Econ Midterm 1

Which of the statements below is/are normative? A) Economists need to include more reality in their models. B) Economists will use a model until it is refuted by someone. C) Microeconomists study economic growth. D) B and C

A) Economists need to include more reality in their models.

Economic models are only applicable to free-market countries. A) False. Economic models are applicable wherever there is scarcity. B) True. Economic models are applicable only when private citizens are free to make their own decisions. C) False. Economic models are applicable in all countries with more than one million people, regardless of political structure. D) True. Economic models are only applicable when government is small relative to the rest of the economy.

A) False. Economic models are applicable wherever there is scarcity.

Which of the following is an example of a normative statement? A) Since this good is bad for you, you should not consume it. B) This good has bad health effects. C) If you consume this good, you will get sick. D) People usually get sick after consuming this good.

A) Since this good is bad for you, you should not consume it.

Most microeconomic models assume that decision makers wish to A) make themselves as well off as possible. B) act selfishly. C) make others as well off as possible. D) None of the above.

A) make themselves as well off as possible.

Economic policy of the government is often based on A) microeconomic models. B) educated guessing. C) intuitive reasoning. D) hints.

A) microeconomic models.

Economic models are most useful in A) predicting changes in one variable due to a change in one or more other variables. B) predicting the direction of the stock market. C) explaining the future with the past. D) generating untestable hypotheses.

A) predicting changes in one variable due to a change in one or more other variables.

Microeconomics is often called A) price theory. B) decision science. C) scarcity. D) resource theory.

A) price theory.

The testing of economic models facilitates A) proving a model is false. B) proving a model is true. C) proving that one person's opinion is morally incorrect. D) proving that one society's legal structure is better than another country's.

A) proving a model is false.

Which choice below illustrates the tradeoff faced by surfboard manufacturers after Clark foam shut down in 2005, eliminating 80% of the world's foam blanks used to shape surfboards? The firms decide to A) substitute foam blanks for balsa wood blanks as used in the 1940s. B) advertise their new surfboard wax. C) offer surf classes. D) B and C

A) substitute foam blanks for balsa wood blanks as used in the 1940s.

Consider the demand for avocados. Does an increase in average income cause a shift of the demand curve for avocados or a movement along the demand​ curve? Explain briefly. An increase in average income causes A. a shift of the avocado demand curve because only a change in the price of avocados causes a movement along the avocado demand curve. B. a shift of the avocado demand curve because consumers will not spend any of the new income. C. a movement along the demand curve for avocados but a shift in the supply curve for avocados. D. a shift of the avocado demand curve because all factors including the price of avocados cause quantity to change for a given price.

A. a shift of the avocado demand curve because only a change in the price of avocados causes a movement along the avocado demand curve.

Some​ companies, such as​ Heinz, can forecast revenues well using pure time series analysis​ (that is, by extrapolation of prior​ data, accounting for seasonal​ effects). Other​ companies, such as FedEx​ (which makes money by shipping​ packages), or Sony​ (which sells consumer​ electronics) find that they cannot rely on pure time series analysis for reliable forecasting. They are strongly affected by recessions and need to use​ theory-based methods, including such explanatory variables as income in their forecasting models. Why are they different from​ Heinz? We need​ theory-based methods to forecast revenues for companies such as FedEx and Sony because A. demand for their products is affected by variables other than results from prior time periods. B. their revenue is not affected by underlying causal factors. C. structural factors affecting their demand change smoothly over time. D. their revenue does not change substantially over time. demand for their products follows a trend line.

A. demand for their products is affected by variables other than results from prior time periods.

Why would high transaction costs or imperfect information tend to prevent​ price-taking behavior? High transaction costs and imperfect information would prevent​ price-taking behavior because they A. discourage customers from buying from rival firms. B. make the demand curves firms face more horizontal. C. prevent firms from setting prices without losing customers. D. enables firms to enter the market without being detected. allows products to seem more homogeneous.

A. discourage customers from buying from rival firms.

The primary participants in a market are A. firms who supply the product and consumers who buy​ it, but government policies such as taxes also play an important role in the operation of markets. B. firms and their​ rivals, with government playing a minimal role. C. customers who buy products and CEOs who make all of the decisions for a​ firm, with government having no influence on the market. D. None of the above.

