ECO2023
The productivity and real wages of workers in industrially advanced economies have risen historically partly because:
workers have been able to use larger quantities of capital equipment.
Refer to the diagram. Land:
would be a free resource if demand is D4 or less.
Government's ability to force people to do things involuntarily is:
Beneficial if it is used to improve economic efficiency
A firm that is hiring labor in a purely competitive labor market and selling its product in a purely competitive product market will maximize its profit by hiring labor until:
marginal revenue product equals marginal resource (labor) cost.
How does human specialization contribute towards increasing an economy's output?
It exploits the differences in abilities
Which of the following is characteristic of a pure monopolist's demand curve?
It is the same as the market demand curve.
Which of the following statements applies to a purely competitive producer?
It will not advertise its product.
Secret conspiracies to fix prices are examples of:
covert collusion.
A profit-maximizing firm will:
expand employment if marginal revenue product exceeds marginal resource cost.
Economic profits are calculated by subtracting:
explicit and implicit costs from total revenue.
Suppose the domestic price (no-international-trade price) of wheat is $3.50 a bushel in the United States while the world price is $4.00 a bushel. Assuming no transportation costs, the United States will:
export wheat.
In recent years, the United States has:
exported more services abroad than it has imported.
A purely monopolistic firm:
faces a downsloping demand curve.
Critics of the minimum wage argue that as an antipoverty device it is "poorly targeted." By this they mean that:
many who benefit from the minimum wage are teenagers or not poor.
"Income receivers should be paid in accordance with the value of output each produces." This statement is consistent with the:
marginal productivity theory of income distribution.
A firm will find it profitable to hire workers up to the point at which their:
marginal resource cost is equal to their MRP.
In a monopsonistic labor market, the employer will maximize profits by employing workers up to that point at which:
marginal revenue product equals marginal resource (labor) cost.
When a firm is maximizing profit, it will necessarily be:
maximizing the difference between total revenue and total cost.
In the short run, a monopolist's economic profits:
may be positive or negative depending on market demand and cost conditions.
The process by which people isolate purchases and fail to consider all consumption options simultaneously is known as:
mental accounting.
Using antitrust law to split up an unregulated natural monopoly into several competing firms:
might either increase product price or reduce product price.
The economic term for a firm that is the sole buyer in a market is:
monopsonist.
Under monopolistic competition, entry to the industry is:
more difficult than under pure competition but not nearly as difficult as under pure monopoly.
The primary gain from international trade is:
more goods than would be attainable through domestic production alone.
The substitution effect indicates that a profit-seeking firm will use:
more of an input whose price has fallen and less of other inputs in producing a given output.
Since 1950, the energy efficiency of the U.S. economy in terms of producing goods and services has:
more than doubled.
For a firm selling its product in an imperfectly competitive market, the marginal revenue product of labor can be found by:
multiplying marginal product by marginal revenue.
Revenues flowing to the government from government-run or government-sponsored businesses, such as public utilities and state lotteries, are known as:
proprietary income.
A BTU is the amount of energy needed to:
raise the temperature of one pound of water by one degree Fahrenheit.
A rising standard of living will:
reduce the birthrate, but population may continue to grow if the death rate falls more quickly.
Real wages in the United States are:
relatively high, but not as high as in some other industrially advanced nations.
Gigantic State University raises tuition for the purpose of increasing its revenue so that more faculty can be hired. GSU is assuming that the demand for education at GSU is:
relatively inelastic.
Capitalist income (corporate profits, interest, and rent) has:
remained approximately constant since 1900.
If labor's share of the income paid to American resource suppliers is broadly defined as the sum of wages and salaries and proprietors' income, we can say that labor's relative share has:
remained approximately constant since 1900.
Population will necessarily fall if the:
replacement rate exceeds the birthrate.
The fact that monopoly and monopsony exist in resource markets means that
resource prices do not always measure contributions to output.
Taxes on commodities or on purchases are known as:
sales and excise taxes.
One difference between sales and excise taxes is that:
sales taxes are calculated as a percentage of the price paid, while excise taxes are levied on a per-unit basis.
Utility refers to the:
satisfaction that a consumer derives from a good or service.
A product has utility if it:
satisfies consumer wants.
A profit-maximizing company should extract a nonrenewable resource in the present up to the quantity where the:
selling price of the resource equals the extraction cost plus the user cost of the resource.
A craft union attempts to increase wage rates by:
shifting the labor supply curve to the left.
Frank is purchasing products C and D in utility-maximizing amounts. If the price of C is $4 and the price of D is $2, then:
the marginal utility of C is twice that of D.
A price discriminating pure monopolist will attempt to charge each buyer (or group of buyers):
the maximum price each would be willing to pay.
The efficiency loss of a tax is:
the net value of sacrificed output caused by the tax.
Daily newspapers have been rising in price in recent years because:
the overhead costs have recently been spread over a shrinking number of buyers.
If an exclusive union is successful in restricting the supply of labor, the:
wage rate will rise.
The World Trade Organization:
was established to resolve disputes arising under world trade rules.
We say that the demand for labor is a derived demand because:
we demand the product that labor helps produce rather than labor service per se.
Internationally, participation differences in organ donation programs are mostly attributed to:
what default option is set for participation or nonparticipation.
The incidence of a tax pertains to:
who actually bears the burden of a tax.
Economies and diseconomies of scale explain:
why the firm's long-run average total cost curve is U-shaped.
A pure monopolist:
will realize an economic profit if price exceeds ATC at the profit-maximizing/loss-minimizing level of output.
efer to the information. The average total cost of 3 units of output is
35
Chronic budget deficits can lead to all of the following, except:
"Smaller government" in the economy
If the total costs of producing 1,500 units of output is $15,000 and this output sold to consumers for a total of $16,500, then the firm would earn profits of:
$1,500
If Kelly deposits $10,000 into an account that pays 8 percent interest, compounded annually, and she makes no further deposits or withdrawals, how much will Kelly have in her account at the end of 5 years?
