Econ 232
I'MaPizzaCo. produces and sells specialty pizzas. Last year, it produced 8,000 mushroom,sausage and spinach pizzas and sold each one for $8. To produce these 8,000 specialty pizzas,the company incurred variable costs of $24,000 and a total cost of $40,000. I'MaPizzaCo'saverage fixed cost to produce 8,000 specialty pizzas was: $1.80 $3.00 $1.60 $2.00
$2.00
I'MaPizzaCo. produces and sells specialty pizzas. Last year, it produced 8,000 mushroom,sausage and spinach pizzas and sold each one for $8. To produce these 8,000 specialty pizzas,the company incurred variable costs of $24,000 and a total cost of $40,000. I'MaPizzaCo'stotal profit or loss to produce 8,000 specialty pizzas was: $24,000 loss $24,000 profit $40,000 profit $40,000 loss
$24,000 profit
I''MABigCorp. produces and sells kitchenware. Last year, it produced 7,000 can openersand sold each one for $6. To produce the 7,000 can openers, the company incurred variablecosts of $28,000 and a total cost of $45,000. I'MABIGCorp.'s average total cost to produce the7,000 can openers was: $6.00 $4.00 $5.50 $6.43
$6.43
Suppose that one worker can produce 15 cookies, two workers can produce 40 cookies together, and three workers can produce 75 cookies together. What is the marginal product of the 2nd worker? 35 cookies 20 cookies 40 cookies 25 cookies
25 cookies
________ is a group of firms colluding to make price and output decisions. A cartel Price leadership A concentrated industry An oligopoly
A cartel
Which of the following is most likely to cause variation in American household spending patterns? each household's personal preferences. All answers are correct. differing levels of family income. geographical location of households.
All answers are correct.
____________ occurs when circumstances have allowed several large firms to have all or most of the sales in an industry. A cartel A monopoly An oligopoly Collusion
An oligopoly
____________ tells a firm whether it can earn profits given the price in the market. Average cost Total cost Marginal cost Average marginal cost
Average cost
Which of the following would be classified as a differentiated product produced by a monopolistic competitor? electricity tap water Channel No. 5 natural gas
Channel No. 5
_______________ occur when the marginal gain in output diminishes as each additional unit of input is added. Diminishing average returns Diminishing marginal costs Diminishing variable returns Diminishing marginal returns
Diminishing marginal returns
Cash expenditures a firm makes to pay for resources are called: Opportunity costs Explicit costs Normal profit You Answered Implicit costs
Explicit costs
Which characteristic would best be associated with perfect competition? Price takers Product differentiation Nonprice competition Few sellers
Price takers
Which of the following is correct? TC = TFC / TVC TC = TFC + TVC TC = TFC - TVC TC = TFC * TVC
TC = TFC + TVC
Which always increase(s) as output increases? Total Cost only Total Cost and Variable Cost Variable Cost only Fixed Cost only
Total Cost and Variable Cost
Which always increase(s) as output increases? Variable Cost only Fixed Cost only Total Cost and Variable Cost Total Cost only
Total Cost and Variable Cost
_____________ is calculated by taking the quantity of everything that is sold and multiplying it by the sale price. Total profits Total revenue Total cost Average profit margin
Total revenue
In terms of microeconomic analysis, what is the function of "utils"? a measurement of utility applies to changes in income a form of budget constraint relates to a consumers original choice
a measurement of utility
A firm that holds a monopoly position in the market place is a price maker monopolistically competitive a price taker subject to infinite market forces
a price maker
How does the cost of financial capital influence innovative research and development activities in a competitive market? a) At a low cost, firms demand a large quantity, as R&D projects will likely return a higher rate. b) At a low cost, the firm receives only small private benefits from investing in R&D. c) Financial capital at a high cost means more projects are likely to pay a much higher return rate. d) At a high cost, firms demand a large quantity, as R&D projects return high rates.
a) At a low cost, firms demand a large quantity, as R&D projects will likely return a higher rate.
Which of the following would be classified as a situation where a third-party benefits from a market transaction by others? a) City buying 10,000 trees for green space renewal projects. b) Allowing a mining company to use a natural lake to discharge waste. c) Two firms trading pollution credits to avoid cutting their toxic emissions. d) Increased levels of air pollution in neighborhoods near a football stadium.
a) City buying 10,000 trees for green space renewal projects.
What was created by the U.S. government in 1914 to specifically define what types of competition were legally unfair? a) Federal Trade Commission b)Antitrust Act c) Department of Justice d) Supreme Court
a) Federal Trade Commission
_________ is a flow of money received, often measured on a monthly or an annual basis. a) Income b) Taxation c) Wealth d) Privilege
a) Income
To address a common poverty trap problem for many low-paid Americans whose jobs pay enough that a family could lose its eligibility for _____________, yet those jobs don't offer ______________ either, some states guaranteed that children would not lose their coverage if their parents worked. a) Medicaid; health insurance benefits b) food stamps; Medicaid benefits c) food stamps; retirement benefits d) Medicaid; drug insurance benefits
a) Medicaid; health insurance benefits
_____________ describes a situation where a third party, outside the transaction, suffers from a market transaction by others. a) Negative externality b) Positive externality c) A spillover d) A market failure
a) Negative externality
Assume there is no way to prevent someone from using an interstate highway, regardless of whether or not he or she helps pay for it. This characteristic is called: a) Nonexcludability b) Nontaxability c) Nonrivalry d) Nondiscrimination
a) Nonexcludability
What Act was passed to allow American workers to opt out of the union in their workplace? a) Taft-Hartley Act of 1947 b) National Workers' Rights Act of 1940 c) Labor Relations Act of 1947 d) National Labor-Management Relations Act of 1935
a) Taft-Hartley Act of 1947
________________ is the level where half of all families had more than that level and half had less. a) The median b) The first quintile c) The third quintile d) The quintile
a) The median
_________ is the sum of the value of all assets, including money in bank accounts, financial investments, a pension fund, and the value of a home. a) Wealth b) Privilege c) Income d) Taxation
a) Wealth
Using the term "spillover" is a less formal means of describing a) an externality. b) market failure. c) social costs. d) private costs.
a) an externality.
