumers expect prices to rise in the near future.
Which of the following is not an assumption of the theory of perfect competition? Question options: There are many sellers and many buyers, none of which is large in relation to total sales or purchases. Buyers and sellers have all relevant information with respect to prices, product quality, and sources of supply. Each firm produces and sells a differentiated product. There is easy entry and exit.
Each firm produces and sells a differentiated product.
Supply and Demand Model
Economic model of price determination in a market If someone wants to know how much a specific item may cost they can determine it by using the supply and demand model.
Monopolistic competition is built on these main assumptions: Question 1 options: Each firm produces and sells the same product Entry and exit are easy Entry and exit are not easy There are many buyers and sellers There are few buyers and sellers Each firm produces and sells a slightly different product
Entry and exit are easy, There are many buyers and sellers, Each firm produces and sells a slightly different product
If tortilla chips are a normal good, what happens to equilibrium price and quantity when there is an increase in income?
Equilibrium price increases and equilibrium quantity increases.
An increase in the price of wheat, an important ingredient in the production of bread, combined with an increase in the number of people consuming bread, will result in which of the following changes in the bread market?
Equilibrium price will increase, but equilibrium quantity may decrease, increase, or stay the same.
The following are problems associated with cartels: Question 4 options: Forming a cartel can be illegal Forming a cartel can be expensive Formulating policy is nearly impossible Cartels cannot prevent industry entry of additional suppliers Cartel members have a strong incentive to cheat the cartel.
Forming a cartel can be illegal Forming a cartel can be expensive Formulating policy is nearly impossible Cartels cannot prevent industry entry of additional suppliers Cartel members have a strong incentive to cheat the cartel.
If country A is to specialize in the production of one of the two goods (and then trade that good with Country B), which good should it be and why? If Country B is to specialize in the production of one of the two goods (and then trade that good to with Country A), which good should it be and why? Question options: Good Y for Country A because it is the lower opportunity cost producer of good Y; good X for Country B because it is the lower opportunity cost producer of good X. Good X for Country A because it is the lower opportunity cost producer of good X; good Y for Country B because it is the lower opportunity cost producer of good Y. Good X for Country A because it is the higher opportunity cost producer of good X; good Y for Country B because it is the higher opportunity cost producer of good Y. Good Y for Country A because it is the higher opportunity cost producer of good Y; good X for Country B because it is the higher opportunity cost producer of good X.
Good X for Country A because it is the lower opportunity cost producer of good X; good Y for Country B because it is the lower opportunity cost producer of good Y.
Why must profits be zero in long-run competitive equilibrium?
If profits are not zero firms will enter or exit the industry
A decrease in the price of gasoline will _________ the demand for cars, a complement of gasoline.
Increase
A supply shortage in the market for lettuce will _______ the equlibrium price of lettuce.
Increase
An increase in buyers' income will _________ the demand for cars, a normal good.
Increase
An increase in the price of butter will _________ the demand for margarine, a substitute for butter.
Increase
When the quantity of cars supplied is smaller than the quantity of cars demanded the equilibrium price of cars will tend to:
Increase
Which of the following illustrates the law of demand?
Lindsay offers to buy more sticks of chewing gum at $1 than $2.
If Luke can bake bread at a lower opportunity cost than Jason and Jason can produce paintings at a lower opportunity cost than Luke it follows that
Luke has a comparative advantage in baking bread and Jason has a comparative advantage in producing paintings
The least-cost rule states: Question options: MPPx/Px < MPPy/Py The least cost rule does not exist. MPPx/Px = MPPy/Py MPPx/Px > MPPy/Py
MPPx/Px = MPPy/Py
Monopolist that seeks to maximize profit produces the quantity of output at which ______ and charges the _____ price per unit at which the quantity of output can be sold. Question 5 options: MR > MC, highest MC > MR, lowest MR = MC, highest MR = MC, lowest
MR = MC, highest
Given two goods, X and Y, and their prices, PX and PY a consumer will maximize total utility by allocating expenditures such that Question options: MUX/PX = MUY /PY. MUX/PY = MUY/PX. MUX = PX = MUY = PY = MU$. MUX = MUY = PX = PY = MU$. PY/MUX = PX/MUY.
MUX/PX = MUY /PY.
_____ is the process in which managers direct employees to perform certain tasks. Question 2 options: Market Planning Managerial Planning Market Coordination Managerial Coordination
Managerial Coordination
_____ is the process in which individuals perform tasks, such as producing certain quantities of goods, on the basis of changes in market forces, such as supply, demand, and price. Question 10 options: Market Coordination Managerial Coordination Market Planning Managerial Planning
Market Coordination
Refer to exhibit 22-1. Diminishing marginal returns set in with the addition of which unit of the variable input?
NOT the second
If economies of scale are so pronounced in an industry that only one firm can survive in the industry. This firm is called a(n) __________ monopoly. Question 2 options: Price Taker Government Monopoly Natural Monopoly Price Searcher
Natural Monopoly
An increase in technology will shift the PPF __________, while a decrease in technology will shift the PPF __________. Question options: Outward; outward Inward; inward Inward; outward Outward; inward
Outward; inward
When does a perfectly competitive firm incur a loss? Question 3 options: P > ATC P > TC P < ATC P <TC
P < ATC
Economic profit of zero is achieved when Question 2 options: P = SRATC accounting profit is zero P > SRATC P < SRATC
P = SRATC
For a monopolist: Question 9 options: P = MR P < MR P > MR P = MC
P > MR
For a product price searcher (such as a monopolist), Question options: P = MR, therefore VMP = MRP. P > MR, therefore VMP < MRP. P > MR, therefore VMP > MRP. P < MR, therefore VMP < MRP.
P > MR, therefore VMP > MRP.
Value marginal product (VMP) equals Question options: P x MPP. P/MPP. P x MFC. b and c none of the above
P x MPP.
38. Refer to Exhibit 11- 1. If average-cost pricing is imposed on the natural monopoly firm, what price is charged?
P2
Refer to Exhibit 5-1, which shows supply and demand for freeway space at both 8 a.m. and 11 p.m. Which toll creates equilibrium at 8 a.m.? Question options: P2 P1 0 it is not constant
P2
As the wage rates rise, Question options: Qs of labor rises Qd of labor rises demand for labor falls Supply of labor rises
Qs of labor rises
Which of the following is false? Question options: People who own property in cities with good weather receive higher rents, ceteris paribus. People who live in cities with good weather receive that benefit for free. Housing prices are higher in cities with better weather, ceteris paribus. The demand for housing is higher in cities with good weather, ceteris paribus.
People who live in cities with good weather receive that benefit for free.
Question 4 Saved A perfectly competitive firm is a _____, which is a seller that does not have the ability to control the price of the product. Question 4 options: Price Mediator Price Integrator Price Taker Price Maker
Price Taker
Which of the following statements best represents the law of supply?
Price and quantity supplied are directly related ceteris paribus
Which of the following is true?
Price ceilings set below the equilibrium price causes shortages ; surpluses result when a price floor is set above the equilibrium price
____ occurs when a seller charges different prices for its product and the price differences are not due to cost differences. Question options: Price discrimination Price seeker Price giver Price searcher
Price discrimination
__________ occurs when a seller charges different prices for its product and the price differences are not due to cost differences. Question 7 options: Profit-Maximization Arbitrage Price discrimination Dead-weight Loss
Price discrimination
Law of Demand
States that the quantity demanded and price move in opposite directions The law of demand says that there is an inverse relationship between the price and quantity demanded.
Which of the following implies that gains are possible in one area without losses in another area? Economic growth Productive efficiency Productive inefficiency Unemployed resources
Productive inefficiency
_____ is maximized by producing the quantity of output at which MR = MC. Question 10 options: Profit Maximization Rule Revenue Minimization Rule Revenue Maximization Rule Profit Minimization Rule
Profit Maximization Rule
Refer to EXHIBIT 14-4. If a labor union successfully organizes the labor market and sets the wage rate at W4, the quantity of labor hired will be
Q1
Refer to Exhibit 28-3. Consider the monopsony setting. In the absence of collective bargaining, what quantity of labor does the profit-maximizing monopsonist hire?
Q1
Refer to Exhibit 24-1. If the product is produced under single-price monopoly what quantity will be produced and what price will be charged in order to maximize prices?
Q1 units at P2
If the world price (PW) is operational in the market, then U.S. imports equal Question options: Q4 - Q2. Q3 - Q1. Q4 - Q3. Q2 - Q1. Q2 - Q3.
Q2 - Q1.