$14,693.
Refer to the data. Creamy Crisp's total economic costs are:
$286,000.
After graduating from high school, Adam is thinking about going to college. The college tuition is $15,000 a year. Instead of going to college, Adam could take a full-time job that pays $25,000. What is Adam's opportunity cost of attending college for one year?
$40,000
Other things equal, ethanol made from corn becomes economically viable (as or less costly than using oil) when oil prices reach _____ or more per barrel.
$60
Other things equal, biodiesel becomes economically viable (as or less costly than using oil) when oil prices reach _____ or more per barrel.
$80
Refer to the data. Creamy Crisp's total revenues exceed its total costs, including a normal profit, by:
$94,000.
Definite grammatical article that implies necessarily that an entity it articulates is presupposed; something already mentioned, or completely specified later in that same sentence, or assumed already completely specified.
0 units at a loss of $150.
Suppose the price of local cable TV service increased from $16.20 to $19.80 and as a result the number of cable subscribers decreased from 224,000 to 176,000. Along this portion of the demand curve, price elasticity of demand is:
1.2
Refer to the information. The total cost of producing 3 units of output is:
105
Relative to 1800, the living standard of the average person today in the United States is about _____ times higher.
12
U.S. exports of goods and services (on a national income account basis) are about:
14 percent of U.S. GDP.
Suppose that interest payments are $140 per year on a $1,000 loan and $1,188 per year on an $8,485 loan. The interest rates on the two loans are:
14 percent on both loans.
A firm can hire six workers at a wage rate of $8 per hour but must pay $9 per hour to all of its employees to attract a seventh worker. The marginal wage cost of the seventh worker is:
15
Refer to the data. The value for X is:
15
Refer to the data. The average total cost of producing 3 units of output is:
16
Assume six firms comprising an industry have market shares of 30, 30, 10, 10, 10, and 10 percent. The Herfindahl index for this industry is:
2,200.
If the four-firm concentration ratio in an oligopolistic industry is 100 percent and each firm has an equal percentage of sales, the Herfindahl index is:
2,500.
The total fertility rate necessary to keep the population constant is approximately equal to:
2.1.
Refer to the data. The value for W is:
20
Currently capitalist income, that is, corporate profits, interest, and rent, accounts for about what percentage of the income paid to American resource suppliers?
20 percent.
Total governmental purchases—federal, state, and local combined—accounted for about what percentage of domestic output in 2012?
20 percent.
Refer to the given data. At what price does each shoe shine sell?
3
Refer to the given data. What is the marginal product of the sixth worker
3 units.
Refer to the short-run data. The profit-maximizing output for this firm is:
320 units.
Refer to the information. The average total cost of 3 units of output is:
35
The scalping of tickets for an event is a sign that the stated price on the ticket is:
Below the market clearing price
Assume that in year 1 you pay an average tax rate of 20 percent on a taxable income of $20,000. In year 2, you pay an average tax rate of 25 percent on a taxable income of $30,000. Assuming no change in tax rates, the marginal tax rate on your additional $10,000 of income is:
35 percent.
The basic tax rate on taxable corporate income is:
35 percent.
In 2010, the top 1 percent of all taxpayers in the United States paid what percent of the federal income tax?
37.4 percent.
Refer to the data. If the market price for this firm's product is $24, it will produce:
4 units at a loss of $138.
Refer to the data. The value for Y is:
45
Approximately what percentage of the federal government's tax revenues are generated from personal income taxes (in 2012)?
46 percent.
Refer to the diagram. At P1, this firm will produce:
47 units and realize an economic profit.
Refer to the data. The value for Z is:
5
The supply of product X is elastic if the price of X rises by:
5 percent and quantity supplied rises by 7 percent.
Other things equal, ethanol made from corn becomes economically viable (as or less costly than using oil) when oil prices reach _____ or more per barrel.
60
Lauren makes $150 a day as a bank clerk. She takes two days off work without pay, to fly to another city to attend the concert of her favorite band. The cost of transportation and lodging for the trip is $250. The cost of the concert ticket is $50. The opportunity cost of Lauren's decision to attend the concert is:
600
The supply of product X is inelastic (but not perfectly inelastic) if the price of X rises by:
7 percent and quantity supplied rises by 5 percent.
Refer to the data. The average fixed cost of producing 3 units of output is:
8
beyond some point, additional units of a product will yield less and less extra satisfaction to a consumer.
8 units of utility.
Refer to the data. If the market price for this firm's product is $87, it will produce:
9 units at an economic profit of $281.97.
Refer to the data. What level of total utility will the utility-maximizing consumer realize?
96 utils.
Which of the following will not cause a change in the demand for product A?
A change in the price of A
Which of the following statements best illustrates the concept of derived demand?
A decline in the demand for shoes will cause the demand for leather to decline.
The economic principle that "unemployment rate will tend to increase as the economy moves into a recession" is an example of:
A generalization
Which of the following is most likely to increase the Herfindahl index of a particular industry?
A horizontal merger between two of the industry's largest firms.
Which of the following best reflects the ability-to-pay philosophy of taxation?
A progressive income tax.
Which of the following is correct?
A purely competitive firm is a "price taker," while a monopolist is a "price maker."
Which of the following would cause the present optimal extraction level of a nonrenewable resource to fall?
A reduction in the price of the resource.
Which of the following is considered to be an entrepreneur?
A self-employed person
The government's budget deficit refers to the:
Gap between high government spending and its lower tax revenues
Assume that Abby, Ben, Clara, Joe, and Matt are the only citizens in a community. A proposed public good has a total cost of $1000. All five citizens will share an equal portion of this cost in taxes. The benefit of the public good is $220 to Abby, $210 to Ben, $210 to Clara, $180 to Joe, and $120 to Matt. Who are likely to vote in favor of this proposal?