A. firms who supply the product and consumers who buy​ it, but government policies such as taxes also play an important role in the operation of markets.

If a specific subsidy​ (negative tax) of s is given to only one competitive​ firm, how should that firm change its output level to maximize its profit and how does its maximum profit​ change? Let the market price be​ p, the marginal cost of production​ (prior to the​ subsidy) for the firm be​ MC, and the subsidy be s. To maximize profit with the subsidy, the firm should A. increase its production until p = MC - s. B. increase its production until p = MC + s. C. decrease its production until p = s. D. not change its level of production. E. decrease its production until p = MC.

A. increase its production until p = MC - s.

At the time of its initial public offering​ (initial sale of​ stock), Groupon, an Internet company that provides discount​ coupons, used unusual measures of its business performance. One such measure used by Groupon was ACSOI ​(pronounced "ack-soy"​ or, alternatively,​ "ack-swa") for​ "adjusted consolidated segment operating​ income." ACSOI is operating profit before subtracting the​ year's online marketing and acquisition expenses. The​ firm's profit was​ negative, but its ACSOI was positive. Groupon argued that ACSOI marketing and acquisition expenses were an investment that would build future business and whose cost should therefore be amortized​ (spread out over​ time). If shareholders care only about the profit of the company in the current​ period, then ACSOI A. is not an appropriate measure because marketing and acquisition expenses reduce profit for the current period. B. is an appropriate measure because marketing and acquition expenses are fixed costs. C. is not an appropriate measure because marketing and acquisition expenses are unavoidable costs. D. is an appropriate measure because marketing and acquition expenses have no opportunity cost. E. is not an appropriate measure because marketing and acquisition expenses are sunk costs.

A. is not an appropriate measure because marketing and acquisition expenses reduce profit for the current period.

In​ 2012, voters in the state of Washington approved a ballot measure legalizing the recreational use of marijuana. The measure required that consumers pay a​ 37% tax on sales of recreational marijuana. For what slopes of the supply or demand curves will this tax substantially reduce the equilibrium quantity of​ marijuana? The amount by which the equilibrium quantity of marijuana will decrease with the tax will be greater in absolute value when the demand curve is A. less elastic. B. flatter. C. perfectly inelastic. D. vertical. The amount by which the equilibrium quantity of marijuana will decrease with the tax will be greater in absolute value when the supply curve is A. steeper. B. upward sloping. C. more elastic. D. unitary elastic.

A. less elastic. C. more elastic.

Consider the production function Q = f(L,K) Where L is labor and K is capital. Suppose that the production function shows that if L = 3 and K = 5 then q +10. Is it possible that L =3 and K = 6 yields q = 11 for this production function? If L =3 and K = 6 then q = 11 is A. possible because the amount of capital used increases. B. not possible because the amount of capital used decreases. C. not possible because the amount of labor used does not increase. D. possible because the amount of labor used increases.

A. possible because the amount of capital used increases.

Economic models are only useful in analyzing government policy. A) True, individuals are irrational and therefore economic models are useless. B) False, economic models can be used to predict individual and firm behavior. C) True, economists only model those questions for which they are hired. D) False, economic models are not even useful in analyzing government policy.

B) False, economic models can be used to predict individual and firm behavior.

The objective of creating a permit trading system for SO2 (sulfur dioxide) is to A) employ environmental protection agency (EPA) workers. B) create a market in which one did not previously exist. C) make annual company tax reporting more difficult. D) increase the incidence of acid rain.

B) create a market in which one did not previously exist.

Which of the following is a fundamental topic addressed by microeconomics? A) whether to extend unemployment insurance B) determining how many new iPhones the Apple company should produce C) the level of inflation in the country D) the impact of interest rates on savings in the economy

B) determining how many new iPhones the Apple company should produce

Economic modeling requires A) mathematics. B) logic. C) calculus. D) trigonometry.

B) logic.

What links the decisions of consumers and firms in a market? A) the government B) prices C) coordination officials D) microeconomics

B) prices

Microeconomics studies the allocation of A) decision makers. B) scarce resources. C) models. D) unlimited resources.

B) scarce resources.

Economists will use a model such as the law of demand A) forever, ignoring all criticism. B) until it is refuted by someone. C) until the model produces the same results with added complexity. D) until every microeconomic courses uses the model.