Refer to EXHIBIT 14-4. If a labor union successfully organizes the labor market and sets the wage rate at W4, the amount of unemployment in this market will be equal to
Q4 - Q1
When the price of wine increases, the demand curve for wine:
Stay the same
A decrease in buyers' income will cause the demand for cars, a normal good, to:
Shift to the left
A decrease in the price of butter will cause the demand for margarine, a substitute for butter, to:
Shift to the left
An increase in the price of gasoline will cause the demand for cars, a complement of gasoline, to:
Shift to the left
If buyers' value for bicycles decrease ,the demand curve for bicycles will ______.
Shift to the left
A decrease in buyers' income will cause the demand for public transportation, an inferior good, to:
Shift to the left (When buyers' income increases, the demand for inferior goods decrease.)
A decrease in the price of gasoline will cause the demand for cars, a complement of gasoline, to:
Shift to the right
An increase in buyers' income will cause the demand for cars, a normal good, to: ________.
Shift to the right
An increase in the price of butter will cause the demand for margarine, a substitute for butter, to:
Shift to the right
If buyers' value for bicycles increase, the demand curve for bicycles will ______.
Shift to the right
When a worker is putting forth less than the agreed-to-effort, he is said to be Question 3 options: Embezzling Shirking Skirting Exponentiating
Shirking
Which pair are most likely substitute goods?
Soft drinks and lemonade
A constant opportunity cost of a production possibilities frontier is shown as a __________, while an increasing opportunity cost is shown as a __________. Question options: Bowed-outward PPF; Straight-line PPF Straight-line PPF; Bowed-outward PPF Productive inefficiency PPF; Productive efficiency PPF Productive efficiency PPF; Productive inefficiency PPF
Straight-line PPF; Bowed-outward PPF
You notice that the price of DVD players falls and the quantity of DVD players sold increases. Which of the following may cause this change?
Supply of DVD players shifts to the right.
The market for lemonade is in equilibrium and the price of lemons rises. How will this affect the lemonade market?
Supply will decrease, increasing the price and decreasing the quantity.
1. The Clayton Act of 1914 makes price discrimination, exclusive dealers, tying contracts, and the acquisition of competing companies' stock illegal when their effects "substantially lessen competition or tend to create a monopoly."
T
10. The hub-and-spoke system has been used more often by airlines since the airline industry was deregulated.
T
11. Natural monopolies arise because of economies of scale.
T
13. In the antitrust case brought against some of the nation's top universities (such as, Harvard, MIT, and Yale), the Justice Department charged the universities with conspiracy to fix prices.
T
15. Thomas Edison played a key role in putting together the Movie Trust which reportedly tried to eliminate competition in the early days of the movie industry.
T
4. Natural monopolies can be regulated based on price, profit, or output.
T
5. The Justice Department began using the Herfindahl index (rather than the four- and eight-firm concentration ratios) in 1982.
T
6. A firm defending itself in an antitrust suit would prefer to have the market it operates in defined broadly, rather than narrowly.
T
7. The type of proposed merger that generally concerns the federal government the most is a horizontal merger.
T
9. Advancements in technology led to the deregulation of the long-distance telephone service industry.
T
The hotel industry contains some aspects that economists consider to be part of the "hidden fee" economy.
T
Maximizing profit is the same as maximizing total revenue when: Question 6 options: TFC = 0 TFC > 0 TVC = 0 TVC > 0
TVC = 0
The closed shop was prohibited by the
Taft-Hartley Act
The closed shop was prohibited by the
Taft-Hartley Act.
Which act made every contract, combination, or conspiracy, in restraint of trade or commercy along the several states, or with foreign nations, illegal? Question options: The Sherman Act (1890) The Clayton Act (1914) The Celler-Kefauver Antimerger Act (1950) The Wheeler-Lea Act (1938) The Robinson-Patman Act (1936) The Federal Trade Commission Act (1914)
The Sherman Act (1890)
Consider the market for iPods. What happens if a fantastic new alternative MP3 player is developed and at the same time a boat carrying a large shipment of iPods is attacked by pirates and sunk?
The change in price is indeterminate and quantity decreases.
Consider the market for corn. What happens if there is an increased demand for corn tortillas and at the same time a new corn seed becomes available that dramatically increases the per-acre yield?
The change in price is indeterminate; quantity increases.
If bagels and donuts are substitute goods, then which of the following is likely to occur if the price of bagels is reduced?
The demand curve for donuts will shift to the left.
VMP = MRP for a price taker but not for a price searcher. Question options: True False
True
When the press uses the word productivity, they are usually referring to the average physical product instead of marginal physical product. Question 5 options: True False
True
The PPF represents the possible combinations of __________ goods that the economy can produce in a certain span of time under conditions of a given state of __________ and fully __________ resources. Question options: Multiple; technology; employed Multiple; employment; technological Two; employment; technological Two; technology; employed
Two; technology; employed
Refer to Exhibit 28-3. Consider the monopsony setting. In the absence of collective bargaining, what wage rate does the profit-maximizing monopsonist pay?
W1
Refer to Exhibit 28-3. In the absence of collective bargaining, if the profit-maximizing monopsonist were to pay workers what their services were worth to it, it would pay
W3.
When does MRP = MPP? Question options: When MR > P When MR = P When MR < P Always
When MR = P
Which of the following will cause a movement down along a demand curve?
a decrease in the product price
In a perfectly competitive industry, do higher wages for labor union members diminish profits? Question options: No, higher wage costs can affect profits only if they affect labor productivity and this doesn't happen. No, because higher labor costs usually bring more firms into the industry and this effect dampens price rises Yes, in the long run, but not in the short run because profits are always fixed in the short run. Yes, in the short run, but not in the long run in which some firms exit the industry because of higher costs.
Yes, in the short run, but not in the long run in which some firms exit the industry because of higher costs.
In a perfectly competitive industry, do higher wages for labor union members diminish profits?
Yes, in the short run, but not in the long run, in which some firms exit the industry because of higher costs.
If supply is perfectly inelastic, it follows that a Question options: rise in price will not change quantity supplied. fall in price will not change quantity supplied. rise in price will change quantity supplied by more than a fall in price. fall in price will change quantity supplied by more than a rise in price. a and b
a and b
If the price of a good ____________, the demand for its complements will __________. Question options: rises; fall falls; rise falls; fall rises; rise a and b
a and b
Two main factors that can shift the market labor supply curve are Question options: wages in other markets non-money aspects of the job leisure goods consumed a and b
a and b
When government interest rates are _____, the indirect result is likely to be an _____ in loans demanded. Question options: high; decrease low; increase high; increase low; decrease a and b
a and b
When the government _____________ mortgage lending standards, the indirect result is likely to be _____________ home prices. Question options: lowers; higher increases; lower lowers; lower increases; higher a and b
a and b
In collective bargaining,
a and c
Which of the following is true for a monopsony?
a and c
Which of the following factors would cause a movement along the demand curve for a particular good?
a change in the price of that good
Supply Schedule
a chart that lists how much of a good a supplier will offer at different prices A supply schedule is used when someone wants to know how much a good will cost dependent on the quantity.
Which of the following comes closest to being a monopsony?
a coal company who employees all of the workers in a given town
A newspaper story recently reported that the price of new cars has decreased and the quantity of new cars sold has dropped. The new price and quantity could have been caused by:
a decrease in buyers' incomes.
Assume the demand schedule for smart phones is downward sloping. If the price of smart phones increases from $200 to $600:
a decrease in quantity demanded of smart phones will occur.
A decrease in the price of on-demand video-streaming services such as Netflix leads to:
a decrease in the demand for DVDs.
Economics of scale refer to
a decrease in the long-run average total cost of production as output increases
Which of the following will cause an increase in the quantity demanded for iPhones?
a decrease in the price of iPhones
Which of the following would cause a decrease in the demand for coffee?
a decrease in the price of tea (a substitute for coffee)
Labor unions generally favor
a, b, and c
Which of the following is a possible objective of labor unions? Question options: employment for all union members maximizing the total (union) wage bill maximizing income for a limited number of union members a and b a, b, and c
a, b, and c
Which of the following is a possible objective of labor unions?
a,b, and c
21. The Justice Department considers a Herfindahl index less than __________ to be representative of an unconcentrated (competitive) industry.
a. 1,000
50. If there are five firms in an industry and the market shares of the firms are 43 percent, 31 percent, 14 percent, 8 percent and 4 percent, the Herfindahl index is
a. 3,086.
51. Refer to Exhibit 11-2. The four-firm concentration ratio in Year 1 was
a. 90 percent.
53. Refer to Exhibit 11-2. The four-firm concentration ratio in Year 3 was
a. 90 percent.
