EC201 chapters 10,11,12,13, EC 201 Quiz 1, EC 201 Quiz 2, EC 201 Quiz 3, EC 201 Quiz 6, EC201 Chapters 6,7,8, and 9
Which of the following best states the relationship between machinery and the earnings of labor?
High productivity per worker hour is a necessary ingredient for the attainment of high real earnings, and adoption of labor-saving machinery enhances the ability of labor to attain such high productivity.
What is the most probable reason why garbage collectors have higher wages than bookkeepers?
The nonmonetary attractiveness of garbage collection causes fewer people to want to be garbage collectors
Which of the following is not a characteristic of a competitive price-searcher market? Select one: a. The entry barriers are high. b. Each firm produces a differentiated product. c. The number of firms in the market is large. d. Each firm faces a downward-sloping demand curve.
a. The entry barriers are high.
Compared to the outcome when the firms are price takers, competitive price-searcher markets will result in Select one: a. a wider variety of products and higher prices. b. less product variety and lower prices. c. less product variety and higher prices. d. a wider variety of products and lower prices.
a. a wider variety of products and higher prices.
A law that requires hairdressers to undergo many hours of training and acquire a license before they can offer haircuts to the public, is an example of a Select one: a. barrier to entry. b. positive externality. c. public good. d. natural monopoly.
a. barrier to entry.
A competitive price-searcher market is characterized by firms Select one: a. being able to choose their price and by low barriers preventing firms from entering or leaving the market. b. being able to choose their price and by high barriers preventing firms from entering or leaving the market. c. having to accept the market price for their product and by low barriers preventing firms from entering or leaving the market. d. having to accept the market price for their product and by high barriers preventing firms from entering or leaving the market.
a. being able to choose their price and by low barriers preventing firms from entering or leaving the market.
A sudden increase in the demand for newly built homes will
a. increase the demand for construction workers and architects
Evidence suggests that education raises the earnings of the workforce mainly by
a. increasing the marginal productivity of labor
A price-searcher firm will expand output and sales until Select one: a. marginal revenue falls to equal the rising marginal cost. b. marginal revenue falls below marginal cost. c. marginal revenue rises to equal the falling marginal cost. d. marginal cost rises above marginal revenue.
a. marginal revenue falls to equal the rising marginal cost.
Everything else equal, wages are likely to be higher when
a. more skill is required to perform well on the job.
A practice whereby a seller charges different prices to different consumers of the same product or service is called Select one: a. price discrimination. b. monopolistic pricing. c. oligopolistic pricing. d. stay-out pricing.
a. price discrimination.
A firm in a competitive price-searcher market can raise its price without losing all of its customers. This is a result of Select one: a. product differentiation. b. the small number of firms in the market. c. low entry barriers. d. a perfectly elastic market demand.
a. product differentiation.
A natural monopoly exists when Select one: a. a single firm has control over a natural resource, such as timber. b. ATC in an industry will be at a minimum if output is produced by a single firm. c. a firm has an exclusive patent or license to produce a product granted by the government. d. entering the industry is barred by governmental authorities.
b. ATC in an industry will be at a minimum if output is produced by a single firm.
Assume a competitive price-searcher firm is earning an economic profit. The marginal revenue from selling an additional unit is $30 and the marginal cost of producing that additional unit is $23. The firm should Select one: a. reduce its price and increase its output level b. reduce both its price and its output level c. change neither its price nor its output level d. increase both its price and its output level e. increase its price and reduce its output level
a. reduce its price and increase its output level
In the short run, how will a profit-maximizing monopolist react if its marginal cost suddenly increases? It will Select one: a. reduce output and raise price. b. maintain the current price if profit is still positive. c. decrease plant size to lower marginal cost. d. lower price to expand revenue possibilities. e. increase plant size to lower marginal cost
a. reduce output and raise price.
Regulating natural monopolies according to the "rate of return" criterion is likely to Select one: a. reduce the incentive of firms to minimize cost. b. discourage the firms from investing resources in an effort to influence the decisions of the regulatory agency. c. increase the number of firms in the industry. d. result in a smaller quantity of output than when the natural monopolist is unregulated.
a. reduce the incentive of firms to minimize cost.