B) until it is refuted by someone.

According to​ Bustle.com, San Francisco has the most coffee shops of any American city​ (as of April​ 2016) with​ 2,613, with new shops opening regularly as the population grows. Suppose the city decides to stop issuing new business licenses for coffee shops so that the industry is capped at its current number of establishments. Which characteristics of this market are consistent with perfect competition and which are​ not? Is the coffee shop market likely to be nearly perfectly​ competitive? Why or why​ not? Which of the following characteristics are consistent with perfect​ competition? (Choose all that apply) A. An active city government B. A market with​ 2,613 coffee shops. C. A growing population. D. New coffee shops regularly entering. E. A limited number of business licenses. This market is A. likely to be nearly competitive with a​ downward-sloping demand curve. B. likely to be nearly competitive with differentiated coffee C. unlikely to be nearly competitive with many consumers. D. unlikely to be nearly competitive with the licensing barrier to entry. E. likely to be nearly competitive with no known transaction costs.

B. A market with​ 2,613 coffee shops. D. New coffee shops regularly entering. D. unlikely to be nearly competitive with the licensing barrier to entry.

Which of the following is​ true? A. A normative economic statement is a testable hypothesis about cause and effect. B. A normative statement concerns what somebody believes should ​happen; a positive statement concerns what will happen. C. A positive statement concerns what somebody believes should ​happen; a normative statement concerns what will happen.

B. A normative statement concerns what somebody believes should ​happen; a positive statement concerns what will happen.

Which of the following statements is​ true? A. A marketing manager must allocate an advertising budget to promote the product least effectively. B. Human resource managers design compensation systems to encourage employees to work hard. C. A production​ manager's objective is normally to achieve a production target at the highest possible cost. D. Managers are not constrained by resource scarcity.

B. Human resource managers design compensation systems to encourage employees to work hard.

Most private sector firms want to maximize A. Cost. B. Profit. C. Revenue. D. All of the above.

B. Profit.

Consider the supply of avocados. Explain why a change in the price of fertilizer causes a shift in the supply curve for avocados rather than a movement along the supply curve for avocados. A change in the price of fertilizer causes a shift in the supply curve for avocados because A. the price of fertilizer also shifts avocado demand. B. a change in the cost of inputs changes how much a producer will supply at any given price. C. factors representing the cost of production do not affect avocado prices. D. the price of fertilizer changes for a given supply of avocados. the price of avocados is held constant along a supply curve.

B. a change in the cost of inputs changes how much a producer will supply at any given price.

What section of a​ straight-line demand curve is​ elastic? The elasticity of demand is elastic A. at no points. B. at all points above the​ curve's midpoint. C. at the midpoint. D. at some random points. E. at all points below the​ curve's midpoint.

B. at all points above the​ curve's midpoint.

When interacting with a small number of rival​ firms, a manager uses a A. plan to maximize cost. B. macroeconomic model. C. Strategy. D. All of the above.

C. Strategy.

Does an equilibrium occur at a positive price and​ quantity? Explain your answer. An equilibrium A. occurs at a positive quantity because price cannot be negative. occurs at a positive quantity because supply plus demand is greater than zero. B. does not occur at a positive quantity because supply does not equal demand at any price. C. does not occur at a positive quantity because consumers are more sensitive to price than producers. D. occurs at a positive quantity because supply and demand are positive.

B. does not occur at a positive quantity because supply does not equal demand at any price.

What are the main types of​ capital, labor, and equipment used to produce​ licorice? According to the managerial​ solution, licorice production requires​ (select all that​ apply): A. paper. B. giant vats. C. barrels. D. coolers. E. steel.

B. giant vats. C. barrels. D. coolers.

​Initially, the market price is p = 16​, and the competitive​ firm's average variable cost is ​20, while its average cost is 23. Should it shut down? Why? This firm should A. not shut down because average cost is greater than average variable cost. B. shut down because average fixed cost is less than the market price. C. shut down because average variable cost is greater than the market price. D. not shut down because average fixed cost is less than the market price. E. shut down because average cost is greater than the market price. Now this​ firm's average variable cost increases by 2 at every​ quantity, while other firms in the market are unaffected. What happens to its average cost? The​ firm's average variable cost is now 24 and its average total cost is 28 Should this firm shut down? Why This firm should A. shut down because average variable cost is greater than the market price B. not shut down because average fixed cost is less than the market price. C. shut down because average fixed cost is less than the market price. D. shut down because average cost is greater than the market price. E. not shut down because average cost is greater than average variable cost.

