Econ 201 Final Study Guide
Which of the following factors will NOT cause a shift in the demand for a good? A) A change in the market price of the good B) A change in consumer incomes C) A change in the number of consumers D) A change in tastes and preferences
A) A change in the market price of the good
Which of the following statements is true? A) As the rental prices of downtown apartments rise, only workers with the highest opportunity cost of time will be willing to rent them. B) Optimizers with the lowest opportunity cost of time push up the rental price of apartments with the lowest commute time. C) Optimizers with the highest opportunity cost of time push up the rental price of apartments with the highest commute time. D) As the rental prices of downtown apartments rise, only workers with the lowest opportunity cost of time will be willing to rent them.
A) As the rental prices of downtown apartments rise, only workers with the highest opportunity cost of time will be willing to rent them.
Which of the following statements is true of optimization? A) Economic agents who optimize attempt to choose the best feasible option, given the information that they have. B) Individuals who optimize do not consider costs when choosing the most feasible alternative. C) Optimization analysis only relates to the financial budget of an economic agent. D) Economic agents can optimize only when they are able to perfectly estimate all future costs and benefits.
A) Economic agents who optimize attempt to choose the best feasible option, given the information that they have.
Which of the following is true? A) Economic profits = Accounting profits — Implicit costs B) Accounting profits = Revenues — Implicit costs — Explicit costs C) Accounting profits = Revenues — Implicit costs D) Economic profits = Revenues— Explicit costs
A) Economic profits = Accounting profits — Implicit costs
Scenario: Two firms in a market sell identical goods and charge a price of $5 per unit. However, the cost of a crucial input used in producing these goods has increased. As a result, both firms are considering increasing the price of the good to $6. If the firms do not raise their prices at the same time, the firm that raises the price stands to lose market share. The payoff matrix shows the respective payoffs on the basis of the prices charged by each firm. Here, payoffs denote the number of units sold by each firm. The first number listed in each cell is the payoff to the row player, and the second number listed is the payoff to the column player. Refer to the scenario above. Which of the following is true in this case? A) Firm 1ʹs dominant strategy is to charge $5. B) Firm 1ʹs dominant strategy is to charge $6. C) This game does not have a dominant strategy equilibrium. D) Firm 2ʹs dominant strategy is to charge $6.
A) Firm 1ʹs dominant strategy is to charge $5.
Which of the following is true of perfect competition in the long run? A) Firms earn zero economic profit because of free entry and exit of firms. B) Firms earn negative economic profit because of free entry and exit of firms. C) Firms earn positive economic profit because of economies of scale. D) Firms earn positive accounting profit because of government regulations.
A) Firms earn zero economic profit because of free entry and exit of firms.
Which of the following statements identifies a difference between optimization using total value and optimization using marginal analysis? A) In many cases, optimization using marginal analysis is faster and easier than optimization using total value. B) Optimization using marginal analysis compares the net benefit of different alternatives, whereas optimization using total value compares only the cost involved in different alternatives. C) In most cases, optimization using total value is faster and easier than optimization using marginal analysis. D) Optimization using marginal analysis compares only the cost involved in different alternatives, whereas optimization using total value compares the net benefit of different alternatives.
A) In many cases, optimization using marginal analysis is faster and easier than optimization using total value.
Which option correctly sorts different market structures in terms of competitiveness, from the most competitive to the least? A) Perfect competition, monopolistic competition, oligopoly, monopoly B) Perfect competition, oligopoly, monopolistic competition, monopoly C) Perfect competition, monopolistic competition, monopoly, oligopoly D) Monopolistic competition, perfect competition, monopoly, oligopoly
A) Perfect competition, monopolistic competition, oligopoly, monopoly
_________ are costs that, once committed, can never be recovered and should not affect current and future production costs. A) Sunk costs B) Variable costs C) Opportunity D) Marginal costs costs
A) Sunk costs
Scenario: Your car broke down while you were driving to the office one morning. You took it to the nearest service center and were told by the mechanic that you need to pay $500 for the repair. You are uncertain about whether to trust him. If you do not trust him, you have to take it to another service center, which is far away and inconvenient. If you trust him, he can either cooperate or defect (do an honest job or not). If he does an honest job, both of you will gain from the trade. If he does not do an honest job, he will gain $500 while you will lose your money. Clearly, he will gain more by defecting rather than by cooperating with you. Refer to the scenario above. Which of the following is true? A) The equilibrium outcome in this case is socially inefficient. B) The equilibrium outcome in this case is both equitable and socially efficient. C) The equilibrium outcome in this case is equitable. D) The equilibrium outcome in this case is socially efficient but not equitable.