99. Modern Justice Department guidelines evaluate mergers according to how they would change the industry's
a. Herfindahl index.
Refer to Exhibit 11-1. What price is charged if marginal-cost price regulation is imposed on the natural monopoly firm?
a. P1
Black Market
an illegal market in which goods or currencies are bought and sold in violation of rationing or controls The black market sells goods outside of the legal qualities, and often has stolen goods on it.
32. One of the criticisms of average-cost regulated pricing of a natural monopoly is that the firm
a. has no incentive to hold costs down.
101. The merger of two firms producing personal computers is an example of a __________ merger.
a. horizontal
The type of merger most likely to reduce competition in an industry is a __________ merger.
a. horizontal
22. The Justice Department considers a Herfindahl index that is ____________________________ to be representative of a moderately concentrated industry.
a. less than 1,000
62. The Sherman Act of 1890
a. made conspiracy in the restraint of trade illegal.
63. The Clayton Act of 1914
a. made interlocking directorates illegal.
71. The Herfindahl index
a. measures the degree of concentration in an industry.
27. Natural monopoly exists when
a. one firm can supply the entire output demanded at lower cost than two or more firms can.
73. If natural monopolies are regulated to produce where there is a normal profit, they produce where
a. price equals average total cost.
76. The natural monopolist might have the incentive to go out of business under
a. price regulation.
Suppose a regulatory agency makes decisions that seem to require an ever-growing agency budget and staff of regulators to monitor firms and enforce the decisions. This would be evidence in support of the __________ theory of regulation.
a. public choice
78. The public interest theory of regulation holds that
a. regulators are seeking to do and will do through regulation what is in the best interest of the public or society at large.
44. The public interest theory of regulation holds that
a. regulators are seeking to do and will do through regulation what is in the best interest of the public.
If government regulators guarantee that a natural monopoly will earn normal profits, then
a. the monopolist has little or no incentive to hold down its costs.
40. "Regulatory lag" refers to the period between the time when
a. the natural monopolist's costs change and the time the regulatory agency adjusts the monopolist's prices.
19. Suppose an industry consists of eight equal-sized firms. Two of the firms plan to merge. The Justice Department __________ be inclined to challenge the merger given that the Herfindahl index before the merger was _____________ and the merger would cause it to rise by __________.
a. would; between 1,000 and 1,800; more than 100
The Herfindahl index is obtained by Question options: adding the squares of the market shares of each firm in the industry. adding the market shares of the largest four firms in the industry. finding the difference between the squares of the market shares of each firm in the industry. finding the difference between the market shares of each firm in the industry. none of the above
adding the squares of the market shares of each firm in the industry.
Marginal revenue product (MRP) is the Question options: additional revenue generated by employing an additional factor unit minus the additional cost. additional output generated by employing an additional factor unit. additional profit generated by employing an additional factor unit. additional revenue generated by employing an additional factor unit. total revenue from the sale of a product divided by the total output of the product.
additional revenue generated by employing an additional factor unit
Labor unions have caused
almost no change in the fraction of national income that goes to labor (union and nonunion, combined).
An "interlocking directorate" is Question options: an arrangement whereby the leaders of a union are also in the top management of the business with which the union is dealing. selling to a retailer on the condition that the retailer not carry any rival products. an arrangement whereby the sale of one product is dependent on the purchase of some other product. an arrangement whereby the directors of one company sit on the board of directors of another company in the same industry.
an arrangement whereby the directors of one company sit on the board of directors of another company in the same industry.
An interlocking directorate is Question options: an arrangement whereby the leaders of a union are also in the top management of the business with which the union is dealing. selling to a retailer on the condition that the retailer not carry any rival products. an arrangement whereby the sale of one product is dependent on the purchase of some other product. an arrangement whereby the directors of one company sit on the board of directors of another company in the same industry.
an arrangement whereby the directors of one company sit on the board of directors of another company in the same industry.
If government regulators guarantee a natural monopolist that it will earn normal profits, then the monopolist will
d. none of the above
If the purchase and sale of an illegal drug were decriminalized, economists would expect Question options: a decrease in demand and supply of this drug. an increase in demand and supply of this drug. a decrease in demand and an increase in supply of this drug. an increase in demand and a decrease in supply of this drug.
an increase in demand and supply of this drug.
In recent years, stainless steel kitchen appliances have become more popular. This change has caused
an increase in demand for stainless steel appliances.
Which of the following always results in an increase in price and quantity?
an increase in demand with no change in supply
Given a supply curve that is positively sloped and a demand curve for a normal good that is negatively sloped, an increase in income will most likely result in:
an increase in equilibrium price and quantity.
A new wonder diet that results in a dramatic weight loss sweeps through America. The key to the diet is to eat unlimited amounts of red meat (beef) but no poultry or carbohydrate-rich foods. As millions of Americans switch to the new diet, we can expect:
an increase in the demand for beef, leading to a shift to the right in the demand curve for beef and higher beef prices. a decrease in the demand for poultry, leading to a shift to the left in the demand curve for poultry and lower poultry prices.
A beneficial technological change enhances the production of cranberries. At the same time, scientists discover the health benefits of cranberries. This will result in:
an increase in the equilibrium quantity and an uncertain impact on the equilibrium price of cranberries.
Which of the following would result in a movement along the demand curve?
an increase in the number of suppliers
Which of the following will cause a decrease in demand?
an increase in the price of a complementary good
A decrease in the price of a good will result in:
an increase in the quantity demanded.
A decrease in the price of eggs will result in:
an increase in the quantity of eggs demanded. a movement along the demand curve for eggs. Correct
Suppose the input costs associated with manufacturing hair replacement treatments decreases over time. This would lead to:
an increase in the supply of such treatments, lower prices, and an increase in the equilibrium quantity.
An increase in supply, with no change in demand, will lead to ________ in equilibrium quantity and ________ in equilibrium price.
an increase; a decrease
An increase in demand with no change in supply will lead to ________ in equilibrium quantity and ________ in equilibrium price.
an increase; an increase
An increase in demand, all other things unchanged, will result in ________ in equilibrium price and ________ in equilibrium quantity.
an increase; an increase
An increase in demand and a decrease in supply will lead to ________ in equilibrium quantity and ________ in equilibrium price.
an indeterminate change; an increase
If a firm is a monopsonist, then it faces Question options: an upward sloping factor supply curve, and its marginal factor cost curve will lie above the factor supply curve. a horizontal marginal factor cost curve. a downward sloping demand curve for its product, and its marginal revenue curve will lie below its demand curve. an upward sloping factor supply curve, and its marginal factor cost curve will coincide with the factor supply curve.
an upward sloping factor supply curve, and its marginal factor cost curve will lie above the factor supply curve.
There ___________ barriers to entry in a perfectly competitive market. There ____________ barriers to entry in monopolistic competition. There ____________ barriers to entry in oligopoly. There ____________ barriers to entry in monopoly. [Your answers should fill in blanks (H), (I), (J) and (K), respectively.] Question options: are; are; are no; are no are no; are; are; are are no; are no; are; are are no; are; are; are no
are no; are no; are; are
Refer to Exhibit 24-1. The dead weight loss of the profit-maximizing monopoly is identified by what area?
area BCA
Refer to Exhibit 24-1. If the product is produced under single-price monopoly what does total revenue equal at the profit maximizing level of output?
area P1P2CB
"Tying contracts" are Question options: agreements between unions and businesses such that when a labor contract is signed, the union and the firm are bound by its terms. arrangements whereby the sale of one product is dependent on the purchase of some other product. selling to a retailer on the condition that the retailer not carry any rival products. selling to a retailer on the condition that the retailer not resell the product to another business.
arrangements whereby the sale of one product is dependent on the purchase of some other product.
Tying contracts are Question options: agreements between unions and businesses such that when a labor contract is signed the union and the firm are bound by its terms. selling to a retailer on the condition that the retailer not resell the product to another business. selling to a retailer on the condition that the retailer not carry any rival products. arrangements whereby the sale of one product is dependent on the purchase of some other product.
arrangements whereby the sale of one product is dependent on the purchase of some other product.
The monopolist's demand curve is
downward sloping
82. What is the Herfindahl index of an industy made up of five equal-sized firms?
b. 2,000
52. Refer to Exhibit 11-2. The four-firm concentration ratio in Year 2 was
b. 95 percent.
54. Refer to Exhibit 11-2. The four-firm concentration ratio in Year 5 was
b. 95 percent.
70. The Celler-Kefauver Antimerger Act of 1950
b. banned anticompetitive mergers that occurred as a result of one company acquiring the physical assets of another company.
15. The Wheeler-Lea Act of 1938 empowered the Federal Trade Commission to
b. deal with false and deceptive advertising.