B. shut down because average fixed cost is less than the market price. A. shut down because average variable cost is greater than the market price

Suppose that a restaurant uses a focus group of regular customers to determine how many customers would buy a proposed new menu item at various prices. Can this information be used to estimate an inverse demand​ curve? A demand​ curve? Explain briefly. Asking how many customers would buy a proposed new menu item at various prices can be used to estimate A. the inverse demand​ curve, and the demand curve can be calculated from it. B. the demand​ curve, and the inverse demand curve can be calculated from it. C. only the inverse demand curve. D. only the demand curve. E. neither the demand curve nor the inverse demand curve. Would it be possible to use a focus group to generate data that could be used to estimate a demand function including both price and income as explanatory​ variables? A demand function with price and income as explanatory variables A. can be generated from the focus group by capturing buying pattern data at different prices and levels of income. B. cannot be generated from the focus group because there would be multiple explanatory variables. C. cannot be generated from the focus group because there would be multiple dependent variables. D. cannot be generated from the focus group because each member has only one level of income. E. can be generated from the focus group by estimating two​ regressions: one for price and one for income.

B. the demand​ curve, and the inverse demand curve can be calculated from it. A. can be generated from the focus group by capturing buying pattern data at different prices and levels of income.

Economists make many assumptions to simplify their models​ because: A. no one would understand complex models. B. the real world is too complex to analyze fully. C. they are lazy. D. None of the above.

B. the real world is too complex to analyze fully.

The price of a good is A) always equal to the cost of producing the good. B) never affected by the number of buyers and sellers. C) usually determined in a market. D) None of the above.

C) usually determined in a market.

Consider Boeing​ (a producer of jet​ aircraft), General Mills​ (a producer of breakfast​ cereals), and Wacky​ Jack's (which claims to be the largest U.S. provider of singing​ telegrams). For which of these firms is the short run the longest period of​ time? For which is the long run the​ shortest? Explain. The short run is longest for A. Wacky Jack's bc it is the largest provider of singing telegrams and the long run is shortest for General Mills bc it is a relatively small cereal producer B. General Mills because cereal production is labor-intensive and the long run is shortest for Wacky Jack's bc providing singing telegrams in capital-intensive C. General Mills bc cereal production is relatively expensive and the long run is shortest for Wacky Jack's bc providing singing telegrams requires primarily labor D. Boeing because aircraft production is most profitable and the long run is shortest for Wacky Jack's bc providing singing telegrams is least profitable

C. General Mills bc cereal production is relatively expensive and the long run is shortest for Wacky Jack's bc providing singing telegrams requires primarily labor

Many countries produce cotton. Production costs differ among countries because of differences in the quality of​ land, rainfall, costs of​ irrigation, costs of​ labor, and other factors. The length of each segment of the​ long-run supply curve of cotton in the graph is the quantity produced by the labeled country. The amount that​ low-cost countries can produce is​ limited, so we observe production by the​ higher-cost countries if the market price is sufficiently high. Suppose market demand is represented by D1. Assuming that the world demand curve must cross the supply curve in the flat section labeled Brazil A. a shift in supply creates a surplus. B. a shift in demand does not affect the market quantity or the market price. C. a shift in demand does not affect the market price. D. a shift in demand does not affect the market quantity. E. a shift in supply creates a shortage. Now suppose market demand is represented by D2 Assuming that the world demand curve must cross the supply curve in the vertical section following the flat section labeled Brazil A. a shift in demand does not affect the market quantity. B. a shift in supply creates a shortage. C. a shift in demand does not affect the market price. D. a shift in demand does not affect the market quantity or the market price. E. a shift in supply creates a surplus.