A) The equilibrium outcome in this case is socially inefficient.
Tom and Billy are playing a game. They both toss a coin simultaneously. If the results of the tosses are the same, both heads or both tails, Tom wins. If the results of the tosses are different, one heads and one tails, Billy wins. This is an example of ________. A) a zero-sum game B) the prisonersʹ dilemma C) an extensive-form game D) a variable-sum game
A) a zero-sum game
Under the dominant-firm (ʺGodfatherʺ) price leadership model, A) all firms but the dominant firm are price takers. B) the market can be characterized as a balanced oligopoly. C) the demand curve faced by the dominant firm is steeper than the market demand curve. D) All of the above are correct.
A) all firms but the dominant firm are price takers.
When price discrimination does not increase output, it increases a monopolyʹs profits because it ________. A) allows the firm to capture some consumer surplus B) increases the willingness of households to pay for a good C) allows the firm to exploit economies of scale more fully D) shifts the demand curve the firm faces
A) allows the firm to capture some consumer surplus
Fair-returns pricing describes a situation in which government regulation of price sets the monopolistʹs price at ________. A) average total cost B) minimum average total cost C) marginal cost D) minimum average variable cost
A) average total cost
In a market with asymmetric information, ________. A) buyers and sellers have different information about the good being traded B) people tend to overuse a resource is such a way that it gets exhausted C) people with an informational disadvantage experience positive externalities D) sellers have very low bargaining power
A) buyers and sellers have different information about the good being traded
Paternalism is the view that A) consumers do not always know what is best for them, and the government should encourage or induce them to change their actions B) the government should impose a tax on an economic activity only if it generates a negative externality C) producers do not always have the resources required for the production of a good, and the government should provide them with these resources D) the government has the supreme power to decide which goods are to be taxed and which are to be subsidized
A) consumers do not always know what is best for them, and the government should encourage or induce them to change their actions
A price floor set above the equilibrium price leads to a(n) A) excess supply of goods in the market B) excess demand for goods in the market C) positive externality D) increase in social well—being
A) excess supply of goods in the market
In economics, ________ refers to a preference for equal outcomes in a target population. A) fairness B) liberalism C) rationalism D) randomness
A) fairness
Each member in a group might do what's best for himself or herself instead of behaving in a way that optimizes the well-being of the entire group. This gives rise to the problem of A) free riding B) Pareto inefficiency C) disequilibrium D) irrational behavior
A) free riding
The buyers of a good will want to purchase it as long as their willingness to pay for the good is A) greater than or equal to the price B) less than the price C) greater than zero D) equal to zero
A) greater than or equal to the price
An omitted variable is a variable that A) has been left out, and if included, would explain why the variables considered in a study are correlated B) does not cause other variables in a study to change when it changes C) is removed from a study as it can lead to the problem of reverse causality D) is purposely left out as it does not aid an economic analysis
A) has been left out, and if included, would explain why the variables considered in a study are correlated
Your neighborʹs 10-year-old son has come to your house to collect money for a relief fund for hurricane victims. You were initially unwilling to contribute but agreed to donate when you discovered that he had already collected money from all your neighbors. This is an example of ________. A) impure altruism B) pure altruism C) rationalism D) liberalism
A) impure altruism
The short-run supply curve of a competitive firm is the portion of A) its marginal cost curve that lies above its average variable cost curve B) its average cost curve that lies below its marginal cost curve C) its marginal cost curve that lies below its average cost curve D) its average cost curve that lies above its marginal cost curve
A) its marginal cost curve that lies above its average variable cost curve
If workers are optimizing their total benefit, they will consume leisure until their ________. A) marginal benefit of leisure equals their wage B) marginal cost of leisure equals their wage C) value of marginal product of labor equals their wage D) marginal product of labor equals their wage
A) marginal benefit of leisure equals their wage