80. If the four-firm concentration ratio is 100 percent, this means that the
b. industry consists of no more than four firms.
64. The Clayton Act of 1914
b. made price discrimination, exclusive dealing, tying contracts, and the acquisition of competing companies' stock illegal when they "substantially lessen competition or tend to create a monopoly."
16. The Cellar-Kefauver Antimerger Act of 1950 was designed to
b. prevent one company from acquiring another company's physical assets if the acquisition reduces competition.
the Sherman act of 1890 was passed with the intent of
b. preventing monopolization and conspiracy in the restraint of trade
75. The natural monopolist might have the incentive to let costs increase under
b. profit regulation.
77. The capture theory of regulation holds that
b. regardless of the motive for the initial regulation and the establishment of the regulatory agency, eventually the regulatory agency will be "captured" (controlled) by the special interests of the industry that is being regulated.
66. The Federal Trade Commission Act of 1914
b. set up the Federal Trade Commission (FTC) to deal with "unfair methods of competition."
Which antitrust legislation made price discrimination illegal?
b. the Clayton Act
The antitrust legislation that empowers the Federal Trade Commission to deal with false and deceptive acts or practices (such as false and deceptive advertising) is
b. the Wheeler-Lea Act.
20. Suppose an industry consists of five equal-sized firms. Two of the firms plan to merge. The Justice Department __________ be inclined to challenge the merger given that the Herfindahl index before the merger was _____________ and the merger would cause it to rise by __________.
b. would; greater than 1,800; more than 50
If a college sets its tuition __________ the equilibrium tuition, then it will have to use some form of nonprice-rationing device to determine who will be accepted for admission to the college. Question options: above below equal to all of the above
below
If a movie theater sets is prices _____ the equilibrium, then it will have to use some form of non-price rationing to determine who will be admitted to shows. equal to above below none of the above
below
If a labor union successfully practices collective bargaining against a monopsonist, then
both wages and employment may rise.
Suppose you own a business which produces two products: books and coffee. Let's say you can make 10 cups of coffee and 0 books, or you can make 0 cups of coffee and 4 books. This would be represented as a __________, because it has __________. Question options: straight-line PPF; constant opportunity costs bowed-outward PPF; increasing opportunity costs bowed-outward PPF; constant opportunity costs straight-line PPF; increasing opportunity costs
bowed-outward PPF; increasing opportunity costs
A person is in consumer equilibrium, and then the price rises for one of the goods she purchases. If she wants to restore herself to consumer equilibrium, she will (most likely) Question options: buy less of the good whose price has risen and more of the relatively lower priced goods try to increase the marginal utility she receives from the good whose price has risen try to decrease the marginal utility she receives from the goods whose prices did not rise buy more of both the good whose price has risen and of the goods whose prices have not risen There is not enough information to answer the question
buy less of the good whose price has risen and more of the relatively lower priced goods
49. If there are five firms in an industry and the market shares of the firms are 50 percent, 25 percent, 15 percent, 5 percent and 5 percent. The four-firm concentration ratio for this industry is __________________ percent and the Herfindahl Index is
c. 95; 3,400.
Price discrimination was deemed illegal by the
c. Clayton Act.
Refer to Exhibit 11-1. Which of the following statements is false?
c. If the natural monopoly firm produces Q3 units of output and charges P3 per unit, the firm earns zero economic profits.
Which of the following statements is false?
c. In the Dupont case in 1956, the market relevant to Dupont was ruled to be the cellophane market rather than the flexible wrapping materials market.
46. Empirical research has shown that immediately upon deregulation of the airline industry,
c. airline fares decreased.
65. The Federal Trade Commission Act of 1914
c. declared "unfair methods of competition in commerce" illegal.
The Robinson-Patman Act of 1936 was passed in an attempt to
c. decrease the failure rate of small businesses.
23. The Justice Department considers a Herfindahl index ____________________________ to be representative of a concentrated industry.
c. greater than 1,800
The public choice theory of regulation states that a regulatory agency makes decisions based on
c. how these decisions affect the well-being of the agency itself.
42. The capture theory of regulation specifies that
c. industries or firms can sometimes gain control of the agencies that are attempting to regulate them.
24. Suppose an industry consists of nine firms: four firms each have 20 percent of the market share, and the other five firms have equal shares of the rest of the market. Three of the small firms plan to merge. The Justice Department __________ be inclined to challenge the merger given that the Herfindahl index before the merger was ____________ and the merger would cause it to rise by
c. would not; between 1,000 and 1,800; less than 100.
Marginal utility is defined as the
change in total utility a person derives from the consumption of a good divided by the change in the quantity of the good consumed
Marginal utility is defined as the Question options: change in marginal utility a person derives from the consumption of a good. change in total utility a person derives from the consumption of a good divided by the value in use of that good. sum of the amounts of satisfaction a person receives from consuming a good change in total utility a person derives from the consumption of a good divided by the price of that good change in total utility a person derives from the consumption of a good divided by the change in the quantity of the good consumed
change in total utility a person derives from the consumption of a good divided by the change in the quantity of the good consumed
Question 6 Saved Market Structure is the environment whose Question 6 options: exponentiation influence a firm's pricing and output decisions. characteristics influence a firm's pricing and output decisions. exponentiation influence a firm's pricing and parabolic decisions. characteristics influence a firm's pricing and parabolic decisions.
characteristics influence a firm's pricing and output decisions.
The ability to produce a good at a lower opportunity cost than others is called a(n) __________ advantage. Question options: indigenous complementary natural comparative
comparative
If a consumer buys a set of headphones at the same time as she buys an .mp3 player, these two products are most likely:
complementary goods
The PPF illustrates
constant opportunity costs between guns and butter
Unions typically argue that state right-to-work laws
constrain unions' abilities to control the supply of labor in a market.
Change in Demand
consumers demand different amounts at every price, causing the demand curve to shift to the left or the right Change in demand means that at every price people will want different quantities. Ex: When someone wants something for $10 but someone else wants something at $8.
For perfectly competitive firms, when P>ATC (>AVC), then the firm will Question 5 options: shut down in the short run continue to produce in the short run to minimize losses. continue to produce in the short run to maximize profits.
continue to produce in the short run to maximize profits.
Question 9 Saved For perfectly competitive firms, when ATC>P>AVC, then the firm will Question 9 options: continue to produce in the short run to minimize losses. continue to produce in the short run to maximize profits. shut down in the short run
continue to produce in the short run to minimize losses.
The primary intent of antitrust legislation is to Question options: ensure that product safety standards are met. eliminate positive economic profits. eliminate price discrimination. control monopoly power and preserve and promote competition. all of the above
control monopoly power and preserve and promote competition.
A movement from point B to point D
could only happen with economic growth
39. Which of the following is not a realistic scenario faced by government regulators of a natural monopoly?
e. All of the above are realistic.
81. What is the Herfindahl index of an industry made up of ten equal-sized firms?
d. 1,000
25. What is the Herfindahl index of a monopoly?
d. 10,000
26. What is the maximum value of the Herfindahl index?
d. 10,000
29. Which of the following is not a way that natural monopolies are regulated?
d. Government regulators determine which patents the monopoly can retain.
43. Which of the following lends support to the capture theory of regulation?
d. all of the above
An "interlocking directorate" is
d. an arrangement whereby the directors of one company sit on the board of directors of another company in the same industry.
Tying contracts" are
d. arrangements whereby the sale of one product is dependent on the purchase of some other product.
68. The Robinson-Patman Act of 1936
d. attempted to decrease the failure rate of small businesses by protecting them from the competition of large and growing chain stores.
17. A firm defending itself in an antitrust suit would like the market it operates in to be defined __________, which __________ the firm's market share compared to what it might be judged otherwise.
d. broadly, lowers
47. The primary intent of antitrust legislation is to
d. control monopoly power and preserve and promote competition.
Antitrust law is legislation passed for the stated purpose of
d. controlling monopoly power and preserving and promoting competition.
18. The Herfindahl index measures the
d. degree of concentration in an industry.
45. Evidence pertaining to the airline industry suggests that
d. deregulation of the airline industry has brought significant price reductions.
91. Deregulation was clearly a result of technological changes in which of the following industries?
d. long-distance telephone service.
To lower the elasticity of demand for labor, a labor union might attempt to
decrease the availability of substitutes for the products union workers produce.
Along a given demand curve, an increase in price of the product will
decrease the quantity demanded.