C. a shift in demand does not affect the market price. A. a shift in demand does not affect the market quantity.

Which market structure best describes​ (a) airplane​ manufacturing, (b) electricians in a small​ town, (c) farms that grow​ tomatoes, and​ (d) cable television in a​ city? ​ Why? Airline manufacturing is A. monopolistically competitive because airplanes are a homogeneous product. B. perfectly competitive because airline manufacturers are price takers. C. an oligopoly because there are only a few airline manufacturers D. a monopoly because airplanes have no close substitutes. E. Perfectly competitive because there are no entry barriers to airline manufacturing

C. an oligopoly because there are only a few airline manufacturers

What types of firm organizations allow owners of a firm to obtain the advantages of limited​ liability? A. sole proprietorships. B. non-profit firms. C. corporations. D. partnerships. E. state-owned enterprises.

C. corporations.

Suppose that the demand curve for wheat in each country is perfectly inelastic up to some​ "choke" price ​p*a price so high that nothing is bought so that the demand curve is vertical at​ Q* at prices below​ p* and horizontal at​ p*. If​ p* and​ Q* vary across​ countries, what does the​ world's demand curve look​ like? Discuss how the elasticity of demand varies with the price along the​ world's demand curve. Assuming many​ countries, the​ world's demand curve for wheat can best be described as A. upward sloping. B. vertical. C. downward sloping. D. horizontal. E. Undefined. Elasticity along the​ world's demand curve for wheat A. will always be inelastic B. will be constant. C. will increase with price. D. will always be perfectly inelastic E. will decrease with price.

C. downward sloping. C. will increase with price.

Usury laws place a ceiling on interest rates that lenders such as banks can charge borrowers. Why would we expect​ low-income households in states with usury laws to have significantly lower levels of consumer credit​ (loans) than comparable households in states without usury​ laws? ​(Hint​: The interest rate is the price of a​ loan, and the amount of the loan is the quantity​ measure.) Low-income households in states with usury laws have lower levels of loans because A. the usury laws have no effect on loan rates. B. banks are not willing to make any loans with the rate ceiling. C. loan demand likely exceeds loan supply at the rate ceiling. D. banks are more profitable with the rate ceiling. E. the rate ceiling shifts the loan demand curve to the right.

C. loan demand likely exceeds loan supply at the rate ceiling.

During the spring and summer of 2008 when gasoline prices were rising​ quickly, politicians in several countries proposed a moratorium on some or all gasoline taxes to help consumers. In the United​ States, John​ McCain, the Republican candidate for​ President, proposed suspending the federal gasoline tax of 18.4 for the summer when demand tends to be higher. Hillary​ Clinton, while an active candidate for the Democratic nomination for the​ President, also pushed this plan. In the United​ Kingdom, Prime Minister John Major proposed delaying a 2p rise in a fuel tax until the fall. How would these​ short-run policies have affected the prices consumers pay in these countries if the policies had been​ enacted? Temporarily suspending or delaying fuel taxes that consumers pay would A. not lower fuel prices because fuel supply is only horizontal in the long run. B. not lower fuel prices because fuel supply is horizontal in the short run. C. shift the demand curve up by an amount equal to the size of the suspended tax. D. shift the demand curve down by an amount equal to the size of the suspended tax.

C. shift the demand curve up by an amount equal to the size of the suspended tax.

Heinz makes most of its money from ketchup and​ prepared, packaged foods that are substitutes for fresh foods. Revenue tends to be low in the second quarter​ (May, June, and​ July). Can you provide a possible reason for this​ pattern? ​(Hint​: Fresh fruits and vegetables are substitutes for many Heinz prepared​ foods, and ketchup is commonly used on food prepared at outdoor​ cookouts.) Revenue for Heinz tends to be low in the second quarter because A. less fresh food is supplied. B. more packaged foods are demanded. C. substitute fresh foods are cheaper. D. outdoor cookouts are more prevalent. E. the production of ketchup is more costly.

C. substitute fresh foods are cheaper.

Economic theory​ is: A. a prediction about cause and effect. B. the specification of a set of assumptions. C. the development and use of a model to test hypotheses. D. None of the above.

C. the development and use of a model to test hypotheses.

The 2017 report of the United Nations Food and Agriculture Organization​ (FAO) notes that the share of​ world's population that is undernourished rose between 2014 and​ 2016, following a long period of decline. This increase occurred even though agricultural output per acre rose between 2014 and 2016. What factors might cause undernourishment to rise even though agricultural land productivity​ rose? Undernourishment could increase even if agricultural output per acre​ (yield) rises if A. the total amount of land used for food production increased. B. the food produced is distributed more equally. C. wars and violent conflicts disrupt food distribution systems. D. the​ world's population decreased.

