ECON 101 FINAL
A perfectly inelastic demand schedule A) can be represented by a line parallel to the vertical axis. B) can be represented by a line parallel to the horizontal axis. C) rises upward and to the right but has a constant slope. D) cannot be shown on a two-dimensional graph.
A
A public good A) can't be provided to one person without making it available to others as well. B) costs essentially nothing to produce and is thus provided by the government at a zero price. C) generally results in substantial negative externalities. D) can never be provided by a nongovernmental organization.
A
According to prospect theory, firms are more likely to shrink packages than raise prices because A) consumers feel the loss of a price increase more than they feel the loss of buying a smaller package for their money. B) consumers associate smaller packages with higher quality luxury goods. C) they don't understand that consumers recognize price increases easily, regardless of what form they take. D) consumers are generally trying to downsize their purchases and lead simpler lives.
A
Among the following examples, the one that best illustrates a public good is A) the bike paths around a city or town. B) the laptops used by students in a college or university. C) the movies produced by Hollywood companies. D) the airline tickets bought by vacationers
A
An inelastic curve is A) vertical B) horizontal C) upward sloping D) down ward sloping
A
Answer the question on the basis of the following information. TFC = Total Fixed Cost MC = Marginal Cost TVC = Total Variable Cost Q = Quantity of Output P = Product Price Average total cost is ________. A) TFC + TVC/ Q B) TVC - TFC/ Q C) TVC - MC D) TVC/Q
A
Assume that a consumer has a given budget or income of $12 and that she can buy only two goods, apples or bananas. The price of an apple is $1.50 and the price of a banana is $0.75. This means that, in order to buy two bananas, this consumer must forgo A) 1 apple. B) 0.5 apple. C) 0.75 apple. D) 1.5 apples.
A
Ben is exhausting his money income consuming products A and B in such quantities that MUa/Pa= 5 and MUb/Pb = 8. Ben should purchase A) more of B and less of A. B) more of A and less of B. C) more of both A and B. D) less of both A and B.
A
Compared to coffee, we would expect the cross elasticity of demand for A) tea to be positive, but negative for cream. B) both tea and cream to be positive. C) tea to be negative, but positive for cream. D) both tea and cream to be negative.
A
Demand-side market failures occur when A) demand curves don't reflect consumers' full willingness to pay for a good or service. B) government imposes a tax on a good or service. C) demand curves don't reflect the full cost of producing a good or service. D) a good or service is not produced because no one wants it.
A
Economists A) are somewhat arbitrary in assigning independent and dependent variables to the horizontal and vertical axes. B) always put the dependent variable on the horizontal axis and the independent variable on the vertical axis. C) measure the slope of a line differently than do mathematicians. D) always put the independent variable on the horizontal axis and the dependent variable on the vertical axis.
A
For which market model can we not assume a homogeneous product? A) monopolistic competition B) pure monopoly C) oligopoly D) pure competition
A
If a nation restricts trade with other nations, then the most likely effect is A) consumers in the nation are made worse off. B) expanded economic wealth of the nation. C) increased specialization of production. D) lower prices of goods and services in the nation.
A
If all resources used in the production of a product are increased by 20 percent and output increases by 20 percent, then there must be A) constant returns to scale. B) economies of scale. C) increasing average total costs. D) diseconomies of scale.
A
If the demand for farm products is price inelastic, a good harvest will cause farm revenues to A) decrease. B) increase. C) be unchanged. D) either increase or decrease, depending on what happens to supply.
A
If the demand for product X is inelastic, a 4 percent decrease in the price of X will A) increase the quantity of X demanded by less than 4 percent. B) decrease the quantity of X demanded by more than 4 percent. C) increase the quantity of X demanded by more than 4 percent. D) decrease the quantity of X demanded by less than 4 percent.
A
If the representative firm in a purely competitive industry is in short-run equilibrium and, at its current output level, its marginal cost exceeds its average total cost, then we can conclude that A) other firms will enter the industry in the long run. B) the firm is suffering economic losses. C) some firms will exit the industry in the long run. D) the firm is not maximizing profits in the short run.
A
If total utility has reached a maximum level, and assuming that diminishing marginal utility already applies, then what will happen as the consumer consumes additional units of the product? A) Marginal utility of the additional units will turn negative. B) Total utility will increase at a diminishing rate. C) Total utility will turn negative. D) Marginal utility of the additional units will be greater than zero.