While making a purchase decision, a buyer should buy the good that yields the highest A) marginal benefit per dollar spent B) average benefit per dollar spent C) total utility per dollar spent D) average benefit plus marginal benefit per dollar spent
A) marginal benefit per dollar spent
A(n) _________ is a group of buyers and sellers who are trading goods and/or services. A) market B) enterprise C) government D) firm
A) market
When two firms in a perfectly competitive market seek to maximize profit in the long run, they eventually end up A) minimizing the total cost of production B) producing the same level of output C) earning the same level of profits D) producing at a sub-optimal level
A) minimizing the total cost of production
The Principle of Optimization at the Margin states that A) moving toward the optimal alternative makes the decision maker better off and moving away from it makes him worse off B) moving toward the optimal alternative makes the decision maker worse off and moving away from it makes him better off C) an optimal alternative has the lowest indirect costs in comparison to other feasible alternatives D) an optimal alternative has the highest net benefits in comparison to other feasible alternatives
A) moving toward the optimal alternative makes the decision maker better off and moving away from it makes him worse off
A green pasture has turned barren due to overgrazing. This has happened because the pasture was A) non-excludable but rival B) excludable and rival C) excludable but non-rival D) non-excludable and non-rival
A) non-excludable but rival
Scenario: Neil and Claire are playing a game. Neil has been given five cookies and has been asked to decide how many he would like to give Claire. Claire has to decide whether to accept Neilʹs offer or reject it. Refer to the scenario above. In equilibrium, Neil will give ________ to Claire if no other factors such as fairness are at work. A) one cookie B) five cookies C) four cookies D) two cookies
A) one cookie
Greenaqua Corp. was given the exclusive right to produce and sell its newly introduced water purifier for 20 years. The right granted to Greenaqua is an example of a ________. A) patent B) trademark C) blueprint D) copyright
A) patent
A change in the slope of a consumer's budget constraint indicates a change in the A) price of either good purchased by the consumer B) consumer's tastes and preferences C) level of consumer satisfaction obtained from the consumption of both goods D) consumer's income
A) price of either good purchased by the consumer
As the number of firms in an oligopolistic market increases, ________. A) prices tend to decline toward marginal cost B) the market demand for a good tends to fall C) prices tend to rise above marginal cost D) the profits earned by firms tend to rise
A) prices tend to decline toward marginal cost
If the rental price of physical capital rises, the firmʹs ________. A) quantity demanded of physical capital will fall B) demand for physical capital will increase C) quantity demanded of physical capital will increase D) demand for physical capital will fall
A) quantity demanded of physical capital will fall
If firms in a perfectly competitive industry are earning positive economic profits in the short run, we would expect firms to enter this industry and cause the market supply curve to A) shift right until price = minimum average total cost B) shift right until price = minimum average variable cost C) shift left until price = minimum average total cost D) shift left until price = minimum average variable cost
A) shift right until price = minimum average total cost
The main source of natural market power for a monopoly firm is ________. A) the existence of economies of scale in production B) government-regulated pricing policy C) patents and copyrights D) the price elasticity of demand for the product produced by the firm
A) the existence of economies of scale in production
Willingness to accept is A) the lowest price that a producer is willing to receive to sell an extra unit of a good B) always lower than the marginal cost of production C) always higher than the marginal cost of production D) The highest price that a producer is willing to receive to sell an extra unit of a good
A) the lowest price that a producer is willing to receive to sell an extra unit of a good
If positive externalities are present in a free market, at any output level.... A) the marginal social benefit of production exceeds the marginal private benefit B) the marginal cost of production equals the average cost of production C) the marginal private benefit from production equals the marginal social benefit D) the marginal social cost of production exceeds the marginal private cost
A) the marginal social benefit of production exceeds the marginal private benefit
The demand curves for good A and B are depicted in the following graph. We can conclude that A) the price elasticity of demand for good A is larger than good B B) good A is perfectly elastic C) good A is perfectly inelastic. D) the price elasticity of demand for good A is smaller than good B