In the market for local coffee, the price will ________ and the quantity will ________ if new coffee shops open and consumers' incomes decrease due to a recession.
decrease; be indeterminate
Say the following two events occur at the same time: 1) a decrease in the price of steel, an input in the production of cars; 2) an increase in the price of gasoline, a complement of cars. The following two events would lead to a(n) _________ in the market price and a(n) __________ in the market quantity of cars.
decrease; indefinite change
Which is the most likely effect of a decrease in the price of tablet computers upon the market for laptop computers?
decreased equilibrium price and decreased equilibrium quantity
Union training programs are meant to shift the __________ labor to the __________.
demand curve for; right
Union training programs are meant to shift the __________ labor to the __________. Question options: demand curve for; left supply curve of; right supply curve of; left demand curve for; right
demand curve for; right
Unions are interested in increasing the productivity of their members because as their productivity rises, the __________ their labor __________ and their wages __________.
demand for; rises; rise
Unions are interested in increasing the productivity of their members because as their productivity rises, the __________ their labor __________ and their wages __________.
demand for; rises; rise.
The market price of airline flights increased recently. Some economists suggest that the price increased because there has been an increase in the number of business travelers. They believe that in the market for flights:
demand increased.
Cross elasticity of demand is the percentage change in the quantity __________ of a good divided by the percentage change in __________. Question options: demanded; the price of another good supplied; the price of the good demanded; income demanded; the price of the good supplied; the price of another good
demanded; the price of another good
Change in Supply
different amounts offered for sale at each and every possible price in the market; shift of the supply curve Whenever a quantity supplied is changed it is called a change in supply
Barriers to entry include all of the following except Question options: exclusive ownership of a scarce resource. diseconomies of scale. public franchises. government licenses. patents.
diseconomies of scale.
A "price taker" is a firm that Question options: does not have the ability to control the price of the product it sells. does have the ability, although limited, to control the price of the product it sells. can raise the price of the product (above the market price) and still sell some units of its product. sells a differentiated product. none of the above
does not have the ability to control the price of the product it sells.
Unions often encourage the buying public to "look for the union label" primarily because
doing so may increase demand for the product they produce, which in turn may increase the wage rate paid to union employees.
What is the most prominent rationing device you will likely find at your campus bookstore?
dollar price
The effects of a quota include: Question options: decreasing consumers' surplus. increasing total revenue for the importers who sell the allowed number of imported units. increasing producers' surplus. b and c a, b, and c
dont know
One of the key characteristics of oligopoly is that Question options: firms are independent of each other. firms face different cost conditions. each firm is aware that its actions will influence other firms and that the actions of the other firms affect it. it is easy to enter the industry. none of the above
each firm is aware that its actions will influence other firms and that the actions of the other firms affect it.
In the long run, if inputs are increased by 10 percent and output increases by 20 percent, then __________ are said to exist. Question options: economies of scale diseconomies of scale constant returns to scale diminishing marginal returns
economies of scale
An economy is productive __________ if it is producing the maximum output with the resources and technology available, and is productive __________ if it is producing less than the maximum output possible. efficient; inefficient inefficient; inefficient efficient; efficient inefficient; efficient
efficient; inefficient
Rice and potatoes are substitutes. If the price of rice rises and there is a bumper crop of potatoes, in the market for potatoes one would expect the:
equilibrium price to rise, fall, or stay the same and equilibrium quantity to rise.
Refer to Exhibit 28-7. For each quantity of labor hired (after the first worker), marginal factor cost (MFC) will
exceed column (2)
A cost that is incurred when an actual monetary payment is made is a(n) _____________ cost
explicit
Gasoline, a derivative of oil, is a large part of transportation costs for many producers. If the price of oil increases at the same time that incomes fall for many consumers, one would expect the equilibrium price of many normal goods to ________, while their equilibrium quantities would ________.
fall, rise, or stay the same; decrease
Suppose the local real estate market is in equilibrium. A recession causes local household incomes to decline. At the same time, construction of a large subdivision of new homes has just been completed. Given these two changes, we can predict the price of real estate will ________ and the quantity of real estate bought and sold will ________.
fall; rise or fall
French fries and hamburgers are complements. Suppose the cost of the ingredients used to make hamburgers rises, so that the price of a hamburger rises. Then the equilibrium price of french fries ________ and the equilibrium quantity ________.
falls; decreases
The price of microchips used to produce computers falls. As a result, the equilibrium price of computers ________ and the equilibrium quantity ________.
falls; increases
If, through collective bargaining, a union is able to raise the wage above the existing competitive equilibrium wage,
fewer workers will be employed than before the wage increase.
Complements
goods that are consumed together, so that purchasing one will make consumers more likely to purchase the other; two goods bought and used together Complements are something that if you buy one you buy the other. Ex: If a person buys shampoo then they are more likely to buy conditioner.
If a perfectly competitive firm and a single-price monopolist face the same demand and cost curves, then the competitive firm will produce a Question options: greater output but charge the same price as the monopolist. greater output and charge a lower price than the monopolist. smaller output and charge a higher price than the monopolist. greater output and charge a higher price than the monopolist. smaller output and charge a lower price than the monopolist.
greater output and charge a lower price than the monopolist.
The Justice Department considers a Herfindahl index ____________________________ to be representative of a concentrated industry. Question options: greater than 1,800 less than 1,000 between 1,000 and 1,800 greater than 10,000
greater than 1,800
In maximizing profits, a single-price monopolist will charge a price that is Question options: less than marginal cost. equal to marginal cost. greater than marginal cost. There is not enough information to answer the question.
greater than marginal cost.
The marginal factor cost of labor for a monopsonist is
greater than the wage rate because if the monopsonist wants to hire another worker, it has to raise the wage rate paid to all workers.
Suppose firm X is a monopolist and is receiving positive economic profits. What prevents other firms from directly competing away the profits? Question options: high barriers to entry antitrust laws low barriers to entry diseconomies of scale none of the above
high barriers to entry
Profit is earned by selling goods and services at prices _____ than _____. equal to; expenses higher; expenses lower; expenses none of the above.
higher; expenses
Sometimes labor unions try to increase the demand for the product they produce. They do so because the demand for labor is derived; and the __________ the demand for the product labor produces, the __________labor and the __________ wages will be, ceteris paribus.
higher; higher the demand for; higher
Sometimes labor unions try to increase the demand for the product they produce. They do so because the demand for labor is derived; and the __________ the demand for the product labor produces, the __________labor and the __________ wages will be, ceteris paribus. Question options: higher; lower the demand for; higher lower; higher the demand for; higher higher; higher the demand for; higher higher; greater the supply of; lower
higher; higher the demand for; higher
The demand curve for a perfectly competitive firm is Question 7 options: upward sloping vertical horizontal downward sloping
horizontal
The federal government most closely examines proposed __________ mergers.
horizontal
Input
ideas, money, effort, etc that you put into an activity or process in order to help it succeed Many resources are input in order to create a product. Ex: money, resources, workers
A tariff is a tax on Question options: capital goods. savings. imports. land.
imports
Good weather in cities such as San Diego
imposes indirect payments for the residents of that city
Good weather in cities such as San Diego Question options: is allocated using a weather market. imposes indirect payments for the residents of that city has no consequences for residents of that city. none of the above
imposes indirect payments for the residents of that city
A conglomerate merger is between firms that are: Question options: selling similar products in the same market. in the same industry but at different stages of the production process. in different industries. owned by the same company.
in different industries.
A vertical merger is between firms that are: Question options: selling similar products in the same market. in the same industry but at different stages of the production process. in different industries. owned by the same company.
in the same industry but at different stages of the production process.
The main difference between the short run and the long run is that Question options: firms earn losses in the long run, but not in the short run. the long run always refers to a time period of one year or longer in the long run, only one input can be fixed in the short run, one or more inputs are fixed none of the above
in the short run, one or more inputs are fixed
A closed shop is an organization
in which an employee must belong to the union before he or she can work.
A closed shop is an organization Question options: set up by the federal government to train ex-convicts to become productive workers. in which an employee must belong to the union before he or she can work. that is closed on holidays. that does not require workers to be union members in order to be hired, but does require them to join the union within a certain period of time after becoming employed.
in which an employee must belong to the union before he or she can work.
An increase in which of the following determinants of demand will have an ambiguous (uncertain) effect on price?
income
When the wage rate increases, the _____ effect says that workers will have more income and they will spend this income to buy more goods. Question options: non-monetary income substitution monetary
income
If the percentage change in quantity demanded of a good is less than the percentage change in buyer's income then the good is said to be
income inelastic
A shift of a demand curve to the right, all other things unchanged, will:
increase equilibrium price and quantity.
To increase the demand for union labor, a labor union might attempt to
increase the demand for the products produced by union labor.