Government policy that attempts to prevent collusion among the sellers of a product and attempts to prevent restraint of trade is known as a) antitrust policy. b) inherent policy. c) goodwill policy. d) social policy.
a) antitrust policy.
If ABC Company's research and development project succeeds, then a) competitors may find a way to adapt and copy the underlying idea without incurring R&D costs. b) their success will be temporary because they will inevitably fall behind other innovative competitors. c) market competition will ultimately discourage commercialization of the new technology. d) they will need to find a less expensive way to add even more desirable characteristics.
a) competitors may find a way to adapt and copy the underlying idea without incurring R&D costs
Regulations that permit a regulated firm to cover its costs and to make a normal level of profit are commonly referred to as a) cost-plus regulations. b) price cap regulations. c) profit regulations. d) regulatory capture.
a) cost-plus regulations
Regulations that permit a regulated firm to cover its costs and to make a normal level of profit are commonly referred to as a) cost-plus regulations. b) price cap regulations. c) profit regulations. d) regulatory capture.
a) cost-plus regulations.
Suppose a firm pollutes a river when it produces a product. To achieve the efficient amount of output, a government could impose a ________ that equals the ________ of the pollution. a) pollution tax; marginal external cost b) pollution charge; marginal external cost c) pollution tax; marginal social cost d) pollution charge; marginal social cost
a) pollution tax; marginal external cost
Regulators employ average cost pricing instead of marginal cost pricing because a) price must be high enough to cover all opportunity costs if the firm is to stay in business. b) average cost pricing is more efficient than marginal cost pricing. c) the price is lower with average cost pricing. d) average cost pricing is simpler to compute than marginal cost pricing.
a) price must be high enough to cover all opportunity costs if the firm is to stay in business.
For a positive externality, _______________ than the social benefits. a) private benefits of an action are less b) social costs of an action are less c) private benefits of an action are more d) social benefits of an action are more
a) private benefits of an action are less
The difference between private cost and social cost is that a) private cost only considers the cost borne by producers of the good. b) social cost only considers the cost borne by people other than the producer. c) social cost also includes any external benefit whereas private cost excludes all external benefits. d) social cost only considers the external cost borne by society.
a) private cost only considers the cost borne by producers of the good.
Marketable permits can be viewed as a form of improved__________________. a) property rights b) command-and-control regulations c) refundable tax credits d) flat fee pollution tax
a) property rights
The marginal social cost of producing a good or service is the a) sum of the marginal private cost and the marginal external cost. b) same as marginal external cost. c) cost of producing an additional unit borne by the producer. d) cost of producing an additional unit borne by people other than the producer.
a) sum of the marginal private cost and the marginal external cost.
Factors that contributed to the current level of the earnings gap in the U.S. labor market between black and white workers include: a) the combination of changes in law and changes in social attitudes. b) changes in production techniques made white workers unproductive. c) a vast decrease in the number of well-educated black workers. d) a large decline in the average education levels for white workers.
a) the combination of changes in law and changes in social attitudes
The Sudsy Soda Company will not sell its soft drinks to a restaurant unless that business also buys paper cups from Sudsy. This requirement is an example of a) tie-in sales. b) product versioning. c) price differentiation. d) complementary pricing.
a) tie-in sales.
Which of the following arguments would most likely be presented by a critic of labor unions? a) unions can prohibit economic growth if new technology is blocked b) unions have a tendency to gain as much as possible in the long-term c) unions have a higher percentage of women members than men d) unions oppose suppression of wages by profit-seeking firms
a) unions can prohibit economic growth if new technology is blocked
The marginal revenue curve for a monopolist _________ the market demand curve. always rises above always is the same always lies beneath always runs parallel
always lies beneath
In the framework of an oligopoly, what strategy can work like a silent form of cooperation? legally enforceable agreements immediately match price increases always match other cartel firms' price increases, but don''t match price cuts always match other cartel firms' price cuts, but don''t match price increases
always match other cartel firms' price cuts, but don''t match price increases
In perfect competition, a firm's demand curve intersects the marginal revenue curve when marginal revenue is minimized. is always below the marginal revenue curve facing the firm. and the marginal revenue curve facing the firm are identical. is always above the marginal revenue curve facing the firm.
and the marginal revenue curve facing the firm are identical.