A) the price elasticity of demand for good A is larger than good B
A surplus occurs in a market when A) the price is higher than the equilibrium price B) the marginal cost of production is negligible C) demand exceeds supply D) the price is lower than the equilibrium price
A) the price is higher than the equilibrium price
A production function establishes the relationship between A) the quantity of inputs used and the quantity of output produced B) the market price of a good and the quantity of output supplied C) the market price of a good and the sales revenue generated D) the quantity of output produced and a firm's profit
A) the quantity of inputs used and the quantity of output produced
In equilibrium, A) the ratio of marginal benefits to price should be identical across all goods B) the ratio of total benefits to income should be identical across all goods C) the ratio of total benefits to price should be identical across all goods D) the ratio of marginal benefits to income should be identical across all goods
A) the ratio of marginal benefits to price should be identical across all goods
The following table shows the total benefit that Jenny derives from consuming different quantities of chocolate. Quantity of Chocolate Consumed Total Benefit ($) 1 10 2 18 3 24 4 29 5 30 Refer to the table above. What is the marginal benefit that Jenny derives from the fifth unit of chocolate? A) $30 B) $1 C) $0 D) $6
B) $1
April runs a small bakery in northern Minnesota. Her most popular item is her homemade cranberry scone. As a pricing experiment, April raises the price of her raspberry scones by 5 percent and sees daily sales fall by 2 percent. From this experiment, April can estimate the price elasticity of demand for her cranberry scones as approximately A) 2 percent B) 0.4 percent C) 2.5 percent D) 5 percent
B) 0.4 percent
Which of the following statements is true? A) A consumer's tastes and preferences are not revealed through her buying decisions and consumption patterns. B) A consumer's tastes and preferences determine the satisfaction she receives from consumption. C) A consumer's tastes and preferences do not play an important role in arriving at a buying decision. D) A consumer's tastes and preferences do not change over time.
B) A consumer's tastes and preferences determine the satisfaction she receives from consumption.
Which of the following is a problem that arises in a health insurance market? A) There are a large number of buyers of various insurance programs. B) A disproportionate number of high-risk individuals tend to buy insurance. C) Only risk-averse individuals buy insurance. D) A fierce competition exists between insurance providers.
B) A disproportionate number of high-risk individuals tend to buy insurance.
Which of the following best describes equilibrium? A) A situation where the government intervenes to allocate resources B) A situation where no economic agent would benefit by changing his or her behavior C) A situation where only one individual or firm makes an optimal decision D) A situation where economic agents do not optimize as they do not have perfect information
B) A situation where no economic agent would benefit by changing his or her behavior
If Project X has a cost of $6 and provides a benefit of $10 and Project Y has a cost of $25 and provides a benefit of $27, which of the following statements is true? A) Switching from Project X to Project Y increases net benefit by $2. B) An individual can optimize by choosing Project X. C) Switching from Project Y to Project X decreases net benefit by $2. D) An individual can optimize by choosing Project Y.
B) An individual can optimize by choosing Project X.
Which of the following is the best description of the Coase Theorem? A) Public goods are over—provided by the private market. B) Bargaining between private parties to an economic exchange results in an efficient allocation of resources. C) Only the government can force private parties to internalize externalities. D) Tariffs can improve economic efficiency.
B) Bargaining between private parties to an economic exchange results in an efficient allocation of resources.
________ is the process of determining the terms of exchange by individual negotiations between a buyer and a seller. A) Collective bargaining B) Bilateral bargaining C) Backward induction D) Arbitration
B) Bilateral bargaining
Which of the following statements correctly describes perfectly competitive market equilibrium? A) There is always excess supply or excess demand when the competitive market is in equilibrium. B) Competitive markets converge to the price at which quantity supplied and quantity demanded are equal. C) Multiple equilibriums are possible for a given set of demand and supply curves in a competitive market. D) Government intervention is necessary for the competitive market to reach equilibrium.