Assume that corn is an input in the production of beef but not in the production of pork. Further, beef and pork are substitutes. A decrease in the price of corn will:
increase the supply of beef and decrease the demand for pork.
An improvement in technology used to produce computers will _________ the supply of computers.
increase.
If farmers begin using better fertilizers to grow corn, we would expect a(n) __________ in the supply of corn.
increase.
If a restaurant gives its patrons free chips and salsa, they will see a(n) _____ in the consumption of _____. Question options: increase; complements decrease; complements increase; steak decrease; beer
increase; complements
Say the following two events occur at the same time: 1) an increase in the price of milk, an input in the production of cheese; 2) a decrease in the price of bagels, a complement of cheese. The following two events would lead to a(n) _________ in the market price and a(n) __________ in the market quantity of cheese.
increase; indefinite change
Say the following two events occur at the same time: 1) an increase in the price of steel, an input in the production of cars; 2) a decrease in the price of gasoline, a complement of cars. The following two events would lead to a(n) _________ in the market price and a(n) __________ in the market quantity of cars.
increase; indefinite change
When the non-pecuniary benefits of a job increases, the supply of labor _____. Question options: does not change increases becomes zero decreases
increases
Refer to EXHIBIT 14-7. As the firm increases employment from 30 to 40 workers, its total labor cost
increases by $160.
A network good is a good whose value _____ as the expected number of units sold _____. Question options: decreases; decreases increases; decreases decreases; increases increases; increases
increases; increases
A PPF is bowed outward as a result of
increasing opportunity costs
The market for corn is in equilibrium. Which of the following is most likely to increase the equilibrium price of corn?
increasing production of corn-based ethanol
Say the following two events occur at the same time: 1) an increase in the price of milk, an input in the production of cheese; 2) an increase in the price of bagels, a complement of cheese. The following two events would lead to a(n) _________ in the market price and a(n) __________ in the market quantity of cheese.
indefinite change; decrease
If a monopolist wishes to sell an additional unit of the good, then Question options: it must raise its price to signal consumers that its product is now a more important part of their budget, and they will purchase more. like a competitive firm, it can simply make more output available and not lower price. it must lower price. it can raise price and not worry that sales will decrease. a and d
it must lower price.
Minerals and forests are all considered to be part of the resource category known as
land
"As additional units of a variable input are added to a fixed input, eventually the marginal physical product of the variable input will decline." This is a statement of the Question options: law of supply law of diminishing marginal utility average-marginal rule law of diminishing marginal returns
law of diminishing marginal returns
As firms exit an industry, the industry supply curve shifts __________ and the equilibrium price __________ until long-run competitive equilibrium is established and the surviving firms are earning __________ economic profits. Question options: rightward; falls; negative leftward; rises; zero leftward; rises; positive rightward; rises; positive leftward; falls; positive
leftward; rises; zero
Price Ceilings
legislated maximum price producers are allowed to charge in a market. an effective price ceiling will lower the price of a good The maximum price that a company may charge for a certain product is called a price ceiling. Ex: A price ceiling for a bottle of ketchup is set at $5 so that companies do not exceed a certain price for a good.
The perfectly competitive firm will shut down in the short run if price is Question options: less than average variable cost. greater than average variable cost but less than average total cost. greater than average total cost. equal to average total cost. a and b
less than average variable cost
A monopsonist's wage rate is
less than marginal factor cost
The perfectly competitive firm will shut down in the short run if the price is
less than the average variable cost
Which of the following would be considered a complementary good for a kayak?
life jacket
Profit can be earned by buying _______ and selling ____________
low;high
Profit can be earned by buying _____________ and selling ____________________. Question options: at one price; at the same price low; high high: low none of the above
low;high
Most likely, if a labor union wanted to employ all its membership it would negotiate for a __________ than if it wanted to maximize the income of a limited number of union members.
lower wage
When the government ____________ mortgage lending standards the indirect results is likely to be ___________ home prices
lower; higher and higher;lower
Refer to EXHIBIT 14-2. One of the things that the labor union probably can do to convince management that the supply curve is S'S instead of SS is
make a credible threat of a strike.
Refer to Exhibit 28-2. One of the things that the labor union probably can do to convince management that the supply curve is S'S instead of SS is
make a credible threat of a strike.
Right-to-work laws
make it illegal to require union membership for purposes of employment.
The number of sellers in a perfectly competitive market is ___________ [blank (A)], the number of sellers in a monopolistic competitive market is ____________ [blank (B)], and the number of sellers in an oligopoly is _________ [blank (C)]. Question options: few; few many few; many; many many; few, few many; many; few
many; many; few
The perfectly competitive firm will seek to produce the level of output for which Question options: average total cost is at a minimum. marginal cost equals marginal revenue. average fixed cost is at a minimum. average variable cost is at a minimum.
marginal cost equals marginal revenue.
The perfectly competitive firm charges a price equal to ___________ while the monopolist charges a price
marginal cost; greater than marginal cost and marginal revenue; greater than marginal revenue
The perfectly competitive firm will seek to produce the level of output for which
marginal costs equals marginal revenue
Applying the least-cost rule to two factors, a firm will Question options: maximize profits at the output at which MRP = MFC. minimize costs when the MRP of factor A equals the MRP of factor B. minimize costs when the MPP of factor A divided by the price of A equals the MPP of factor B divided by the price of B. minimize costs when the MPP of factor A equals the MPP of factor B.
minimize costs when the MPP of factor A divided by the price of A equals the MPP of factor B divided by the price of B.
The excess capacity theorem holds for a (n) __________, and states that in the long run the firm produces an output __________. Question options: monopolistic competitor; smaller than the one that would minimize its costs of production none of the above monopoly firm; that is not resource-allocative efficient perfectly competitive firm; that is resource-allocative efficient oligopoly firm; larger than the one that would minimize its costs of production
monopolistic competitor; smaller than the one that would minimize its costs of production
A single buyer in a factor market is known as a
monopsony
Since workers today can move from city to city (quite easily) and from firm to firm (again, quite easily), it is unlikely that there are very many pure
monopsony firms.
A single buyer in a factor market is known as a
monopsony.
A single buyer in a factor market is known as a Question options: oligopsony. monopoly. pure buyer. monopsony.
monopsony.
If the economy is at point C it follows that
more guns could be produced with available resources than are currently being produced
The law of increasing opportunity costs states that as
more of a good is produced the higher the opportunity costs of producing that good
When milk prices increased in 2008, one milk consumer stated that the reason he cut down on milk consumption is so that he could drive his car. This action represents a:
movement along the demand curve for milk.
"Collective bargaining" refers to
negotiations between labor unions and management about wage rates and other issues.
Collective bargaining" refers to
negotiations between labor unions and management about wage rates and other issues.
A monopolist practicing (perfect) price discrimination has Question options: no deadweight loss triangle. a deadweight loss triangle one-half the size of what it would be with uniform pricing. the same deadweight loss triangle as a single-price monopolist. a larger deadweight loss triangle than a single-price monopolist has.
no deadweight loss triangle.
If the price of a good rises and as a result the revenue falls then it must follow that cross elasticity of demand for the good is negative price elasticity of demand for the good is less than 1 income elasticity of demand for the good is positive b and c none of the above
none of the above
If the price of a good rises and as a result total revenue falls, then it must be true that Question options: cross elasticity of demand for the good is negative. price elasticity of demand for the good is less than 1. income elasticity of demand for the good is positive. b and c none of the aboveno
none of the above
If an increase in income leads to an increase in the demand for opera tickets, then opera concerts are a(n):
normal good.
Suppose people expect the price of MP3 players to rise next year. As a result of this expectation, people will most likely:
observe higher prices for MP3 players this year.
Natural monopoly exists when Question options: one firm can supply the entire output demanded at the same cost as two or more firms. one firm can supply the entire output demanded at lower cost than two or more firms can. one firm can supply the entire output demanded at higher cost than two or more firms can. one firm controls all of the rights to a scarce resource.
one firm can supply the entire output demanded at lower cost than two or more firms can.
The need to make choice is most closely related to the economic concept of
opportunity cost
Residents of cities with a reputation for good weather, ceteris paribus, Question options: pay a higher price for housing because the supply and demand for housing is higher. pay a higher price for housing because the demand for housing is higher pay the same for housing as they would in cities with a reputation for bad weather pay a higher price for housing because the supply of housing is higher.
pay a higher price for housing because the demand for housing is higher
If the price of gasoline increases from $4 to $4.50,:
people will buy less gasoline.
