Econ Comp Quiz

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Briefly discuss the difference between these two concepts.

Productive efficiency pertains to production within an industry while allocative efficiency pertains to production across all industries.

What is the difference between zero accounting profit and zero economic profit?

Zero economic profit includes a firm's opportunity costs but zero accounting profit does not.

a U shape, initially falling when the marginal product of labor is rising and then eventually rising when the marginal product of labor is falling.

What is the main reason that firms eventually encounter diseconomies of scale as they keep increasing the size of their store or factory?

Firms have difficulty coordinating production

A student makes the following argument: "When a market is in equilibrium, there is no consumer surplusLOADING.... We know this because in equilibrium, the market price is equal to the price consumers are willing to pay for the good." Part 2 Briefly explain whether you agree with the student's argument. Part 3 A. The student is incorrect because the price consumers are willing to pay and the market price are only equal for the last unit consumed. Your answer is correct. B. The student is correct because the highest price consumers are willing to pay and the lowest price firms are willing to accept are equal. C. The student is incorrect because the market price is greater than marginal cost. D. The student is correct because the highest price consumers are willing to pay and the price consumers actually pay are equal. E. The student is incorrect because consumer surplus equals the price consumers are willing to pay for a good, which is a positive amount.

According to economists, an efficient tax is one that Part 2 A. imposes a small excess burden relative to the tax revenue it raises. Your answer is correct. B. splits the tax burden equally between consumers and producers. C. is relatively easy to collect relative to the revenue it generates. D. maximizes tax revenue for government.

Briefly explain whether you agree with the following statement: "A lower price in a market always increases economic efficiency in that market." Part 2 A. I disagree, because economic efficiency declines if price falls below the market equilibrium. B. I agree, because the resulting increase in consumer surplus will more than offset the decline in producer surplus. C. I agree, because falling prices for their products will inspire firms to operate as efficiently as possible. D. I disagree, because shortages will result, thereby encouraging firms to be shoddy in how they operate and in what they produce.

Compare monopolistically competitive industries with perfectly competitive industries in the long run. Which industry structure is more efficient? Part 2 Compared to perfect competition, monopolistically competitive industries are Part 3 A. less efficient because average cost is not minimized. Your answer is correct. B. less efficient because there are fixed costs. C. more efficient because there is excess capacity. D. more efficient because price equals marginal cost. E. less efficient because marginal revenue is greater than marginal cost.

Does the strength of each of the five competitive forces remain constant over time? Briefly explain. Part 2 The strength of the five competitive forces Part 3 A. does not remain constant over time. For example, existing firms may advertise to create product loyalty to make entry less attractive, reducing the threat from additional potential entrants. Your answer is correct. B. remains constant over time For example, the entry of new firms decreases profits, reducing the threat from additional potential entrants. C. remains constant over time. For example, existing firms may introduce slightly differentiated new products to make entry less attractive, reducing the threat from additional potential entrants. D. does not remain constant over time. For example, as new firms enter, it is easier to implicitly collude, increasing competition from existing firms. E. remains constant over time. For example, competitors rarely introduce new products to fill consumer needs better than current products.

Firms must typically purchase inputs from suppliers to produce output. Part 2 What effect might suppliers have on an industry? Part 3 A. If an input is specialized, then the supplier is likely to have the bargaining power to limit a firm's profits. Your answer is correct. B. Suppliers cannot affect output markets, although an output market with only a few firms is likely to have the bargaining power to limit a supplier's profits. C. If suppliers are price takers, then a firm will likely be a price taker with no ability to raise price. D. If many firms can supply an input, then suppliers are likely to have the bargaining power to limit a firm's profits. E. If only a few firms can supply an input, then markets will likely experience shortages because firms are unable to produce sufficient output.

For many years, De Beers of South Africa essentially operated as a monopoly. What made this company a monopolyLOADING...? Part 2 De Beers of South Africa was essentially a monopoly because Part 3 A. it had almost exclusive control of the world's supply of diamond deposits, used to make diamond jewelry. Your answer is correct. B. the suppliers of raw diamonds, used to make diamond jewelry, had substantial bargaining power. C. the input market for raw diamonds, used to make diamond jewelry, was perfectly competitive. D. Raw diamonds, used to make diamond jewelry, has many close substitutes that can also be used to produce diamond jewelry. E. the buyers of diamond jewelry had virtually no bargaining power.

How is the prisoner's dilemma result changed in a repeated game? Part 2 In a repeated game, Part 3 A. players can employ retaliation strategies. Your answer is correct. B. players can implicitly collude. C. players can appoint a first-mover. D. players are unable to employ enforcement mechanisms. E. players can essentially form a cartel.

How should sunk costsLOADING... be used in consumer decision-making? Part 2 In consumer decision-making, sunk costs should Part 3 A. be ignored. Your answer is correct. B. be treated as nonmonetary costs. C. be treated as opportunity costs. D. be treated as monetary costs. E. be included in the budget constraint. Part 4 Suppose you bought a ticket to a musical. The ticket is nonrefundable (and can't be resold) and must be used on Saturday. Then, a friend calls and invites you to a play on Saturday. You only have time to attend one of the events, and your friend offers to pay the cost of going to the play. Part 5 If you prefer plays over musicals, then you should attend the playplay.

If patents reduce competition, why does the federal government grant them? Part 2 The federal government grants patents Part 3 A. to encourage firms to spend money on research to create new products. Your answer is correct. B. to prevent network externalities. C. to encourage firms to collude. D. to increase the number of close substitutes available. E. to create natural monopolies.

In monopolistically competitive markets, what is a factor under a firm's control that determines whether it will be successful? Part 2 A. A firm's ability to produce at a lower average cost than competing firms. Your answer is correct. B. Consumer preferences. C. Chance events. D. Factors that affect all firms in a market. E. Both a and b.

In 1999, at a meeting of the World Trade Organization in Seattle, Washington, a large number of people protested attempts to reduce trade barriers. Part 2 What is a reason why some would want to prevent trade barriers from being reduced? Part 3 Some want to prevent trade barriers from being reduced because they Part 4 A. seek to protect domestic infant industries. Your answer is correct. B. want to reduce tariffs. C. wish to promote dumping. D. believe trade requires costly environmental standards. E. instead favor globalization.

Question content area Part 1 List the competitive forces in the five competitive forces model. Part 2 The five competitive forces are Part 3 A. competition from existing firms, the threat of potential entrants, competition from substitutes, the bargaining power of buyers, and the bargaining power of suppliers. Your answer is correct. B. competition from existing firms, trade barriers, competition from substitutes, the bargaining power of buyers, and the bargaining power of suppliers. C. competition from existing firms, the threat of potential entrants, competition from substitutes, international competition, and the bargaining power of suppliers. D. competition from existing firms, the threat of potential entrants, competition from substitutes, the bargaining power of buyers, and international competition. E. competition from existing firms, the threat of potential entrants, legislation, the bargaining power of buyers, and the bargaining power of suppliers.

Question content area Part 1 Suppose a consumer is trying to decide how much to spend on transportation and how much to spend on all other (non-transportation) consumption. Part 2 The economic model of consumer behavior predicts that the consumer will Part 3 A. choose the combination of transportation and non-transportation consumption that makes her as well off as possible from among the combinations of transportation and non-transportation items she can afford. Your answer is correct. B. consume as much transportation and as much non-transportation consumption as she wants. C. consume as much transportation as she can afford without any non-transportation consumption. D. consume any combination of transportation and non-transportation consumption from among the combinations of transportation and non-transportation items she can afford. E. consume an infinite amount of transportation and non-transportation consumption.

Suppose that last semester your semester GPA was 3.90 and your resulting cumulative GPA was 2.56. Part 2 Next, suppose that this semester your semester GPA will be 3.50. Part 3 If so, then your cumulative GPA Part 4 A. will increase because your "marginal" GPA will be above your cumulative GPA. Your answer is correct. B. could increase or decrease because your "marginal" GPA will be below your semester GPA last semester but above your cumulative GPA. C. will increase because your "marginal" GPA will be below your semester GPA last semester. D. will increase because your "marginal" GPA will be above your semester GPA last semester.

The demand for gasoline is likely to be more inelastic than the demand for Domino's Pizza because: Part 2 A. gasoline has fewer substitutes available.

What do most economists find to be the most persuasive argument in favor of protectionism? Part 2 A. Trade barriers protect infant industries that initially have relatively high costs. Your answer is correct. B. Trade barriers protect our national security. C. Trade barriers prevent the distinctive cultures of developing countries from being destroyed. D. Trade barriers prevent job loss when firms move production to other countries. E.

What explanation might an economist provide why some people smoke cigarettes when such behavior can lead to health consequences? Part 2 Some people likely smoke cigarettes because Part 3 A. they overvalue the utility from current choices. Your answer is correct. B. they overvalue the utility to be received in the future from not getting lung cancer. C. they undervalue the utility from current choices. D. they overestimate the future costs of current choices. E. their preferences are consistent over time.

What role does utilityLOADING... play in the economic model of consumer behavior? Part 2 When modeling consumer behavior, utility Part 3 A. reflects the enjoyment a consumer receives from consuming a particular set of goods and services. Your answer is correct. B. identifies the combination of goods and services that can be produced most efficiently. C. provides an objective measure of satisfaction from consuming a particular set of goods and services in units called "utils." D. identifies the consumer who receives the most satisfaction from consuming a particular set of goods and services. E. identifies the combination of goods and services that is most expensive.

What "forces" does the five competitive forces model address? Part 2 The competitive forces in the five competitive forces model does not include Part 3 A. the allocative efficiency of producers. Your answer is correct. B. the threat from potential entrants. C. the bargaining power of suppliers. D. both a and b. E. none of the above.

Which of the following is a primary determinant of the price elasticity of supplyLOADING...? Part 2 The price elasticity of supply is affected by Part 3 A. the passage of time. Your answer is correct. B. whether the good produced has close substitutes available. C. the share of the good in consumer budgets. D. whether the good produced is a luxury or a necessity. E. the definition of the market. Part 4 In particular, the supply curve for a particular product will be increasingly more inelastic over a shorter period of time.

Your company incurs a cost for machinery, which, in the short run, is fixed. What happens to this cost in the long run? Part 2 In the long run, the cost of machinery Part 3 A. becomes a variable cost. Your answer is correct. B. becomes a nonmonetary opportunity cost. C. remains a fixed cost. D. becomes an accounting cost. E. becomes zero.

What are implicit costs? Part 2 An implicit cost is Part 3 A. a nonmonetary opportunity cost. B. the highest-valued alternative that must be given up to engage in an activity. C. a cost incurred in the short run. D. a cost that changes as output changes. E. a cost that remains constant as output changes. How are implicit costs different from explicit costs? Part 5 A. An explicit cost is a cost that involves spending money, while an implicit cost is a nonmonetary cost. B. An explicit cost is not an opportunity cost, while an implicit cost is an opportunity cost. C. An explicit cost is a cost incurred in the short run, while an implicit cost is a cost incurred in the long run. D. An explicit cost is a cost incurred holding output constant, while an implicit cost is a cost incurred as output changes. E. Both a and b.

A , A

If the price of a bottle of orange juice is $0.75, then consumer surplus is an amount equal to the area A. under the demand curve and above the $0.75 price for each individual who buys and consumes orange juice. Your answer is correct. B. under the demand curve and above the $1.50 price for each individual who buys and consumes orange juice. C. under the demand curve for each individual who buys and consumes orange juice. D. above the demand curve for each individual who buys and consumes orange juice. Part 4 If the price of a bottle of orange juice is $1.50, then consumer surplus is an amount equal to the area A. under the demand curve for each individual who buys and consumes orange juice. B. under the demand curve and above the $1.50 price for each individual who buys and consumes orange juice. Your answer is correct. C. under the demand curve and above the $0.75 price for each individual who buys and consumes orange juice. D. above the demand curve for each individual who buys and consumes orange juice.

A , B

Why would a firm produce in the short run while experiencing losses?

A firm would not shut down if by producing it would lose an amount less than its total fixed costs.

Why was De Beers worried that people might resell their old diamonds? If people resell their old diamonds, then Part 2 A. market competition would increase, decreasing market prices. Your answer is correct. B. used diamonds would not have a brand name. C. market supply would increase, increasing profits. D. De Beers would become a natural monopoly. E. De Beers would not be able to gain patent protection. Part 3 How did De Beers attempt to convince consumers that used diamonds were not good substitutes for new diamonds? Part 4 A. De Beers developed the slogan "a diamond is forever" to increase sentimental value. Your answer is correct. B. De Beers claimed that used diamonds were "blood diamonds." C. De Beers eliminated microscopic branding from their diamonds. D. De Beers claimed that their diamonds are mined under ethical, environmentally friendly conditions. E. Both a and b. Part 5 How did De Beers' strategy affect the demand curve for new diamonds? Part 6 The demand for new diamonds has remained unchanged. Part 7 How were De Beers' profits affected? Part 8 De Beers has remained profitable.

A, A

What is the difference between a firm's shutdown point in the short run and its exit point in the long run? In the short run, a firm's shutdown point is the minimum point on the Part 2 A. average variable cost curve, while in the long run, a firm's exit point is the minimum point on the average total cost curve. Your answer is correct. B. average total cost curve and in the long run, a firm's exit point is the minimum point on the average total cost curve. C. marginal cost curve and and in the long run, a firm's exit point is the minimum point on the marginal cost curve. D. average variable cost curve, while in the long run, a firm's exit point is the minimum point on the average fixed cost curve. E. average variable cost curve, while in the long run, a firm cannot exit. Part 3 Why are firms willing to accept losses in the short run but not in the long run? Part 4 A. It is always profitable to incur losses in the short run because profits will always arise in the long run. B. There are fixed costs in the short run but not in the long run. Your answer is correct. C. Sunk costs are larger in the long run than in the short run. D. Firms cannot shut down in the short run. E. Firms are price takers in the short run but not in the long run.

A, B

What is an oligopoly? Part 2 An oligopoly is a market structure Part 3 A. where a small number of interdependent firms compete. Your answer is correct. B. where many sellers compete by selling differentiated products. C. where only one firm buys an input in a factor market. D. where many sellers compete by selling an identical product. E. where only one firm supplies the entire market. Part 4 Three examples of oligopolies in the United States are industries that produce or sell Part 5 A. first−class mail delivery, dog and cat food, and pharmaceutical drugs. B. groceries in supermarkets, toys, and aircraft. C. computers, athletic footware, and cigarettes. Your answer is correct. D. wheat, pharmaceutical drugs, and beer. E. restaurant food, college textbooks, and breakfast cereal.

