Micro

(3) Which of the following will cause the quantity demanded for product K to change?

A change in in the price of K

(6) Which of the following best expresses the law of diminishing returns?

As successive amounts of one resource (labor) are added to fixed amounts of other resources (capital), beyond some point the resulting extra output will decline. Previous PageNext Page

(2) How do workers typically express self-interest?

By seeking jobs with the best combination of wages and benefits.

(4) Which is a determinant of the price elasticity of demand for most products?

- the number of good substitutes available for the product - The proportion of most consumers' budget spent on the product - The amount of time consumers have to adjust their purchases of a product to a change in its price

(6) Assume that in the short run a firm is producing 100 units of output, has average total costs of $200, and has average variable costs of $150. The firm's total fixed costs are

5,000

(11) The percentage of total before-tax income received by the highest 20 percent of households in 2016 was about:

51 percent.

(11) Earnings from wealth:

Contribute to income inequality

Pure monopoly

Firms: One firm Product: Unique; no close substitutes Price: Significant control over prices Entry: blocked

Pure competition

Firms: Very large number Product: standardized Price: No control; price takers Entry: No obstacles (demand is perfectly inelastic)

(4) Price elasticity of supply is

Greater in the long-run than in the short-run

(4) If the price elasticity of demand for a good is .75, the demand for the good can be described as:

Inelastic.

(4) Indy has a price elasticity of demand for soda of 2.55. Suppose the price of each soda is increased by 10 percent. What will happen to the total amount Indy earns on soda?

It will decrease.

(1) A reduction in the level of unemployment would have which effect with respect to the nation's production possibilities curve?

It would not shift the curve; it would be represented by moving from a point inside the curve toward the curve.

(1) The basic economic problem is essentially one of deciding how to make the best use of

Limited resources to satisfy unlimited economic wants.

(9) A major reason that firms form a cartel is to:

Maximize joint profits

pure competition loss minimization

Occurs if: MR > MC (but ATC > MR > AVC)

(9) How would many economists view inefficiency in oligopoly?

P>MC and P>minimum ATC

(8) Other things equal, which reduces competition in an industry?

Patent laws.

(8) Which piece of federal legislation aims to prevent monopolization and restraint of trade?

Sherman Act

(1) The role of an assumption in an economic theory is to

Simplify the theory. Previous PageNext Page

(8) Which is true of price discrimination?

Successful price discrimination will provide the firm with more profit than if it did not discriminate.

(2) Which condition will encourage competition?

The freedom of sellers and buyers to enter or exit an industry.

(1) The production possibilities curve represents which of the following?

The maximum combinations of goods attainable with fixed resources.

(2) Which statement best describes a command economy?

The production and allocation of goods and services is determined primarily through government.

(10) Which is an example of a change in product demand that decreases labor demand?

The widespread availability of self-serve gas pumps reduces the demand for workers pumping gas

(8) What do economies of scale, the ownership of essential raw materials, and patents have in common?

They are all barriers to entry.

(2) All economic systems must answer certain fundamental economic questions. Which is not one of these questions?

Which actions should government take to reduce inflation?

(10) Derived demand is the demand:

XXXXXX derived from consumer satisfaction with a product

(10) A characteristic of a purely competitive labor market would be:

XXXXXX significant differences among workers in the level of work skills

(10) Other things being equal, the elasticity of demand for labor will be greater the:

XXXXXX smaller the proportion of total costs accountable for by labor costs.

(10) Which factor leads to wage differentials?

XXXXXXX Purely competitive labor markets

(10) If the supply of labor in a purely competitive labor market decreases, the labor:

XXXXXXX supply curve for a single employer will shift downward.

(10) An example of derived demand is the demand for

XXXXXXX used cars

(10) Compared to a purely competitive firm, a monopsonist will pay:

XXXXXXXX a higher wage rate to its workers.

(10) Exclusive unionism has the economic effect of:

XXXXXXXX increasing the demand for labor. Previous PageNext Page

(1) The alternative combinations of two goods that a consumer can purchase with a given money income is

a budget line.

(7) The long-run supply curve would be downsloping in

a decreasing-cost industry.

(9) The characteristic most closely associated with oligopoly is:

a few large producers.

(6) A business organization that owns and operates one or more plants is

a firm

(8) One feature of pure monopoly is that the monopolist is

a price maker.

(4) A positive income elasticity of demand coefficient indicates that

a product is a normal good.

(11) The earned income tax credit (EITC) is, in essence:

a wage subsidy for low-income workers to offset Social Security taxes. Previous PageNext Page

(4) When the demand for a good is price-inelastic at a given output level

an increase in price will lead to an increase in total revenue for firms selling the good.

(10) An expenditure on education and training that improves the skills and therefore the productivity of workers is:

an investment in human capital.

(6) The short run is characterized by

at least one fixed resource

(7) In long-run equilibrium under conditions of pure competition and productive efficiency, all firms produce at minimum

average total cost

(12) Assume the demand for automobile tires is highly inelastic and that the supply is highly elastic. The burden of a $2 excise tax on each tire will be

borne primarily by buyers of tires.

(7) A firm sells a product in a purely competitive market. The marginal cost of the product at the current output of 1000 units is $2.50. The minimum possible average variable cost is $2.00. The market price of the product is $2.50. To maximize profit or minimize losses, the firm should

continue producing 1000 units.

(2) The development of the Internet and e-mail to often replace regular mail services is an example of

creative destruction.

(10) Craft unions typically attempt to increase wage rates by:

decreasing the supply of labor.