C. wars and violent conflicts disrupt food distribution systems.

Explain why the firm will or will not experience diminishing marginal returns to labor in the​ short-run if its production function is q​=min{3L,2K}. Note that dq/dL = 3L < 2K and dq/dL = 0 if 3L > 2K In the short-run the firm A. will experience diminishing marginal returns to labor if 3L<2K. B. will experience diminishing marginal returns to labor if 3L>2K. C. will experience diminishing marginal returns to labor when 3L first becomes greater than 2K. D. will not experience diminishing marginal returns to labor if 3L=2K. E. both a and b.

C. will experience diminishing marginal returns to labor when 3L first becomes greater than 2K.

One million automobiles have a defect that could cause the car to explode; however, only one of those cars will actually explode. Nobody knows which one car it is. When the car does explode, the victim's family will sue the automaker for $1 million and win. The defect costs $2 per car to repair. What does economics predict about the automaker's decision to repair the defect?

Correcting the defect will cost $2 million. Not correcting the defect will only cost $1 million. Economics predicts that the automaker will not correct the defect.

In the Soviet Union, which boasted about giving every worker a job, some workers were given the task of digging holes and filling them again. What function of microeconomic analysis did this policy address? A) What goods/services to produce B) How to produce the goods and services C) Who gets the goods and services D) A and B

D) A and B

Which of the following is an example of a positive statement? A) Prices determine what goods and services are produced in a market economy. B) The government of the Soviet Union determined the three fundamental questions of microeconomics (i.e., what is produced, how it is produced, who receives the product). C) The production of goods and services should be determined by market prices. D) A and B

D) A and B

Economists make simplifying assumptions to A) understand extremely complex phenomenon. B) build a model that is as close to the real world as possible. C) focus on the variables that are important to an economic theory. D) A and C

D) A and C

A "twinkie tax" on fatty foods would aim to A) reduce the consumption of fatty foods. B) reduce the production of fatty foods. C) raise tax revenues for other uses. D) All of the above.

D) All of the above.

Governments use microeconomic models to A) predict the impact of a policy before adopting it. B) consider the tradeoff between clean air and a high level of GDP. C) determine the tradeoff between equity and efficiency. D) All of the above.

D) All of the above.

Individuals use microeconomic models to determine A) their optimal consumption of beer given an increase in inflation. B) their optimal amount of leisure. C) whether or not to go to college given current student loan interest rates. D) All of the above.

D) All of the above.

Microeconomic models are used to A) make predictions. B) explain real-life phenomena. C) evaluate policy alternatives. D) All of the above.

D) All of the above.

Which of the following is not considered an ingredient to an economic model? A) Assumptions B) Logic C) Hypotheses D) Experience

D) Experience

Firms do NOT use microeconomic models to A) determine what inputs will be used for production. B) determine whether they should advertise in the newspaper or on the radio. C) strategically raise profits over competitors. D) None of the above.

D) None of the above.

Every economic model should include money as a variable. This statement is A) true, because every transaction in the economy uses money. B) true, because the federal reserve is very important. C) false, because some transactions in the economy are accomplished without money. D) false, because a model can get unnecessarily complex if it includes money.

D) false, because a model can get unnecessarily complex if it includes money.

Who or what is responsible for bringing together scarce resources to produce most of the goods and services in the U.S.? A) the U.S. government B) the United Nations C) the Federal Reserve Bank D) markets and prices

D) markets and prices

Set up by a former University of North Carolina​ (UNC) student, Morris​ Gelblum, the firm Sweeps uses​ UNC, Duke, North Carolina​ State, and other college students to perform a variety of​ short-term jobs, such as​ cleaning, yard​ work, painting, tech​ help, tutoring, and moving. A customer describes the work desired on the​ firm's website, and the firm provides workers. For one​ job, they provide​ "21 guys dressed up like​ Frankenstein." The​ firm's motto is​ "College Students,​ On-Demand." What​ input(s) does the firm use in the long​ run? In the long run, the firm's inputs likely include A. Labor B. Tools and supplies C. Managerial expertise D. All of the above

D. All of the above

It is appropriate to use the supply and demand model​ if, in a​ market, costs of trading are low. A. firms sell identical products. B. everyone is a price taker with full information about the price and C. quality of the good. D. All of the above.