A, C

What is the difference between explicit collusion and implicit collusion? Part 2 Unlike explicit collusion, implicit collusion Part 3 A. is where firms signal to each other without actually meeting and agreeing to charge the same price. Your answer is correct. B. is where firms meet to discuss charging the same price without actually reaching an agreement. C. is where firms meet and agree to not compete without appointing a price leader. D. is illegal. E. is where firms meet and agree to charge the same price without employing retaliation strategies. Part 4 Give an example of each. Part 5 An example of explicit collusion is Part 6 A. price leadership, and an example of implicit collusion is firms forming a cartel. B. where firms meet and agree to charge the same price, and an example of implicit collusion is firms forming a cartel. C. where firms meet and agree to charge the same price, and an example of implicit collusion is price leadership. Your answer is correct. D. price leadership, and an example of implicit collusion is firms advertising that they will match the lowest price offered by any competitor. E. firms advertising that they will match the lowest price offered by any competitor, and an example of implicit collusion is price leadership.

A, C

Which of the terms below is defined as "anything that keeps new firms from entering an industry in which firms are earning economic profits"? A. barriers to entry Your answer is correct. B. economies of scale C. game theory D. oligopoly Part 2 Economies of scale exist when a firm's ___________ average costs fall as it __________ output. A. short-run; increases B. short-run; decreases C. long-run; increases Your answer is correct. D. long-run; decreases Part 3 Which of the following terms is a barrier to entry? A. ownership of a key input B. economies of scale C. patents D. All of the above.

A, C, D

Use the following production possibilities frontier for a country to answer the following questions. P Which point(s) are unattainable? Briefly explain why. a. Point A because it is outside the production possibilities frontier. Your answer is correct. b. None of the points because they all are feasible. c. Point E because it is inside the production possibilities frontier. d. All the points because the production of each has an opportunity cost. e. Points B, C, and D because they are on the production possibilities frontier. Which point(s) are efficient? Briefly explain why. a. Point E because it is inside the production possibilities frontier. b. Points E, B, C, and D because they are attainable. c. Points B, C, and D because this is where maximum output is produced with available resources. Your answer is correct. d. Point A because it is where the most capital and consumption goods combined are produced. e. Point B because it is where the most resources are used to produce capital goods. Which point(s) are inefficient? Briefly explain why. Part 7 A. Point A because it is unattainable. B. Points B, C, and D because they are on the production possibilities frontier. C. Points E, B, C, and D because they are attainable. D. Point E because production there is not using all available resources. Your answer is correct. E. Points B, C, D, and A because they are unattainable. Part 8 At which point is the country's future growth rate likely to be the highest? Briefly explain why. Part 9 A. Point B because it is where the most resources are used to produce capital goods. Your answer is correct. B. Point A because it is where the production possibilities frontier will shift with growth. C. Point D because it is where the most resources are used to produce consumption goods. D. Point E because it is where resources are saved for investments. E. Point C because it is an efficient point where a mix of capital and consumption goods are produced.

A, C, D, A

Suppose the economy whose PPF is shown on the right experiences economic growth. Which of the following may have caused the shift you have drawn? (Check all that apply.) A. A larger labor force. Your answer is correct. B. Balanced production between ships and food. C. Advances in technology. Your answer is correct. D. An increase in the capital stock. Your answer is correct. E. The achievement of full employment.

A, C, and D

What is the relationship between a monopolist's demand curve and the market demand curve?

A monopolist's demand curve is the same as the market demand curve. This is the correct answer. Part 3

What is the relationship between a monopolist's demand curve and its marginal revenue curve?

A monopolist's marginal revenue curve has twice the slope of its demand curve, because to sell more output, a monopoly must lower price.

. The Price of fires increases due to a potato shortage. This will A. increase the demand for McDonald's Big Mac hamburgers. B. decrease the demand for McDonald's Big Mac hamburgers. C. cause a movement along the demand curve for McDonald's Big Mac hamburgers.

A student argues, "The prisoner's dilemmaLOADING... game is unrealistic. Each player's strategy is based on the assumption that the other player won't cooperateLOADING.... But if each player assumes that the other player will cooperate, then the 'dilemma' disappears." Is this argument correct or incorrect? Part 2 A. The argument is incorrect. The best strategy for each player is to not cooperate knowing that the other will cooperate. B. The argument is incorrect. The best strategy for each player is to not cooperate no matter what the other player does. Your answer is correct. C. The argument is incorrect. The best strategy for each player is to cooperate knowing that the other will not cooperate. D. The argument is correct. The best strategy for each player is to cooperate.

Briefly explain whether you agree with the following statement: "A lower price in a market always increases economic efficiency in that market." Part 2 A. I agree, because falling prices for their products will inspire firms to operate as efficiently as possible. B. I disagree, because economic efficiency declines if price falls below the market equilibrium. Your answer is correct. C. I agree, because the resulting increase in consumer surplus will more than offset the decline in producer surplus. D. I disagree, because shortages will result, thereby encouraging firms to be shoddy in how they operate and in what they produce.

Consider a pair of Gap Jeans. Is the consumption of Gap Jeans rival and excludable? Part 2 The consumption of Gap Jeans is Part 3 A. nonrival and nonexcludable. B. rival and excludable. Your answer is correct. C. quasi-rival and quasi-excludable. D. rival and nonexcludable. E. nonrival and excludable.

Encyclopedia Britannica is an encyclopedia publisher who sells printed encyclopedias. In the 1990s, encyclopedias began to be sold electronically. What effect did electronic encyclopedias have on Encyclopedia Britannica? Part 2 Electronic encyclopedias Part 3 A. used printed encyclopedias from Encyclopedia Britannica as a key input. B. served as a new product that fills a consumer need better than printed encyclopedias did. Your answer is correct. C. prompted Encyclopedia Britannica to form the first cartel for encyclopedias. D. served as a complement, increasing sales of electronic and printed encyclopedias. E. resulted in the government introducing occupational licensing laws for educational materials.

How do externalities in the production of electricity result in market failureLOADING...? Part 2 Because of externalities, the market for electricity will Part 3 A. result in a price for electricity that is inefficiently high. B. provide too much electricity. Your answer is correct. C. provide insufficient electricity. D. generate too much economic surplus. E. result in a surplus of electricity.

How do property rights affect externalities and market failure? Part 2 A. Externalities will be positive and market failure will not occur when property rights are enforced. B. Externalities and market failure will result from incomplete property rights. Your answer is correct. C. Externalities and market failure will not occur when property rights are difficult to enforce. D. Externalities will be positive and market failure will not occur when property rights are divided equally among market participants. E. Externalities and market failure will result from producers having all the property rights.

How might society solve problems associated with externalities and market failure? Part 2 If an externality is present, resulting in market failure, then Part 3 A. government intervention will further reduce the well−being of society. B. private solutions may reduce or correct market failure. Your answer is correct. C. only government intervention can increase economic efficiency. D. additional competition will reduce problems associated with market failure. E.

In another example, suppose market research shows that a particular brand of truck is a normal good and a necessity. Part 5 If so, then the income elasticity of demand for this truck is Part 6 A. negative. B. less than 1 but greater than 0. Your answer is correct. C. positive. D. zero. E. greater than 1.

Economists have developed broad and narrow definitions to identify monopolies. What is a characteristic that supports a firm being classified as a monopoly? Part 2 Economists could find that a firm is a monopoly if Part 3 A. it achieves allocative efficiency. B. it is a price taker. C. it earns profits in the long run. Your answer is correct. D. its production decisions are unresponsive to price.

In recent years, some economists have begun studying situations in which people do not appear to be making choices that are economically rational. Part 2 This new area of economics is called behavioral economicsbehavioral economics. Part 3 Why might consumers not act rationally? Part 4 Consumers might Part 5 A. only take actions that are appropriate to reach their goals. B. be overly optimistic about their future behavior. Your answer is correct. C. don't take into account monetary costs. D. take into account nonmonetary opportunity costs. E. ignore sunk costs. Part 6 The most obvious reason why consumers might not act rationally would be that they do not realize that their actions are inconsistent with their goals. For example, consumers commonly commit the following three mistakes when making decisions: 1. They take into account monetary costs but ignore nonmonetary opportunity costs. 2. They fail to ignore sunk costs. 3. They are overly optimistic about their future behavior. Get more help Next

Many factors under a firm's control affect profitability. Do factors that are not under a firm's control also affect profitability? Part 2 Factors not under a firm's control Part 3 A. such as product differentiation affect profitability. B. such as rising fuel prices affect profitability. Your answer is correct. C. do not affect profitability. D. such as marketing affect profitability. E. such as the ability to lower the average cost of production affect profitability.

Match the following definition with one of the terms below: "A situation where each firm chooses the best strategy, given the strategies chosen by other firms." A. Dominant strategy B. Nash equilibrium Your answer is correct. C. Payoff matrix D. Collusion

Question content area Part 1 What characterizes perfectly competitive markets? Part 2 Perfectly competitive markets have Part 3 A. a few buyers. B. no barriers to new firms entering. Your answer is correct. C. firms that are price makers. D. different products sold by all firms. E. a few sellers.

What are the three conditions for a market to be perfectly competitive? Part 2 For a market to be perfectly competitive, there must be Part 3 A. many buyers and sellers, with firms selling similar but not identical products, with low barriers to new firms entering the market. B. many buyers and sellers, with all firms selling identical products, and no barriers to new firms entering the market. Your answer is correct. C. many buyers andsellers, with all firms selling identical products, and substantial barriers to new firms entering the market. D. many buyers and a small number of firms that compete, selling differentiated products, and barriers to new firms entering the market. E. many buyers and one seller, with the firm producing a product that has no close substitutes, and barriers to new firms entering the market.

What is the difference in the short run and the long run? Part 2 In the short run, Part 3 A. all of the firm's inputs are variable, while in the long run, the firm is able to vary all its inputs as well as adopt new technology and change the size of its physical plant. B. at least one of the firm's inputs is fixed, while in the long run, the firm is able to vary all its inputs, adopt new technology, and change the size of its physical plant. Your answer is correct. C. at least one of the firm's inputs is fixed, while in the long run, the firm is either able to vary all its inputs, adopt new technology, or change the size of its physical plant. D. at least one of the firm's inputs is fixed, while in the long run, at least one of the firm's inputs is variable. E. all of the firm's inputs are fixed, while in the long run, the firm is able to vary all its inputs, adopt new technology, and change the size of its physical plant.

What is the production function? Part 2 The production function is the relationship between Part 3 A. the output produced by a firm in the short run and in the long run. B. the inputs employed by a firm and the maximum output it can produce with those inputs. Your answer is correct. C. the inputs employed by a firm and the minimum long-run average cost of production. D. the output produced by a firm and its cost of production. E. returns to scale and economies of scope.

What must be true for the Coase Theorem to hold? For the Coase Theorem to hold, A. the externality must be created by the production of a good or service. B. all parties to an agreement must be willing to accept a reasonable agreement. Your answer is correct. C. the government must monitor the negotiations to obtain an agreement. D. transaction costs to obtain an agreement must be high. E. the parties to an agreement cannot know the full cost of the externality.

Why are many companies so concerned about brand management? Part 2 Companies use brand management Part 3 A. to collude with other firms and earn economic profits in the short run. B. to maintain product differentiation and earn economic profits in the short run. Your answer is correct. C. to produce a product identical to that of competitors and create network externalities in the long run. D. to achieve productive efficiency and maximize economic surplus in the short run. E. to eliminate excess capacity and earn economic profits in the short run.

Question content area Part 1 What is a price taker? Part 2 A price taker is Part 3 A. a firm with a downward-sloping demand curve. B. a firm that is unable to affect the market price. Your answer is correct. C. a firm that does not seek to maximize profits. D. a firm that has the ability to charge a price greater than marginal cost. E. a firm with a perfectly inelastic demand curve. Part 4 When are firms likely to be price takers? Part 5 A firm is likely to be a price taker when Part 6 A. it has market power. B. it sells a product that is exactly the same as every other firm. Your answer is correct. C. it represents a substantial portion of the total market. D. barriers to entry are substantial. E. firms in the industry collude.

B, B

What are the most important differences between perfectly competitive markets and monopolistically competitive markets? Part 2 Unlike in perfectly competitive markets, in monopolistically competitive markets, Part 3 A. firms face horizontal demand curves, and there are no barriers to entry. B. firms face downward-sloping demand curves, and the products competitors sell are differentiated. Your answer is correct. C. firms face downward-sloping demand curves, and the products competitors sell are identical. D. there are only a few sellers, and the products competitors sell are differentiated. E. firms face downward−sloping demand curves, and there are substantial barriers to entry. Part 4 Give two examples of products sold in perfectly competitive markets and two examples of products sold in monopolistically competitive markets. Part 5 A. The Sony PS3 and the Microsoft Xbox are sold in perfectly competitive markets and Maybelline cosmetics and Ralph Lauren cologne are sold in monopolistically competitive markets. B. Apples and oranges are sold in perfectly competitive markets and Starbucks coffee and Gap clothing are sold in monopolistically competitive markets. Your answer is correct. C. Starbucks coffee and Gap clothing are sold in perfectly competitive markets and aircraft and automobiles are sold in monopolistically competitive markets. D. Apples and oranges are sold in perfectly competitive markets and electricity and cable TV are sold in monopolistically competitive markets. E. Cigarettes and beer are sold in perfectly competitive markets and Maybelline cosmetics and Ralph Lauren cologne are sold in monopolistically competitive markets.

B, B

According to the goal of economic efficiency, governments tend to favor taxes that Part 2 A. generate an equal division of the tax burden between buyers and sellers. B. create a small excess burden relative to revenue raised. Your answer is correct. C. create no efficiency loss. D. raise the most revenue. E. raise the least revenue. In addition, governments favor taxes that place a greater share of the tax burden on those who receive greater benefits, according to the benefits-received principle. Part 4 Further, governments favor taxes that treat people in the same economic situation equally, according to the horizontal-equity principle. Part 5 According to the ability−to−pay principle, governments favor taxes that Part 6 A. treat people in the same economic situation equally. B. are regressive. C. divide the tax burden equally across people. D. place a greater share of the tax burden on those who receive greater benefits. E. place a greater share of the tax burden on those who have greater ability to pay. Your answer is correct. Finally, governments tend to favor taxes that promote social objectives. True.