In order to determine ____________, the firm's total costs must be divided by the quantity of its output. average cost diminishing marginal returns variable cost fixed costs
average cost
Which of the following government institutions bears the responsibility of enforcing US antitrust laws? a) Congress and Senate b) Department of Justice c) Federal Trade Commission d) Supreme Court
b) Department of Justice
Which of the following is an example of a negative externality? a) The higher price you pay when you buy a heavily advertised product b) Falling property values in a neighborhood where a disreputable nightclub is operating c) The costs paid by a company to build an automated factory d) An increase in the value of land you own when a nearby development is completed
b) Falling property values in a neighborhood where a disreputable nightclub is operating
Street entertainers face the free-rider problem when they perform because of the: a) Diminishing marginal utility b) Nonexcludability characteristic c) Rivalry characteristic d) Law of Demand
b) Nonexcludability characteristic
_____________ occurs when the existing firm (or firms) reacts to a new firm by dropping prices very low, until the new firm is driven out of the market, at which point the existing firm raises prices again. a) Tie-in sales b) Predatory pricing c) Bundling d) Versioning
b) Predatory pricing
Government passed the _________ to limit the power of large, consolidated firms that were run by trustees as if they were a single firm. a) Thatcher Act in 1980 b) Sherman Act in 1890 c) Antitrust Act in 1890 d) Competition Act in 1980
b) Sherman Act in 1890
The first antitrust law in the United States was the a) Clayton Act. b) Sherman Act. c) FTC Act. d) Robinson-Patman Act.
b) Sherman Act.
An externality is a) the amount a consumer pays to consume an additional amount of a particular good. b) a cost or benefit resulting from some activity or transaction that is imposed or bestowed on parties outside the activity or transaction. c) a problem intrinsic to public goods: The good or service is so costly that its provision generally does not depend on whether or not any single person pays. d) the total cost to society of producing an additional unit of a good or service.
b) a cost or benefit resulting from some activity or transaction that is imposed or bestowed on parties outside the activity or transaction.
A cost that arises from the production or consumption that falls on someone other than the producer or consumer is called a) a positive externality. b) a negative externality. c) a negative benefit. d) a public choice impact.
b) a negative externality.
Antitrust laws in the United States a) are not necessary in the twenty-first century. b) are an attempt to foster competition. c) have not been used in the past twenty-five years. d) are the same as the laws in the European Union.
b) are an attempt to foster competition
Antitrust laws in the United States a) are not necessary in the twenty-first century. b) are an attempt to foster competition. c) have not been used in the past twenty-five years. d) are the same as the laws in the European Union.
b) are an attempt to foster competition.
Firms operating under cost-plus regulation have an incentive to generate high costs by building huge factories or employing lots of staff, a) because this will reduce the firm's costs more quickly and it can make a high level of profit. b) because what they can charge is linked to the costs they incur. c) because the market changes dramatically and they have incentive to meet new demand. d) because doing so creates efficiencies and innovation.
b) because what they can charge is linked to the costs they incur.
Those firms in the oil refining industry that can reduce pollution ______________________ will do so ______________________. a) for a flat charge; with the most expensive technologies b) cheaply and easily; to minimize their pollution taxes c) for a flat charge; at the industrial level d) cheaply and easily; with the most expensive technologies
b) cheaply and easily; to minimize their pollution taxes
The existence of labor unions forces employers to deal with workers _____________. a) individually, rather than as a collective b) collectively, rather than as individuals c) cooperatively, rather than uncooperatively d) equitably, rather than inequitably
b) collectively, rather than as individuals
If immigration consists of mainly high-skilled workers, then a(n) __________ in immigration will __________ the wages of high-skilled workers. a) increase, not affect b) decrease, increase c) increase, increase d) decrease, decrease
b) decrease, increase
An individual who wants others to pay for public goods, but plans to use those goods for their own purposes, is often referred to as a(n) _____________. a) excludable b) free rider c) nonexcludable d) tax evader
b) free rider
A(n) _______ in demand for the firm's product drives up the product's price, which ______ the firm's demand for labor. a) increase, decreases b) increase, increases c) decrease, increases d) none of the answers are correct
b) increase, increases
A natural monopoly a) produces a natural resource. b) is a firm than can supply the market at lower average total cost than two or more firms. c) faces a horizontal demand curve. d) sells to a single buyer. e) sets price equal to marginal revenue.
b) is a firm than can supply the market at lower average total cost than two or more firms.
To eliminate the inefficiency resulting from pollution that creates an external cost, the government can impose a pollution tax on producers that is equal to the a) MC. b) marginal external cost. c) MSC. d) MSB.
b) marginal external cost.
When the price of a product increases, the marginal revenue product curve in a perfectly competitive market a) becomes flatter. b) shifts to the right. c) shifts to the left. d) does not change.
b) shifts to the right.
The typical pattern revealed in a budget constraint model shows that as the quantity consumed rises, a) total utility decreases. b) total utility rises, but marginal utility falls. c) total utility decreases, but marginal utility rises. d) marginal utility increases.
b) total utility rises, but marginal utility falls.
In microeconomic terms, the ability of a good or a service to satisfy wants is called: a) opportunity cost. b) utility. c) preferences effect. d) profit potential.
b) utility.
When used with a natural monopoly, an average cost pricing rule results in a) economic losses for the firm. b) zero economic profit for the firm. c) the efficient level of output. d) the need for government to subsidize the natural monopoly. e) the firm making an economic profit.
b) zero economic profit for the firm.
Marginal utility can: be positive or negative, but not zero. decrease, but not become negative. increase positively, but not negatively. be positive, negative, or zero.
be positive, negative, or zero.
Which of the following is most likely to cause variation in American household spending patterns? a) each household's personal preferences. b) geographical location of households. c) All answers are correct. d) differing levels of family income.
c) All answers are correct.