D. All of the above.

Suppose that the production function is Q = L^0.75 * K^0.25 What is the average product of labor APL, holding capital fixed at Ǩ? A. APL = L^(-0.25Ǩ^0.25) B. APL = q / L C. APL = 0.75L^(-0.25Ǩ^0.25) D. Both a and b E. All of the above

D. Both a and b

Suppose that q = 40​, L = 3​, and K = 20 is a point on the production function Q = f(L, K) Is it possible for q = 50​, L = 5​, and K = 16 to also be a point on this production function? The combination q = 50​, L = 5​, and K = 16 A. cannot be a point because we assume production functions are comprised of fixed inputs. B. can be a point because we assume production functions exhibit diminishing returns. C. cannot be a point because we assume production functions represent the short run. D. cannot be a point because we assume production functions are efficient. E. can be a point because we assume production functions hold technology constant.

D. cannot be a point because we assume production functions are efficient.

The market for electrical work in a small town is monopolistically competitive because electrical work is a homogeneous product. A. monopolistically competitive because electrical workers have market power. B. an oligopoly because there are only a few electricians in a small city. C. a monopoly because there are several electrical suppliers. D. perfectly competitive because electrical workers can easily enter and exit the market.

D. perfectly competitive because electrical workers can easily enter and exit the market.

The market for tomatoes is A. an oligopoly because each tomato farmer produces a large share of the output. B. monopolistically competitive because tomato farming has barriers to entry. C. An oligopoly because tomato farmers have market power. D. perfectly competitive because tomato farmers produce identical products E. a monopoly because tomatoes have no close substitutes.

D. perfectly competitive because tomato farmers produce identical products

You work for a firm producing fitness equipment. You have been told that the demand curve for the​ firm's main​ product, a​ multi-station home​ gym, is linear. You have been provided with price and quantity data obtained from focus groups and have been asked to run a regression of revenue on price. A. A linear functional form can properly be used to​ estimate: B. revenue with quantity as the explanatory variable because revenue is not linear in price. C. revenue with price and quantity included as explanatory variables. D. quantity with price as the explanatory variable because the demand curve is linear. E. profit with price as the explanatory variable because revenue is not statistically significant. F. price with revenue as the explanatory variable because revenue determines price.

D. quantity with price as the explanatory variable because the demand curve is linear.

For which of the following industries is the​ supply-and-demand model likely to be most​ accurate? The​ supply-and-demand model will most closely mirror reality for government services. A. airplane production. B. public utilities. C. high end smart phones. D. retail trade.

D. retail trade.

Compared to a​ $2.40 tax on​ sellers, the​ $2.40 tax on buyers results in an equilibrium quantity that is A. greater because the demand curve shifts down. B. the same because the demand curve also shifts upward. C. less because the supply curve is unaffected. D. the same because the demand curve shifts by the same amount.

D. the same because the demand curve shifts by the same amount.

A producer of ballpoint pens has been purchasing ink from an ink supplier and is considering acquiring the ink supplier. Would the pen company be more or less likely to vertically integrate by buying the ink manufacturer if the government imposes an ink sales​ tax? If the government taxes ink​ sales, then the ballpoint pen company A. will be less likely to vertically integrate to avoid paying taxes. B. will be less likely to vertically integrate to limit liability. C. will be more likely to vertically integrate to increase corporate governance. D. will be more likely to vertically integrate to avoid paying ink sales taxes. E. will be more likely to vertically integrate to increase revenue.

D. will be more likely to vertically integrate to avoid paying ink sales taxes.

Explain why the firm will or will not experience diminishing marginal returns to labor in the​ short-run if its production function is q = L^½ * K^½ Note that dq/dL = .5L^-1/2K^-½ In the short-run, the firm A. will experience diminishing marginal returns to labor because​ labor's marginal product equals 0.5L^-1/2 B. will not experience diminishing marginal returns to labor because​ labor's marginal product is constant. C. will not experience diminishing marginal returns to labor because​ labor's marginal product equals 1. D. will experience diminishing marginal returns to labor because​ labor's marginal product equals 0.5L^-1/2K^-½ E. both a and b.