A
If variables X and Y are positively correlated, this means that A) causation may or may not exist between X and Y. B) causation necessarily exists, but we don't know whether X or Y is the cause. C) X is the cause of Y. D) Y is the cause of X.
A
In which market model is there mutual interdependence? A) oligopoly B) pure competition C) pure monopoly D) monopolistic competition
A
Increasing marginal cost of production explains A) why the supply curve is upsloping. B) the law of demand. C) why the demand curve is downsloping. D) the income effect.
A
Most economists contend that A) noncash gifts are less efficient than cash gifts. B) government can assess consumer preferences better than can consumers themselves. C) noncash and cash gifts are equally efficient. D) noncash gifts are more efficient than cash gifts.
A
Oftentimes, the socially optimal quantity for a product that imposes external costs on the society is not zero, but something greater than zero. This is because completely eliminating the externality would involve A) a much greater marginal cost than marginal benefit. B) a much greater marginal benefit than marginal cost. C) having surpluses in the market. D) having shortages in the market.
A
One difference between monopolistic competition and pure competition is that A) there is some control over price in monopolistic competition. B) products may be homogeneous in monopolistic competition. C) firms differentiate their products in pure competition. D) monopolistic competition has significant barriers to entry.
A
Productive efficiency refers to A) cost minimization, where P = minimum ATC. B) setting TR = TC. C) maximizing profits by producing where MR = MC. D) production at a level where P = MC.
A
Sony is considering a 10 percent price reduction on its HD TV sets. If the price-elasticity coefficient for the sets in this price range is 0.75, then the price cut will cause A) sales quantity to increase but revenues to decrease. B) sales quantity to decrease but revenues to increase. C) sales quantity to increase and revenues to also increase. D) sales quantity to decrease and revenues to also decrease.
A
Suppose that MUx/Px exceeds MUy/Py. To maximize utility, the consumer who is spending all her money income should buy A) more of X and/or less of Y. B) more of Y only if its price rises. C) less of X only if its price rises. D) more of Y and/or less of X.
A
The main mechanism that regulates the market system is A) competition. B) self-interest. C) freedom of enterprise and choice. D) private property.
A
When the Defense Department ordered 132 new airplanes, the cost per plane was estimated to be $580 million. A cut in the order to 75 planes increased the per plane cost to $800 million. This change in per unit cost can be explained by A) the loss of economies of scale. B) the law of diminishing returns. C) an increase in total fixed cost. D) a move to minimum efficient scale.
A
Which of the following is most likely to be a variable cost? A) fuel and power payments B) interest on business loans C) real estate taxes D) rental payments on IBM equipment
A
"Consumer sovereignty" refers to the A) idea that the pursuit of self-interest is in the public interest. B) idea that the decisions of producers must ultimately conform to consumer demands. C) fact that a federal agency exists to protect consumers from harmful and defective products. D) fact that resource prices are higher than product prices in capitalistic economies.
B
"Variety is the spice of life" is best applied to which market structure?A) pure competition B) monopolistic competition C) monopoly D) oligopoly
B
A consumer is in equilibrium and is spending income in such a way that the marginal utility of product X is 40 units and that of Y is 16 units. If the unit price of X is $5, then the price of Y must be A) $1 per unit. B) $2 per unit. C) $3 per unit. D) $4 per unit.
B
An increase in the demand for a product and a reduction in its costs of production would A) decrease the profits of producers. B) encourage firms to enter an industry. C) encourage firms to leave an industry. D) cause a shortage of the product
B
As output increases, total variable cost A) increases continuously at a decreasing rate. B) increases at a decreasing rate and then at an increasing rate. C) increases at a constant rate. D) increases more rapidly than does total cost.
B
Assume there is no way to prevent someone from using an interstate highway, regardless of whether or not he or she helps pay for it. This characteristic is called A) nondiscrimination. B) nonexcludability. C) nonrivalry. D) nontaxability.
B
Copyrights, Patents, and trademarks are examples of A) public goods. B) property rights. C) capital goods. D) human capital.
B
Diseconomies of scale occur mainly because A) the short-run average total cost curve rises when marginal product is greater than average total cost. B) of the inherent difficulties involved in managing and coordinating a large business enterprise. C) of the law of diminishing returns. D) firms in an industry must be relatively large in order to use the most efficient production techniques.