(3) If products A and B are complements and the price of B decreases, the

demand for A will increase and the amount of B demanded will increase.

(11) A cause of the unequal distribution of income in the United States is:

differences in preferences and risks.

(11) A Lorenz curve shows:

distribution of income

(9) Mutual interdependence means that:

each firm must consider the possible reactions of rivals when establishing price policy.

(11) The debate over income distribution focuses on the trade-off between:

economic efficiency and equality.

(12) If the demand for a product is perfectly inelastic, the incidence of an excise tax will be

entirely on the buyer.

(12) avg tax rate

equal to total taxes/total taxable income. Previous PageNext Page

(2) A characteristic of the market system is

extensive use of capital goods.

(8) A monopolist will always charge the highest price it can get.

false

Oligopoly

firms: Few firms products: Standardized or differentiated prices: Control over prices by collusion entry: Many obstacles

Monopolistic competition

firms: Many firms products: Differentiated products price: Some control over price entry: Relatively easy

(12) The opportunity cost of borrowing funds to finance government deficits is

greatest when the economy is doing well. Previous PageNext Page

(10) Wage differentials occur for all the following reasons except:

homogeneous workers.

(2) In the simple circular flow model

households are sellers of resources and demanders of products.

(11) What is a major reason for growing income inequality in the United States?

import competition

(10) Other things being the same, if the demand of labor is inelastic:

increases in wage rates will result in greater payrolls

(8) Suppose a monopolist calculates that at present output and sales levels, marginal revenue is $1.00 and marginal cost is $2.00. He could maximize profits (or minimize losses) by

increasing price and decreasing output

(9) A major difference between pure competition and monopolistic competition is that under pure competition:

individual firms have more elastic demand curves.

(3)Demand for products that varies indirectly with changes in consumer incomes are known as:

inferior goods

(4) Elasticity of supply will decrease when

it is harder to substitute one factor of production for another in a manufacturing process.

(1) Which is considered to be an economic resource by economists?

labor

(8) When compared with the purely competitive industry with identical costs of production, a monopolist will produce:

less output and charge a higher price.

(12) Government borrowing

may crowd out private sector investment.

(1) The study of how a single business firm sets its prices would fall under the study of

microeconomics

(11) A government payment in the form of goods and services rather than money is a(n):

noncash transfer.

pure competition profit maximization

occurs if: MR > MC (and MR > ATC

(10) An industrial union:

organizes skilled and unskilled workers in an industry.

(12) The largest category of federal spending is for

pensions and income security

(7) If a firm is a price taker, then the demand curve for the firm's product is:

perfectly elastic

(12) The three most important sources of federal tax revenue in order of descending importance are

personal income, payroll, and corporate income taxes.

(6) When total product is increasing at an decreasing rate, marginal product is

positive and decreasing.

(3) The demand curve shows the relationship between

price and quantity demanded.

(9) A major prediction of the kinked-demand curve model is:

price stability in oligopolies.

(2) The circular flow model shows that the goods and services produced by business firms are sold through

product markets.

(12) With respect to local finance,

property taxes are the basic source of revenue and education is the major type of expenditure.

(12) Revenues flowing to the government from government-run or government-sponsored businesses, such as public utilities and state lotteries, are known as

proprietary income

(9) A positive effect of advertising for society is that it:

provides useful information to reduce search cost for consumers.

(7) The market model with the largest number of firms is:

pure competition

(3) If the price of a product increases, we would expect

quantity demanded goes down

(4) Elastic demand displays considerable

quantity stretch.

(9) Which is a characteristic of monopolistic competition?

relatively easy entry

(11) Social Security payment are primarily made to:

retired and disabled workers.

(12) With respect to state finance, for most states

sales and excise taxes are the major source of revenue and education is the major type of expenditure.

(6) One major advantage of limited liability is that it

shields the personal assets of owners from liability claims.

(11) What form of aid is used for Medicaid?

subsidized services

(3) An increase in the excise tax on cigarettes raises the price of cigarettes by shifting the

supply curve for cigarettes leftward.

(7) If firms are losing money in a purely competitive industry, then in the long run this situation will shift the industry

supply curve to the left, and the market price will increase.

(4) The main reason for the high price of antiques is that:

supply is relatively inelastic and demand increases over time.

(12) A progressive tax is such that

tax rates are higher the greater one's income.

(9) A monopolistically competitive firm in the short run is producing where price is $3.00 and marginal cost is $1.50. To maximize profits:

the firm should produce the level of output where marginal revenue equals marginal cost.

(6) Implicit and explicit costs are different in that

the former refer to nonexpenditure costs and the latter to out-of-pocket costs.

(7) A purely competitive firm will be willing to produce at a loss in the short run provided

the loss is no greater than its total fixed costs.

(12) The marginal tax rate is

the percentage of an increment of income that is paid in taxes.

(9) In the long run, profits for a monopolistic competitor will be:

the same as the profits for a purely competitive firm.

(2) In a capitalistic economy

there is a reliance on the market system.

(10) Marginal revenue product is the increase in

total revenue from the use of an additional unit of a resource

(4) When the price of a product is increased 10 percent, the quantity demanded decreases 10 percent. In this range of prices, demand for this product is

unitary elastic??

(1) The satisfaction or pleasure one gets from consuming a good or service is called

utility

(6) If a company owns plants at various stages of the production process, this is called:

vertically integrated firm.

(2) The term "consumer sovereignty" means that

what is produced is ultimately determined by what consumers purchase