D. will experience diminishing marginal returns to labor because​ labor's marginal product equals 0.5L^-1/2K^-½

What is the marginal product of labor MPL? A. MPL = 0.75 (q/L) B. MPL =0.75L^(-0.25Ǩ^0.25) C. MPL = L^(0.75Ǩ^0.25) D. MPL = L ^(-0.25Ǩ^0.25) E. Both a and b

E. Both a and b

Based on the information in​ "Malthus and the Green​ Revolution," how did the average product of labor for corn change over​ time? Over time, the average product of labor for corn has A. Decreased due to starvation B. Increased due to a population decrease C. Increased due to fewer fertilizers and tractors D. Decreased due to a fixed amount of land E. Increased due to technological advances

E. Increased due to technological advances

The market for cable television in a city is A. a monopoly because there is only one cable supplier. B. perfectly competitive because cable companies are price takers. C. an oligopoly because cable television has no close substitutes. D. monopolistically competitive because cable companies sell a differentiated product. E. a monopoly because entry into the cable market is easy.

E. a monopoly because entry into the cable market is easy.

What types of firms would not normally maximize​ profit? A. a sole proprietorship. B. a partnership. C. a firm owned by shareholders. D. a corporation. E. an organization pursuing social justice.

E. an organization pursuing social justice.

What section of a straight-line demand curve is inelastic? The elasticity of demand is inelastic A. at no points. B. at all points above the​ curve's midpoint. C. at the midpoint. D. at some random points. E. at all points below the​ curve's midpoint.

E. at all points below the​ curve's midpoint.

In the​ short-run, a firm cannot vary its​ capital, K​=4, but can vary its​ labor, L. It produces output q. Explain why the firm will or will not experience diminishing marginal returns to labor in the​ short-run if its production function is Q = 10L + K Note that dq/dL = 10 In the short-run, the firm A. will not experience diminishing marginal returns to labor because​ labor's marginal product is constant. B. will not experience diminishing marginal returns to labor because​ labor's marginal product equals 10. C. will experience diminishing marginal returns to labor because​ labor's marginal product equals 10. D. will experience diminishing marginal returns to labor because​ labor's marginal product equals 10L. E. both a and b.

E. both a and b.

Why must isoquants be​ thin? Isoquants must be thin because we assume production A. is comprised of fixed inputs. B. is in the short run. C. exhibits diminishing returns. D. occurs with technology. E. is efficient.

E. is efficient.

Price controls on gasoline would have A. benefited all consumers because gas prices would have been lower. B. benefited all consumers because there would have been no surpluses. C. resulted in a market equilibrium because gas would have been affordable. D. resulted in a shortage because refiners would have shut down their plants in protest. E. resulted in a shortage because demand would have exceeded supply.

E. resulted in a shortage because demand would have exceeded supply.

Most modern financial centers use computers to match buyers and sellers. This absence of personal contact contradicts the definition of a market. True / False

False. Buyers and sellers need not meet during a market transaction since a market is not tied to a particular location.

Under most circumstances, the application of taxes on goods will only affect who gets the goods. True/ False

False. Buyers and sellers need not meet during a market transaction since a market is not tied to a particular location.

If actual experience supports two competing theories, then both theories are proven to be true. True / False

False. Neither theory can be rejected but if they are competing, then the test is inconclusive.

Normative analysis offers decision makers the most valuable information when choosing among alternatives. True / False

False. Normative analysis states subjective goals but not how those goals can be achieved. To choose among alternatives decision maker uses positive analysis.

Normative statements are easily debated whereas positive statements are simply rhetorical. True / False

False. Positive statements are not merely rhetorical. Rather, positive statements are testable statements. On the other hand, normative statements are not testable and therefore are often the most debated topics in society.

Governments do not respond to prices. True / False

False. When products or services that governments purchase become more expensive, governments tend to purchase less of the products. For example, when the price of gasoline increased dramatically in the spring of 2006, the state of Georgia restricted the use of school buses.

If a model fits reality but doesn't generate testable predictions, it is of little value to economists. True / False

True. If the model doesn't deliver testable predictions it cannot be tested against competing models.

Microeconomics can be used by governments to predict the impacts of a policy and suggest solutions to problems. True / False

True. Microeconomics models can be used to examine the effects of a policy, and can provide insight into possible solutions to economic problems.