B, E

How do barriers to entry affect the extent of competition, or lack thereof, in an industry? Part 2 Without barriers to entry, Part 3 A. new firms will enter industries where firms are earning accounting profits. B. new firms will enter industries where firms are earning economic profits. Your answer is correct. C. existing firms will experience price leadership. D. new firms will enter industries exhibiting economies of scale. E. existing firms will agree to charge the same price and not compete. Part 4 What are the most important barriers to entry? Part 5 The most important barriers to entry are Part 6 A. ownership of a key input, occupational licensing, and diseconomies of scale. B. economies of scale, lack of network externalities, and occupational licensing. C. economies of scale, lack of tariffs, and ownership of a key input. D. ownership of a key input, lack of quotas, and economies of scale. E. economies of scale, ownership of a key input, and government imposed barriers.

B, E

Perfect price discrimination is Part 4 A. unlikely to occur because firms are typically able to keep consumers who buy a product at a low price from reselling it. B. unlikely to occur because firms typically do not know how much each consumer is willing to pay. Your answer is correct. C. likely to occur because it results in higher profits. D. likely to occur because it results in economic efficiency. E. both a and b. Part 5 Is perfect price discrimination economically efficient? Part 6 Perfect price discrimination is Part 7 A. inefficient because it results in no consumer surplus. B. inefficient because it restricts output below the equilibrium level and creates deadweight loss. C. inefficient because it converts into producer surplus a portion of consumer surplus. D. efficient because it converts into producer and consumer surplus what had been deadweight loss. E. efficient because it converts into producer surplus what had been consumer surplus and deadweight loss.

B, E

What is technology? Part 2 Technology is Part 3 A. the rate of economic depreciation. B. the processes a firm uses to turn inputs into outputs of goods and services. Your answer is correct. C. a change in the ability of the firm to produce a given level of output with a given quantity of inputs. D. the additional output a firm produces as a result of hiring one more input. E. the highest-valued alternative that must be given up to engage in an activity. Part 4 An example of technological change is Part 5 A. being able to produce more output using the same inputs. B. being able to produce the same output using fewer inputs. C. a decline in the quantity of output that can be produced from a given quantity of inputs. D. both a and b. E. all of the above.

B, E

A game where pursuing dominant strategies results in noncooperation that leaves everyone worse off is called a A. dominant strategy. B. cooperative equilibrium. C. prisoner's dilemma. Your answer is correct. D. noncooperative equilibrium.

A price ceiling Part 6 A. does increase the amount of the product that consumers buy because it lowers the price. B. does increase the amount of the product that consumers buy because it creates a surplus. C. does not increase the amount of the product that consumers buy because it creates a shortage. Your answer is correct. D. does not increase the amount of the product that consumers buy because it creates a surplus. E. both a and b.

According to the horizontal−equity principle, governments favor taxes that Part 6 A. place a greater share of the tax burden on those who have greater ability to pay. B. place a greater share of the tax burden on those who receive greater benefits. C. treat people in the same economic situation equally. This is the correct answer. D. divide the tax burden equally across people. E. are regressive

A fast-food restaurant decides to raise the price of its hamburgers. Assume the firm is in a monopolistically competitive industry. What will happen to the demand for its hamburgers? Part 2 When the fast-food restaurant raises the price of hamburgers, Part 3 A. none of its customers will be willing to pay the higher price because this restaurant faces competition from other restaurants. B. all of its customers will be willing to pay the higher price because this restaurant is close to them. C. some of its customers will be willing to pay a higher price because they prefer this brand of hamburgers. Your answer is correct. D. none of its customers will be willing to pay the higher price and will stop buying hamburgers. E. all of its customers will be willing to pay the higher price because this restaurant faces no competition.

Behavioral economistsLOADING... attribute some consumer behavior to the endowment effect. Part 2 Which of the following is an example of the endowment effect? Part 3 An example of the endowment effect is Part 4 A. taking into account nonmonetary opportunity costs such as the value of your time. B. being unwilling to sell a vase that you already own. C. being unwilling to sell a house for a price that is greater than the price you would be willing to pay to buy the house if you didn't already own it. Your answer is correct. D. buying lottery tickets with an expected value that is less than their price. E. being willing to will your descendents a painting upon your death that you otherwise could have sold for a substantial price.

Bob consumes food and housing. Suppose his marginal utility from an additional unit of food is 40 and his marginal utility from an additional unit of housing is 80. Furthermore, suppose the price of a unit of food is $1.00 and the price of a unit of housing is $4.00. Can Bob increase his utility without changing his total expenditures on food and housing? Part 2 Holding expenditures constant, Part 3 A. Bob cannot increase his utility. B. Bob can increase utility by spending less on food and more on housing. C. Bob can increase utility by spending more on food and less on housing. Your answer is correct. D. Bob can increase utility by spending more on food and more on housing. E. Bob can increase utility by spending more on food and the same amount on housing.

Briefly explain whether you agree with the following statement: "If consumer surplusLOADING... in a market increases, producer surplusLOADING... must decrease." Part 2 A. The statement is incorrect. Consumer surplus (and producer surplus) could increase if the government intervenes in a market by imposing a price floor. B. The statement is incorrect. Consumer surplus (and producer surplus) could increase by decreasing economic efficiency. C. The statement is incorrect. Consumer surplus (and producer surplus) could increase by decreasing deadweight loss. Your answer is correct. D. The statement is correct. E. The statement is incorrect. Consumer surplus (and producer surplus) could increase by decreasing economic surplus.

Compare the demand for sugar with demand for gasoline. Part 2 The demand for sugar is likely Part 3 A. more elastic because sugar tends to represent a smaller fraction of a consumer's budget. B. more elastic because sugar tends to be purchased in larger quantities. C. more inelastic because sugar tends to represent a smaller fraction of a consumer's budget. Your answer is correct. D. more elastic because sugar tends to represent a larger fraction of a consumer's budget. E. more inelastic because sugar tends to be purchased more frequently.

Question content area Part 1 In his review of a book, business writer Nick Schultz cited the following passage that refers to the market for high-speed Internet access: "There are two enormous monopoly submarkets—one for wireless and one for wired transmission. Both are dominated by two or three large companies." Source: Nick Schultz, "The Joys of Oligopoly," Wall Street Journal, January 10, 2013. Part 2 Schultz commented on this passage that, "The claim is by definition nonsense," because A. the monopoly submarkets are not huge. B. wireless and wired transmissions are not separate markets. C. monopoly is, by defnition, a market with one firm. Your answer is correct. D. these markets have more than two or three large companies.

Question content area Part 1 When a competitive market is in equilibrium, what is the economically efficient level of output? A. any output level where marginal cost is greater than marginal benefit B. any output level where marginal benefit is greater than marginal cost C. the output level where marginal cost is equal to marginal benefit Your answer is correct. D. All of the above.

Suppose a common resource—wood in a public forest—is being overused because residents consider the benefits of gaining firewood or wood for building but do not account for the cost of deforestation when chopping down trees. What could be done to prevent wood in the forest from being overused? Part 2 To prevent overuse of the common resource, Part 3 A. the government could make a binding commitment to keep the forest lands public. B. the government could subsidize chopping down trees. C. the community could establish norms where social pressure limits deforestation. Your answer is correct. D. the community could establish social customs prohibiting the use of permits required to chop down trees. E. the community could create transaction costs to private bargaining.

Suppose ham is an inferiorLOADING... good. How will consumers adjust their buying decisions if the price of ham changes? Part 2 If the price of ham increases, then consumers will demand Part 3 A. more ham due to the income effect because their purchasing power increases and less ham due to the substitution effect because the opportunity cost of consuming ham is higher. B. more ham due to the income effect because the opportunity cost of consuming ham is lower and less ham due to the substitution effect because their purchasing power decreases. C. more ham due to the income effect because their purchasing power decreases and less ham due to the substitution effect because the opportunity cost of consuming ham is higher. Your answer is correct. D. less ham due to the income effect because their purchasing power decreases and less ham due to the substitution effect because the opportunity cost of consuming ham is higher. E. more ham due to the income effect because the opportunity cost of consuming ham is higher and less ham due to the substitution effect because their purchasing power decreases. Part 4 Instead, suppose ham is a normal good. Part 5 If the price of ham increases, then consumers will demand lessless ham due to the income effect and less ham due to the substitution effect.

Suppose you have purchased a ticket to an NFL football game for $79. The ticket is nonrefundable, cannot be resold, and must be used on Sunday afternoon, which is the only time the game will be played. Prior to the game, a friend calls and invites you to his country club to play a round of golf on Sunday afternoon. Though the cost of a round of golf is $31, your friend will pay the cost of golfing at the club. Part 2 Assume you would rather play a round of golf with your friend than attend the NFL football game. What would you do if behaving rationally? Play golf with your friend. Part 3 In this instance, the $79 cost of the football game ticket is a Part 4 A. endowment cost. B. nonmonetary opportunity cost. C. sunk cost. Your answer is correct. D. switching cost. E. hidden add-on cost.

What is the government's policy on collusion in the United States? Explain the rationale for this policy. Part 2 In the United States Part 3 A. the government encourages collusion with subsidies because resulting profits can be used to develop new products. B. the government promotes collusion with the Federal Trade Commission because perfectly competitive markets enhance economic efficiency. C. the government makes collusion illegal with antitrust laws because monopolies reduce economic efficiency. Your answer is correct. D. the government makes collusion legal with antitrust laws because monopolies enhance economic efficiency. E. the government makes collusion unnecessary with government-imposed barriers to entry because monopolies create no deadweight loss.

Why might a monopoly arise? One firm will be present when Part 2 A. only a couple of firms control access to key raw materials necessary to produce a good. B. it can supply the entire market at lower average fixed cost than can two or more firms. C. the government blocks entry of more than one firm by granting a copyright. Your answer is correct. D. there exists no possibility for network externalities with other firms. E. All of the above.

hich of the following is an expression of profit for a perfectly competitive firm? Part 2 Profit for a perfectly competitive firm can be expressed as Part 3 A. Profit=(P×Q)−(TC×Q), where P is price, Q is output, and TC is total cost. B. Profit=P−MC, where P is price and MC is marginal cost. C. Profit=(P−ATC)×Q, where P is price, Q is output, and ATC is average total cost. Your answer is correct. D. Profit=P×Q, where P is price and Q is output. E. Profit=P−ATC, where P is price and ATC is average total cost.

Which type of tax raises the most revenue for the federal government? Part 2 A. Excise taxes. B. Property taxes. C. Individual income taxes. Your answer is correct. D. Corporate income taxes. E. Social insurance taxes. Part 3 Which of the following is the main source of revenue for state and local governments? A. Property tax. B. Individual income tax. C. Grants from the federal government and other receipts. Your answer is correct. D. Sales tax.

C , C

What do economists mean by scarcity? Part 2 A. Economists mean that trade is not possible. B. Economists mean that people are not employed. C. Economists mean that unlimited wants exceed limited resources. Your answer is correct. D. Economists mean that the economy is unable to produce increasing quantities of goods and services. E. Economists mean that production is inefficient. Which of the following is not scarce according to the economic definition? Part 4 A. Time. B. Capital. C. Oil. D. Tutorial services. E. None of the above.

C , E

What is the value of the Herfindahl-Hirschman Index (HHI) when there are four firms in an industry and each firm has an equal market share? A. 4 B. 625 C. 2,500 Your answer is correct. D. 4,000 Part 2 The Department of Justice and the FTC consider markets as highly concentrated if the postmerger HHI for a proposed horizontal merger is A. below 500. B. between 500 and 1,500. C. between 1,500 and 2,500.

C, D

What is perfect price discrimination?

Charging every consumer a different price equal to their willingness to pay.

Briefly explain whether you agree with the following statement: "If consumer surplusLOADING... in a market increases, producer surplusLOADING... must decrease." Part 2 A. The statement is incorrect. Consumer surplus (and producer surplus) could increase by decreasing economic efficiency. B. The statement is incorrect. Consumer surplus (and producer surplus) could increase by decreasing economic surplus. C. The statement is incorrect. Consumer surplus (and producer surplus) could increase if the government intervenes in a market by imposing taxes. D. The statement is incorrect. Consumer surplus (and producer surplus) could increase by decreasing deadweight loss. Your answer is correct. E. The statement is correct.

Do airlines practice price discriminationLOADING...? Explain. Part 2 Airlines Part 3 A. engage in price discrimination by maintaining the same price on seats even if seats will not be sold. B. do not engage in price discrimination because airlines seats are perishable. C. do not engage in price discrimination because they charge lower prices to passengers who will stay at their destination over a Saturday night. D. engage in price discrimination by charging business travelers and leisure travelers different prices. Your answer is correct. E. do not engage in price discrimination because their passengers have similar demands. Part 4 For example, business travelers have a more inelastic demand than leisure travelers, so airlines charge business travelers a higher price.

Economic surplus in a market is the sum of _____ surplus and _____ surplus. In a competitive market, with many buyers and sellers and no government restrictions, economic surplus is at a _____ when the market is in _____. Part 2 A. consumer; producer; maximum; disequilibrium B. consumer; government; maximum; equilibrium C. consumer; producer; minimum; equilibrium D. consumer; producer; maximum; equilibrium

Economist Michael Porter argues that factors other than the number of firms affect industry competition and profits. What is an example of a factor that would limit profits? Part 2 According to Porter's model, industry profits will be reduced if Part 3 A. fewer close substitutes are available. B. barriers prevent new firms from entering. C. inputs are not specialized. D. other firms provide longer warranties. Your answer is correct. E. buyers have less bargaining power.

Firms experience economies of scaleLOADING... for several reasons. What is one such reason? Part 2 A firm might experience economies of scale because Part 3 A. a firm's technology may make it impossible to increase production without a larger proportional increase input usage. B. workers experience diminishing returns, decreasing their marginal productivity as output expands. C. managers begin to have difficulty coordinating the operation of the firm. D. as a firm expands, it may be able to borrow money more inexpensively. Your answer is correct. E. large firms may be required to purchase inputs at higher costs than smaller competitors.