Laws and government actions designed to prevent monopoly and to promote competition are the focus of: a) Industrial regulation b) Incomes policy c) Antitrust policy d) Social regulation
c) Antitrust policy
Which of the following has the power to allow a merger, prohibit it, or allow it if certain conditions are met? a) antitrust regulators at the FTC b) Supreme Court c) Department of Justice d) Congress and/or Senate
c) Department of Justice
A merger between one firm and another firm that is its supplier is known as a: a) Parallel merger b) Conglomerate merger c) Vertical merger d) Horizontal merger
c) Vertical merger
The implicit assumption that competitive conditions across industries are similar enough to make a decision about the effects of a merger is a) fundamental to antitrust regulators for conducting case-by-case competitive analysis. b) a fundamentally sound principle found in all antitrust law. c) a weakness of the concentration ratio analysis method. d) fundamental to case-by-case analysis of how sales are divided in a particular market.
c) a weakness of the concentration ratio analysis method.
A private cost is a cost of production that is a) borne by someone other than the producer of a good. b) measured in marginal terms. c) borne by the producer of a good. d) measured in total terms.
c) borne by the producer of a good.
Since the 1980's, the earnings gap between men and women in the U.S. labor market has a) steadily risen. b) increased throughout the 1970s. c) continued to narrow. d) been completely eliminated.
c) continued to narrow
A local regulator has calculated the average cost of production for the public water utility. The regulator has allowed an adjustment for the normal rate of profit the firm should expect to earn, and then set the price that consumers can be charged accordingly. In this instance, the regulator has used which of the following a) market-price analysis b) cost-plus analysis c) cost-plus regulation d) price-cap regulation
c) cost-plus regulation
If a glass manufacturer has only a few ______________________ of reducing pollutants, it will ______________________. a) inexpensive ways; incur the pollution tax instead. b) inexpensive ways; buy the most expensive technology. c) costly ways; end up paying the pollution tax. d) costly ways; do so to minimize its pollution taxes.
c) costly ways; end up paying the pollution tax.
Because of fixed capital, the marginal product of labor declines as the employer hires additional workers. a) variable inputs b) variable capital c) fixed capital d) derived demand
c) fixed capital
An inferior good is a product: a) that has an upward sloping demand curve. b) for which there is no demand. c) for which demand decreases as income increases. d) for which demand increases as income increases.
c) for which demand decreases as income increases.
Which of the following would an economist identify as a difficulty relating to environmental command-control regulations? a) lack of incentive to reduce pollution b) obvious lack of loopholes c) high degree of inflexibility d) clear distinctions drawn between firms
c) high degree of inflexibility
A major shortcoming of the Sherman Act was that a) violators of the Act were forced out of business. b) it was not enforced by the courts c) it failed to explicitly state which specific activities were illegal. d) when it was passed, there were no violations, so the Supreme Court ruled it unnecessary.
c) it failed to explicitly state which specific activities were illegal.
Which of the following would an economist identify as a difficulty relating to environmental command-control regulations? a) it usually requires different standards for all current and potential polluters. b) it often requires different pollution-control technology for each polluter. c) it is full of fine print and exceptions, and costly for some firms to comply with. d) it is not subject to compromises in the political process and all of the above.
c) it is full of fine print and exceptions, and costly for some firms to comply with.
The monopolist's input demand curve is equal to its a) average cost curve. b) variable cost curve. c) marginal revenue product curve. d) marginal cost curve.
c) marginal revenue product curve.
Which of the following typically leads to two formerly separate firms being under common ownership? a) government regulation b) business mergers c) mergers and acquisitions d) business acquisitions
c) mergers and acquisitions
Today, you might be buying from a regulated natural monopoly when you purchase a) a computer, a phone, or a camera. b) a car, a truck, or a bicycle. c) natural gas or electricity. d) a house, a condominium, or a plot of land.
c) natural gas or electricity.
An individual whose income level is just above the poverty line would most likely be classified as being a member of the _____________. a) working poor b) poverty trapped c) near-poor d) illiterate poor
c) near-poor
When it is costly or impossible to exclude someone who hasn't paid to use a particular good from using it, then that good is classified as being a) free rider b) public good c) nonexcludable d) unexcludable
c) nonexcludable
Public goods are a) rival in consumption, and their benefits are nonexcludable. b) rival in consumption, and their benefits are excludable. c) nonrival in consumption, and their benefits are nonexcludable. d) nonrival in consumption, and their benefits are excludable.
c) nonrival in consumption, and their benefits are nonexcludable.
When the price of a good _____, households will typically demand ____ of that good. a) less, less b) rises, more c) rises, less d) none of the answer are correct
c) rises, less
Medicaid is a federal-state joint program enacted in 1965 that provides medical insurance for a) the disabled. b) low-income mothers, but not their spouses. c) the near-poor and the low-income elderly. d) all those below the poverty line.
c) the near-poor and the low-income elderly.
In the U.S., government support programs that are focused specifically on the poor include which of the following? a) income stamps b) food credits c) welfare d) Medicaid credits
c) welfare
If you are highly asthmatic, then having high levels of industrial air pollutants waft over your house every day a) is a voluntary exchange. b) is positively a voluntary exchange. c) would be a negative externality. d) would be an external voluntary exchange.
c) would be a negative externality.