B
If average variable cost is $74 and total fixed cost is $100 at 5 units of output, then average total cost at this output level is A) $97. B) $94. C) $91. D) $100.
B
If pollution coming from factories is bad, then why would the socially optimal level of pollution not be zero? A) because there are significant social benefits from attaining zero pollution B) because there are significant social costs of achieving zero pollution C) because the factories are privately owned in a market system D) because there are zero benefits from zero pollution
B
If the long-run average total cost curve for a firm is horizontal in the relevant range of production, then it indicates that there A) are economies of scale. B) are constant returns to scale. C) are diseconomies of scale. D) is a minimum efficient scale.
B
In a capitalist system, the decisions and actions of millions of consumers and firms are highly coordinated by A) the state and government. B) markets and prices. C) an international organization. D) a central planning agency.
B
In the circular flow model of the market system, households' major role is to A) sell products and buy resources. B) buy products and sell resources. C) sell both products and resources. D) buy both products and resources.
B
Martha's Milkshake Company buys earthquake insurance from the Stable Ground Insurance Company. Based on this purchase, economists would conclude that A) Martha's has a greater tolerance for earthquake risk than Stable Ground. B) Martha's has a lower tolerance for earthquake risk than Stable Ground. C) Stable Ground believes no damaging earthquakes will occur. D) Martha's believes a damaging earthquake is imminent.
B
Prashanth decides to buy a $75 ticket to a particular New York professional hockey game rather than a $50 ticket for a particular Broadway play. We can conclude that Prashanth A) obtains more marginal utility from the play than from the hockey game. B) has a higher "marginal utility-to-price ratio" for the hockey game than for the play. C) is relatively unappreciative of the arts. D) has recently attended several other Broadway plays.
B
Suppose that as the price of Y falls from $2.00 to $1.90, the quantity of Y demanded increases from 110 to 118. Then the absolute value of the price elasticity (using the midpoint formula) is A) 2.09. B) 1.37. C) 3.94. D) 4.00.
B
The advent of Netflix movie streaming and Redbox kiosks renting DVD and Blu-ray movies have virtually demolished the market for video rentals from brick and mortar stores such as Blockbuster. This is an example of A) the difference between normal and economic profits. B) creative destruction. C) capital accumulation. D) derived demand.
B
The alternative combinations of two goods that a consumer can purchase with a specific money income is shown by A) a consumer expenditure line. B) a budget line. C) a production possibilities curve. D) a demand curve
B
The elasticity of supply of product X is unitary if the price of X rises by A) 5 percent and quantity supplied rises by 7 percent. B) 8 percent and quantity supplied rises by 8 percent. C) 7 percent and quantity supplied rises by 5 percent. D) 10 percent and quantity supplied stays the sam
B
The goal of a rational consumer is to maximize A) the quantities of all goods consumed. B) total utility from all goods consumed. C) the MU/P of all goods consumed. D) marginal utility of all goods consumed.
B
The market system's answer to the fundamental question "How will the goods and services be produced?" is essentially A) "By exploiting labor." B) "In ways that minimize the cost per unit of output." C) "Using the latest technology." D) "With as much machinery as possible."
B
The price elasticity of demand for a popular sporting event is 1.2. If the price of a ticket to this event increases by 10 percent, the quantity of tickets demanded will A) increase by 12 percent. C) increase by 8.3 percent. B) decrease by 12 percent. D) decrease by 8.3 percent.
B
The production possibilities curve A) shows all of those levels of production that are consistent with a stable price level. B) is a frontier between all combinations of two goods that can be produced and those combinations that cannot be produced. C) indicates that any combination of goods lying outside the curve is economically inefficient. D) shows all of those combinations of two goods that are most preferred by society.
B
The total revenue of a purely competitive firm from selling 6 units of output is $48. Based on this information, the unit price of the output must be A) $288. B) $8. C) $54. D) $42.
B
To maximize profit, a pure monopolist must A) produce where average total cost is at a minimum. B) maximize the difference between total revenue and total cost. C) maximize the difference between marginal revenue and marginal cost. D) maximize its total revenue.
B
We would expect the cross elasticity of demand between dress shirts and ties to be A) negative, indicating substitute goods. B) negative, indicating complementary goods. C) positive, indicating complementary goods. D) positive, indicating normal goods.