How does the long-run equilibrium for a monopolistically competitive market differ from the long-run equilibrium for a perfectly competitive market? Part 2 One way in which monopolistically competitive markets and perfectly competitive markets differ is that in long-run equilibrium, monopolistically competitive firms Part 3 A. do not earn zero economic profits. B. charge a price less than marginal revenue. C. produce where marginal revenue is less than marginal cost. D. do not produce at minimum average total cost. Your answer is correct. E. produce at minimum marginal cost.

In the presence of shortages, why would a firm, such as a restaurant with people waiting for a table or a theater with people waiting for a ticket, not raise prices when doing so would seem to increase profits? Part 2 A. Increasing prices might alienate customers. B. Increasing prices might result in short run gains at the expense of long run profits. C. Increasing prices requires the firm to pay substantial "switching costs." D. Both a and b. Your answer is correct. E. All of the above.

In this example, pepper and salt are complements Instead, suppose pepper and salt were substitutes. If so, then the cross-price elasticity of demand between pepper and salt would be Part 6 A. zero. B. greater than 1. C. greater than −1. D. positive. E. negative.

Many firms advertise. What effect does advertising have on firm profits? Part 2 One possible effect of advertising is to Part 3 A. increase profits by allowing the firm to produce more output with the same amount of inputs. B. increase profits by making the demand curve for the product more elastic. C. increase profits by shifting the demand curve for the product to the left. D. decrease profits by increasing the cost of production. Your answer is correct. E. increase profits by making the supply curve for the product more inelastic.

Oligopolies exist because of barriers to entry. One of the most important barriers to entry is due to economies of scale. Why is this true? Part 2 It is more likely for an industry to be an oligopoly than competitive in the presence of economies of scale because Part 3 A. a firm's total cost is a large fraction of total revenue when output is low. B. economic profits are lower when firm output is a large fraction of industry output. C. a firm's average costs do not change when it produces more output. D. minimum average cost occurs when firm output is a large fraction of industry output. Your answer is correct. E. a firm's average costs increase when it produces more output.

Producer surplus is Part 2 A. the difference between the highest price a consumer is willing to pay and the lowest price a firm would be willing to accept. B. the difference between the lowest price a firm would be willing to accept and marginal cost. C. the difference between the highest price a consumer is willing to pay and the price the consumer actually pays. D. the difference between the lowest price a firm would be willing to accept and the price it actually receives. Your answer is correct. E. the market price multiplied by the number of units sold by a firm.

Suppose the production of electricity by a utility generates pollution that harms others. Suppose also that Coase bargainingLOADING...can occur between the utility and the victims of pollution but that the utility has not been legally liable for the damages from its pollution. How would making the utility legally liable for the damages from its pollution affect pollution reduction? Part 2 If the electric utility and the people suffering the effects of the utility's pollution can bargain, then making the utility legally liable for the damages from its pollution will Part 3 A. increase the amount of pollution reduction by decreasing the marginal cost and increasing the marginal benefit of pollution reduction to the utility. B. increase the amount of pollution reduction by increasing the marginal cost of pollution reduction to the utility. C. increase the amount of pollution reduction by increasing the marginal benefit of pollution reduction to the victims of pollution. D. not change the amount of pollution reduction because the marginal benefit and marginal cost of pollution reduction will not change. Your answer is correct. E. increase the amount of pollution reduction by increasing the marginal benefit of pollution reduction to the utility.

The guidelines used by the Department of Justice and the Federal Trade Commission when evaluating proposed mergers include three main parts. What are they? Part 2 The three main parts of the mergerLOADING... guidelines involve Part 3 A. merger standards, consumer surplus, and deadweight loss. B. economic profits, measure of concentration, and government revenue. C. government revenue, economies of scale, and network externalities. D. market definition, measure of concentration, and merger standards. Your answer is correct. E. deadweight loss, market definition, and economic profits.

What is required for a firm to successfully engage in price discrimination? Part 2 Successful price discrimination requires Part 3 A. the firm to be able to engage in arbitrage. B. the prices customers are willing to pay to be unknown. C. the customers to have the same willingness to pay for the product. D. the firm to have market power. Your answer is correct. E. the firm to be unable to divide up the market between customers.

What is the definition of monopoly? Part 2 A. A monopoly is a firm that earns large economic profits. B. A monopoly is a firm that is created and regulated by the government. C. A monopoly is a firm that is the only seller of a product that can ignore the fixed cost of production. D. A monopoly is a firm that is the only seller of a product in a given industry. Your answer is correct. E. All of the above.

What is the difference between a progressive tax and a regressive tax? Give an example of each. Part 2 A progressive tax is a tax for which people with lower incomes pay a lower percentage of their incomes in tax than do people with higher incomes, and a regressive tax is a tax for which people with lower incomes pay a higher percentage of their incomes in tax than do people with higher incomes. Part 3 An example of a regressive tax is the gasoline tax. Part 4 Raising taxes on high-earning families will cause the U.S. tax system to become A. more progressive because the portion of taxes that are federal will increase. B. less progressive because those with lower incomes will not experience a tax increase. C. less progressive because taxes on those with higher incomes are less efficient. D. more progressive because those with higher incomes will pay a larger percentage of their incomes in tax. Your answer is correct. E. less progressive because not everyone will pay the tax increases.

What is "natural" about a natural monopoly? Part 2 A natural monopoly Part 3 A. is the only firm legally allowed to produce a product due to a government copyright. B. produces a product whose usefulness increases with the number of consumers who use it. C. develops automatically due to diseconomies of scale. D. develops automatically due to economies of scale. Your answer is correct. E. is a public enterprise.

Which of the following is an example of price discrimination? Part 2 An example of price discrimination is Part 3 A. an airline charging higher prices for business travelers than for leisure travelers. B. a movie theater charging higher prices for evening showings than for afternoon showings. C. an apartment complex charging higher rent to females than to males. D. Both a and b. Your answer is correct. E. All of the above.

Which of the following is true of the relationship between the average product of labor and the marginal product of labor? Part 2 A. Whenever the marginal product of labor is greater than the average product of labor, the average product of labor must be decreasing. B. Whenever the marginal product of labor is decreasing, the average product of labor must be decreasing. C. The average product of labor equals the sum of the marginal products of labor. D. Whenever the marginal product of labor is less than the average product of labor, the average product of labor must be decreasing. Your answer is correct. E. The marginal product of labor equals the average product of labor for the quantity of workers where the marginal product of labor is at its maximum.

One reason some oppose free trade and the reduction of trade barriers is protectionism. Part 2 What does old-fashioned protectionism seek to protect? Part 3 Protectionism traditionally seeks to use trade barriers to protect Part 4

Domestic Wages

Which of the following is an example of a transaction costLOADING... associated with negotiating the reduction of a negative externality? Part 2 An example of a transaction cost is Part 3 A. the cost associated with not reducing a negative externality. B. the total cost of reducing a negative externality. C. the marginal cost of reducing a negative externality. D. the time required to negotiate an agreement to reduce a negative externality. Your answer is correct. E. the cost of a negative externality on others. Part 4 How might transaction costs affect private solutions to externality problems? Part 5 Transaction costs Part 6 A. may provide additional incentive for private solutions to reduce negative externalities. B. do not affect private solutions to reduce negative externalities. C. may make private solutions to reduce negative externalities unnecessary. D. may make private solutions to reduce negative externalities easier. E. may make private solutions to reduce negative externalities no longer feasible.

D , E

How are games in game theory played? Part 2 In game theory, Part 3 A. players determine their objectives and then payoffs are randomly assigned. B. agents determine their objectives, and principals are hired by contract to achieve those objectives. C. a natural experiment is used to determine the effect of a factor by treating a portion of participants, with remaining untreated participants becoming the control group. D. rules determine what actions are allowable, players employ strategies to attain their objectives, and payoffs are the results of the interaction among the players' strategies. Your answer is correct. E. players employ strategies to attain their objectives sequentially so that they are not affected by the actions of other players. Part 4 How is game theory used in economics? Part 5 In economics, Part 6 A. the rules of the game include technology, a strategy is the government, and the payoffs are the cost of production. B. the rules of the game include matters beyond a firm's control, a strategy is a firm maximizing profits, and the payoffs are profits. Your answer is correct. C. the rules of the game include technology, a strategy is the firm, and the payoffs are profits. D. the rules of the game include matters beyond a firm's control, a strategy is a firm maximizing profits, and the payoffs are the cost of production. E. the rules of the game include laws that a firm must obey, a strategy is a firm maximizing profits, and the payoffs are output levels.

D, B

Which of the following is a result of perfect price discrimination? A. maximum consumer surplus B. infinite producer surplus C. price greater than marginal cost D. zero consumer surplus Your answer is correct. Part 2 Which of the following are key results of price discrimination? A. Profits decrease and consumer surplus increases. B. Profits increase and consumer surplus decreases. Your answer is correct. C. Profits decrease and consumer surplus decreases. term-208D. Profits increase and consumer surplus increases.

D, B

The price elasticities in this range Part 5 A. are elastic because they are less than zero. B. are inelastic during a portion of the range and elastic during a portion of the range. C. are inelastic because they are less than zero. D. are inelastic because they are less than one (in absolute value). Your answer is correct. E. are elastic because they are less than one (in absolute value). Part 6 If cigarette manufacturers raise prices, will their revenue increase or decrease? Briefly explain. Part 7 If manufacturers raise prices, then their revenue will Part 8 A. increase because the percentage increase in price will be smaller than the percentage decrease in quantity. B. remain unchanged because quantity will decrease as price increases. C. decrease because quantity will decrease. D. increase because the percentage increase in price will be larger than the percentage decrease in quantity. Your answer is correct. E. increase because price will increase.

D, D

Give an example of a government-imposed barrier to entry. Part 2 An example of a government-imposed barrier to entry is Part 3 A. a tariff on imports. B. occupational licensing. C. economies of scale. D. both a and b. Your answer is correct. E. all of the above. Part 4 Why would the government be willing to erect barriers to entering an industry? Part 5 The government would be willing to impose barriers to Part 6 A. encourage firms to carry out research and development of new and better products. B. protect the public from incompetent practitioners. C. protect U.S. firms from international competition. D. both a and b. E. all of the above.

D, E

How did De Beers attempt to convince consumers that used diamonds were not good substitutes for new diamonds?

De Beers developed the slogan "a diamond is forever" to increase sentimental value.

How does consumer surplus change as the equilibrium price of a good rises or falls? Part 4 As the price of a good rises, consumer surplus decreases, and as the price of a good falls, consumer surplus increases.

Decreases , increases

A marginal tax rate is Part 2 A. the fraction of income that must be paid in taxes, while the average tax rate is the total tax paid divided by total income. B. a tax for which people with lower incomes pay a higher percentage of their income in tax than do people with higher incomes, while the average tax is a tax for which people with lower incomes pay a lower percentage of their income in tax than do people with higher incomes. C. the total tax paid, while the average tax rate is the total tax paid divided by total income. D. a federal tax, while the average tax rate is a state or local tax. E. the fraction of each additional dollar of income that must be paid in taxes, while the average tax rate is the total tax paid divided by total income. Your answer is correct. Part 3 Which is more important in determining the impact of the tax system on economic behavior? The marginal tax rate.

According to behavioral economists, why might consumers or businesses not act rationally? Part 2 People might not act rationally because they Part 3 A. fail to ignore nonmonetary opportunity costs. B. are too realistic about their future behavior. C. account for monetary costs. D. experience no endowment effect. E. fail to ignore sunk costs.

Are consumers only interested in making themselves as well off as possible in a material sense? Part 2 Consumers are Part 3 A. only concerned with their own utility as exemplified by social influences having no effect on decision-making. B. only concerned with their own utility as exemplified by only tipping in restaurants that will be visited again. C. only concerned with their own financial well-being as exemplified by only parting with money when required. D. also concerned with fairness as exemplified by network externalities. E. also concerned with fairness as exemplified by tipping in restaurants that will never be visited again.

Consider a form of public consumptionLOADING... such as attending sporting events. Part 2 An individual's demand for sporting events depends on Part 3 A. the cost of the sporting event. B. the individual's tastes and preferences. C. other consumers' consumption of sporting event. D. both a and b. E. all of the above.

Consider the consumption of public pasture land. What type of good is public pasture land? Part 2 Public pasture land is Part 3 A. a public good. B. a quasi−public good. C. a private good. D. an externality. E. a common resource.

Consumer choices are affected by social influences such as Part 2 A. what other consumers are buying. B. celebrity endorsements. C. fairness. D. whether consumption of a product will make the consumer appear knowledgeable. E. all of the above.

Describe a monopoly's demand curve. Part 2 A monopoly's demand curve Part 3 A. is the same as its marginal revenue curve. B. is infinitely elastic and equal to the market price. C. is vertical at the profit-maximizing quantity. D. is above the demand curve for the product. E. is the same as the demand curve for the product.

Do producers tend to favor price floors or price ceilings? Why? Part 2 Producers favor Part 3 A. price ceilings because, when binding, price ceilings increase price above the equilibrium and may increase producer surplus. B. price floors because, when binding, price floors decrease price below the equilibrium and increase producer surplus. C. price floors because, when non-binding, price floors increase price above the equilibrium and may increase producer surplus. D. price floors because, when binding, price floors increase price above the equilibrium and increase economic efficiency. E. price floors because, when binding, price floors increase price above the equilibrium and may increase producer surplus.

Tax incidence is Part 2 A. the efficiency loss to the economy that results from a tax causing a reduction in the quantity of a good produced. B. the division of the tax burden between rich and poor people. C. the fraction of each additional dollar of income that must be paid in taxes. D. the amount by which people with lower incomes pay a higher percentage of their income in tax than do people with higher incomes. E. the division of the tax burden between buyers and sellers in a market.

Economist Michael Porter argues that if buyers have more bargaining power, then Part 2 A. fewer firms will be in the industry. B. efficiency in the industry will be reduced. C. the prices of firms in the industry will be higher. D. more factors will affect industry competition. E. firm profits in the industry will be lower.

How do externalitiesLOADING... affect markets? Part 2 If a positive externality in consumption is present in a market, then Part 3 A. the private cost of production will be different than the social cost of production. B. consumer and producer surplus will be maximized. C. the private cost of production will be equal to the private benefit from consumption. D. the social cost of production will be equal to the social benefit from consumption. E. the private benefit from consumption will be different than the social benefit from consumption.