Which of the following conditions is most essential if a firm is going to earn long-run economic profits? Select one: a. restrictions that limit the entry of potential competitors into the industry b. a differentiated product c. a small number of firms, even though competitors are free to enter the industry d. an inelastic market demand for the product
a. restrictions that limit the entry of potential competitors into the industry Correct
Competitive price-searcher markets are common in Select one: a. retail selling. b. farming. c. electric power generation. d. basic manufacturing.
a. retail selling.
Compared to the profit-maximizing outcome, average cost pricing in natural monopoly leads to Select one: a. the elimination of economic profit. b. decreased consumer surplus. c. a higher price. d. less output.
a. the elimination of economic profit.
In markets characterized by oligopoly, Select one: a. the oligopolists earn the highest profit when they cooperate and behave like a monopolist. b. collective profits are always lower with cartel arrangements than they are without cartel arrangements. c. pursuit of self-interest by profit-maximizing firms always maximizes collective profits in the market. d. collusive agreements will always prevail.
a. the oligopolists earn the highest profit when they cooperate and behave like a monopolist.
The fact that some people will work hard to earn a lot of money while others will be content with much less income indicates that
a. worker preferences are an important source of earning differentials.
A natural monopoly is defined as an industry in which one firm Select one: a. can produce the entire industry output at a lower average cost than a larger number of firms could. b. can produce the entire industry output at a lower marginal cost than a larger number of firms could. c. is very large relative to other firms that could enter the industry. d. can earn higher profits if it is the only firm in the industry rather than if other firms also enter the industry.
a. can produce the entire industry output at a lower average cost than a larger number of firms could.
An oligopolistic market Select one: a. has a small number of rival firms, and each is large relative to the size of the market. b. is characterized by firms that merely take the price that is determined by the forces of supply and demand in the market. c. has low entry barriers facing firms that may be interested in entering the market. d. has a large number of firms that are small relative to the size of the market.
a. has a small number of rival firms, and each is large relative to the size of the market.
A market situation in which only a small number of mutually interdependent, rival sellers exists is known as a(n) Select one: a. oligopoly market. b. monopoly market. c. open price-taker market. d. competitive price-searcher market.
a. oligopoly market.
When employment discrimination results from the personal prejudices of employers, economic theory suggests that
an employer who discriminates will experience higher costs.
Economic models suggest that movie stars have salaries that
are about equal to their marginal revenue products.
Business owners who care only about maximizing profits are
at an advantage when competing against those who practice employment discrimination.
A market situation in which the average total costs of production continually decline with increased output until the entire market is supplied is called Select one: a. a legal monopoly. b. a natural monopoly. c. diminishing returns to scale. d. diminishing returns to a variable factor.
b. a natural monopoly.
Which of the following is a necessary condition for price discrimination to be profitable? Select one: a. All consumers must have an identical demand for the product. b. Groups of consumers with different demand elasticities must be easily distinguishable. c. It must be possible for buyers to resell the product at a low cost. d. The market demand for the product must be highly elastic.
b. Groups of consumers with different demand elasticities must be easily distinguishable.
Which of the following statements best describes the price, output, and profit conditions of competitive price-searcher markets? Select one: a. Price will equal marginal cost at the profit-maximizing level of output; profits will be positive in the long-run. b. Marginal revenue will equal marginal cost at the short run, profit-maximizing level of output; in the long run, economic profit will be zero. c. Marginal revenue will equal average total cost in the short run; long-run economic profits will be zero. d. Price will always equal average variable cost in the short run and either profits or losses may result in the long run.
b. Marginal revenue will equal marginal cost at the short run, profit-maximizing level of output; in the long run, economic profit will be zero.
A major fruit juice manufacturer failed in its attempt to engage in price discrimination between students and all other consumers. What is the most likely explanation for this failure? Select one: a. The cost of producing the product is relatively high. c. Market demand for fruit juice is inelastic. d. The two groups of consumers have different demand elasticities for fruit juice.
b. There was nothing to prevent the students from reselling the fruit juice to other consumers.
An example of a non-pecuniary job characteristic is
b. a comfortable work environment.