B
Which is an example of barter? A) a gift of tuition money from parents to their children B) A person trades a desk for a box of tools. C) A person buys clothes at a used clothing store. D) the purchase of stock on the New York Stock Exchange
B
Which of the following best describes the invisible-hand concept? A) The inability to substitute resources creates a conflict between private and public interests and calls for government intervention. B) The desires of resource suppliers and producers to further their own self-interest will automatically further the public interest. C) Central direction by the government will improve resource allocation in a capitalistic economy. D) The market system is the best system for overcoming the scarce resources-unlimited wants problem.
B
Which of the following goods (with their respective income elasticity coefficients in parentheses) will most likely suffer a decline in demand during a recession? A) chicken purchased at the grocery store for preparation at home (+0.25) B) plasma screen and LCD TVs (+4.2) C) dinner at a nice restaurant (+1.8) D) second-hand clothing (-0.6)
B
Which of the following industries most closely approximates pure competition? A) aerospace & defense B) agriculture C) clothing D) utilities
B
Which of the following is associated with macroeconomics? A) an examination of the incomes of professional athletes B) an empirical investigation of the general price level and unemployment rates since 1990 C) a case study of pricing and production in the textbook industry D) a study of the trend of pecan prices since the Second World War
B
While eating at Alex's "Pizza by the Slice" restaurant, Kara experiences diminishing marginal utility. She gained 10 units of satisfaction from her first slice of pizza consumed and would only receive 5 units of satisfaction from consuming a second slice, at the same price. Based on this information, we can conclude that A) Kara will not eat a second slice, even if it is given to her at no charge. B) Alex may have to lower the price to convince Kara to buy a second slice. C) Kara will definitely want to buy a second slice of pizza. D) even if Kara buys a second slice, she will not buy a third slice.
B
"Consumer equilibrium" refers to the situation when the consumer is getting A) equal marginal utility values from each product consumed. B) equal total utility values from each product consumed. C) the highest total utility out of spending a given budget on various goods. D) the highest marginal utility out of spending a given budget on various goods.
C
A decrease in supply, holding demand constant, will cause A) lower prices and a larger quantity sold. B) lower prices and a smaller quantity sold. C) higher prices and a smaller quantity sold. D) higher prices and a larger quantity sold.
C
A negative externality or spillover cost occurs when A) the price of a good exceeds the marginal cost of producing it. B) firms fail to achieve allocative efficiency. C) the total cost of producing a good exceeds the costs borne by the producer. D) firms fail to achieve productive efficiency.
C
A production possibilities curve shows A) that people prefer one of the goods more than the other. B) that resources are unlimited. C) the maximum amounts of two goods that can be produced, assuming the full use of available resources. D) combinations of capital and labor necessary to produce specific levels of output.
C
A purely competitive firm is precluded from making economic profits in the long run because A) it produces a differentiated product. B) its demand curve is perfectly elastic. C) of unimpeded entry to the industry. D) it is a "price taker."
C
An economist for a bicycle company predicts that, other things equal, a rise in consumer incomes will increase the demand for bicycles. This prediction assumes that A) there are many goods that are complementary to bicycles. B) there are few goods that are substitutes for bicycles. C) bicycles are normal goods. D) there are many goods that are substitutes for bicycles.
C
Competition is more likely to exist when A) a government-issued license is required to set up a firm in an industry. B) economic power is concentrated among a few large firms. C) there is easy entry into and exit out of industries. D) the government purchases most goods and services.
C
Competitive firms will always try to earn more than a normal profit by doing the following except A) developing new products. B) adopting better production technology. C) raising the prices of their existing products. D) improving their business organization and operation.
C
Demand-side market failures occur when A) demand curves don't reflect the full cost of producing a good or service. B) a good or service is not produced because no one wants it. C) demand curves don't reflect consumers' full willingness to pay for a good or service. D) government imposes a tax on a good or service.
C
Firms in a purely competitive market seek to maximize A) market share. B) total costs C) total profit. D) total revenue
C
Gigantic State University raises tuition for the purpose of increasing its revenue so that more administration can be hired. GSU is assuming that the demand for education at GSU is A) perfectly elastic. B) decreasing. C) relatively inelastic. D) relatively elastic.
C
Households and businesses are A) sellers in the product and resource markets respectively. B) both buyers in the resource market. C) sellers in the resource and product markets respectively. D) both sellers in the product market.