A situation known as ______________ occurs when all production inputs areallowed to expand, but that expansion does not result in much of a change in the average cost of production. constant returns to scale economies of scale diminishing marginal returns returns to scale
constant returns to scale
The ______________ of all firms can be broken down into some common underlyingpatterns. diminishing short-run costs cost structure diminishing long-run costs total revenues
cost structure
Tying contracts, which is prohibited under the Clayton Act, refers to the situation where a producer requires that a buyer: a) Cannot buy a similar product from other producers if that buyer wants to continue buying its product b) Can resell the product but only at a higher price than the original purchase price c) Cannot ever resell the product bought d) Buy another of its products as a condition for buying the desired product
d) Buy another of its products as a condition for buying the desired product
The Sherman Act of 1890 outlawed: a) Monopoly pricing and foreign trade b) Foreign trade and monopolization c) Price discrimination and monopoly profits d) Restraint of trade and monopolization
d) Restraint of trade and monopolization
__________________ include both the private costs incurred by firms and also costs incurred by third parties outside the production process. a) Private costs b) External costs c) Market costs d) Social costs
d) Social costs
Antipoverty programs that are set up so that the amount of government benefits will decline substantially as poor people earn more income typically create ______________. a) a poverty line b) an income inequity c) a safety net d) a poverty trap
d) a poverty trap
A complementary approach to supporting R&D that does not involve the government's close scrutiny of particular R&D projects is to give firms a) assurance that antitrust authorities challenge cooperative R&D efforts. b) a permanent monopoly over all their inventions that never expires. c) the option to fund all R&D projects through colleges or universities. d) a reduction in corporate taxes based on amount of R&D performed.
d) a reduction in corporate taxes based on amount of R&D performed.
If a society decides to reduce the level of economic inequality, which of the following sets of tools can it use? a) a tax imposed on the value of inheritances b) trying to assure that a ladder of opportunity is widely available c) redistribution from those with high incomes to those with low incomes d) all of the above
d) all of the above
Which of the following is an example of economic output that can injure the environment? a) paper mill discharging raw chemical waste into a river b) gold mine discharging arsenic into a natural lake it's using for a tailings pond c) excessive clear cutting of wood resources by logging companies d) all of the above
d) all of the above
Some economists argue that if privately owned firms were required to pay the social costs of their pollution, the result would be: a) each would lower production to decrease pollution levels. b) the price of goods will rise. c) each would create less pollution. d) all of the above.
d) all of the above.
Poverty is measured by the number of people who fall below a) the income needed for a basic standard of living. b) a certain level of income. c) the nation's economic poverty line. d) all the above are correct.
d) all the above are correct.
Antitrust laws were created to give government the power to a) block cartels, and break up regulatory capture. b) block certain mergers that are determined to be uncompetitive. c) force the firm to sell off the profitable parts of its opera d) block certain mergers and break up large firms into smaller ones.
d) block certain mergers and break up large firms into smaller ones.
Antitrust laws were created to give government the power to a) block cartels, and break up regulatory capture. b) block certain mergers that are determined to be uncompetitive. c) force the firm to sell off the profitable parts of its operation. d) block certain mergers and break up large firms into smaller ones.
d) block certain mergers and break up large firms into smaller ones.
Market-oriented environmental tools _________ for firms to take the social costs of pollution into account and _________ in reacting to these incentives. a) specify particular technology; lower the social costs incurred b) lack incentives; prohibit firms from having flexibility c) draw distinctions; lower the social costs incurred d) create incentives; allow firms some flexibility
d) create incentives; allow firms some flexibility
Currently, the approach to antitrust regulation involves a) market concentration ratio. b) defining a market and counting up total sales. c) HHI and concentration ratio. d) detailed analysis of specific markets and companies.
d) detailed analysis of specific markets and companies.
When a firm is regulated so it uses an average cost pricing rule, the price a) is less than marginal cost. b) equals marginal revenue. c) exceeds average total cost. d) equals average total cost. e) equals marginal cost.
d) equals average total cost
An agreement between a manufacturer and a distributor stipulating that a dealer will only distribute that manufacturer's products would be classified as a form of a) tie-in-sales arrangement. b) price maintenance. c) predatory pricing. d) exclusive dealing.
d) exclusive dealing.
Union membership has _____________ in the United States because of ____________. a) risen; increased global trade from U.S. manufacturers b) risen; the shift from service to manufacturing industries c) fallen; laws making workplace protection more difficult d) fallen; laws enacted making it more difficult to unionize
d) fallen; laws enacted making it more difficult to unionize
The earnings gap in the U.S. labor market between black and white workers __________. a) has not diminished at all since 1960 b) was completely eliminated by the end of the 1960s c) existed in the 1960s but was reversed throughout the 1970s d) has diminished since 1960, but a gap still remains
d) has diminished since 1960, but a gap still remains
A narrowly defined market will tend to make concentration appear ____________, while a broadly defined market will tend to make it appear _____________. a) concerning; less concerning b) less concerning; concerning c) smaller; higher d) higher; smaller
d) higher; smaller
Property rights are the legal rights of ownership on which others are a)allowed to infringe by paying the property owner's pollution tax. b) able to enforce use of pollution-control technologies. c) able to specify allowable quantities of pollution. d) not allowed to infringe without paying compensation.
d) not allowed to infringe without paying compensation
Property rights are the legal rights of ownership on which others are a) allowed to infringe by paying the property owner's pollution tax. b) able to enforce use of pollution-control technologies. c) able to specify allowable quantities of pollution. d) not allowed to infringe without paying compensation.
d) not allowed to infringe without paying compensation.
The objective of imposing a higher pollution tax is to a) ensure firms must pay the pollution charge for all reduced emissions. b) provide incentive for firms to maintain regulation emission levels. c) ensure firms have pollution charge credits for all reduced emissions. d) provide adequate incentive for firms to reduce their emissions by more.
d) provide adequate incentive for firms to reduce their emissions by more.