Abby, Ben, and Clara
Which of the following industries most closely approximates pure competition?
Agriculture.
Assume that by devoting all of its resources to the production of X, nation Alpha can produce 40 units of X. By devoting all of its resources to Y, Alpha can produce 60Y. Comparable figures for nation Beta are 60X and 40Y. We can conclude that:
Alpha should specialize in Y and Beta in X.
A leftward shift of the supply curve for oil in the United States is most likely to result from:
An increase in the costs of exploration and drilling for oil
Which of the following would cause the present optimal extraction level of a nonrenewable resource to fall?
An increase in the present value of expected future profits.
Which of the following is consistent with the law of demand?
An increase in the price of hamburgers causes buyers to buy fewer hamburgers
Which of the following is considered a renewable natural resource?
Aquifers
Which of the following best expresses the law of diminishing returns?
As successive amounts of one resource (labor) are added to fixed amounts of other resources (capital), beyond some point the resulting extra or marginal output will decline.
Money is not considered to be an economic resource because:
As such it is not productive
Specialization is beneficial:
At the individual, regional, and even international levels
Fatal automobile accidents occur much more frequently than do fatal airplane crashes, yet airplane crashes receive a disproportionate amount of media coverage. As a result, some people are overly fearful of flying in planes yet have no problem riding in cars. Which of the following cognitive biases best explains this disconnect between these people's fears and the statistical realities?
Availability heuristic.
Which of the following goods would most probably be an inferior good?
Generic beer
When monetary policy becomes highly politicized, the policy tends to:
Become destabilizing, instead of promoting stability
All of the following are consequences of a government's having to deal with a "debt crisis", except:
Being forced to drastically raise taxes
Which of the following is a characteristic of pure monopoly?
Barriers to entry.
Which is an example of a nontariff barrier (NTB)?
Box-by-box inspection requirements for imported fruit.
The role of the entrepreneur in society is to:
Bring the factors of production together and take the risks of producing
According to the circular flow model, product markets are where:
Businesses earn their revenues from households
In the circular flow model of the market system, households:
Buy products and sell resources
The market system is an economic system that:
Gives private individuals the right to own resources used in production
Selfishness is:
exhibited more strongly in the dictator game than in the ultimatum game.
The so-called collective action problem refers to the:
Greater difficulty in organizing and motivating large groups than small ones
The economist who advocated a single tax on land was:
Henry George.
The United States' most important trading partner quantitatively is:
Canada
In competitive markets, a surplus or shortage will:
Cause changes in the quantities demanded and supplied that tend to eliminate the surplus or shortage
Which of the following is an example of a capital-intensive commodity?
Chemicals
Which country has the largest share of total world exports?
China
Tying contracts are illegal under the:
Clayton Act of 1914.
In a market system, which of the following will eliminate high-cost producers, and allow only the low-cost producers to survive?
Competition
Which of the following is least likely to violate the Sherman Act or the Clayton Act?
Competitive firms F and G independently charge lower prices to frequent customers than to occasional customers.
The difference between the maximum price a consumer is willing to pay for a product and the actual price the consumer pays is called:
Consumer Surplus
The value that consumers get (from consuming a product) over and above that they actually paid for the product is called:
Consumer surplus
If the price of a product increases:
Consumer surplus will decrease
From an economic perspective, when a student decides to go to the movies instead of studying for a test, it indicates that in the student's thinking the marginal:
Cost of going to the movies is less than the marginal benefit of going to the movies
The Heritage Foundation in 2012 ranked which of the following economies to have among the highest economic freedom?
Hong Kong
A television station reports that the price of coffee has increased but the quantity traded in the market has decreased. This situation would be caused by a(n):
Decrease in supply
Assume that Matt, Joe, and Teresa are the only citizens in a community. A proposed public good has a total cost of $1000. All three citizens will share an equal portion of this cost in taxes. The benefit of the public good is $500 for Matt, $280 for Joe, and $260 for Teresa. In a majority vote, this proposal will most likely be:
Defeated; the public good is not produced even though it would have been efficient to do so
When producers do not produce the efficient amount of a product because they are unable to charge consumers what they are willing to pay for it, then we have a:
Demand-side market failure
Which of the following is an example of a labor-intensive commodity?
Digital cameras.
So-called business cycles refer to the multi-year periods:
During which the economy's overall output and employment expands and contracts
The ability to impose fines, revoke licenses, and put people into jail allows the government to:
Enforce involuntary transactions
Which of the following is another way of saying "marginal benefits of an action"?
Extra benefits resulting from the action
Which of the U.S. industries below has not seen major shutdowns and layoffs because of free foreign trade?
Financial services.
Which of the following is not a reason why specialization and trade are beneficial to society?
Firms and workers become less dependent on others for producing goods and services
In a market economy, the government's ability to coerce is beneficial in the following cases, except in:
Fixing resource prices
Which of the following is most likely to be an implicit cost for Company X?
Forgone rent from the building owned and used by Company X.
Which of the following is correct?
If marginal utility is diminishing and is a positive amount, total utility will increase.
The study of public choice theory involves the economic analysis of the following, except:
Impact of budget deficits on the public debt
Which of the following statements is correct?
In seeking the profit-maximizing output, the pure monopolist underallocates resources to its production.
Some economists contend that government agencies are generally less efficient than private businesses due to the following reasons, except:
Incompetent workers gravitate towards government, while motivated workers gravitate towards the private sector
By requiring car producers to install emission control devices on cars, the government forces these producers to internalize some of the external costs of auto pollution. This will lead to the equilibrium price of cars:
Increasing and the quantity decreasing
A higher price reduces the quantity demanded for a product because:
Individuals can afford less of the product and will switch to substitutes
Which of the following companies was not fined in 2011 for attempting to run an international cartel and fix prices?