C
If a monopolist were to produce in the inelastic segment of its demand curve, A) marginal revenue would be positive. B) total revenue would be at a maximum. C) the firm would not be maximizing profits. D) it would necessarily incur a loss.
C
If the income elasticity of demand for store brand macaroni and cheese is 3.00, this means that A) store brand macaroni and cheese is a normal good. B) more store brand macaroni and cheese will be purchased when its price falls. C) store brand macaroni and cheese is an inferior good. D) store brand macaroni and cheese is a substitute for name brand macaroni and cheese.
C
If there is allocative efficiency in a purely competitive market for a product, the maximum price consumers are willing to pay is A) greater than marginal cost. B) equal to the amount of efficiency or deadweight losses. C) equal to the minimum price producers are willing to accept. D) less than marginal benefit.
C
In a market system, which of the following will eliminate high-cost producers and allow only the low-cost producers to survive? A) money B) specialization C) competition D) a sovereign government
C
In the resource market, A) businesses sell services to households. B) businesses borrow financial capital from households. C) households sell resources to businesses. D) firms sell raw materials to households.
C
In the short run, A) one cannot generalize concerning the behavior of TVC as output increases. B) TVC will increase for a time at an increasing rate, but then beyond some point will increase at a diminishing rate. C) TVC will increase for a time at a diminishing rate, but then beyond some point will increase at an increasing rate. D) TVC will increase by the same absolute amount for each additional unit of output produced.
C
In which market model are the conditions of entry into the market easiest? A) monopolistic competition B) pure monopoly C) pure competition D) oligopoly
C
In which two market models would advertising be used most often? A) pure competition and pure monopoly B) pure competition and monopolistic competition C) monopolistic competition and oligopoly D) pure monopoly and oligopoly
C
Long-run equilibrium for a monopolistically competitive firm where economic profits are zero results from A) a perfectly elastic product demand curve. B) rising marginal costs. C) relatively easy entry. D) product differentiation and development.
C
Suppose a firm in a purely competitive market discovers that the price of its product is above its minimum AVC point but everywhere below ATC. Given this, the firm A) minimizes losses by producing at the minimum point of its AVC curve. B) should close down immediately. C) should continue producing in the short run but leave the industry in the long run if the situation persists. D) maximizes profits by producing where MR = ATC.
C
Suppose the supply of product X is perfectly inelastic. If there is an increase in the demand for this product, equilibrium price A) and quantity will both decrease. B) will increase, but equilibrium quantity will decline. C) will increase, but equilibrium quantity will be unchanged. D) will decrease, but equilibrium quantity will increase.
C
The basic formula for the price elasticity of demand coefficient is A) absolute decline in price/absolute increase in quantity demanded. B) absolute decline in quantity demanded/absolute increase in price. C) percentage change in quantity demanded/percentage change in price. D) percentage change in price/percentage change in quantity demanded.
C
The central problem that economics hopes to solve is... A) Opportunity Cost. B) Tradeoffs. C) Scarcity. D) Production Possibilities.
C
The demand for most products varies directly with changes in consumer incomes. Such products are known as A) competitive goods. B) inferior goods. C) normal goods. D) complementary goods.
C
The following is cost information for the Creamy Crisp Donut Company. Entrepreneur's potential earnings as a salaried worker = $50,000 Annual lease on building = $22,000Annual revenue from operations = $380,000Payments to workers = $120,000 Utilities (electricity, water, disposal) costs = $8,000Value of entrepreneur's talent in the next best entrepreneurial activity = $80,000 Entrepreneur's forgone interest on personal funds used to finance the business = $6,000 Creamy Crisp's accounting profit is A) $150,000. B) $380,000. C) $230,000. D) $294,000.
C
The larger the diameter of a natural gas pipeline, the lower is the average total cost of transmitting 1,000 cubic feet of gas 1,000 miles. This is an example of one reason for A) diminishing returns to scale. B) diminishing marginal returns. C) economies of scale. D) increasing marginal cost.
C
The output of digital music players should be A) reduced to zero if their unit costs exceed the unit costs of alternative products. B) increased if marginal costs exceed marginal benefits. C) reduced if marginal costs exceed marginal benefits. D) reduced if marginal benefits exceed marginal costs.