The objective of imposing a higher pollution tax is to a)ensure firms must pay the pollution charge for all reduced emissions. b) provide incentive for firms to maintain regulation emission levels. c) ensure firms have pollution charge credits for all reduced emissions. d) provide adequate incentive for firms to reduce their emissions by more.
d) provide adequate incentive for firms to reduce their emissions by more.
Cathy can take either of two separate roads to drive to work. The first is a lightly used new toll road that is rarely congested. The second road is a local road with no tolls, but it is often congested and has many potholes. In this instance, the toll road is a) rivalrous and excludable b) nonrivalrous and excludable c) nonrivalrous and nonexcludable d) rivalrous and nonexcludable
d) rivalrous and nonexcludable
If a government chooses a system of marketable permits as its environmental managing tool, the reduction in pollution will a) take place in every firm within the time set by the permit. b) be initiated at the household level. c) be rewarded with refundable charges. d) take place in the firms where it is least expensive to do so.
d) take place in the firms where it is least expensive to do so.
Which of the following is considered to be a tell-tale signal that the point with the highest total utility has been found? a) the quantities demanded change so total utility rises b)the marginal utility per dollar is controlled by trade-offs c) the demand curves are flatter reducing quantity d) the marginal utility per dollar is the same for both goods
d) the marginal utility per dollar is the same for both goods
Antitrust law includes specific rules against restrictive practices in particular because a) they're very disruptive and controversial practices. b) they're effective in creating natural monopolies. c) their specific contracts are complicated. d) their effects can reduce competition.
d) their effects can reduce competition.
If a monopoly or a monopolistic competitor raises their prices, the decline in quantity demanded will be larger for the monopolistic competitor. decline in quantity demanded will be larger for the monopoly. the quantity demanded for the monopolistic competitor will fall to zero. the quantity demanded for the monopoly product falls to zero.
decline in quantity demanded will be larger for the monopolistic competitor.
Monopolistic competitors in the food industry will often include a recyclable symbol onpackaging used for their product as a means to be environmentally responsible. be perceived more favorably. differentiate their product. be socially responsible.
differentiate their product.
In the monopolistically competitive market for figure skate blades, manufacturers offer an array of products that are distinctly similar in a particular way. virtually identical on the competition spectrum. at opposite ends of the competition spectrum. distinctly different in a particular way.
distinctly different in a particular way
A two firm oligopoly is known as a contestable market. duopoly cartel. monopoly.
duopoly
In order to calculate marginal cost, the change in ______________ is divided by the amount of change in quantity. either total cost or average cost increasing marginal returns decreasing marginal returns either total cost or variable cost
either total cost or variable cost
When a monopolist increases sales by one unit, the marginal revenue of selling a unit is more than the price of the unit. every other unit must now be sold at a lower price. higher output levels create the typical downward sloping cost curve total costs decrease and become flatter as output rises
every other unit must now be sold at a lower price.
The term "constant returns to scale" describes a situation where a larger-scale firm can produce at a lower cost than a smaller-scale firm. expanding all inputs does not change the average cost of production. the quantity of output rises and the average cost of production falls. expanding all inputs changes the average cost of production.
expanding all inputs does not change the average cost of production.
Accounting costs represent both sunk and future costs. long run costs only. opportunity costs. explicit costs paid by the firm.
explicit costs paid by the firm.
Accounting costs represent opportunity costs. both sunk and future costs. long run costs only. explicit costs paid by the firm.
explicit costs paid by the firm.
A perfectly competitive industry is a: hypothetical extreme. realistic assumption. hypothetical assumption. realistic extreme
hypothetical extreme
A perfectly competitive industry consists of firms that produce ________ products. significantly differentiated identical unique slightly differentiated
identical
The term _____________ describes a situation where a ________________ causes a reduction in the buying power of income, even though actual income has not changed. intertemporal budget; higher price substitution effect; lower price intertemporal budget; lower price income effect; higher price
income effect; higher price
When economists attempt to predict the spending patterns of U.S. households, they will typically view the _____________________ as a primary determining factor that influences the individual consumption choices that each will make. income level of each household nation's perennial political debate national average spending level national average savings level
income level of each household
A perfectly competitive firm will react to profits by ______________. increasing its production reducing its labor inputs tailoring their quality controls increasing quality of products
increasing its production
The demand curve for a monopoly firm is the same as the market demand curve is horizontal. lies below its marginal revenue curve. is perfectly inelastic.
is the same as the market demand curve.
A ________ often arise when laws prohibit or severely limit competition. monopolistic competition oligopoly natural monopoly legal monopoly
legal monopoly
A ________ often arise when laws prohibit or severely limit competition. oligopoly monopolistic competition legal monopoly natural monopoly
legal monopoly
A natural monopoly occurs when the quantity demanded is ____________ the minimum quantity it takes to be at the bottom of the long-run average cost curve. less than greater than equal to none of the answers are correct
less than
A natural monopoly occurs when the quantity demanded is ____________ the minimum quantity it takes to be at the bottom of the long-run average cost curve. equal to less than none of the answers are correct greater than
less than
Which of the following is most likely to be a monopoly? local television broadcaster local fast-food restaurant local bathroom fixtures shop local electricity distributor
local electricity distributor
When a natural monopoly exists in a given industry, the per-unit costs of production will be lower for the smaller firms than for larger firms. lower for the smaller firms than for larger firms. minimized at the output that maximizes the industry's profitability. lowest when a single firm generates the entire output of the industry.
lowest when a single firm generates the entire output of the industry.