Is zero economic profit inevitable in the long run for monopolistically competitive firms? Part 2 In the long run, monopolistically competitive firms Part 3 A. may continue to earn profit by instead beginning to produce a product identical to competitors. B. will continue to earn profit due to barriers to new firms entering the market. C. will not continue to earn profit because the cost of production will rise as new firms enter the market. D. will not continue to earn profit because monopolistically competitive firms produce identical products. E. may continue to earn profit by reducing costs.

Ocean Spray has faced limited competition in the market for fresh and frozen cranberries. Part 2 What barrier has kept new firms from entering the market for fresh and frozen cranberries? Part 3 Ocean Spray Part 4 A. has had lower long-run average costs than competitors. B. has been able to convince customers that its brand of fresh and frozen cranberries has extra value. C. has had a patent on fresh and frozen cranberries. D. has enjoyed economies of scope from producing multiple types of products. E. has had almost exclusive ownership of cranberries, which is a key input.

One measure of the extent of competition in an industry is the concentration ratio. What level of concentration indicates that an industry is an oligopoly? Part 2 Most economists believe that a four-firm concentration ratio of greater than 4040 percent indicates that an industry is an oligopoly. (Enter your response as an integer.) Part 3 Is the concentration ratio an accurate measure of the extent of competition? Part 4 The four-firm concentration ratio Part 5 A. is flawed in that it is calculated for local markets even though competition in some industries is national. B. is accurate because it is based on estimates from the U.S. Census Bureau. C. is flawed in that it includes competition between industries. D. is accurate because it is based on national and global competition. E. is flawed in that it does not include sales in the U.S. by foreign firms.

Question content area Part 1 The government indirectly influences the level of industry competition with its own barriers to entry. How? Part 2 The government can restrict entry by Part 3 A. reducing the duration of patents on inventions. B. eliminating quotas to promote free trade. C. regulating the size of profits that firms can earn. D. preventing lobbyists from influencing policymakers. E. requiring licenses for a firm to produce.

Why would a monopolistically competitive firm advertise? Part 2 A monopolistically competitive firm would advertise to Part 3 A. reduce the total cost of production. B. shift its demand curve to the left. C. reduce product differentiation. D. decrease the price it charges. E. make its demand curve more inelastic.

The five competitive forces model suggests the bargaining power of buyers may affect industry competition. Part 2 Which of the following is an example of a way buyers might affect an industry? Part 3 A. Wal−Mart has significant bargaining power over its suppliers, which raises the prices suppliers can charge. B. The Technicolor Company no longer has any bargaining power over movie studios, limiting the profitability of producing color movies. C. McDonald's has significant bargaining power over napkin suppliers, which raises the napkin prices they pay. D. Wal-Mart has limited bargaining power over suppliers, which results in many of their suppliers altering their distribution systems to accommodate Wal-Mart's need to control the stocks of goods in stores. E. GM has significant bargaining power in the tire market, which reduces the profitability of tire manufactures.

The five competitive forces model suggests the threat from potential entrants affects industry competition. Part 2 How might an existing firm deter entry of new firms? Part 3 An existing firm might Part 4 A. downsize to produce less output. B. charge higher prices to increase profits. C. collude with competitors to raise prices. D. engage in price leadership for price matching. E. advertise to create product loyalty.

The formula for the price elasticity of supply is Part 2 A. the percentage change in quantity supplied divided by the percentage change in quantity demanded. B. the percentage change in price divided by the percentage change in quantity supplied. C. the percentage change in quantity supplied divided by the percentage change in price. Your answer is correct. D. the percentage change in quantity supplied divided by the price. E. the change in price divided by the change in quantity supplied.

The marginal cost of production shows the change in a firm's total cost from producing one more unit of a good or service. What is the shape of the marginal cost curve? Part 2 Graphically, the marginal cost curve is Part 3 A. shaped like a hill, initially rising when the marginal product of labor is falling and then eventually falling when the marginal product of labor is rising. B. a U shape, initially falling due to diminishing returns and then eventually rising due to division of labor. C. shaped like a hill, rising when the average cost of production is rising and then eventually falling when the average cost of production is falling. D. a U shape, initially falling when the marginal product of labor is below marginal cost and then eventually rising when the marginal product of labor is above marginal cost. E. a U shape, initially falling when the marginal product of labor is rising and then eventually rising when the marginal product of labor is falling.

What affects the desirability of a product? Part 2 Products become more desirable when Part 3 A. professional athletes use a product because consumers who use the same product may feel closer to famous people. B. celebrities use a product because consumers who use the same product may feel more fashionable. C. movie stars use a product because consumers perceive them to be particularly knowledgeable about it. D. both a and b. E. all of the above.

What effect might the government have on oligopolies? Part 2 In oligopolies, the government might Part 3 A. impose barriers to entry with a free-trade agreement with another country to promote competition. B. promote competition with occupational licensing, where a license is required to provide a good or service. C. promote competition by allowing large firms to lobby state legislators and members of Congress for favorable laws. D. impose barriers to entry with a copyright, which allows only the government to supply a good or service. E. impose barriers to entry with a tariff to limit foreign competition.

uppose you have a monthly entertainment budget that you use to rent movies and purchase CDs. You currently use your income to rent 5 movies per month at a cost of $5.00 per movie and to purchase 5 CDs per month at a cost of $10.00 per CD. Your marginal utilityLOADING... from the fifth movie is 50 and your marginal utility from the fifth CD is 92. Part 2 Are you maximizing utility? Part 3 You are Part 4 A. maximizing utility because you are spending all of your entertainment budget. B. not maximizing utility because the price of movies is not equal to the price of CDs. C. not maximizing utility because the marginal utility of movies is not equal to the marginal utility of CDs. D. maximizing utility because you are consuming an equal number of movies and CDs. E. not maximizing utility because the marginal utility per dollar spent on movies is not equal to the marginal utility per dollar spent on CDs. Your answer is correct. Part 5 What could you do to increase utility? Part 6 You could increase utility by consuming more movies and fewer CDs.

What is price discrimination? Part 2 Price discrimination is when Part 3 A. firms charge a higher price for a product when it is first introduced and a lower price later. B. firms charge a higher price to customers who are less sensitive to price and a lower price to consumers who are more sensitive to price. C. firms charge each consumer a different price equal to that consumer's willingness to pay. D. both a and b. E. all of the above. Your answer is correct. Part 4 Under what circumstances can a firm successfully practice price discrimination? Part 5 To successfully practice price discrimination, Part 6 A. some consumers must have greater willingness to pay for the product than others and a firm must know consumer willingness to pay for the product. Your answer is correct. B. arbitrage must be possible. C. a firm must be a price taker. D. both a and b. E. all of the above.

E, A

What is price discrimination? Part 2 Price discrimination is when Part 3 A. firms charge a higher price to customers who are less sensitive to price and a lower price to consumers who are more sensitive to price. B. firms charge a higher price for a product when it is first introduced and a lower price later. C. firms charge each consumer a different price equal to that consumer's willingness to pay. D. both a and b. E. all of the above. Your answer is correct. Part 4 Under what circumstances can a firm successfully practice price discrimination? Part 5 To successfully practice price discrimination, Part 6 A. some consumers must have greater willingness to pay for the product than others and a firm must know consumer willingness to pay for the product. Your answer is correct. B. arbitrage must be possible. C. a firm must be a price taker. D. both a and b. E. all of the above.

E, A

A production possibilities frontier: Part 2 A. shows the market for a good or service. B. shows how unlimited wants exceed the limited resources available to fulfill those wants. C. shows how participants in the market are linked. D. shows the act of buying and selling. E. shows the maximum attainable combinations of two goods that may be produced with available resources. Your answer is correct. We can show economic efficiency: Part 4 A. with points inside and on the production possibilities frontier. B. with points on the production possibilities frontier. Your answer is correct. C. with points on and outside the production possibilities frontier. D. with points inside the production possibilities frontier. E. with points outside the production possibilities frontier. We can show economic inefficiency: Part 6 A. with points on the production possibilities frontier. B. with points outside the production possibilities frontier. C. with points inside and on the production possibilities frontier. D. with points on and outside the production possibilities frontier. E. with points inside the production possibilities frontier. Your answer is correct. The production possibilities frontier will shift outward Part 8 A. if resources are used to produce consumption goods. B. if technological advances occur. Your answer is correct. C. if production occurs outside the production possibilities frontier. D. if resources are not used in production. E. if resources are not used to produce capital goods.

E, B, E, B

What is the difference between explicit collusion and implicit collusion? Part 2 Unlike explicit collusion, implicit collusion Part 3 A. is illegal. B. is where firms meet to discuss charging the same price without actually reaching an agreement. C. is where firms meet and agree to charge the same price without appointing a price leader. D. is where firms meet and agree to charge the same price without employing retaliation strategies. E. is where firms signal to each other without actually meeting and agreeing to charge the same price. Your answer is correct. Part 4 Give an example of each. Part 5 An example of explicit collusion is Part 6 A. firms advertising that they will match the lowest price offered by any competitor, and an example of implicit collusion is price leadership. B. price leadership, and an example of implicit collusion is firms advertising that they will match the lowest price offered by any competitor. C. where firms meet and agree to charge the same price, and an example of implicit collusion is price leadership. Your answer is correct. D. where firms meet and agree to charge the same price, and an example of implicit collusion is firms forming a cartel. E. price leadership, and an example of implicit collusion is firms forming a cartel.

E, C

Why does a local McDonald's face a downward-sloping demand curve for its Quarter Pounder? Part 2 In monopolistically competitive markets, Part 3 A. changing the price affects the quantity sold because there are only a few sellers. B. changing the price affects the quantity sold because firms are price takers. C. changing the price does not affect the quantity sold because firms have market power. D. changing the price does not affect the quantity sold because firms are price makers. E. changing the price affects the quantity sold because firms sell differentiated products. Your answer is correct. Part 4 If McDonald's raises the price it charges for Quarter Pounders above the prices charged by other fast-food restaurants, won't it lose all its customers? No.

E, No

What is the government's policy on collusion in the United States? Explain the rationale for this policy. Part 2 In the United States Part 3

E. the government makes collusion illegal with antitrust laws because monopolies reduce economic efficiency.

Can economic analysis provide a final answer to the question of whether the government should intervene in markets by imposing price ceilings and price floors? Why or why not?

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

A hospital provides emergency-room medical care for local residents. Suppose the hospital currently provides this care for 15,000 patients per year at a total cost of $60,000,000. If the hospital expands, it can provide emergency-room medical care for 20,000 patients per year at a total cost of $60,000,000. Part 2 If the hospital expands, will it be experiencing economies of scale, diseconomies of scale, or constant returns to scale? Part 3 If the hospital expands, it will be experiencing

Economies of scale

MIT economist Jerry Hausman has estimated the price elasticity of demand for Post Raisin Bran cereal to be −2.5 and the price elasticity of demand for all types of breakfast cereals to be −0.9. Part 2 The demand for Post Raisin Bran cereal is elastic, and the demand for all types of breakfast cereals is inelastic. Part 3 Why might the demand for Post Raisin Bran cereal be more elastic than the demand for all types of breakfast cereals? Part 4 Post Raisin Bran cereal Part 5 A. is a smaller share of a consumer's budget. B. is consumed over a shorter period of time. C. is defined more broadly. D. is more of a necessity. E. has more substitutes available.

Elastic, Inelastic, E

Suppose that France and Germany both produce wine and cheese. The table below shows combinations of the goods that each country can produce in a day.

France has a comparative advantage producing wine and Germany has a comparative advantage producing cheese. After specialization and trade, France gains by consuming the same amount of wine and 4 additional pound(s) of cheese (enter a numeric response using an integer) and Germany gains by consuming the same amount of wine and 2 additional pound(s) of cheese.

How does producer surplus change as the equilibrium price of a good rises or falls? Part 4 As the price of a good rises, producer surplus increases, and as the price of a good falls, producer surplus decreases.

Increases, decreases

f the price of flashlights falls while the demand for batteries rises, is the cross-price elasticity of demand between the pair of products likely to be positive or negative? ________ Part 2 Therefore, the cross-price elasticity of demand between "substitutes" is most likely _______ and the cross-price elasticities of demand between "complements" is most likely ________.

Negative, positive, negative

Which point(s) are inefficient? Briefly explain why

Point A because production there is not using all available resources.

At which point is the country's future growth rate likely to be the highest? Briefly explain why.

Point B because it is where the most resources are used to produce capital goods

Which point(s) are unattainable? Briefly explain why.

Point E because it is outside the production possibilities frontier.

Which point(s) are efficient? Briefly explain why.

Points B, C, and D because this is where maximum output is produced with available resources.

Monopolies are recognized to create deadweight loss. How large are the efficiency losses due to monopoly? Part 2 Economists generally agree that efficiency losses due to monopolies in the economy are

Small because true monopolies are very rare

What would need to be true for a demand curve to be upward sloping? Part 2

The good would have to be an inferior good, and the income effect would have to be larger (in absolute value) than the substitution effect.

What is the main determinant of the price elasticity of supply?

The passage of time

Question content area Part 1 Suppose Kim owns the only restaurant in town that serves pizza. Other restaurants serve hamburgers, tacos, and fried chicken. Suppose that in the long run, Kim's restaurant continues to be the only one in town selling pizza. If Kim is earning economic profits, then, under the broad definition, is Kim's restaurant a monopoly? Yes.

Yes

a decrease in the price of baskets of traditional wings. C. An increase in the prices of substitutes in production. This is the correct answer. D. A decrease in the number of sellers.

Consider the market for eggs illustrated in the figure to the right. Suppose the market is perfectly competitive and initially in equilibrium at a price of 5 cents and a quantity of 50 (thousand). Part 2 a. If the price were 3 cents instead of 5 cents, then consumer surplus would In turn, producer surplus would Consequently, at a price of 3 cents, deadweight loss would equal

a. increase by area C and decrease by area E b. decrease by areas C and F c. areas E and F

Why does a local McDonald's face a downward-sloping demand curve for its Quarter Pounder? Part 2 In monopolistically competitive markets, Part 3 If McDonald's raises the price it charges for Quarter Pounders above the prices charged by other fast-food restaurants, won't it lose all its customers? No .

changing the price affects the quantity sold because firms sell differentiated products.

charge a price greater than marginal cost.