Which of the following is most likely to cause the productivity of labor to increase?
b. a higher rate of investment in human and nonhuman capital
Cartel agreements are difficult to maintain because individual members Select one: a. can gain by secretly raising their price above the price that is best for the cartel. b. are often unable to police the price and output policies of other members. c. can enforce price arrangements vigorously in court. d. can gain by raising their price above the price that is best for the cartel.
b. are often unable to police the price and output policies of other members.
Which of the following best explains why productive workers can command high wages?
b. competition among employers for productive workers
If economic profits were present in a competitive price-searcher industry, Select one: a. firms would operate in the short run, but they would be forced out of business in the long run as competition eliminated the economic profit. b. competition from new entrants would occur until the economic profits had been eliminated. c. production inefficiency would develop, causing costs to increase until the profits had been eliminated. d. the firms would eventually find these profits offset by long-run economic losses.
b. competition from new entrants would occur until the economic profits had been eliminated.
The fact that barriers to entry are low in competitive price-searcher markets means that if current firms are making economic losses, Select one: a. these losses will remain in the long run because no firms can exit the market. b. current firms will exit the market, causing the demand curves that face the remaining firms to increase. c. new firms will enter the market, causing no change in the demand curves that face the existing firms in the market. d. new firms will enter the market, causing the demand curves that face the existing firms to decrease.
b. current firms will exit the market, causing the demand curves that face the remaining firms to increase.
If a firm refuses to hire any minorities due to a personal prejudice, its profits will
b. decrease.
For a monopolist that does not price discriminate, economic profit is maximized in the short run at a price of $140. Marginal revenue at that output level is Select one: a. less than marginal cost. b. less than $140. c. greater than $140. d. equal to $140. e. greater than average revenue
b. less than $140.
If customers are racist but employers are not, then employment discrimination will be
b. more profitable than nondiscrimination
Automated production methods are only attractive when they
b. reduce per-unit costs.
Which of the following conditions is most essential if a firm is going to earn long-run economic profits? Select one: a. a small number of firms, even though competitors are free to enter the industry b. restrictions that limit the entry of potential competitors into the industry c. a differentiated product d. an inelastic market demand for the product
b. restrictions that limit the entry of potential competitors into the industry
One key characteristic that is distinctive of an oligopoly market is that Select one: a. there are many sellers in the market and each is small relative to the total market. b. the decisions of one seller often influence the price of products, the output, and the profits of rival firms. c. there is only one firm that produces a product for which there are no good substitutes. d. the demand curve facing each firm is downward sloping, with a marginal revenue curve that lies below the firm's demand curve.
b. the decisions of one seller often influence the price of products, the output, and the profits of rival firms
A competitive price-searcher firm is currently producing 10 units of output. At this level of output the firm is charging a price equal to $10, has marginal revenue equal to $6, has marginal cost equal to $6, and has average total cost equal to $12. From this information we can conclude that Select one: a. firms are likely to enter this market in the long run. b. the firm is currently maximizing its profit. c. the firm would earn more profit by expanding output d. the profits of the firm are positive
b. the firm is currently maximizing its profit.
An increase in the demand for a resource
b. will increase the price of the resource and, thereby, increase the incentive of potential suppliers to provide the resource in the future
The fact that some people will work hard to earn a lot of money while others will be content with much less income indicates that
b. worker preferences are an important source of earning differentials.
A monopoly is best defined as Select one: a. a single seller of a product that has characteristics very similar to the products produced in other industries. b. a single seller of a well-defined product for which there are no good substitutes operating in a market with high barriers to entry. c. a market in which a small number of rival sellers produce the entire market output. d. any firm operating in a contestable market.
b. a single seller of a well-defined product for which there are no good substitutes operating in a market with high barriers to entry.
A regulatory agency that imposes a price ceiling in order to limit monopoly profits to a "fair rate of return" is forcing the monopolist to sell at a price equal to Select one: a. average fixed cost. b. average total cost. c. marginal cost. d. average variable cost.
b. average total cost.
An oligopolistic firm that is deciding the price to charge, the output to produce, or the quality of product to offer, must consider Select one: a. the regulatory price limits that are always present with oligopoly. b. the potential reactions of rivals in the market. c. the fact that per-unit costs will usually increase as the scale of production increases. d. that entry barriers into oligopolistic markets are low.
b. the potential reactions of rivals in the market.