Intel
Which of the following policies has succeeded in reducing fishery catch sizes without creating an "arms race" among fishers?
Issuing individual transferable quotas (ITQs).
A reduction in the level of unemployment would have which effect with respect to the nation's production possibilities curve?
It would not shift the curve; it would be represented by a movement from a point inside the curve toward a point on the curve
One basic difference between "labor" and "entrepreneur" is that:
Labor is hired by a firm whereas the entrepreneur owns the firm
If farmers withhold some of their current corn harvest from the market because they anticipate a higher price of corn in the near future, then this would cause a(n):
Leftward shift in the current supply of corn
If a firm wanted to know how much it would save by producing one less unit of output, it would look to:
MC
If profits are maximized (or losses minimized), which of the following conditions is common to both unregulated monopoly and pure competition?
MR = MC.
Which of the following has been a significant factor in the ability of iPads to compete effectively against laptop and desktop computers?
Many consumers perceive that iPads are superior to laptops and desktop computers for the consumption of digital media.
In the U.S., the Federal government runs a chronic budget deficit, whereas many state and local governments do not, because:
Many state and local governments have balanced-budget laws that make deficits illegal, while the Federal government does not
When producers (say, of roads) are not able to make all consumers pay for enjoying their product (i.e., the roads), they tend to see a:
Marginal benefit of production that is too low, and there is a demand-side market failure
Which of the following statements is correct?
Marginal cost is the price or cost of an extra variable input (for example, an additional worker or machine) divided by its marginal product.
Which of the following statements about market failure is not true:
Market failure always results from some government action or policy in a market
The government may impose industrial safety regulations and occupational licensing requirements in which of the following economic systems?
Mixed market economy
If a nation produces more consumer goods and less capital goods, then the nation will have:
More consumption now, but less consumption later
Which of the following best explains the difference between neoclassical economics and behavioral economics?
Neoclassical economics assumes that people are rational in their decision making, while behavioral economics believes people make systematic errors.
Suppose the price of a product rises and the total revenue of sellers increases.
No conclusion can be reached with respect to the elasticity of supply.
In which of the following market structures is there clear-cut mutual interdependence with respect to price-output policies?
Oligopoly
When a state government chooses to build more roads, the resources used are no longer available for public education programs. This dilemma illustrates the concept of:
Opportunity cost
Which of the following arguments contends that certain industries need to be protected in the interest of national security?
The military self-sufficiency argument.
In the short run, a purely competitive firm will earn a normal profit when:
P = ATC.
If the unit price of a product is P, then the amount of spending that the buyers would need to pay for a given quantity Q is equal to:
P x Q
In developing prospect theory, which of the following did behavioral economists not discover about people's reaction to goods and bads?
People feel equivalent losses and gains in equal measure, supporting the assumption that consumers behave rationally.
In the face of rising costs, some firms reduce the quality of the goods they produce rather than maintain quality and increase prices. How would behavioral economics explain this strategy?
People have an aversion to losses, and consumers are more likely to feel the loss of a price increase than a quality reduction.
Which of the following assumptions about human behavior is most likely to be accepted by behavioral economists?
People have preferences that are unstable and vary by context.
Which of the following sets of personal characteristics best reflects what behavioral economists assume about how people make decisions?
People have preferences that depend on context, avoid and are bad at computation, often give in to temptation, and are often selfless in their behavior.
When studying human behavior, economists assume rational self-interest. This means that:
People make decisions based on some desired outcome
In analyzing human decision and action, economists assume that:
People's behavior reflects rational self-interest
Which of the following occupations is projected to be the fastest growing in the U.S. in terms of percentage increases?
Personal care aides.
Which of the following goods (with their respective income elasticity coefficients in parentheses) will most likely suffer a decline in demand during a recession?
Plasma screen and LCD TVs (+4.2)
All of the following would affect the position of the supply curve for cranberries, except the:
Popularity of cranberry drinks
Which of the following occupations is among the ten projected most rapidly declining U.S. occupations in terms of percentage increases?
Postal service workers.
Which of the following would not be emphasized in a capitalist economy?
Prevention of owners of capital from exposing this resource to risk
The idea of the Law of Demand, as applied to electric cars, assumes which of the following to be constant?
Price of gasoline cars
Which of the following is not an important source of revenue for the federal government?
Property taxes.
In which of the following industry structures is the entry of new firms the most difficult?
Pure monopoly.
In which one of the following market models is X-inefficiency most likely to be the greatest?
Pure monopoly.
Which of the following is correct?
The nominal and the real wage may both fall.
The possibility that an adverse change in consumer tastes will decrease the demand for the firm's product.
The nominal interest rate is the real interest rate less the rate of inflation.
The horizontal axis of a graph that shows a market demand curve indicates the:
Quantities which consumers will be willing and able to buy at various prices
If the price of a product decreases, we would expect:
Quantity supplied to decrease
Which of the following is correct?
Real capital is a resource, but money is not.
Which of the following is not a basic characteristic of monopolistic competition?
Recognized mutual interdependence.
Which of the following best approximates a pure monopoly?
The only bank in a small town.
Which of the following represents an uninsurable risk to a business firm?
The possibility that an adverse change in consumer tastes will decrease the demand for the firm's product.
A characteristic of the market system is:
Reliance on the use of capital goods to expand total output
Larry's Lizards and Ronaldo's Reptiles are competing pet store franchises. Both are considering opening a store in the small town of Turtleville. If Ronaldo's opens a profitable store in Turtleville and Larry's management determines that it is not profitable to also open a store, then:
Ronaldo's had a first-mover advantage in this game.