Briefly discuss the effect of price elasticity of supply and demand on tax incidence. Part 2 When the demand for a product is less elastic than supply, consumers pay the majority of the tax on a product; when supply for a product is less elastic than the demand, firms pay the majority of the tax on the product.

consumers firms

Briefly discuss the effect of price elasticity of supply and demand on tax incidence. Part 2 When the demand for a product is less elastic than supply, _______ pay the majority of the tax on a product; when supply for a product is less elastic than the demand, ________ pay the majority of the tax on the product.

consumers, firms

According to the goal of economic efficiency, governments tend to favor taxes that

create a small excess burden relative to revenue raised.

decreases because average fixed cost decreases as output increases

Is perfect price discrimination economically efficient? Part 6 Perfect price discrimination is

efficient because it converts into producer surplus what had been consumer surplus and deadweight loss.

The rule of equal marginal utility per dollar spent suggests that consumers maximize utility by Part 4

equalizing the marginal utility per dollar spent across goods and services

What are the five most important variables that cause the market demand curve for labor to shift? Part 2 The demand curve for labor shifts with changes in Part 3

human capital, technology, the price of the product, the quantity of other inputs, and the number of firms in the market.

What effect might the government have on oligopolies? Part 2 In oligopolies, the government might

impose barriers to entry with occupational licensing, where a license is required to provide a good or service.

In the circular-flow diagram showing how a market system works,

income flows to households through factor markets.

Suppose the price of a complement to LCD televisions falls. What effect will this have on the market equilibrium for LCD TVs? The equilibrium price of LCD TVs will

increase and the equilibrium quantity will increase.

Many firms advertise. What effect does advertising have on firm profits? Part 2 One possible effect of advertising is to Part 3

increase profits by making the demand curve for the product more inelastic

A budget constraint: Part 2

indicates the limited amount of income available to consumers to spend on goods and services.

What is meant by allocative efficiency? Part 2 Allocative efficiency is when every good or service

is produced up to the point where the marginal benefit for consumers equals the marginal cost of producing it.

What conditions make a market perfectly competitive? Part 2 A market is perfectly competitive if Part 3

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

Why was De Beers worried that people might resell their old diamonds? If people resell their old diamonds, then

market competition would increase, decreasing market prices.

How might transaction costs affect private solutions to externality problems? Part 5 Transaction costs

may make private solutions to reduce negative externalities no longer feasible.

Consider the demand for large homes illustrated in the figure to the right. What demographic change would likely result in the demand curve for large homes shifting to the right? Part 2 The demand curve for large homes would likely shift to the right if the

portion of the population that is elderly decreases

Do producers tend to favor price floors or price ceilings? Why? Part 2 Producers favor Part 3

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

How might a monopolistically competitive firm continually earn economic profit greater than zero? Part 2 To earn economic profit greater than zero, a monopolistically competitive firm must

produce a product that creates value for consumers relative to competitors.

the community could establish norms where social pressure limits deforestation

Which of the following is an example of a transaction costLOADING... associated with negotiating the reduction of a negative externality? Part 2 An example of a transaction cost is

the cost associated with drawing up a binding contractto reduce a negative externality.

How should firms in perfectly competitive marketsLOADING... decide how much to produce? Part 2 Perfectly competitive firms should produce the quantity where

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

What is the production function? Part 2 The production function is the relationship between

the inputs employed by a firm and the maximum output it can produce with those inputs.

How is the price elasticity of demand measured? Part 2 The price elasticity of demand is measured as

the percentage change in the quantity demanded divided by the percentage change in price.

How do externalitiesLOADING... affect markets? Part 2 If a negative externality in production is present in a market, then Part 3

the private cost of production will be different than the social cost of production.

Perfect price discrimination is

unlikely to occur because firms typically do not know how much each consumer is willing to pay.

What is meant by productive efficiency? Part 5 Productive efficiency is

when a good or service is produced at lowest possible cost.

What are diseconomies of scale? Part 2 Diseconomies of scale is

when a firm's long-run average costs increase with output.

What is a compensating differential? Give an example. Part 2 A compensating differential is

when higher wages are paid to compensate a worker for unpleasant aspects of a job, such as when workers are paid higher wages for dangerous work.

Suppose only two airlines, United and Delta, provide flights between Atlanta and Greenville. Both firms must choose whether to advertise or not advertise. Part 2 The advertising strategies with corresponding profits are depicted in the payoff matrix to the right. United Airline's profits are in blue and Delta Airline's are in red. Part 3 United Airline's dominant strategy is to __________, and Delta Airline's dominant strategy is to ___________ Part 4 What is the Nash equilibrium for this game? Part 5 A. United and Delta will both choose to advertise. B. United will choose not to advertise and Delta will choose to advertise. C. United and Delta will both choose not to advertise. D. United will choose to advertise and Delta will choose not to advertise.

Advertise, Advertise, A

After World War II in 1945, the United States experienced a "baby boom" as birthrates rose and remained high through the early 1960s. In 2011, the first members of the baby boom generation became older than 65. What effect will this have on the market for hospital facilities? Part 2 As the first baby boomers become older than 65, the Part 3 A. supply curve for hospital facilities will shift to the right. B. demand curve for hospital facilities will shift to the right. C. demand curve for hospital facilities will become vertical. D. demand curve for hospital facilities will shift to the left. E. quantity of hospital facilities demanded will increase.

Are perfectly competitive markets productively efficient in the long run? Part 2 A. Yes, because firms produce where the marginal benefit to consumers equals the marginal cost of production. B. Yes, because firms produce at the lowest average cost possible. C. No, because firms earn zero economic profits. D. No, because firms will not shut down unless price is less than the average variable cost of production. E. Both a and b.

As the level of output increases, what happens to the difference between the value of average total cost and average variable cost? Part 2 As the level of output increases, the difference between the value of average total cost and average variable cost Part 3 A. decreases because average total cost and average variable cost decrease with output. B. decreases because average fixed cost decreases as output increases. C. remains constant because average total cost and average variable cost both increase with output. D. increases because average total cost increases with output but average fixed cost decreases with output. E. remains constant because average fixed cost remains the same as output increases.

Assume the world market for oil is competitive and that the marginal cost of producing (extracting and bringing to market) another barrel of oil is $79.40 and the marginal benefit is $80.00. If one more barrel of oil is produced and consumed, how will economic surplus change? Part 2 Economic surplus will Part 3 A. increase by $80.00. B. increase by $0.60. C. not change. D. decrease by $0.60. E. decrease by $159.40.

Explain why it is true that for a firm in a perfectly competitive market that P = MR = AR. Part 2 In a perfectly competitive market, P = MR = AR because Part 3 A. firms have market power. B. firms can sell as much output as they want at the market price. C. there are barriers to entry. D. firms face downward sloping demand curves. E. firms are price makers.

How do market economies ultimately determine what goods and services are produced, how the goods and services will be produced, and who will receive the goods and services? Part 2 A. The government determines what goods and services are produced, how to produce them, and who will receive them. B. Consumers determine what goods and services are produced, firms determine how to produce them, and markets determine who will receive them. C. Consumers determine what goods and services are produced, firms determine how to produce them, and equity determines who will receive them. D. Firms determine what goods and services are produced and how to produce them, and markets determine who will receive them. E. Firms determine what goods and services are produced, efficiency determines how to produce them, and consumers determine who will receive them.

How might a monopolistically competitive firm continually earn economic profit greater than zero? Part 2 To earn economic profit greater than zero, a monopolistically competitive firm must Part 3 A. eliminate excess capacity by producing at minimum average cost. B. produce a product that creates value for consumers relative to competitors. C. rely on chance events. D. be the first firm to enter a market to obtain first-mover advantages. E. block entry of new firms with government-enforced copyrights.

Is the demand for agricultural products elastic or inelastic? Why? Part 2 The demand for agricultural products is A. inelastic because they are perishable products. B. inelastic because such products represent a small share in the consumer's budget. C. elastic because the markets for such products are defined very broadly. D. inelastic because such products have many close substitutes. E. elastic because such products are necessities.

Is the loss in efficiency due to market power large or small? Explain. Part 2 The loss in efficiency due to market power is Part 3 A. large because virtually every firm has at least some market power. B. small because competition limits market power, even when the market is not perfectly competitive. C. large because almost every industry is a monopoly with firms that have substantial market power. D. small because even firms without market power are economically inefficient. E. small because almost every industry is perfectly competitive with firms that have no market power.

Prepping for a next-day exam over the course of an evening (and possibly into the wee hours of test day) poses increasing costs since Part 2 A. tutors charge higher rates after 7 p.m. B. the longer you choose to study will result in an increase in the number and value of foregone activities. C. studying productivity declines sharply as the effort extends through the evening. D. evenings are a less productive time to study compared to daylight hours.

Question content area Part 1 Governments often have the potential to influence whether firms are monopolies Part 2 How might the government affect whether a firm is a monopoly? Part 3 The government could Part 4 A. grant a patent to a firm, making it a natural monopoly. B. grant a copyright to a firm, giving it the exclusive right to produce a product. C. reduce taxes so that a firm benefits from diseconomies of scale. D. grant a firm a public enterprise, allowing it to benefit from network externalities. E. grant a firm a public franchise, making it a natural monopoly.

Suppose a common resource—wood in a public forest—is being overused because residents consider the benefits of gaining firewood or wood for building but do not account for the cost of deforestation when chopping down trees. What could be done to prevent wood in the forest from being overused? Part 2 To prevent overuse of the common resource, Part 3 A. the community could establish social customs prohibiting the use of permits required to chop down trees. B. the government could impose restrictions on access to wood in the forest. C. the government could subsidize chopping down trees. D. the community could create transaction costs to private bargaining. E. the government could make a binding commitment to keep the forest lands public.

The price of Burger King's Whopper hamburger increases. This will cause A. demand for McDonald's Big Mac hamburgers to decrease. B. demand for McDonald's Big Mac hamburgers to increase. C. a movement along the demand curve for McDonald's Big Mac hamburgers.

What are the three most important variables that cause the market supply curve for labor to shift? Part 2 The supply curve for labor shifts with changes in Part 3 A. the population, the number of firms in the market, and opportunities in other labor markets. B. the population, demographics, and opportunities in other labor markets. Your answer is correct. C. the population, the wage rate, and opportunities in other labor markets. D. the population, minimum wage legislation, and the wage rate. E. human capital, demographics, and opportunities in other labor markets.

What is the relationship between a monopolist's demand curve and its marginal revenue curve? Part 4 A. A monopolist's marginal revenue curve has twice the slope of its demand curve due to diseconomies of scale. B. A monopolist's marginal revenue curve has twice the slope of its demand curve, because to sell more output, a monopoly must lower price. Your answer is correct. C. A monopolist's demand curve is the same as its marginal revenue curve. D. A monopolist's marginal revenue curve has half the slope of its demand curve, because to sell more output, a monopoly must lower price. E. A monopolist's demand curve is downward sloping and its marginal revenue curve is horizontal.

What is the circular-flow diagram and what does it illustrate? Part 2 A. The circular-flow diagram shows the government's role in markets through taxes and transfer payments. B. The circular-flow diagram shows how households and firms are linked through product and factor markets. C. The circular-flow diagram shows how households and firms are linked through product markets. D. The circular-flow diagram shows how firms are linked through product and factor markets. E. The circular-flow diagram shows the maximum attainable combinations of two products that may be produced with available resources and current technology.

Which of the following events would cause the supply curve to decrease from S1 to S2? Supply curve moved left A. An increase in the number of firms in the market. B. An increase in the price of inputs. C. Lower expected future prices. Your answer is not correct. D. A decrease in the price of inputs.

Suppose that the curves in the figure to the right represent two supply curves for traditional wings (basket of six) at Buffalo Wild Wings. Part 2 The movement from point A to B on S1 is caused by Part 3 A. a decrease in the price of baskets of traditional wings. B. an increase in the price of baskets of traditional wings. Your answer is correct. C. a decrease in input prices. Indicate which of the following would cause a movement from point A to C. (Check all that apply.) A. An increase in the product's price. B. An increase in the number of buyers. C. An increase in the number of sellers. D. A decrease in input prices.

B , (C and D)

What are the two main categories of participants in markets? Part 2 A. Firms and banks. B. Firms and households. Your answer is correct. C. Households and the government. D. Domestic participants and international participants. E. Households and entrepreneurs. Part 3 Which participants are of greatest importance in determining what goods and services are produced? Part 4 A. Households. B. Entrepreneurs. C. The financial sector. D. Firms. E. The government.

B , A

Bradford is a small town that currently has no fast-food restaurants. McDonald's and Burger King are both considering entering this market. Burger King will wait until McDonald's has made its decision before deciding whether to enter. Use the decision tree below to determine the optimal strategy for each company, assuming that the minimum rate of return that owners of fast-food restaurants require on their investment is 15%. a. What is the optimal strategy for Burger King? A. Not enter the market. B.Enter the market whether or not McDonald's builds a small store or a large store. Enter the market whether or not McDonald's builds a small storeor a large store. Your answer is correct. C. Enter the market if McDonald's builds a large store. D.Enter the market if McDonald's builds a small store . Enter the market if McDonald's builds a small store . What is the optimal strategy for McDonald's? A. Building either a small store or a large store would be optimal. B. Build a small store. Your answer is correct. C. Not build another store. D. Build a large store.

B , B

Can economic analysis provide a final answer to the question of whether the government should intervene in markets by imposing price ceilings and price floors? Why or why not? Part 2 A. Economic analysis can provide such an answer because it seeks to address both positive and normative questions such as "what is" and "what ought to be." B. Economic analysis cannot provide such an answer because it seeks to address normative questions such as "what ought to be." C. Economic analysis can provide such an answer because it seeks to address normative questions such as "what ought to be." D. Economic analysis cannot provide such an answer because it seeks to address positive questions such as "what is." E. Economic analysis can provide such an answer because it seeks to address positive questions such as "what is."

Compare the efficiency of monopolistic competition and perfect competition in long-run equilibrium. Part 2 A. Perfectly competitive firms and monopolistically competitive firms both charge a price that equals marginal cost and are therefore allocatively efficient. B. Monopolistically competitive firms and perfectly competitive firms both produce at lowest possible average total cost and are therefore productively efficient. C. Monopolistically competitive firms produce where marginal revenue equals marginal cost and are therefore productively efficient, but perfectly competitive firms produce where price equals marginal cost and are therefore not productively efficient. D. Perfectly competitive firms produce where price equals marginal cost and are therefore allocatively efficient, but monopolistically competitive firms produce where price is greater than marginal cost and are therefore not allocatively efficient. E. Monopolistically competitive firms and perfectly competitive firms both produce with no excess capacity and are therefore not productively efficient.