B) Competitive markets converge to the price at which quantity supplied and quantity demanded are equal.
________occur when average total cost falls as the quantity produced increases. A) Decreasing marginal returns B) Economies of scale C) Increasing marginal returns D) Diseconomies of scale
B) Economies of scale
Kim is participating in an auction in which bids are placed publicly and the price of the good being auctioned increases until there is only one standing bid. This is an example of a(n) ________ auction. A) second-price B) English C) Dutch D) first-price
B) English
Which of the following correctly identifies an argument against free trade? A) Free trade limits the bundle of goods and services available in smaller countries. B) Infant domestic industries fail to compete successfully with the advanced foreign competitors. C) Buyers in importing countries suffer losses due to free trade. D) Free trade leads to a loss of revenue for exporting countries.
B) Infant domestic industries fail to compete successfully with the advanced foreign competitors.
Sarah has to choose between renting a hotel room for 2 days and renting a hotel room for 3 days. If Sarah is optimizing using marginal analysis, then which of the following statements is true? A) She will rent the hotel room for 3 days if the cost of staying for the first 2 days is less than the cost of staying for the third day. B) She will rent the hotel room for 3 days if the benefit of staying for the third day exceeds the cost of staying for the third day. C) She will rent the hotel room for 3 days if the net benefit of staying for 3 days exceeds the net benefit of staying for 2 days. D) She will rent the hotel room for 3 days if the benefit of staying for the third day exceeds the benefits of staying for the first 2 days
B) She will rent the hotel room for 3 days if the benefit of staying for the third day exceeds the cost of staying for the third day.
An individual pays $100 every month as rent for an apartment, and his monthly opportunity cost of commuting from the apartment to his place of work is $40. Which of the following statements is then true? A) The indirect cost of renting the apartment is $140 B) The direct cost of renting the apartment is $100, whereas the indirect cost of renting the apartment is $40 C) The direct cost of renting the apartment is $140 D) The direct cost of renting the apartment is $40, whereas the indirect cost of renting the apartment is $100
B) The direct cost of renting the apartment is $100, whereas the indirect cost of renting the apartment is $40
Which of the following statements is true about the income elasticity of demand? A) The income elasticity of demand for inferior goods is always positive. B) The income elasticity of demand for normal goods is always positive. C) The income elasticity of demand for normal goods is always zero. D) The income elasticity of demand for inferior goods is always zero.
B) The income elasticity of demand for normal goods is always positive.
Which of the following is the best definition of an externality? A) When government intervene in a market reduces consumer surplus B) When an economic activity imposes spillover costs or benefits on a third party C) When a worker takes a job "off the books" to avoid paying taxes D) When firms sell products at a price greater than marginal cost
B) When an economic activity imposes spillover costs or benefits on a third party
Scenario: Your car broke down while you were driving to the office one morning. You took it to the nearest service center and were told by the mechanic that you need to pay $500 for the repair. You are uncertain about whether to trust him. If you do not trust him, you have to take it to another service center, which is far away and inconvenient. If you trust him, he can either cooperate or defect (do an honest job or not). If he does an honest job, both of you will gain from the trade. If he does not do an honest job, he will gain $500 while you will lose your money. Clearly, he will gain more by defecting rather than by cooperating with you. Refer to the scenario above. Which of the following is likely to happen if the service center has a reputation for trustworthiness? A) You will trust the mechanic, but he will defect. B) You will trust the mechanic, and he will cooperate. C) Neither of you will gain from trade. D) Only the mechanic will gain.
B) You will trust the mechanic, and he will cooperate.