The government adds to its overall public debt whenever it:
Runs a budget deficit
The basic truth that underlies the study of economics is the fact that we all face:
Scarcity
In the U.S. market economy, the government performs the following prominent roles, except:
Set prices for most resources
Laissez-faire capitalism limits the government's economic functions to the following, except:
Setting prices of individual goods and services
Movie producers A, B, and C secretly meet and agree to release their summer blockbuster films in sequence, rather than at the same time. The U.S. Justice Department learns of the agreement and files an antitrust suit. The federal government would most likely file charges under the:
Sherman Act, Section 1.
The economies of North Korea and Cuba are:
Similar in that they are both basically command systems
Which of the following is considered a renewable natural resource?
Solar power.
"Unfunded liability" refers to a government commitment to:
Spend in the future without also committing to collect enough tax money to pay for it
During a period when output and employment is falling, the government will try to:
Stimulate borrowing and spending
If some activity creates external benefits as well as private benefits, then economic theory suggests that the activity ought to be:
Subsidized
Which of the following is an example of a market failure?
Successful public schools provide benefits to the students who attend them, as well as to the community as a whole including those who don't go to those public schools
Many state and local governments in the U.S. have balanced-budget laws in order to prevent politicians from:
Succumbing to voters' strong preference for budget deficits
The difference between the actual price that a producer receives and the minimum acceptable price the producer is willing to accept is called the producer:
Surplus
Susie buys two goods: rounds of golf and massages. Suppose that the price of a round of golf is $20 and the price of a massage is $30. In a typical week, Susie will play two rounds of golf, getting 20 units of satisfaction from the second round. She normally buys three massages each week, with the third giving her 30 units of satisfaction. If she were to buy a fourth massage in a week, it would give her 20 units of satisfaction. If the price of massages is reduced to $15, which of the following outcomes might we expect to occur?
Susie would buy more massages and fewer rounds of golf, as predicted by the substitution effect.
The so-called collective action problem is the reason why:
Taxpayers are not able to effectively counter special interest groups
Which one of the following acts declared "[e]very contract, combination . . . or conspiracy, in restraint of trade or commerce among the several states . . . to be illegal"?
The Sherman Act.
"Price" in the statement of the Law of Supply refers to:
The amount that buyers are willing and able to pay for each unit of the product
When a competitive market achieves allocative efficiency, it implies that:
The combined consumer and producer surplus is maximized
There is a surplus of tomatoes in the market. This implies that:
The current price is set above the equilibrium level
Which of the following is not characteristic of the demand for a commodity that is elastic?
The elasticity coefficient is less than one.
What is a major opportunity cost of going to college on a full-time basis?
The foregone income that could be earned working full-time job
When economic efficiency is attained, it implies all of the following, except:
The gap between marginal benefits and marginal costs of production is at maximum
In a command system:
The government makes production and allocation decisions
A result of a fall in the price of gasoline, consumers can afford to buy more gasoline for more driving trips. This is an illustration of:
The income effect
Which of the following factors is a "demand shifter" for new houses?
The interest rates on mortgage loans
All of the following would affect the position and shape of a nation's production possibilities curve, except:
The level of unemployment
When there is overproduction of a good:
The marginal cost of the good exceeds its marginal benefit
Which of the following is most likely to be an example of monopsony?
The market for Major League Baseball umpires.
If there are external benefits associated with the consumption of a good or service:
The private demand curve will underestimate the true demand curve
If a price ceiling is set below the equilibrium price in a market:
The quantity demanded will exceed the quantity supplied
What is the relationship between living standards and birthrates?
The relationship is negative (inversely related).
As a result of a decrease in the price of online streaming movies, consumers download more movies online and buy fewer DVDs. This is an illustration of:
The substitution effect
A required element for specialization to lead to an increase in the satisfaction of society's wants is:
The use of money
When economists speak of "demand" in a particular market, they refer to:
The whole demand curve or schedule
The idea in economics that "there is no free lunch" means that:
There are opportunity costs involved even in free lunches
Competition is more likely to exist when:
There is easy entry into and exit out of industries
What do economies of scale, the ownership of essential raw materials, and patents have in common?
They are all barriers to entry.
Which of the following statements is true about falling birthrates?
They tend to lag behind falling death rates, allowing population growth to continue for at least one or two more generations.
Which of the following goods will least likely suffer a decline in demand during a recession?
Toothpaste
At equilibrium in a market for a product, the total revenues received by sellers equal the:
Total amount spent by buyers on the product
Capitalism gets its name from the fact that capital resources are mostly:
Treated as private property
In a free-market economy, a product which entails a positive externality will be:
Underproduced
Which of the following constitutes an implicit cost to the Johnston Manufacturing Company?
Use of savings to pay operating expenses instead of generating interest income.
The opportunity cost of constructing a new public highway is the:
Value of other goods and services that are sacrificed in order to construct the new highway
In order to derive a market demand curve from individuals' demand curves, we add up the:
Various individuals' quantities demanded at each price level
Laissez-faire capitalism is characterized by:
Very limited government role in the economy
Which of the following holds true?
When AP is rising AVC is falling, and when AP is falling AVC is rising.
Which of the following is correct?
When MP is rising MC is falling, and when MP is falling MC is rising.
Economic systems differ from one another based on who own the factors of production and:
Who make decisions regarding what to produce and how it is produced
Which of the following is not a barrier to entry?
X-inefficiency.
Refer to the graph above. At equilibrium, consumer surplus would be represented by the area:
a
A purely competitive seller is:
a "price taker."
Refer to the graph above. At equilibrium, the total maximum amount that consumers would have been willing to pay for the product is represented by the area:
a + b + c
Suppose the only three existing manufacturers of video game players signed a written contract by which each agreed to charge the same price for products and to distribute their products only in the geographical area assigned them in the contract. This best describes:
a cartel.
A merger between a maker of household detergents and a fast-food chain would be an example of:
a conglomerate merger.
Rapid population growth since 1800 has occurred primarily because of:
a significant reduction in death rates as living standards have risen.