(I) Oligopolistic firms have an incentive to collude to increase profits. (II) Oligopolistic firms have an incentive to cheat on collusive agreements to increase profits. Select one: a. I is false; II is true. b. I is true; II is false. c. Both I and II are true. d. Both I and II are false.
c. Both I and II are true.
(I) Differences in worker productivity are one major reason why individual earnings differ. (II) Even if all workers were identical, differences in the desirability of jobs would still cause earnings differentials.
c. Both I and II are true. Correct
Which of the following is true when long-run equilibrium conditions are present in price-taker and competitive price-searcher markets? Select one: a. P = ATC in both price-taker and competitive price-searcher markets b. MR = MC in both price-taker and competitive price-searcher markets c. Both a and b, but not c are true. d. P = MC in both price-taker and competitive price-searcher markets
c. Both a and b, but not c are true.
Which of the following is true when long-run equilibrium conditions are present in price-taker and competitive price-searcher markets? Select one: a. P = ATC in both price-taker and competitive price-searcher markets b. P = MC in both price-taker and competitive price-searcher markets c. Both a and b, but not c are true. d. MR = MC in both price-taker and competitive price-searcher markets
c. Both a and b, but not c are true.
Which of the following statements best describes the price, output, and profit conditions of competitive price-searcher markets? Select one: a. Price will always equal average variable cost in the short run and either profits or losses may result in the long run. b. Marginal revenue will equal average total cost in the short run; long-run economic profits will be zero. c. Marginal revenue will equal marginal cost at the short run, profit-maximizing level of output; in the long run, economic profit will be zero. d. Price will equal marginal cost at the profit-maximizing level of output; profits will be positive in the long-run.
c. Marginal revenue will equal marginal cost at the short run, profit-maximizing level of output; in the long run, economic profit will be zero.
Which of the following is a major difference between a competitive price searcher and a price taker? Select one: a. Price takers are exposed to competition because of low barriers to entry, whereas competitive price searchers are somewhat immune from competition due to relatively high barriers to entry. b. Price takers can never earn economic profits, whereas competitive price searchers can earn economic profits in the short run. c. Price takers produce identical goods, whereas competitive price searchers produce goods that are differentiated from the goods produced by their competitors. d. Price takers need to compete through advertising because they cannot choose their own price, whereas competitive price searchers compete primarily through their pricing policies.
c. Price takers produce identical goods, whereas competitive price searchers produce goods that are differentiated from the goods produced by their competitors.
A major fruit juice manufacturer failed in its attempt to engage in price discrimination between students and all other consumers. What is the most likely explanation for this failure? Select one: a. The cost of producing the product is relatively high. b. Market demand for fruit juice is inelastic. c. There was nothing to prevent the students from reselling the fruit juice to other consumers. d. The two groups of consumers have different demand elasticities for fruit juice.
c. There was nothing to prevent the students from reselling the fruit juice to other consumers.
A decrease in the demand for a final product will cause
c. a decrease in demand for the resources used to produce the good
Which of the following would cause the demand for computer programmers to increase?
c. an increase in the productivity of computer programmers
In general, an organization of sellers designed to coordinate supply decisions so that the joint profits of the members is maximized is called a(n) ____. If they are successful, the total market output and price will most closely approximate the output and price in a(n) ____ market. (Fill in the blanks.) Select one: a. cartel; open price-taker b. cooperative; open price-taker c. cartel; monopoly d. OPEC; competitive price-searcher
c. cartel; monopoly
As a group, oligopolists would always earn the highest profit if they would Select one: a. produce more than the competitive quantity of output. b. produce the competitive quantity of output. c. charge the same price that a monopolist would charge if the market were a monopoly. d. operate according to their own individual self-interests.
c. charge the same price that a monopolist would charge if the market were a monopoly.
The major determinant of an individual's income is
c. how productive she is combined with demand for what she produces.
Assume that Burger King employees work in an air-conditioned environment while McDonalds employees do not. Other things equal, you would expect wages to be ____ in Burger King because ____.
c. lower; Burger King has more favorable working conditions
A price searcher confronts a downward sloping demand curve because Select one: a. the firm gains nothing if it lowers its price. b. there is no close competitor in the market. c. products in the market are differentiated. d. the market is essentially monopolized.
c. products in the market are differentiated.