An industry is deemed concentrated when ________. A) most of the firms in that industry earn zero economic profits in the long run B) a few firms account for a large fraction of the total sales in that industry C) each firm in that industry has a small market share D) all the firms in that industry charge a price lower than the average cost of production
B) a few firms account for a large fraction of the total sales in that industry
The proposed merger of Sprint and T-Mobile is an example of: A) a vertical merger B) a horizontal merger C) a leveraged buyout D) a conglomerate merger
B) a horizontal merger
Beth has moved into a new house. Most people living in her neighborhood go for a jog early in the morning. Although Beth had always been a late riser, she has started getting up early for a jog after moving into her new house. This is an example of ________. A) adverse selection B) a peer effect C) moral hazard D) a negative externality
B) a peer effect
A model refers to A) facts, measurements, or statistics that describe the world B) a simplified description, or representation, of reality C) a set of facts established by observation and measurement D) a perfect replica of reality
B) a simplified description, or representation, of reality
You are on a vacation in a foreign country. Because it is your first visit to the country, you do not know much about the tourist spots. Therefore, you decide to ask the manager of the hotel about popular tourist places. He tells you that there is a waterfall and a beautiful park close to the hotel that you can visit. You are wondering which place to go to when you overhear some of the tourists planning a trek to one of the falls. You decide to join them. This is an example of ________. A) adverse selection B) an information cascade C) a pecuniary externality D) moral hazard
B) an information cascade
In a typical cartel agreement, the cartel maximizes profit when it A) behaves as a duopoly B) behaves as a monopoly C) behaves as a perfectly competitive firm. D) is flexible in enforcing production targets.
B) behaves as a monopoly
In a Dutch auction, the ________ wins the good. A) second bidder B) bidder who stops the auction C) bidder with the lowest value for the good D) bidder who bids up to his value for the good
B) bidder who stops the auction
An open-outcry auction is an auction where ________. A) public goods are sold B) bidders know about one anotherʹs bids C) bids are placed privately D) free goods are distributed among the general public
B) bidders know about one anotherʹs bids
A rise in the price of flour, used in making cakes, is likely to _________ of cakes. A) increase the quantity supplied B) decrease the supply C) decrease the quantity supplied D) increase the supply
B) decrease the supply
If firms in a perfectly competitive market are realizing economic losses in the short run, A) entry will occur, the market supply curve will shift out, and the market price will fall B) exit will occur, the market supply will shift in, and the market price will rise C) exit will occur, the market supply will shift in, and the market price will fall D) entry will occur, the market supply curve will shift out, and the market price will rise
B) exit will occur, the market supply will shift in, and the market price will rise
A(n) ________ is any good that is produced domestically but sold abroad, and a(n) ________ is any good that is produced abroad but sold domestically. A) import; export B) export; import C) public good; private good D) private good; public good
B) export; import
Suppose you and your roommate are trying to decide how to divide up the remaining slice of pizza left over from the night before. You assert that because you went down to the dorm lobby and picked up the pizza, you get to ʺcut and choose.ʺ This is an example of ________. A) backward induction B) first-mover advantage C) a game tree D) commitment
B) first-mover advantage
Assume that the supply curve for a commodity shifts to the left and the demand curve shifts to the right, and the shift in demand is greater than the shift in supply. Then in comparison to the initial equilibrium, the new equilibrium will be characterized by a A) higher price and a lower quantity B) higher price and quantity C) lower price and quantity D) lower price and a higher quantity
B) higher price and quantity
In a first-price auction, the ________ bidder wins the good being auctioned. A) lowest B) highest C) second-highest D) first
B) highest
Economics is primarily the study of A) the mental functions and behavior of individuals and groups B) how agents choose to allocate scarce resources and how these choices affect society C) the state, nation, government, and politics and policies of governments D) the problems related to the existence and evolution of society
B) how agents choose to allocate scarce resources and how these choices affect society
A Pigouvian tax is a tax designed to A) induce the producers generating positive externalities to reduce production B) induce the producers generating negative externalities to reduce production C) force the producers to stop the production of a good in the short run D) induce the consumers of a good to reduce their consumption of the good
B) induce the producers generating negative externalities to reduce production
Encouraging the formation of monopolies provides firms an incentive to ________. A) increase social surplus B) innovate C) hire fewer resources in production D) decrease deadweight loss