Price elasticity of demand is the ratio of the
percentage change in quantity demanded to the percentage change in price
Price elasticity of demand is the ratio of the Question options: percentage change in price to the percentage change in quantity demanded. absolute change in price to the absolute change in quantity demanded. percentage change in quantity demanded to the percentage change in price. absolute change in quantity demanded to the absolute change in price.
percentage change in quantity demanded to the percentage change in price
Consumers will pay the full tax that is placed on the sellers of a good if demand is _________ or supply is ___________
perfectly inelastic; perfectly elastic
Consumers will pay the full tax that is placed on the sellers of a good if demand is __________ or supply is __________. Question options: elastic; inelastic perfectly inelastic; perfectly elastic perfectly elastic; perfectly inelastic perfectly inelastic; perfectly inelastic perfectly inelastic; unit elastic
perfectly inelastic; perfectly elastic
The perfectly competitive firm's short-run supply curve is the Question options: upward-sloping portion of its average total cost curve. portion of its average variable cost curve that lies above the average fixed cost curve. portion of its marginal cost curve that lies above its average variable cost curve. horizontal portion of its marginal revenue curve. upward-sloping portion of its marginal cost curve.
portion of its marginal cost curve that lies above its average variable cost curve.
The perfectly competitive firm's short-run supply curve is the
portion of its marginal cost curve that lies above its average variable cost curve? Check - exam 3
Attempts to determine what is are part of _________ economics
positive
In short-run equilibrium the perfectly competitive firm may be making ___________ economic profit
positive, negative, or zero. Any of the above
The Sherman Act of 1890 was passed with the intent of Question options: establishing the Federal Trade Commission (FTC) to deal with "unfair methods of competition." dealing with false and deceptive advertising. preventing monopolization and/or conspiracy in the restraint of trade. declaring interlocking directorates illegal. spelling out the conditions under which mergers would be considered anti-competitive.
preventing monopolization and/or conspiracy in the restraint of trade
The Sherman Act of 1890 was passed with the intent of Question options: establishing the Federal Trade Commission (FTC) to deal with unfair methods of competition. preventing monopolization and/or conspiracy in the restraint of trade. spelling out the conditions under which mergers would be considered anti-competitive. dealing with false and deceptive advertising. declaring interlocking directorates illegal.
preventing monopolization and/or conspiracy in the restraint of trade.
A natural monopoly may be regulated through: Question options: product price output profit
price output profit
If firms are earning zero economic profits, they must be producing at an output level at which a. price equals marginal cost. b. price equals average total cost. c. price equals average variable cost. d. marginal revenue equals marginal cost. e. none of the above
price equals average total cost.
What is the definition of producers surplus?
price received minus minimum selling price
Suppose that more police and security workers become aware that wearing bulletproof vests can protect them from injury and decide to start wearing bulletproof vests. At the same time, the price of ceramics used to produce the vests falls. The equilibrium relative price of bulletproof vests ________ and the equilibrium quantity produced ________.
probably changes, but in an ambiguous direction; increases
Alice goes to the local supermarket to purchase one package of her favorite taco shells. She often pays $1.50 for a package, but she finds they are on sale for $1 each. According to the law of demand, one can expect Alice to:
purchase more than one package of taco shells.
If the demand curve for a good shifts leftward
quantity demanded is less at each price
The ________ apples will decrease when apple prices rise.
quantity demanded of
Unions generally call for __________ the barriers against foreign trade, as a way of __________ the elasticity of demand for union labor.
raising; decreasing
Unions generally call for __________ the barriers against foreign trade, as a way of __________ the elasticity of demand for union labor. Question options: raising; decreasing raising; increasing lowering; decreasing lowering; increasing
raising; decreasing
Assume you are a perfectly competitive firm in a market with 100 other firms. You wish to become a monopoly, so you take measures such as hiring a lobbyist and taking government officials out to dinner in hopes of changing public policy to redistribute income to your firm. This behavior is called _____.
rent seeking
A union shop is an organization that
requires individuals to join a union within a certain period of time after becoming employed.
A union shop is an organization that Question options: is set up by labor unions to train new entrants and inform members of jobs in different states. is legal in all fifty states. requires individuals to join a union within a certain period of time after becoming employed. requires individuals to be members of the union before they can be hired.
requires individuals to join a union within a certain period of time after becoming employed.
Rent seeking is socially wasteful because
resources devoted to transferring rents are not used to produce goods
"Rent seeking" is socially wasteful because Question options: it discourages innovation and risk taking. resources devoted to transferring rents are not used to produce goods. wage income is converted into profit income. it results in higher prices than would exist without monopoly.
resources devoted to transferring rents are not used to produce goods.
A price floor set above the equilibrium price will
result in a surplus of the good
Profit is: expenses less revenues. revenues less expenses. the monetary value of your goods and services. all cash received from the sale of goods and services.
revenues less expenses.
Suppose the market for gasoline is in equilibrium. You have heard that the price of crude oil is falling because of new oil discoveries. You are also aware that the number of car and truck drivers is steadily rising. Knowing this, you predict that the price of gasoline will ________ and the quantity of gasoline bought and sold will ________.
rise or fall; rise
If the government legalizes the purchase and sale of illegal drugs, the equilibrium quantity would then _____ and the price would then ____ if the supply of the drug increased by _____ than the demand for the drug increase. Question options: fall; rise; more fall; fall; less fall; fall; more rise; fall; less rise; fall; more
rise;fall;more
If the demand for a good increases by more than the supply of the food increases than the goods equilibrium price will ___________ and its equilibrium quantity will _________
rise;rise
If the price of a good __________ the demand for its complements will __________
rises;fall and falls;rises
When the price of a good rises the price is transitioning information indicating that the good as become relatviely
scarcer
According to economists, competition exists because of
scarcity
A monopoly firm is a _____ and has _____ control over the price at which it sells. Question 8 options: searcher, all searcher, some taker, some taker, no
searcher, some
Inefficient High Quality
sellers offer high-quality goods at a high price, even though buyers would prefer a lower quality at a lower price Inefficient high quality is when a price is made too expensive because the quality of the good is high which is desired. Ex: A good is really high quality and costs $40, but buyers would rather have a lower quality good that costs $20.
A horizontal merger is between firms that are: Question options: selling similar products in the same market. in the same industry but at different stages of the production process. in different industries. owned by the same company.
selling similar products in the same market.
Exclusive dealing is Question options: a situation in which sellers provide only high-quality name-brand goods. selling to a retailer on the condition that the retailer not resell the product to another business. selling to a retailer on the condition that the retailer not carry any rival products. when a union's leadership deals only with the firm's managers and vice versa; so that individual workers cannot cut their own deal.
selling to a retailer on the condition that the retailer not carry any rival products.
If the economy booms and peoples' incomes rise, then the demand curve for a normal good like new houses will ________ and the equilibrium quantity of new houses produced will ________.
shift to the right; increase
Refer to the exhibit. A price of $1 will result in a ________ in this market which will cause the price of the product to gravitate ___________
shortage; upward
Refer to Exhibit 5-1, which shows supply and demand for freeway space at both 8 a.m. and 11 p.m. At P = $0, there is a ________ of freeway space at 8 a.m. and ________ at 11 p.m. Question options: surplus; a shortage shortage; a surplus surplus; equilibrium shortage; equilibrium
shortage;equalibrium
Refer to Exhibit 5-1, which shows supply and demand for freeway space at both 8 a.m. and 11 p.m. A toll of P1 creates __________ at 8 a.m. and __________ at 11 p.m. Question options: a shortage; equilibrium a shortage; a surplus equilibrium; a surplus a surplus; a shortage
shortage;surplus
For perfectly competitive firms, when P<AVC (<ATC), then the firm will Question 1 options: continue to produce in the short run to maximize profits. continue to produce in the short run to minimize losses.
shut down in the short run
If goods are not rationed according to price if follows that
some non-price rationing device will be used to ration the goods
Inefficient Allocation to Customers
some people who want the good badly and are willing to pay a high price don't get it, and some who care relatively little about the good and are only willing to pay a low price do get it Inefficient allocation to customers occurs when someone who doesn't really want something pays a really low price in order to get a good that might be expensive for someone who really wants it and will pay anything to get it. Ex: The woman didn't really care about the product and got it for $100, The other woman really wanted the product and was willing to pay $1000 for it but could not get a hold of it.
A rightward shift of the demand curve shows that
something has happened to cause a higher quantity demanded at every given price.
A leftward shift of the demand curve shows that
something has happened to cause a lower quantity demanded at every given price.
Two major exports for the United States are Question options: clothing and office machines. footwear and fish. coffee and diamonds. soybeans and scientific instruments.
soybeans and scientific instruments.