The term _____________ is used to describe the additional cost of producing one more unit. marginal cost fixed cost average cost variable cost
marginal cost
The term _____________ is used to describe the additional cost of producing one more unit. fixed cost average cost variable cost marginal cost
marginal cost
In perfect competition, a firm's ________ curve is horizontal. total cost. total revenue marginal cost marginal revenue
marginal revenue
For perfectly competitive firms, none of the answers are correct. marginal revenue equals total revenue. marginal revenue equals price. total revenue equals price.
marginal revenue equals price.
If a monopolist increases quantity by one unit, but sells the increased output at a slightly lower price, the marginal revenue of selling a unit is more than the price of the unit. marginal revenue is affected by adding one additional unit sold at the new price. all the previous units, which used to sell at a higher price, now sell for more. because of higher output the marginal revenue curve is above the demand curve.
marginal revenue is affected by adding one additional unit sold at the new price.
The term _________________ refers to the additional utility provided by one additional unit of consumption. marginal utility Giffen utility utility added utility
marginal utility
A decrease in consumer preference for a product, other things being equal, will cause: quantity demanded is not a price function. a decrease in supply. market demand to shift to the right. market demand to shift to the left.
market demand to shift to the left.
Joe's Butcher Shop is producing where MR = MC; Joe's Butcher Shop must be earning a zero economic profit. maximizing profits. incurring a loss. maximizing revenue but not maximizing profits.
maximizing profits.
Shopping malls typically lease retail space to a large number of clothing stores. When this group of retailers competes to sell similar but not identical products, they engage in what economists call _____________. collusion perfect competition a cartel monopolistic competition
monopolistic competition
Shopping malls typically lease retail space to a large number of clothing stores. When this group of retailers competes to sell similar but not identical products, they engage in what economists call _____________. monopolistic competition perfect competition collusion a cartel
monopolistic competition
The single most common form of competition in the U.S. is perfect competition among firms with differentiated products. oligopolistic competition in a certain market with similar products. monopolistic competition among firms with differentiated products. perfect competition because it displays product and allocative efficiencies.
monopolistic competition among firms with differentiated products
A ___________ often arise in industries where the marginal cost of adding an additional customer is very low, once the fixed costs of the overall system are in place. natural monopoly legal monopoly monopolistic competition oligopoly
natural monopoly
If a profit-maximizing firm is currently producing where MR = MC, it should decrease output so that marginal revenue will be greater than marginal cost and the firm's profit will increase. exit the industry. not change because it is already maximizing profit. increase output so that marginal revenue is less than marginal cost.
not change because it is already maximizing profit.
If a profit-maximizing firm is currently producing where MR = MC, it should exit the industry. not change because it is already maximizing profit. decrease output so that marginal revenue will be greater than marginal cost and the firm's profit will increase. increase output so that marginal revenue is less than marginal cost.
not change because it is already maximizing profit.
A form of industry structure characterized by a few firms each large enough to influence market price is oligopoly. monopoly. monopolistic competition. perfect competition.
oligopoly
The market structure in which the behavior of any given firm depends on the behavior of the other firms in the industry is oligopoly. perfect competition. monopoly. monopolistic competition.
oligopoly.
Perfect competition and monopoly stand at ___________ of the spectrum of competition. opposite ends the high end the mid-way point the low end
opposite ends
Following the assumption that firms maximize profits, how will the price and output policy of an unregulated monopolist compare with ideal market efficiency? output will be too large and its price too low. output will be too small and its price too low. output will be too large and its price too high. output will be too small and its price too high.
output will be too small and its price too high.
When a business adopts a strategy of reducing and/or discontinuing production in response to a sustained pattern of losses, it is considering capital investments. preparing to exit operations. considering opportunity costs. preparing to reach its shutdown point.
preparing to exit operations.
The term _______________ refers to a firm operating in a perfectly competitive market thatmust take the prevailing market price for its product. price taker price setter business entity trend setter
price taker
Why would labor be treated as a variable cost? producing larger quantities of a good or service generally requires more workers labor costs are an input cost that firms are unable to change in the short run they are made before production starts and vary according to the specific line of business they are costs incurred in the act of producing that will decrease with quantity produced
producing larger quantities of a good or service generally requires more workers
A monopolist is able to maximize its profits by producing output where MR = MC and charging a price along the demand curve. setting the price at the level that will maximize its per-unit profit. producing maximum output where price is equal to its marginal cost. setting output at MR = MC and setting price at the demand curve's highest point.
producing output where MR = MC and charging a price along the demand curve.
In the event that Only1Corp. obtains control of all the natural gas producers in the US, it would most likely acquire rights for its investors to produce and sell their product. raise prices, cut production, and realize positive economic profits. have a patent giving it exclusive legal rights to make, use, and sell for a limited time.
raise prices, cut production, and realize positive economic profits.
When the price of a good _____, households will typically demand ____ of that good. less, less none of the answer are correct rises, more rises, less
rises, less
If an individual perfectly competitive firm charges a price below the industry equilibrium price, it will sell all that it produces but gain less revenue than competing firms will. not sell anything. sell all that it produces and gain more revenue than competing firms will. sell part of what it produces.
sell all that it produces but gain less revenue than competing firms will.
A monopolistically competitive firm may earn abnormally high profits in the short run, but after entry occurs, the long term perceived demand curve shifts to the right. long term, but the process of entry will drive those profits to zero in the short run. short term, but the process of entry will drive those profits to zero in the long run. long run, but after entry occurs, the short term perceived demand curve shifts to the right.
short term, but the process of entry will drive those profits to zero in the long run.