Economists generally criticize high barriers to market entry because Select one: a. unregulated monopolists and oligopolists can often gain by increasing output and raising price. b. legal barriers to entry will encourage firms to "invest" resources in developing highly desired products that consumers are willing to pay more for. c. the ability of consumers to discipline producers is weakened. d. entry barriers are popular with consumers but not businesses.
c. the ability of consumers to discipline producers is weakened.
A monopolist will maximize profits by Select one: a. setting the price at the level that will maximize per-unit profit. b. producing the output where marginal revenue equals total cost and charging a price along the demand curve. c. selling at the price on the demand curve at the output rate where marginal revenue equals marginal cost. d. producing at the output rate where price equals marginal cost.
c. selling at the price on the demand curve at the output rate where marginal revenue equals marginal cost.
Which of the following best explains why productive workers can command high wages?
competition among employers for productive workers.
If a profit-maximizing firm hires an additional unit of labor, what must be true about labor's wage and marginal revenue product?
d. Its wage is always less than or equal to its marginal revenue product
When the price of a resource goes up and firms seek other suitable resources, this is called the
d. substitution in production effect.
In a market economy, which of the following is most important if one is going to achieve high earnings?
provision of goods and/or services that others value highly
Why do airlines often charge students and vacationers a lower price than business travelers? Select one: a. It is cheaper to provide airline service to students and vacationers than to business travelers. b. The demand of business travelers is generally more elastic than the demand of students and vacationers. c. Airlines prefer to deal with students and vacationers rather than business travelers. d. The demand of students and vacationers is generally more elastic than the demand of business travelers.
d. The demand of students and vacationers is generally more elastic than the demand of business travelers.
How will the price and output of an unregulated monopolist compare with the ideal levels that might be reached if the market was competitive? Select one: a. The output of the monopolist will be larger and the price lower. b. The output of the monopolist will be larger and the price higher. c. The output of the monopolist will be smaller and the price lower. d. The output of the monopolist will be smaller and the price higher.
d. The output of the monopolist will be smaller and the price higher.
Which of the following is the best example of "creative destruction"? Select one: a. The imprudent use of a credit card by a family that already has a high level of debt. b. The failure of a business because of higher cost resulting from government regulation. c. The failure of a business because of poor management. d. The virtual elimination of the film camera by the digital camera.
d. The virtual elimination of the film camera by the digital camera
If large numbers of young Americans thought the life of a cowhand was great (despite the hardships), we would expect
d. a decrease in the wages of cowhands because supply would be enlarged.
In some industries where firms experience declining average total costs over the full range of output that consumers are willing to buy, Select one: a. a single large firm will develop, and it will buy out any smaller rival firms to avoid the small firms' production at a lower per-unit cost. b. a smaller firm will always have lower per-unit costs. c. many firms will tend to emerge from the competitive process. d. a single large firm will develop, and it will have cost advantages that protect it from potential rivals.
d. a single large firm will develop, and it will have cost advantages that protect it from potential rivals.
Antitrust action restructures a previously monopolized industry into a competitive industry. If economies of scale are unimportant in the industry, the expected result of this movement from monopoly to competition is Select one: a. a reduction in both price and output in the industry. b. an increase in both price and output in the industry. c. a reduction in output and an increase in price in the industry. d. an increase in output and a reduction in price in the industry.
d. an increase in output and a reduction in price in the industry.
Because of the rise of global competition and free trade, Select one: a. U.S. industrial concentration poses more of a threat to consumers. b. U.S. markets are becoming less competitive. c. U.S. manufacturers are seeking fewer trade barriers. d. antitrust policy may be less necessary than previously thought.
d. antitrust policy may be less necessary than previously thought.
A firm that uses price discrimination to enhance its net revenues will Select one: a. charge a higher price to consumers with a more elastic demand for the firm's product. b. expand output as long as price exceeds average total costs. c. expand output as long as average total costs are declining. d. charge a lower price to consumers with a more elastic demand for the firm's product.
d. charge a lower price to consumers with a more elastic demand for the firm's product.
Because the demand for a resource is highly dependent upon the demand for the final goods that the resource helps produce, the demand for a resource is called a(n)
d. derived demand.