Economists have developed broad and narrow definitions to identify monopolies. What is a characteristic that supports a firm being classified as a monopoly? Part 2 Economists could find that a firm is a monopoly if Part 3 A. it produces a small quantity. B. it is a price taker. C. it achieves allocative efficiency. D. it earns profits in the long run. E. its production decisions are unresponsive to price.

How are prices determined in perfectly competitive marketsLOADING...? Part 2 In perfectly competitive markets, prices are determined by Part 3 A. consumers because firms sell identical products. B. firms because they each have market power. C. firms because they sell differentiated products. D. the interaction of market demand and supply because firms and consumers are price takers. E. consumers because firms individually are very small relative to the market.

How else can you calculate the price elasticity of demand? Part 5 A. Price elasticity of demand can be calculated using final values for price and quantity. Your answer is not correct. B. Price elasticity of demand can be calculated using initial values for price and quantity. C. Price elasticity of demand can be calculated by finding the slope of the demand curve. D. Both a and b. E. All of the above.

How might society solve problems associated with externalities and market failureLOADING...? Part 2 If an externality is present, resulting in market failure, then Part 3 A. additional competition will reduce problems associated with market failure. B. it is not possible to increase economic efficiency. C. only government intervention can enhance the well−being of society. D. private solutions may reduce or correct market failure. E. government intervention will further decrease economic efficiency.

In economics, the term capital refers to Part 2 A. funds, including cash, used by businesses to hire resources. Your answer is not correct. B. the process of raising funds through the sale of stocks and bonds. C. the difference between a firm's assets and its liabilities. D. goods used to produce other goods.

Many firms advertise. What effect does advertising have on firm profits? Part 2 One possible effect of advertising is to Part 3 A. increase profits by making the demand curve for the product more elastic. B. increase profits by making the supply curve for the product more inelastic. C. increase profits by allowing the firm to produce the same amount of output with fewer inputs. D. decrease profits by increasing the cost of production. E. increase profits by shifting the demand curve for the product to the left.

One effect of tariffs and quotas Part 2 A. is generally a net gain for the nation enacting the protective legislation. B. is to reduce prices to domestic consumers as it protects jobs in the target industry. C. is to create jobs outside the industries immediately affected. D. is to cost jobs outside the industries immediately affected.

Question content area Part 1 In economics, the term capital refers to Part 2 A. the process of raising funds from venture capitalists. B. funds, including cash, used by businesses to hire resources. C. the difference between a firm's assets and its liabilities. D. physical capital, such as machinery, that is used to produce other goods.

According to behavioral economics, consumers Part 2 A. do not always behave rationally because they take into account nonmonetary opportunity costs. B. always behave rationally because they account for sunk costs. C. do not always behave rationally because they fail to ignore sunk costs. D. always behave rationally because they take into account monetary costs and nonmonetary opportunity costs. E. do not always behave rationally because they accurately project their future behavior.

Compare the demand for sugar with demand for gasoline. Part 2 The demand for sugar is likely Part 3 A. more inelastic because sugar tends to be purchased more frequently. B. more elastic because sugar tends to be purchased in larger quantities. C. more inelastic because sugar tends to represent a smaller fraction of a consumer's budget. D. more elastic because sugar tends to represent a smaller fraction of a consumer's budget. E. more elastic because sugar tends to represent a larger fraction of a consumer's budget.

Consumer surplus is Part 2 A. the highest price a consumer is willing to pay to consume a good or service. B. the difference between the highest price a consumer is willing to pay and the lowest price a firm would be willing to accept. C. the difference between the highest price a consumer is willing to pay and the price the consumer actually pays. D. the difference between the highest price a consumer is willing to pay and marginal benefit. E. the difference between the lowest price a firm would be willing to accept and the price it actually receives. Part 3

Is Jill Johnson correct when she says the following: "I am currently producing 20,000 pizzas per month at a total cost of $40,000. If I produce 20,001 pizzas, my total cost will rise to $40,001. Therefore, my marginal cost of producing pizzas must be increasing." Part 2 A. Jill's average total cost of production is decreasing, so her marginal cost of producing pizzas must be increasing. B. Jill's average total cost of production is increasing, so her marginal cost of producing pizzas must be increasing. Your answer is not correct. C. Though Jill's average total cost of production is decreasing, her marginal cost of producing pizzas could be increasing or decreasing. This is the correct answer. D. Jill's average total cost of production is decreasing, so her marginal cost of producing pizzas must be decreasing. E. Jill's average total cost of production is increasing, so her marginal cost of producing pizzas must be decreasing.

On the diagram to the right, a movement from B to C represents a Part 2 S1 A (bottom) to B (Top) S2 C (Top) A. change in quantity supplied. B. decrease in supply. C. change in supply. Your answer is correct. D. movement down the supply curve

Suppose cigarettes generate a negative externality in consumption. If so, then Part 2 A. the private market equilibrium results in a price that is equal to the efficient price. B. the private market equilibrium results in a quantity that is less than the equilibrium price. C. the private market equilibrium results in a quantity that is greater than the efficient quantity. D. the private market equilibrium results in a quantity that is less than the efficient quantity. E. the private market equilibrium results in a quantity of zero.

Suppose that last semester your semester GPA was 1.90 and your resulting cumulative GPA was 2.69. Part 2 Next, suppose that this semester your semester GPA will be 2.30. Part 3 If so, then your cumulative GPA Part 4 A. will decrease because your "marginal" GPA will be below your semester GPA last semester. B. could increase or decrease because your "marginal" GPA will be above your semester GPA last semester but below your cumulative GPA. C. will decrease because your "marginal" GPA will be below your cumulative GPA. Your answer is correct. D. will increase because your "marginal" GPA will be above your semester GPA last semester. E. will decrease because your "marginal" GPA will be above your semester GPA last semester.

Suppose two jobs require the same degree of training and education, yet one of the two jobs pays a higher wage. How can compensating differentials explain this wage difference? Part 2 According to compensating differentials, wages will be higher if the corresponding job is Part 3 A. monopsonized. B. safer. C. more dangerous. D. more stable. E. unionized.

Tax incidence is Part 2 A. the potential division of the burden of a tax between buyers and sellers in a market. B. the potential division of the burden of a tax between buyers and government in a market. C. the actual division of the burden of a tax between buyers and sellers in a market. D. the actual division of the burden of a tax between buyers and government in a market.

What is the circular-flow diagram and what does it illustrate? Part 2 A. The circular-flow diagram shows how firms are linked through product and factor markets. B. The circular-flow diagram shows how households and firms are linked through product markets. C. The circular-flow diagram shows how households and firms are linked through product and factor markets. D. The circular-flow diagram shows the government's role in markets through taxes and transfer payments. E. The circular-flow diagram shows the maximum attainable combinations of two products that may be produced with available resources and current technology.

What was the primary reason why De Beers at one time faced limited competition due to barriers to entry? Part 2 The primary reason that De Beers faced limited competition was because Part 3 A. De Beers had successfully formed diamond cartels. B. average costs were decreasing with the quantity of diamonds sold. C. only De Beers had access to most of the diamond mines. D. only De Beers had received a government patent to sell diamonds. E. consumers viewed diamonds as having many close substitutes.

Which of the following events would cause the supply curve to decrease from S1 to S2? WENT LEFT Part 2 A. Lower expected future prices. B. An increase in the number of firms in the market. C. An increase in the price of inputs. D. A decrease in the price of inputs.

McDonald's distributes $1.00 off coupons. This will cause A. demand for McDonald's Big Mac hamburgers to shift to the left. B. demand for McDonald's Big Mac hamburgers to shift to the right. C. a movement along the demand curve for McDonald's Big Mac hamburgers.

Trade-offs force society to answer questions such as what goods and services will be produced, how will the goods and services be produced, and who will receive the goods and services produced. Part 2 Which of the following countries has an economy where households and firms make these decisions? Part 3 A.North Korea North Korea B.The Soviet Union The Soviet Union C.Canada D.Cuba

A black market is Part 2 A. a market in which buying and selling occur at legal prices. B. a market in which participants exchange goods and services without using money. C. a market in which buying and selling occur at prices that violate government price regulations. Your answer is correct. D. a market in which there are non-binding price controls. E. a market in which there is no deadweight loss. Black markets may arise A. in reaction to binding price ceilings. Your answer is correct. B. in reaction to non-binding price floors. C. in reaction to excessive consumer surplus. D. in reaction to insufficient producer surplus. E.

C , A

Suppose a local McDonald's hamburger restaurant raises the price of its cheeseburgers from $2.00 to $2.50. What will happen to the quantity of McDonald's cheeseburgers demanded? Part 2 If McDonald's raises the price of it's cheeseburgers, then Part 3 A. none of McDonald's customers will continue to demand McDonald's cheeseburgers because they can buy comparable cheeseburgers from other fast-food restaurants. B. all of McDonald's customers will continue to demand McDonald's cheeseburgers because cheeseburgers from other fast-food restaurants are at least slightly differentiated. C. some of McDonald's customers, but not all of them, will still demand McDonald's cheeseburgers because cheeseburgers from fast-food restaurants are identical. D. some of McDonald's customers, but not all of them, will still demand McDonald's cheeseburgers because this restaurant may be closer to them. E. all of McDonald's customers will continue to demand McDonald's cheeseburgers because McDonald's faces no competition.

Suppose the United Kingdom and Norway both produce oil and fish oil, which are sold for the same prices in both countries. The following table shows combinations of both goods that each country can produce in a day, measured in thousands of barrels, using the same amounts of capital and labor: Part 2 Who has the comparative advantage in producing oil? Part 4 A. The United Kingdom has a comparative advantage producing oil because its opportunity cost of producing oil is lower. B. The United Kingdom has a comparative advantage producing oil because it can produce more oil. C. Norway has a comparative advantage producing oil because its opportunity cost of producing oil is lower. D. Neither country has a comparative advantage producing oil because their opportunity costs of producing oil are equal. E. Norway has a comparative advantage producing oil because it can produce more oil.

Suppose the market for cotton is perfectly competitive and that input prices increase as the industry expands. Characterize the industry's long-run supply curve. Part 2 The cotton industry's long-run supply curve will be Part 3 A. downward sloping because the total cost of production will be increasing. B. downward sloping because existing firms will exit as they experience losses. C. upward sloping because new firms will enter as prices rise. D. upward sloping because the long-run average cost of production will be increasing. E. horizontal and equal to the minimum point on the long-run average cost curve.

Suppose the price of a complement to LCD televisions rises. What effect will this have on the market equilibrium for LCD TVs? The equilibrium price of LCD TVs will Part 2 A. increase and the equilibrium quantity will decrease. B. not change and the equilibrium quantity will not change. C. increase and the equilibrium quantity will increase. D. decrease and the equilibrium quantity will decrease. E. decrease and the equilibrium quantity will increase.

What are the five most important variables that cause the market demand curve for labor to shift? Part 2 The demand curve for labor shifts with changes in Part 3 A. human capital, technology, the wage rate, the quantity of other inputs, and the number of firms in the market. B. human capital, technology, immigration, the quantity of other inputs, and the number of firms in the market. C. human capital, minimum wage legislation, the wage rate, the quantity of other inputs, and the number of firms in the market. D. human capital, technology, the price of the product, the quantity of other inputs, and the number of firms in the market. E. human capital, opportunities in other labor markets, the price of the product, the quantity of other inputs, and the number of firms in the market.

What is the advantage of the midpoint method? Part 7 A. The midpoint formula will give the same value as the price elasticity of demand when using the lower price and the higher quantity. B. The midpoint formula will give the same value as the price elasticity of demand when using the initial price and the initial quantity. C. The midpoint formula will give the same value as the price elasticity of demand when using the lower price and the lower quantity. D. The midpoint formula will give the same value whether moving from the higher price to the lower price or from the lower price to the higher price. Your answer is correct. E. The midpoint formula is easier to calculate.

When economists speak of a shortage, they mean a situation in which Part 2 A. the quantity demanded exceeds quantity supplied. B.some consumers are unable to make a purchase at the current price. some consumers are unable to make a purchase at the current price. C. the market price is below the equilibrium price. D. all of the above. E. A and B only.

When economists speak of a surplus, they mean a situation in which Part 2 A. the quantity supplied exceeds quantity demanded. Your answer is not correct. B. the market price is above the equilibrium price. C.firms have unsold goods piling up. nothing nothing firms have unsold goods piling up. D. all of the above. E. A and B only.

Which of the following correctly explains the effect of a variable on the labor demand curve? Part 2 A. If the wage increases, then the labor demand curve will shift to the right. B. If the quantities of other inputs increase, then we will move up the labor demand curve. C. If the number of firms in the market increases, then the labor demand curve will shift to the left. D. If the price of the product increases, then the labor demand curve will shift to the right. E. If human capital increases, then we will move down the labor demand curve.

Which of the following is a correct statement about a mixed economy? A. In a mixed economy, all economic decisions are made in markets. B. In a mixed economy, most economic decisions are made by the government but markets plays a significant role in the allocation of resources. C. In a mixed economy, the government makes all economic decisions. D. In a mixed economy, most economic decisions are made in markets but the government plays a significant role in the allocation of resources.

Why do some consumers tend to favor price controls while others tend to oppose them? Part 2 A. Price ceilings generate shortages. Consequently, consumers surplus increases, but producer surplus decreases. B. Price ceilings generate surpluses. Consequently, consumers who obtain the product at a lower price win, but consumers who obtain the product at a higher price lose. C. Price floors generate shortages. Consequently, the consumers who obtain the product at a lower price win, but other consumers will lose because they would like to purchase the product but are unable to because of a shortage. D. Price ceilings generate shortages. Consequently, the consumers who obtain the product at a lower price win, but other consumers will lose because they would like to purchase the product but are unable to because of a shortage. E. None of the above.

Which of the following is an example of a transaction costLOADING... associated with negotiating the reduction of a negative externality? Part 2 An example of a transaction cost is Part 3 A. the marginal cost of reducing a negative externality. B. the cost of a negative externality on others. C. the cost associated with not reducing a negative externality. D. the cost associated with monitoring an agreement to reduce a negative externality. E. the total cost of reducing a negative externality. How might transaction costs affect private solutions to externality problems? Part 5 Transaction costs Part 6 A. may provide additional incentive for private solutions to reduce negative externalities. B. may make private solutions to reduce negative externalities no longer feasible. Your answer is correct. C. may make private solutions to reduce negative externalities easier. D. may make private solutions to reduce negative externalities unnecessary. E. do not affect private solutions to reduce negative externalities.