A monopolistically competitive firm may earn abnormally high profits in the long term, but the process of entry will drive those profits to zero in the short run. long run, but after entry occurs, the short term perceived demand curve shifts to the right. short run, but after entry occurs, the long term perceived demand curve shifts to the right. short term, but the process of entry will drive those profits to zero in the long run.
short term, but the process of entry will drive those profits to zero in the long run.
If a firm's revenues do not cover its average variable costs, then that firm has reached its____________. price taking point marginal point opportunity margin shutdown point
shutdown point
An oligopolistic industry is characterized by having no market power. strategic behavior. one dominant firm in the industry. free entry and exit.
strategic behavior
Which of the following occurs simultaneously with an income effect? backward-bending supply curve preferences effect substitution effect Giffen good effect
substitution effect
Economists are able to determine total utility by: summing up the marginal utilities of each unit consumed. multiplying the marginal utility of the last unit consumed by the number of units consumed. multiplying the marginal utility of the first unit consumed by the number of units consumed.
summing up the marginal utilities of each unit consumed.
The marginal product of an input is the addition to total output that adds nothing to profit. total product divided by the amount of the input used to produce this amount of output. the addition to total output due to the addition of one unit of all other inputs. the addition to total output due to the addition of the last unit of an input, holding all other inputs constant.
the addition to total output due to the addition of the last unit of an input, holding all other inputs constant.
The fast-food industry is not considered perfectly competitive because entry and exit are strictly regulated by the government. there is a very large number of firms. there is a small number of dominant firms. the firm's products are not homogeneous.
the firm's products are not homogeneous.
The fast-food industry is not considered perfectly competitive because there is a very large number of firms. entry and exit are strictly regulated by the government. the firm's products are not homogeneous. there is a small number of dominant firms.
the firm's products are not homogeneous.
Implicit costs are costs that are variable in the short run and fixed in the long run. the opportunity costs of using factors that a producer does not buy or hire but already owns. costs that are taken into consideration by accountants. the costs of using factors that a producer hires or rents.
the opportunity costs of using factors that a producer does not buy or hire but already owns.
When entry occurs in a monopolistically competitive industry, the perceived demand and marginal revenue curves for each firm will shift to the right. the marginal revenue curves for each firm will shift to the right. the perceived demand curve for each firm will shift to the right. the perceived demand and marginal revenue curves for each firm will shift to the left.
the perceived demand and marginal revenue curves for each firm will shift to the left.
In order to determine the average variable cost, the firm's variable costs are divided by____________. the quantity of output its' fixed costs diminishing marginal costs its' average costs
the quantity of output
When a firm pursues a predatory pricing strategy, it does so to maximize profits in the long run. to discourage short run competition. to increase supply to benefit consumers. to hire more staff to lower unemployment.
to maximize profits in the long run.
Accounting profit can be calculated as total revenue - explicit costs. total revenue - fixed costs. total revenue - explicit costs - implicit costs. total revenue - implicit costs.
total revenue - explicit costs
Accounting profit can be calculated as total revenue - fixed costs. total revenue - explicit costs - implicit costs. total revenue - explicit costs. total revenue - implicit costs.
total revenue - explicit costs.
Profit-maximizing firms want to maximize the difference between total revenue and marginal cost. marginal revenue and average cost. total revenue and total cost. marginal revenue and marginal cost.
total revenue and total cost.
Economic profits are equal to total revenues minus the opportunity cost of labor. total revenues minus the implicit and explicit costs of all inputs used. total revenues minus total fixed costs. total revenues, after tax, minus cost of goods sold.
total revenues minus the implicit and explicit costs of all inputs used
In the long run, firms can choose their production technology, and so all costs become ______ costs. fixed sunk expanding variable
variable
If a paper mill shuts down its operations for three months so that it produces nothing, its__________________ will be reduced to zero? fixed costs total cost opportunity costs variable costs
variable costs
In a free market economy, firms operating in a perfectly competitive industry are said to haveonly one major choice to make. Which of the following correctly sets out that choice? what price to charge what quality to produce what quantity of labor is needed what quantity to produce
what quantity to produce
A monopolist's profit-maximizing price and output correspond to the point on a graph where marginal revenue equals marginal cost and charging the price on the market demand curve for that output where price is as high as possible. where total costs are the smallest relative to price. where average total cost is minimized.
where marginal revenue equals marginal cost and charging the price on the market demand curve for that output.
A monopolist's profit-maximizing price and output correspond to the point on a graph where price is as high as possible. where total costs are the smallest relative to price. where marginal revenue equals marginal cost and charging the price on the market demand curve for that output. where average total cost is minimized.
where marginal revenue equals marginal cost and charging the price on the market demand curve for that output.
If a monopolistic competitor raises its price, it ___________ customers than a perfectly competitive firm, but ____________ customers compared to the number that a monopoly that raised its prices would. will lose more; it will lose as many will lose fewer; it will lose more will lose more; it will lose more will lose fewer; it will lose as many
will lose fewer; it will lose more
Would raising the price for a product create a larger decline in quantity demanded for a monopolistic competitor's than it would for a monopoly? yes; consumers will buy from competitors offering lower priced substitutes no; conditions of imperfect competition means demand is constant yes; but temporarily because price increases only create a short-run decline no; a monopolistic competitor perceives demand as a price maker
yes; consumers will buy from competitors offering lower priced substitutes