C
When the federal government started requiring restaurants to print calorie counts next to menu items, some people increased their consumption of higher-calorie items. Which of the following best explains this phenomenon? A) Restaurants lowered the prices of healthier items, signaling to consumers that they are less appealing. B) Restaurants cut portion sizes on all items to reduce calorie counts. C) Consumers are more interested in maximizing calories per dollar than health per dollar. D) Consumers at restaurants are systematically irrational.
C
Which characteristic would best be associated with pure competition? A) few sellers B) nonprice competition C) price takers D) product differentiation
C
Which of the following is assumed to be most limited in scope under a market system? A) specialization B) self-interest C) government D) entrepreneurship
C
Which of the following is correct? A) When MP is rising, MC is rising, and when MP is falling, MC is falling. B) When AP is rising, MC is falling, and when AP is falling, MC is rising. C) When MP is rising, MC is falling, and when MP is falling, MC is rising. D) There is no relationship between MP and MC.
C
Which of the following situations is not an example of market failure?A) Ben's Industries is dumping its wastewater into the unregulated river behind the factory. B) Ben's Place is the only restaurant in town, and thus he has significant power to set menu prices. C) Ben cannot afford to buy a high-end Mercedes Benz luxury car. D) Ben's Department Store cannot charge passers-by for using the sidewalk outside the store.
C
Which of the following statements concerning a pure public good is false? A) It is impossible to exclude nontaxpayers from the enjoyment of the public good. B) The private sector does not have an economic incentive to produce a socially optimal amount of a public good. C) All benefits associated with the production and use of a public good are received by the government. D) The availability of a public good to one person simultaneously makes it available to all members of society.
C
Which of the following would be a Free Good. A) Movies. B) Jewelry. C) Water. D) Toothbrushes.
C
Which of the following would be an example of government intervention to correct a market failure caused by buyers having inadequate information about sellers? A) sponsoring legislation to reduce pollution B) requiring all car drivers to buy auto insurance C) licensing of medical doctors and surgeons D) providing unemployment compensation insurance
C
A price ceiling below market price will A) clear the market. B) result in a product surplus. C) induce new firms to enter the industry. D) result in a product shortage.
D
A product has utility if it A) violates the law of demand. B) takes more and more resources to produce successive units of it. C) is useful. D) satisfies consumer wants.
D
A purely monopolistic firm A) earns only a normal profit in the long run. B) has no entry barriers. C) produces a product or service for which there are many close substitutes. D) faces a downsloping demand curve.
D
Amanda buys a ruby for $330 for which she was willing to pay $340. The minimum acceptable price to the seller, Tony, was $140. Amanda experiences A) a producer surplus of $200, and Tony experiences a consumer surplus of $10. B) a consumer surplus of $670, and Tony experiences a producer surplus of $200. C) a producer surplus of $10, and Tony experiences a consumer surplus of $190. D) a consumer surplus of $10, and Tony experiences a producer surplus of $190.
D
Assume a pure monopolist is currently operating at a price-quantity combination on the inelastic segment of its demand curve. If the monopolist is seeking maximum profits, it should A) retain its current price-quantity combination. B) charge a lower price. C) increase both price and quantity sold. D) charge a higher price.
D
Because of unseasonably cold weather, the supply of oranges has substantially decreased. This statement indicates the A) equilibrium quantity of oranges will rise. B) price of oranges will fall. C) demand for oranges will necessarily rise. D) amount of oranges that will be available at various prices has declined.
D
Because successive units of a good produce less and less additional satisfaction, the price must fall to encourage a buyer to purchase more units of the good. This statement is most consistent with which explanation for the law of demand? A) the substitution effect B) the income effect C) the rationing function of prices D) diminishing marginal utility
D
Economies and diseconomies of scale explain A) the profit-maximizing level of production. B) why the firm's short-run marginal cost curve cuts the short-run average variable cost curve at its minimum point. C) the distinction between fixed and variable costs. D) why the firm's long-run average total cost curve is U-shaped.
D
For economists, the word "utility" means A) rationality. B) versatility and flexibility. C) purposefulness. D) pleasure or satisfaction.
D
If A decreases, then B will also decrease. The graph relating the two variables A and B is A) horizontal. B) vertical. C) downward-sloping. D) upward-sloping.
D
If many people in a community get flu shots, the whole community benefits, including those that did not get flu shots. Therefore, not enough people may decide to get the shots. This is one illustration of A) monopoly power due to lack of competition. B) the market allocating resources efficiently. C) supply-side market failure. D) demand-side market failure.