Pure monopoly refers to:
a single firm producing a product for which there are no close substitutes.
Differences in production efficiencies among nations in producing a particular good result from:
all of these.
The Celler-Kefauver Act of 1950:
amended the Clayton Act.
Marginal resource cost refers to the:
amount by which a firm's total resource cost increases as the result of hiring one more unit of the resource.
If two resources are highly substitutable for one another:
an increase in the price of one will increase the demand for the other.
OPEC provides an example of:
an international cartel.
Economists would describe the U.S. automobile industry as:
an oligopoly.
The rent paid for the pasture land used to graze cattle would increase if:
any of these occurred.
Economic rent refers to the price paid for land and other natural resources that:
are fixed in total supply.
As a proportion of domestic output, taxes in the United States:
are lower than in most other industrially advanced countries.
Refer to the graph above. At equilibrium, the total amount of spending that consumers would be paying for the product is represented by the area:
b + c
The electricians' union is a good example of:
exclusive unionism.
Monopolistic competition resembles pure competition because:
barriers to entry are either weak or nonexistent.
The law of diminishing marginal utility states that:
beyond some point, additional units of a product will yield less and less extra satisfaction to a consumer.
A major criticism of industrial regulation is that:
by allowing a fair return price, it gives natural monopolists little incentive to contain costs.
Anchoring
can influence decision making with irrelevant information.
Susie knows that too many sugary treats, while delicious when eaten, have long-term adverse effects on weight and health. Based on this information, a neoclassic economist would expect Susie to:
carefully weigh the short-term benefits against the long-term costs and make a rational decision about how many treats to eat.
Three major means of collusion by oligopolists are:
cartels, informal understandings, and price leadership.
Marginal revenue is the:
change in total revenue associated with the sale of one more unit of output.
Marginal utility is the:
change in total utility obtained by consuming one more unit of a good.
Critics of a single tax on land oppose the idea because:
changes in land ownership would cause the tax burden to fall unfairly on people who did not receive economic rents.
If a monopolist engages in price discrimination, it will:
charge a higher price where individual demand is inelastic and a lower price where individual demand is elastic.
In 2012, the primary sources of U.S. electricity generation, in order from largest to smallest, were:
coal, natural gas, nuclear, and hydropower.
As a percentage of GDP, U.S. exports are:
considerably lower than in several other industrially advanced nations.
The theory of consumer behavior assumes that:
consumers behave rationally, attempting to maximize their satisfaction.
In the United States, professional football players earn much higher incomes than professional soccer players. This occurs because:
consumers have a greater demand for football games than for soccer games.
In contrast to American firms, Japanese firms frequently make lifetime employment commitments to their workers and agree not to lay them off when product demand is weak. Other things being equal, we would expect Japanese firms to:
continue to produce in the short run at lower prices than would American firms.
The price elasticity of demand for beef is about 0.60. Other things equal, this means that a 20 percent increase in the price of beef will cause the quantity of beef demanded to:
decrease by approximately 12 percent.
An increase in the price of product A will:
decrease the marginal utility per dollar spent on A.
If the demand for product X is inelastic, a 4 percent increase in the price of X will:
decrease the quantity of X demanded by less than 4 percent.
World commodity prices over the past 150 years have:
decreased in the long run despite occasional short-run increases.
A union might increase the demand for the labor services of its members by:
decreasing the prices of complementary inputs.
Suppose an oligopolistic producer assumes its rivals will ignore a price increase but match a price cut. In this case the firm perceives its:
demand curve as kinked, being steeper below the going price than above.
If the price of hand calculators falls from $10 to $9 and, as a result, the quantity demanded increases from 100 to 125, then:
demand is elastic.
According to behavioral economists, people's preferences toward a particular outcome:
depend heavily on the contextual information that defines whether that outcome is a gain or a loss.
Some economists advocate taxes on land because such taxes:
do not affect the supply of land.
A unique characteristic of taxes on economic rents is that such taxes:
do not lead to a reallocation of the resource.
The threat of rejection in market transactions:
does all of these.
According to behavioral economics:
each successive unit of loss hurts, but less than the previous unit.
The price elasticity of demand of a straight-line demand curve is:
elastic in high-price ranges and inelastic in low-price ranges.
If an industrial union is formed to bargain with a monopsonistic employer, then in this labor market:
employment may either increase or decrease.
Suppose the United States eliminates high tariffs on German bicycles. As a result, we would expect:
employment to decrease in the U.S. bicycle industry.
The diamond-water paradox arises because:
essential goods may be cheap while nonessential goods may be expensive.
The benefits-received principle of taxation is most evident in:
excise taxes on gasoline.
Occupational licensing has much the same effect as:
exclusive unionism.
Al regularly pays the full amount of taxes due, even though he could easily hide some of his income and reduce his tax burden, with no risk of getting caught. According to behavioral economics:
fairness and other moral considerations cause Al to act contrary to his pure self-interest.
If the nominal wage rises by 4 percent, and the price level rises by 7 percent, the real wage will:
fall by 3 percent.
The general rule for hiring any input (say, labor) in the profit-maximizing amount is MRC = MRP. This rule takes the special form W = MRP (where W is the wage rate) when the:
firm is hiring labor under purely competitive conditions.
The short run is characterized by:
fixed plant capacity.
Labor unions may attempt to raise wage rates by:
forcing employers, under the threat of a strike, to pay above-equilibrium wage rates.
The study of how people (or firms) behave in strategic situations is called:
game theory.
If demand for a product is elastic, the value of the price elasticity coefficient is:
greater than one.
For a purely competitive firm, total revenue
has all of these characteristics.
For a purely competitive firm, total revenue:
has all of these characteristics.
The long-run trend of real wages:
has been upward.
Overall, economists believe that deregulation of industries formerly subjected to industrial regulation:
has produced large net benefits for consumers and society.