D , B

What are diseconomies of scale? Part 2 Diseconomies of scale is Part 3 A. when a firm's long-run average costs decrease with output. B. when the marginal cost of production is increasing with output. C. when the marginal product of labor is increasing with output. D. when a firm's long-run average costs increase with output. What is the main reason that firms eventually encounter diseconomies of scale as they keep increasing the size of their store or factory? A. Fixed costs become too large. B. Higher output levels result in lower market prices. C. Firms have difficulty coordinating production. D. Firms exhaust the benefits of specialization. E. The marginal product of labor begins to decrease according to the law of diminishing returns.

D , C

Give an example of a government-imposed barrier to entry. Part 2 An example of a government-imposed barrier to entry is Part 3 A. a tariff on imports. B. occupational licensing. C. economies of scale. D. both a and b. E. all of the above. Part 4 Why would the government be willing to erect barriers to entering an industry? The government would be willing to impose barriers to A. encourage firms to carry out research and development of new and better products. B. protect the public from incompetent practitioners. C. protect U.S. firms from international competition. D. both a and b. E. all of the above.

D , E

Are salaries determined by the importance of the work being done? If not, what are they determined by? Part 3 Salaries are determined Part 4 A. by the marginal revenue product of the average worker hired and the supply of labor. B. by the importance of the work being done, as measured by the total value to society. C. by productivity, as measured by the marginal product of labor. D. by the supply of labor. E. by the marginal revenue product of the last worker hired and the supply of labor.

Canada has a market economy. As such, Canada's economy (relative to centrally planned economies) tends to result in A. allocative efficiency and equity but not necessarily productive efficiency. B. equity but not necessarily productive efficiency or allocative efficiency. C. allocative efficiency but not necessarily productive efficiency or equity. D. productive efficiency but not necessarily allocative efficiency or equity. E. productive efficiency and allocative efficiency but not necessarily equity.

Consider a form of public consumption such as attending sporting events. Part 2 An individual's demand for sporting events depends on Part 3 A. the cost of the sporting event. B. the individual's tastes and preferences. C. other consumers' consumption of sporting event. D. both a and b. E. all of the above.

Consumer surplus is Part 2 A. the difference between the highest price a consumer is willing to pay and the lowest price a firm would be willing to accept. B. the highest price a consumer is willing to pay to consume a good or service. C. the difference between the lowest price a firm would be willing to accept and the price it actually receives. D. the difference between the highest price a consumer is willing to pay and marginal benefit. E. the difference between the highest price a consumer is willing to pay and the price the consumer actually pays.

Economic theory suggests countries benefit from international trade by producing more of those good and services for which they have a comparative advantage (and less of that for which a country does not have a comparative advantage). However, countries rarely specialize completely. Why? Part 2 Even with international trade, countries rarely specialize completely because Part 3 A. some countries would lose as a result of free trade. B. some countries do not have an absolute advantage producing anything. C. production of most goods involves decreasing opportunity costs. D. consumers in different countries have homogeneous tastes. E. some goods and services cannot be traded internationally.

Economic theory suggests perfectly competitive markets are efficient. How should competition affect economic discrimination? Part 2 A. Competition among firms will not affect discrimination because all firms break even in the long run when no barriers to new firms entering exist. B. Competition among firms may reduce, but not completely eliminate, discrimination due to cognitive dissonance, where employers underestimate the extent to which they discriminate. C. Competition among firms should completely eliminate discrimination because nondiscriminating firms pay higher wages and discriminating firms cannot attract enough workers. D. Competition among firms may reduce but not completely eliminate discrimination because worker productivity, worker preferences, and, consequently, discrimination are difficult to measure. E. Competition among firms may reduce but not completely eliminate discrimination due to negative feedback loops,where discrimination discourages black workers from training to enter certain occupations.

How does the long-run equilibrium for a monopolistically competitive market differ from the long-run equilibrium for a perfectly competitive market? Part 2 One way in which monopolistically competitive markets and perfectly competitive markets differ is that in long-run equilibrium, monopolistically competitive firms Part 3 A. produce where marginal revenue is greater than marginal cost. B. produce at minimum marginal cost. C. do not earn zero economic profits. D. charge a price equal to marginal revenue. E. charge a price greater than marginal cost.

Is the demand for agricultural products elastic or inelastic? Why? Part 2 The demand for agricultural products is Part 3 A. elastic because the markets for such products are defined very broadly. B. elastic because such products are necessities. C. inelastic because they are perishable products. D. inelastic because such products have many close substitutes. E. inelastic because such products represent a small share in the consumer's budget.

Macroeconomics is most likely to include the study of Part 2 A. religious decisions. B. household choices. C. consumer choices. D. firm interaction. E. economic growth.

Suppose that a large oil field is discovered in Michigan. By imposing a tax on the oil, the state government is able to eliminate the state income tax on wages. What is likely to be the effect on the labor supply curve in Michigan? Part 2 A. The quantity of labor supplied in Michigan will increase. B. The supply curve for labor in Michigan will shift to the right. C. The supply curve for labor in Michigan will shift to the left. D. The quantity of labor supplied in Michigan will increase if the income effect is larger than the substitution effect. E. The quantity of labor supplied in Michigan will increase if the substitution effect is larger than the income effect.

What is price discrimination? Price discrimination is when A. firms charge a higher price for a product when it is first introduced and a lower price later. B. firms charge a higher price to customers who are less sensitive to price and a lower price to consumers who are more sensitive to price. C. firms charge each consumer a different price equal to that consumer's willingness to pay. D. both a and b. E. all of the above.

What is the difference between zero accounting profit and zero economic profit? Part 2 A. Zero economic profit and zero accounting profit for a firm are equal. B. Zero economic profit corresponds to negative accounting profit for a firm. C. Zero economic profit includes a firm's sunk costs but zero accounting profit does not. D. Zero accounting profit includes a firm's fixed costs but zero economic profit does not. E. Zero economic profit includes a firm's implicit costs but zero accounting profit does not.

What is the midpoint method for calculating price elasticity of demand? Part 2 The midpoint method for calculating price elasticity of demand is: Part 3 A. the change in quantity divided by the average of the initial and final quantities divided by price. B. the change in quantity divided by the final quantity divided by the change in price divided by the final price. C. the average of the initial and final quantities divided by the average of the initial and final prices. D. the change in quantity divided by the average of the initial and final quantities divided by the change in price divided by the final price. E. the change in quantity divided by the average of the initial and final quantities divided by the change in price divided by the average of the initial and final prices.

What is the relationship between a monopolist's demand curve and the market demand curve? Part 2 A. The market demand curve has twice the slope of a monopolist's demand curve. B. A monopolist's demand curve is greater than the market demand curve. C. The market demand curve is the sum of the demand curves for all firms in the market. D. A monopolist's demand curve is downward sloping and the market demand curve is upward sloping. E. A monopolist's demand curve is the same as the market demand curve.

What would need to be true for a demand curve to be upward sloping? Part 2 A. The good would have to be an inferior good. B. The income effect would have to be larger (in absolute value) than the substitution effect. C. The good would have to be an inferior good, and the income effect would have to be smaller (in absolute value) than the substitution effect. D. The good would have to be a normal good, and the income effect would have to be larger (in absolute value) than the substitution effect. E. The good would have to be an inferior good, and the income effect would have to be larger (in absolute value) than the substitution effect.

The guidelines used by the Department of Justice and the Federal Trade Commission when evaluating proposed mergers include three main parts. What are they? Part 2 The three main parts of the mergerLOADING... guidelines involve Part 3 A. deadweight loss, market definition, and economic profits. B. measure of concentration, producer surplus, and deadweight loss. C. government revenue, economies of scale, and network externalities. D. economic profits, merger standards, and government revenue. E. market definition, measure of concentration, and merger standards.

Consider the demand for Ramen noodles. Suppose the price of Ramen noodles decreases. Part 2 If Ramen noodles are an inferior good, this will produce a _____ substitution effect and a ______ income effect.

Positive, Negative

Indicate whether each of the following is primarily a microeconomic issue or a macroeconomi issue. a. The effect of higher cigarette taxes on the quantity of cigarettes sold. This is a _________ issue. Part 3 b. The effect of higher income taxes on the total amount of consumer spending. This is a _____________ issue. Part 4 c. The reasons for the economies of East Asian countries growing faster than the economies of sub-Saharan African countries. This is a ______________ issue. Part 5 d. The reasons for low rates of profit in the airline industry. This is a _________ issue.

a. micro b. macro c. macro d. micro

How does consumer surplus change as the equilibrium price of a good rises or falls? Part 4 As the price of a good rises, consumer surplus __________, and as the price of a good falls, consumer surplus _______.

decreases , increases

What effect will changes in labor supply have on the equilibrium wage and employment? Part 2 If the labor supply curve shifts to the right, then the equilibrium wage will fall and employment will rise.

fall rise

The figure to the right illustrates the market for seats at a concert, which will be held in a local stadium that seats 15,000 people. Part 2 What is the value of producer surplus in this market? P = 5 Q = 1500 ______________- How does it differ from the producer surplus in the markets you have studied up to this point? Unlike in most other examples, in this case, Part 4 A. the firm's total revenue is less than producer surplus. B. the firm's cost of production equals producer surplus. C. the firm's producer surplus is equal to consumer surplus. D. the firm's producer surplus is a positive amount. E. the firm's total revenue equals producer surplus.

75000 , E

Can these two countries gain from trading oil and fish oil? Part 6 A. These countries cannot gain from trade because neither has a comparative advantage producing either good. B. These countries cannot gain from trade because neither has an absolute advantage producing either good. C. These countries can gain from trade because Norway has an absolute advantage producing oil. D. These countries can gain from trade because their opportunity costs of producing each good are the same. E. These countries can gain from trade because The United Kingdom has an absolute advantage producing fish oil.

Consider the supply of copper. What would make the supply of copper more elastic? Part 2 The supply of copper would become more elastic if Part 3 A. the time horizon becomes longer. B. it becomes a larger portion of a consumer's budget. C. the definition of the market becomes narrower. D. it were more of a luxury. E. more substitutes were available.

Consider the supply of zinc. What would make the supply of zinc more elastic? Part 2 The supply of zinc would become more elastic if Part 3 A. the time horizon becomes longer. B. the definition of the market becomes narrower. C. more substitutes were available. Your answer is not correct. D. it were more of a luxury. E. it becomes a larger portion of a consumer's budget.

In England during the Middle Ages, each village had an area of pasture, known as a commons, on which any family in the village was allowed to graze its cows or sheep without charge. Was the common land used optimally? Part 2 A. Grazing created a negative externality, resulting in the commons being overused. B. The commons was underused because the commons was a rival good. C. Grazing created no externality, resulting in the commons being used optimally. D. The commons was underused due to free riding. E. The commons was overused because the commons was an excludable good

In the diagram to the right, point G indicates an Point F is left of the demand curve Point C is on the demand curve Point G is right of the demand curve A. unattainable result. B. efficient result. C. inefficient result.

In the circular-flow diagram showing how a market system works, A. income flows to firms through product markets. B. firms and households are both demanders in product markets. C. households purchase output produced by firms in product and factor markets. D. income flows to firms and the government through factor markets. E. households are demanders and firms are suppliers in factor markets.

Suppose Sony makes PlayStation 3 using labor. In what way is labor a derived demand? Part 2 Labor for Sony to make PlayStation 3 is a derived demand because Part 3 A. it depends on consumer demand for PlayStation 3. Your answer is correct. B. it does not depend on the revenue Sony would receive from selling additional PlayStation 3s. C. it depends on the cost of labor, but not on the price of the PlayStation 3. D. it is relatively inelastic. E. it depends on the opportunity cost of labor.

The U.S. economy enters a period of rapid growth in incomes. This will cause A. demand for McDonald's Big Mac hamburgers to shift to the left if they are inferior goods. B. demand for McDonald's Big Mac hamburgers to shift to the right if they are inferior goods. C. a movement along the demand curve for McDonald's Big Mac hamburgers if they are normal goods.

Under what circumstances can a firm successfully practice price discrimination? Part 5 To successfully practice price discrimination, Part 6 A. some consumers must have greater willingness to pay for the product than others and a firm must know consumer willingness to pay for the product. B. arbitrage must be possible. C. a firm must be a price taker. D. both a and b. E. all of the above.

What is negative technological change? Part 2 Negative technological change is when Part 3 A. a firm produces less output with the same inputs. B. a firm is able to produce the same output with fewer inputs. C. a firm turns inputs into outputs of goods and services. D. the price of labor decreases. E. the price of capital increases.

Why are major league baseball players on average paid substantially more than college professors? Explain. Part 2 Major league baseball players are paid more than college professors because Part 3 A. the marginal revenue product of major league baseball players is high relative to college professors. B. the total value of baseball games is greater than the total value of education. C. the marginal product of major league baseball players is low relative to college professors. D. the supply of major league baseball players is more inelastic than the supply of college professors. E. the supply of major league baseball players is abundant relative to the supply of college professors.

State whether each of the following events will result in a movement along the demand curve for McDonald's Big Mac hamburgers or whether it will cause the curve to shift. The price of Burger King's Whopper hamburger declines. This will cause A. demand for McDonald's Big Mac hamburgers to decrease. B. demand for McDonald's Big Mac hamburgers to increase. C. a movement along the demand curve for McDonald's Big Mac hamburgers. McDonald's distributes $1.00 off coupons. This will cause A. demand for McDonald's Big Mac hamburgers to shift to the left. B. demand for McDonald's Big Mac hamburgers to shift to the right. C. a movement along the demand curve for McDonald's Big Mac hamburgers. The price of fries decreases due to a potato surplus. This will A. increase the demand for McDonald's Big Mac hamburgers. B. decrease the demand for McDonald's Big Mac hamburgers. C. cause a movement along the demand curve for McDonald's Big Mac hamburgers. The U.S. economy enters a period of decline in incomes. This will cause A. demand for McDonald's Big Mac hamburgers to shift to the left if they are inferior goods. B. demand for McDonald's Big Mac hamburgers to shift to the right if they are inferior goods. C. a movement along the demand curve for McDonald's Big Mac hamburgers if they are normal goods.

A , C, A, B,

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