D
If some activity creates external benefits as well as private benefits, then economic theory suggests that the activity ought to be A) taxed. B) prohibited. C) left alone. D) subsidized.
D
If the price elasticity of demand for a product is 2.5, then a price cut from $2.00 to $1.80 will A) increase the quantity demanded by about 250 percent. B) increase the quantity demanded by about 2.5 percent. C) decrease the quantity demanded by about 2.5 percent. D) increase the quantity demanded by about 25 percent.
D
In terms of the circular flow diagram, households make expenditures in the ________ market and receive income through the ________ market. A) capital; product B) resource; product C) product; financial D) product; resource
D
In which market model are the conditions of entry the most difficult?A) monopolistic competition B) pure competition C) oligopoly D) pure monopoly
D
Kara was out jogging and, despite being tired, decided to run one more mile. Based on her actions, economists would conclude that Kara A) was not very tired, so the marginal cost of the extra mile was very low. B) decided that the marginal cost of running one more mile would outweigh the benefit of the additional mile. C) must be an avid runner. D) decided that the marginal benefit of running one more mile would outweigh the cost of the additional mile.
D
Other things equal, which of the following might shift the demand curve for gasoline to the left? A) a large decline in the price of automobiles B) the discovery of vast new oil reserves in Montana C) an increase in the price of train and air transportation D) the development of a low-cost electric automobile
D
Pure monopolists A) are price takers. B) face demand curves that are perfectly inelastic. C) maximize MR. D) operate where P > MC.
D
Specialization is beneficial A) at the individual firm level, but not at the national and international levels. B) only if there are differences in the abilities of resources. C) only as long as money and capital goods are employed. D) at the individual, regional, and even international levels.
D
Suppose that Ms. Thomson is currently exhausting her money income by purchasing 10 units of A and 8 units of B at prices of $2 and $4, respectively. The marginal utility of the last units of A and B are 16 and 24, respectively. These data suggest that Ms. Thomson A) has preferences that are at odds with the principle of diminishing marginal utility. B) should buy less A and more B. C) considers A and B to be complementary goods. D) should buy less B and more A.
D
Suppose that the price of peanuts falls from $3 to $2 per bushel and that, as a result, the total revenue received by peanut farmers changes from $16 to $14 billion. Thus, A) no inference can be made as to the elasticity of demand for peanuts. B) the demand curve for peanuts has shifted to the right. C) the demand for peanuts is elastic. D) the demand for peanuts is inelastic.
D
The demand for a luxury good whose purchase would exhaust a big portion of one's income is A) relatively price inelastic. B) perfectly price elastic. C) perfectly price inelastic. D) relatively price elastic
D
The demand for commodity X is represented by the equation P = 100 - 2Q and supply by the equation P = 10 + 4Q. If demand changes from P = 100 - 2Q to P = 130 - Q, the new equilibrium quantity is A) 15. B) 32. C) 20. D) 24.
D
The long run is characterized by A) the increase in variable cost. B) at least one fixed input. C) the relevance of the law of diminishing returns. D) the ability of the firm to change its plant size.
D
The money income of households consists of all the following, except A) wages. B) interest. C) profits. D) revenues.
D
The sole proprietor of the Milwaukee Machine Company receives all accounting profits earned by her firm. She has a standing salary offer of $35,000 a year to work for a large corporation. If she had invested her capital outside her own company, she estimates that would have returned $22,000 this year. If accounting profits for the year were $50,000, then her economic profits were (based solely on the given figures) A) $57,000. B) $107,000. C) $50,000. D) $7,000.
D
When economists speak of "demand" in a particular market, they refer to A) one point on the demand curve. B) one price-quantity combination on the demand schedule. C) how much of an item buyers want to buy at a given price. D) the whole demand curve or schedule.
D
When the marginal benefit of an output exceeds the marginal cost, A) increasing the production of that output would increase the deadweight loss. B) reducing the production of that output would reduce efficiency losses. C) production of that output should be decreased, in order to achieve efficiency. D) production of that output should be increased, in order to achieve efficiency.
D
Which of the following is an example of market failure? A) negative externalities B) public goods C) positive externalities D) all of these
D
Which of the following is true of normal profits? A) They are excluded from a firm's costs of production. B) They are what attract other firms to enter an industry. C) They are zero under pure competition in the long run. D) They are necessary to keep a firm in the industry in the long run.
D