When the wage rate increases, the _____ effect says that workers will tend to substitute away from leisure and toward labor. Question options: substitution income non-monetary monetary
substitution
Marginal utility is defined as the Question options: change in marginal utility a person derives from the consumption of a good. change in total utility a person derives from the consumption of a good divided by the value in use of that good. sum of the amounts of satisfaction a person receives from consuming a good change in total utility a person derives from the consumption of a good divided by the price of that good change in total utility a person derives from the consumption of a good divided by the change in the quantity of the good consumed
sum of the amounts of satisfaction a person receives from consuming a good
Total utility is defined as the
sum of the amounts of satisfaction a person receives from consuming a good
Total utility is defined as the Question options: change in total utility a person derives from the consumption of a good divided by the price of that good change in total utility a person derives from the consumption of a good divided by the change in the consumption of that good sum of the amounts of satisfaction a person receives from consuming a good change in marginal utility a person derives from the consumption of a good. change in total utility a person derives from the consumption of a good
sum of the amounts of satisfaction a person receives from consuming a good
Price elasticity of supply is the percentage change in the quantity ___________ of a good divided by the percentage charge in ____________
supplied; the price of the good
The Robinson-Patman Act of 1936 prohibited Question options: large retailers from selling at prices below those prices charged by small retailers. large retailers from engaging in false and deceptive acts and practices. suppliers from offering price discounts to large retailers unless they also offered discounts to all other retailers. customers from seeking out the lowest-priced good from different retailers. all of the above
suppliers from offering price discounts to large retailers unless they also offered discounts to all other retailers.
The Robinson-Patman Act of 1936 prohibited Question options: large retailers from selling at prices below those prices charged by small retailers. large retailers from engaging in false and deceptive acts and practices. suppliers from offering price discounts to large retailers unless they also offered discounts to all other retailers. customers from seeking out the lowest-priced good from different retailers. all of the above
suppliers from offering price discounts to large retailers unless they also offered discounts to all other retailers.
Equilibrium quantity will always increase if:
supply and demand both increase.
The market price of airline flights increased recently. Some economists suggest that the price increased because several airlines went out of business. They believe that in the market for flights:
supply decreased.
You notice that the price of DVD players falls and the quantity of DVD players sold increases. This set of observations can be the result of the:
supply of DVD players shifting to the right.
It is certain that the equilibrium quantity will fall when:
supply shifts to the left and demand stays the same.
Refer to the exhibit. A price of $5 will result in a _________ in this market which will cause the price of the product to gravitate ________________
surplus; downward
Which antitrust legislation was passed in an attempt to decrease the failure rate of small businesses by protecting them from competition from large and growing chain stores?
the Robinson-Patman Act.
Marginal factor cost (MFC) is Question options: the additional revenue generated by employing an additional factor unit. the additional cost generated by producing an additional unit of output. total cost from the production of a product divided by the total number of factor units used. the additional cost generated by employing an additional factor unit.
the additional cost generated by employing an additional factor unit.
Saying the marginal costs are greater than the marginal benefits is the same as saying
the additional costs are greater than the additional benefits
Quantity Demanded
the amount of a good or service that a consumer is willing and able to purchase at a given price Quantity demanded is based on how much a consumer wants to buy and how much they may need.
Quantity Supplied
the amount of a good or service that a firm is willing and able to supply at a given price The quantity supplied is how much a seller is willing to sell of a certain amount of goods at a fixed price.
Equilibrium Quantity
the amount of output that results in no shortage or surplus, the amount of goods and service bought and sold in the economy When the same amount is needed as the amount produced it is called equilibrium quantity. Ex: 50 pairs of shoes are needed, 50 pairs of shoes produced
Research by H. Gregg Lewis shows that over the period 1929-1979,
the average wage of union members was 10 to 15 percent higher than that of comparable nonunion labor.
Marginal revenue is Question options: the change in total output brought about by using an additional unit of a variable input. total profit minus total costs. the change in total revenue minus the change in total costs. total revenue divided by the quantity of output. the change in total revenue brought about by selling an additional unit of the good.
the change in total revenue brought about by selling an additional unit of the good.
Which of the following is not an argument for trade restrictions? Question options: the infant industry argument the antidumping argument the comparative advantage argument the national defense argument
the comparative advantage argument
If more people join carpools and travel to work together Question options: the demand curve for freeway space shifts leftward. the supply curve for freeway space shifts rightward. the supply curve for freeway space shifts leftward. a and b none of the above
the demand curve for freeway space shifts leftward
If more people join carpools and travel to work together
the demand curve for freeway space shits leftward
If there is a widely held expectation that prices of cotton will be higher next year, then
the demand for cotton will increase today.
If union action leads to a rise in the relative price of factors that are substitutes for union labor,
the demand for union labor rises.
Demand refers to
the different quantities of a good people are willing and able to buy at different prices
In all cases, macroeconomics deals with
the entire economy
The market for milk is initially in equilibrium. Milk producers engage in an advertising program to encourage milk drinking, which succeeds in shifting consumer tastes toward drinking milk. More milk producers enter the market. Standard demand and supply analysis tells us that:
the equilibrium quantity of milk will rise, but we can't determine how the equilibrium price will be affected.
If the purchase and sale of an illegal drug becomes legalized Question options: the equilibrium quantity will rise, but the change in equilibrium price depends upon whether the demand curve shifts rightward more or the supply curve shifts rightward more. the equilibrium price will fall, but the change in equilibrium quantity depends upon whether the demand curve shifts rightward more or the supply curve shifts rightward more. the equilibrium price and quantity will both fall. the equilibrium price and quantity will both rise.
the equilibrium quantity will rise, but the change in equilibrium price depends upon whether the demand curve shifts rightward more or the supply curve shifts rightward more.
A good will tend to have a low price elasticity of demand if
the good has few substitutes
A good will tend to have a low price elasticity of demand if Question options: the good has few substitutes. a person has a long period of time to adjust to price changes. the good is a luxury. a person spends a high percentage of his or her budget on the good.
the good has few substitutes.
If the cross elasticity of demand for two goods is negative
the goods are complements
The higher the opportunity cost of attending college
the less likely an individual will go to college
The lower the elasticity of demand for a product, Question options: the higher the ratio of labor costs to total costs. the lower the ratio of labor costs to total costs. the lower the elasticity of demand for the labor that produces the product. the higher the elasticity of demand for the labor that produces the product. none of the above
the lower the elasticity of demand for the labor that produces the product.
For a perfectly competitive firm
the marginal revenue curve and the marginal cost curve are the same (NOT TRUE)
The law of diminishing marginal utility says that Question options: the marginal utility gained by consuming equal successive units of a good will decline as the amount consumed increases the more of a particular good one consumes, the greater is the utility received from the consumption of that good. the marginal utility gained by consuming equal successive units of a good will increase as the amount consumed increases. the more of a particular product one sells, the less utility one receives from selling none of the above
the marginal utility gained by consuming equal successive units of a good will decline as the amount consumed increases
The equilibrium price is also known as
the market-clearing price.
Assuming the wage-employment tradeoff exists, if labor in a particular geographic area is homogeneous and the unionized workers successfully negotiate a higher wage rate, then
the nonunion labor market will experience an increase in the number of workers, and this will cause wage rates to decrease in this market.
The theory of consumer choice assumes that consumers attempt to maximize Question options: the difference between total utility and marginal utility. average utility. total utility. marginal utility.
total utility.
Houses in cities with good weather are generally in higher demand and cost more. Question options: True False
true
The prisoner's dilemma game illustrates individually rational behavior leading to a jointly inefficient outcome. Question 6 options: True False
true
The Federal Trade Commission Act of 1914 declared illegal Question options: interlocking directorates. anticompetitive mergers that occurred as a result of one company acquiring the physical assets of another company. unfair or overly aggressive methods of competition. price discounting of goods supplied to large sellers.
unfair or overly aggressive methods of competition.
102. The merger of a brewery with an aluminum can producer is an example of a __________ merger.
vertical
If a union seeks to maximize the total wage bill received by its members, then it should negotiate the
wage rate at which the elasticity of demand for workers is 1.
If a union seeks to maximize the total wage bill received by its members, then it should negotiate the Question options: highest possible wage rate. wage rate at which all of its members are employed. wage rate at which the elasticity of demand for workers is 1. wage rate that maximizes the firm's profits.
wage rate at which the elasticity of demand for workers is 1.
If a union seeks to maximize the total wage bill received by its members, then it should negotiate the
wage rate to which the elasticity of demand for workers is 1
If a firm is a monopsony, then it
will have to pay a higher price to purchase additional units of a factor.
In long-run equilibrium the perfectly competitive firm earns _________ economic profit
zero