Real wages in the United States in the long run:
have increased at about the same rate as increases in output per worker.
The supply curve of loanable funds is upsloping because:
households are willing to save more at high interest rates than they are at low interest rates.
A central focus of prospect theory is:
how people deal with "bads," as well as how they deal with "goods."
The antitrust laws are based on the:
idea that competition leads to greater economic efficiency than does a monopoly.
Under which of the following situations would a monopolist increase profits by lowering price (and increasing output):
if it discovered that it was producing where MC < MR.
Interlocking directorates are:
illegal under provisions of the Clayton Act of 1914.
In 2012, the United States:
imported more goods than it exported.
To economists, the main difference between the short run and the long run is that:
in the long run all resources are variable, while in the short run at least one resource is fixed.
For an increase in demand, the price effect is smallest and the quantity effect is largest:
in the long run.
In the United States cartels are:
in violation of the antitrust laws.
The marginal productivity theory of income distribution has been criticized because:
income from inherited property is inconsistent with the theory.
If the demand for bacon is relatively elastic, a 10 percent decline in the price of bacon will:
increase the amount demanded by more than 10 percent.
According to economists, gift registries, returning gifts for cash refunds, and "recycling gifts":
increase the efficiency of gift-giving because they allow the recipient to consume goods that provide greater utility and transfer away those goods that are less satisfying.
If the price elasticity of demand for a product is 2.5, then a price cut from $2.00 to $1.80 will:
increase the quantity demanded by about 25 percent.
Advertising can impede economic efficiency when it:
increases entry barriers.
The fact that most medical care purchases are financed through insurance:
increases the amount of health care consumed by reducing the price of additional units of care.
The amount of land covered by forests is:
increasing in places like the United States and Western Europe, while declining in countries in South and Central America.
The incentive function of prices:
indicates that price increases bring forth more of that resource.
The results of running the dictator game experiments thousands of times have revealed to behavioral economists that:
individual feelings about fairness and generosity vary widely across the population.
Cartels are difficult to maintain in the long run because:
individual members may find it profitable to cheat on agreements.
Price-fixing:
is a per se violation of the antitrust laws.
Critics of social regulation argue that it:
is a relatively greater burden for small firms than for large firms.
The Federal Trade Commission:
is empowered to hold public hearings to investigate unfair practices.
If total utility is increasing, marginal utility:
is positive but may be either increasing or decreasing.
As it relates to international trade, dumping:
is the practice of selling goods in a foreign market at less than cost.
It is generally easier to prevent deforestation than fishery collapse because:
it is easier to establish and enforce property rights on national lands than in international waters.
Effective usury laws:
keep some low-income people from obtaining credit and loans.
If the income elasticity of demand for lard is −3.00, this means that:
lard is an inferior good.
Monopolistic competition is characterized by a:
large number of firms and low entry barriers.
The monopolistically competitive seller's demand curve will become more elastic the:
larger the number of competitors.
Suppose the transportation industry has been regulated for many years. Government now proposes to deregulate the industry, only to find that firms in the industry oppose this action. This is consistent with the:
legal cartel theory of regulation.
If technology dictates that labor and capital must be used in fixed proportions, an increase in the price of capital will cause a firm to use:
less labor as a consequence of the output effect.
Suppose firms in a collusive oligopoly decide to establish their prices at a level that discourages new rivals from entering the industry. This is called:
limit pricing.
A fishery is typically identified by:
location and species.
Solar power.
location and species.
A natural monopoly occurs when:
long-run average costs decline continuously through the range of demand.
Monopolistic competition means:
many firms producing differentiated products.
If country A can produce both goods X and Y more efficiently, that is, with smaller absolute amounts of resources, than can country B:
mutually advantageous specialization and trade between A and B may still be possible.
Some nations are increasing the amount of land covered by forests, while others are experiencing rapid deforestation. According to economists, this is largely because:
nations with increasing forest cover treat forests as private property or strictly regulated government property.
We would expect a cartel to achieve:
neither allocative efficiency nor productive efficiency.
Productive inputs that are actually or virtually fixed in supply are known as:
nonrenewable natural resources.
Refer to the diagram. If demand is D2, a tax of X per acre will:
not affect the quantity of land available to society.
Tying agreements:
obligate a purchaser of product X to also buy product Y from the same seller.
Resource pricing is important because:
of all of these reasons.
Pure monopolists may obtain economic profits in the long run because:
of barriers to entry.
Behavioral economists believe that people:
often succumb to temptation.
An industry comprised of a small number of firms, each of which considers the potential reactions of its rivals in making price-output decisions, is called:
oligopoly.
In introducing the opportunity cost of time into the theory of consumer behavior, we find that, all else equal:
one should consume less of time-intensive goods.
A vertical merger involves a combining of one or more firms:
operating at different stages of the production process in a particular industry.
The Clayton Act of 1914:
outlawed price discrimination, tying contracts, acquisition of stocks of competing corporations, and interlocking directorates that lessen competition.
A change in an input price will alter both production costs and the profit-maximizing output. Thus, a decline in the price of capital will reduce production costs, increase the profit-maximizing output, and thereby increase the demand for labor. This describes the:
output effect.
Because of "mental accounting:"
people isolate purchases and sometimes make irrational decisions.
The basic formula for the price elasticity of demand coefficient is:
percentage change in quantity demanded/percentage change in price.
A demand curve that is parallel to the horizontal axis is:
perfectly elastic.
The total supply of land is:
perfectly inelastic.
The three most important sources of federal tax revenue in order of descending importance are:
personal income, payroll, and corporate income taxes.
If a firm is confronted with economic losses in the short run, it will decide whether or not to produce by comparing:
price and minimum average variable cost.
With respect to the pure monopolist's demand curve, it can be said that:
price exceeds marginal revenue at all outputs greater than 1.