A monopoly is most likely to emerge in a market when Select one: a. the price elasticity of demand for the product is high. b. the producers in the market have U-shaped average total cost curves. c. the cost of entry and exit into the market is low. d. economies of scale are large relative to market demand.
d. economies of scale are large relative to market demand.
An oligopolistic market Select one: a. is characterized by firms that merely take the price that is determined by the forces of supply and demand in the market. b. has a large number of firms that are small relative to the size of the market. c. has low entry barriers facing firms that may be interested in entering the market. d. has a small number of rival firms, and each is large relative to the size of the market.
d. has a small number of rival firms, and each is large relative to the size of the market.
A contestable market is a market Select one: a. characterized by high profitability and government regulation. b. characterized by a large number of firms; in essence, the term means the same thing as pure competition. c. that is highly contested by two, and only two, rival firms. d. in which the costs of entry and exit are low.
d. in which the costs of entry and exit are low
Economists refer to expenditures on training, education, and skill development designed to increase the productivity of an individual as
d. investments in human capital.
Which of the following is the best definition of "physical capital"?
d. man-made resources used to produce other goods
A price-searcher firm will expand output and sales until Select one: a. marginal revenue rises to equal the falling marginal cost. b. marginal revenue falls below marginal cost. c. marginal cost rises above marginal revenue. d. marginal revenue falls to equal the rising marginal cost.
d. marginal revenue falls to equal the rising marginal cost.
In long-run equilibrium, output is expanded to the minimum long-run average total cost by Select one: a. neither price takers nor competitive price searchers. b. competitive price searchers but not by price takers. c. both competitive price searchers and price takers. d. price takers but not by competitive price searchers.
d. price takers but not by competitive price searchers.
If marginal cost exceeds marginal revenue, a profit-maximizing firm should Select one: a. expand output until marginal cost equals marginal revenue. b. reduce output until price equals average total cost. c. expand output until marginal revenue equals price. d. reduce output until marginal cost equals marginal revenue.
d. reduce output until marginal cost equals marginal revenue.
A firm that is a "pure monopoly" is Select one: a. the producer of a product subsidized by the government. b. a seller of a highly advertised and differentiated product in a market with low barriers to entry in the long run. c. the only buyer of a unique raw material. d. the only seller of a good for which there are no good substitutes in a market with high barriers to entry.
d. the only seller of a good for which there are no good substitutes in a market with high barriers to entry.
A competitive market economy with low barriers to entry faces an entrepreneur with Select one: a. an environment that shields each currently successful producer from changing market conditions. b. a static business environment. c. little opportunity for wealth creation. d. the opportunity to bring new and different products and services to the market.
d. the opportunity to bring new and different products and services to the market.
Compensation where the top performer receives much higher rewards than other competitors, even if the others perform at only slightly lower levels, is called
d. tournament pay.
If coal and oil are substitute inputs in the production of electricity, an increase in the price of oil
d. will increase the demand for coal
A monopolist will earn economic profits as long as his price exceeds Select one: a. marginal revenue. b. average fixed cost. c. average variable cost. d. average total cost.
d. average total cost.
An industry is said to be a natural monopoly when Select one: a. legal barriers limit entry into the market. b. diseconomies of scale are present in the market. c. the market demand for the product supplied by a firm is inelastic. d. long-run ATC continues to decline as firm size increases. e. larger firms have higher per-unit costs than their smaller rivals.
d. long-run ATC continues to decline as firm size increases
Other things the same, the wages in an occupation are likely to be higher the more
dangerous the job.
If there is employment discrimination against minorities, this will cause the
demand for their services to decline, and their wages to fall.
The fact that wage differentials continue to exist across different groups of workers leads economists to believe that
differences in human capital and job characteristics must be important in explaining the differences in wages. Correct
An improvement in technology that allows workers to process twice as many insurance forms in an hour than before will cause
more workers to be employed because their marginal revenue product has increased.
Working conditions, prestige, variety, location, employee freedom, and employee responsibilities are all examples of
non-pecuniary job characteristics
An individual who possesses a specialized skill that is difficult to execute will
receive a high wage only when this skill is in great demand relative to its supply.
The fact that some people will work hard to earn a lot of money while others will be content with much less income indicates that
worker preferences are an important source of earning differentials.