The purely competitive employer of resource A will maximize the profits from A by equating the
price of A with the MRP of A.
Interest is the:
price paid for the use of money.
A monopolistically competitive industry combines elements of both competition and monopoly. The monopoly element results from:
product differentiation.
Employers will hire more units of a resource if the:
productivity of the resource increases.
Suppose that a business incurred implicit costs of $500,000 and explicit costs of $5 million in a specific year. If the firm sold 100,000 units of its output at $50 per unit, its accounting:
profits were zero and its economic losses were $500,000.
The U.S. tax-transfer system (as distinct from the tax system alone) is:
progressive
"Player drafts" of professional athletes:
promote monopsony in the hire of professional athletes.
Alex and Ben are both loggers wanting to harvest timber from the same forest. Alex prefers to harvest and replant at a sustainable rate; Ben wants to harvest as many trees as possible to maximize short-run profit, and then move on. They face the same production costs.
property rights are well-defined and enforced.
Assume you are spending your full budget and purchasing such amounts of X and Y that the marginal utility from the last units consumed is 40 and 20 utils respectively. Assume (a) the prices of X and Y are $8 and $4 respectively; (b) it takes 3 hours to consume a unit of X and 1 hour to consume a unit of Y; and (c) your time is worth $2 per hour. You:
should consume less of X and more of Y.
A competitive employer is using labor in such an amount that labor's MRP is $10 and its wage rate is $8. This firm:
should hire more labor because this will increase profits.
Refer to the diagram. At P4, this firm will:
shut down in the short run.
The labor demand curve of a purely competitive seller:
slopes downward because of diminishing marginal productivity.
According to behavioral economists, someone suffering from myopia is most likely to:
spend too much on present consumption and not save enough for the future.
In effect, tariffs on imports are:
subsidies for domestic producers.
A firm will employ more of an input whose relative price has fallen and, conversely, will use less of an input whose relative price has risen. Thus, a fall in the price of capital will increase the relative price of labor and thereby reduce the demand for labor. This describes the:
substitution effect.
The ability-to-pay principle of taxation:
suggests that taxes should vary directly with people's income and wealth.
Total utility may be determined by:
summing the marginal utilities of each unit consumed.
Compared to coffee, we would expect the cross elasticity of demand for:
tea to be positive, but negative for cream.
A normal profit is:
the "price" required to retain entrepreneurial talent in some particular line of production.
A competitive employer should hire additional labor as long as:
the MRP exceeds the wage rate.
The long run is characterized by:
the ability of the firm to change its plant size.
A company has designed an alarm clock that "runs and hides" after going off, forcing the person to get up and find the alarm clock if he or she wants to shut off the alarm. According to behavioral economists:
the alarm clock serves as a precommitment device, helping the user to stick to the originally planned wake-up time.
Entry fees at national parks and monuments are an example of:
the benefits-received principle of taxation.
A manufacturer of frozen pizzas found that total revenue decreased when price was lowered from $5 to $4. It was also found that total revenue decreased when price was raised from $5 to $6. Thus,
the demand for pizza is elastic above $5 and inelastic below $5.
The demand for airline pilots results from the demand for air travel. This fact is an example of:
the derived demand for labor.
Junior collects baseball cards. He owns one Felix Hernandez card that sells in most shops for $15. He is interested in buying a different Felix card that also sells for $15. According to behavioral economics:
the endowment effect would suggest that Junior would not be willing to trade the card he has for the card he doesn't have.
What is the best economic explanation for why a person would drop out of college to take a job or start a business?
the expected future benefits from starting a business now are greater than the costs
If a pure monopolist can price discriminate by separating buyers into two or more groups:
the firm will face multiple marginal revenue curves.
The marginal revenue product schedule is:
the firm's resource demand schedule.
Implicit and explicit costs are different in that:
the former refer to nonexpenditure costs and the latter to monetary payments.
Labor unions are restrained in their wage demands because:
the labor demand curve is downsloping.
The narrower the definition of a product:
the larger the number of substitutes and the greater the price elasticity of demand.
Last month Laura saw the value of her stock portfolio rise by $20,000. This month she saw the value of her portfolio decline by $20,000. According to behavioral economics:
the positive utility Laura received from seeing her portfolio value rise was less than the disutility she felt when its value declined.
Economic or pure rent is:
the price paid for the use of land and other nonreproducible resources.
Price discrimination refers to:
the selling of a given product at different prices to different customers that do not reflect cost differences.
Landowners will not receive any rent so long as:
the supply curve lies entirely to the right of the demand curve.
"Essential" water is cheaper than "nonessential" diamonds because:
the supply of water is great relative to demand and the supply of diamonds is small relative to demand.
In monopsony:
the wage rate paid by the employer varies directly with the number of workers employed.
Refer to the data. Diminishing marginal returns become evident with the addition of the:
third worker.
Economists use the term imperfect competition to describe:
those markets that are not purely competitive.
The MR = MC rule applies:
to firms in all types of industries.
The main purpose of the antitrust laws is:
to prevent the monopolization of industries.
Suppose that, when producing 10 units of output, a firm's AVC is $22, its AFC is $5, and its MC is $30. This firm's:
total cost is $270.
In determining one's personal income tax, taxable income is:
total income less deductions and exemptions.
Firms seek to maximize:
total profit.
The theory of consumer behavior assumes that consumers attempt to maximize:
total utility.
A purely competitive firm should produce in the short run if its total revenue is sufficient to cover its:
total variable costs.
Refer to the data. Average product is at a maximum when:
two workers are hired.
An important economic problem associated with pure monopoly is that, at the profit-maximizing outputs, resources are:
underallocated because price exceeds marginal cost.
Government lotteries are:
used by a large number of states to supplement their tax revenues.
The theory of consumer behavior assumes that consumers attempt to maximize:
utility