B) innovate
A firm is likely to pay high efficiency wages when ________. A) the minimum wages are set above the equilibrium wage rate B) it is not easy to monitor workers C) it is easy to monitor workers D) there is excess supply of labor in the labor market
B) it is not easy to monitor workers
The decision rule for a profit-maximizing firm operating in a competitive market to hire an additional worker is that the value of the ________. A) average product of the worker being hired should be equal to the wage rate B) marginal product of the worker should be equal to or greater than the wage rate C) marginal product of the worker should be equal to or less than the wage rate D) average product of the worker being hired should be less than the wage rate
B) marginal product of the worker should be equal to or greater than the wage rate
State provision of free healthcare may encourage individuals to engage in unhealthy behavior, such as excessive smoking or the consumption of alcohol. This is an example of ________. A) adverse selection B) moral hazard C) anchoring D) a positive externality
B) moral hazard
When two variables move in opposite directions, they are said to be A) equivalent B) negatively correlated C) positively correlated D) uncorrelated
B) negatively correlated
An outcome is Pareto efficient if A) an individual can be made better off without making someone else worse off B) no individual can be made better off without making someone else worse off C) the costs of the outcome are equally shared by all participants D) the benefits of the outcome are equally distributed among all participants
B) no individual can be made better off without making someone else worse off
A best response is ________. A) one playerʹs optimal action choice taken irrespective of the action of the other player B) one playerʹs optimal action choice taking the other playerʹs action as given C) an action choice that results in equal payoffs to all the players in a game D) an action choice that always results in a zero payoff to the opponent
B) one playerʹs optimal action choice taking the other playerʹs action as given
Jack wants to buy a new house. But the surge in housing demand over the past few months has led to a sharp increase in housing prices, making it impossible for him to buy one on his current income. This is an example of a A) conspicuous externality B) pecuniary externality C) negative externality D) positive externality
B) pecuniary externality
The marginal income tax rate is the A) total revenue received by the government divided by the number of taxpayers B) percentage of the last dollar earned that a household pays in taxes C) difference between the highest and lowest income tax rates charged by a state D) total tax paid by an individual divided by the total income earned
B) percentage of the last dollar earned that a household pays in taxes
Taxes levied on goods and services transported across political boundaries are referred to as A) transport taxes B) tariffs C) service taxes D) value added taxes
B) tariffs
In a market with asymmetric information, hidden actions exist if ________. A) the production or consumption of a good gives rise to negative externalities B) the buyer or the seller takes actions that are relevant for, but not observed by, the other party C) the value of a good to a seller is greater than its value to a buyer D) the production or consumption of a good gives rise to positive externalities
B) the buyer or the seller takes actions that are relevant for, but not observed by, the other party
Bringing water from people who are not thirsty to people who are thirsty using a leaky bucket is an illustration of.... A) costs in the regulation of an economy B) the efficiency costs involved in the redistribution of income C) forgone tax revenues resulting from an inefficient tax system D) a loss of efficiency due to free markets
B) the efficiency costs involved in the redistribution of income
The slope of a production possibility curve represents A) the total cost of producing a given level of output B) the opportunity cost of producing one more unit of a good in terms of the forgone production of the other good C) combinations of two goods that are not attainable with existing technology D) the rate at which people in an economy would like to bade one good for another
B) the opportunity cost of producing one more unit of a good in terms of the forgone production of the other good
The demand for a good is elastic. This means that if there is a 10% change in price of this good, A) the quantity demanded will change 10% as well B) the quantity demanded will change more than 10% C) the quantity demanded will change less than 10% D) the quantity demanded will not change at all
B) the quantity demanded will change more than 10%
The winner of a second-price auction pays an amount equal to ________. A) half of his bid B) the second-highest bid C) the lowest bid D) his valuation of the good
B) the second-highest bid
If prices are held below the equilibrium price... A) all firms will earn positive economic profits B) there will be a shortage in the market C) there will be a surplus in the market D) social surplus will be maximized
B) there will be a shortage in the market
Which of the following correctly completes the following table? High Excludability Low Excludability High Rivalry x y Low Rivalry z w A) x = Public Good; y = Private Good; z = Common Pool Resource; w = Club Good B) x = Private Good; y = Common Pool Resource; z = Club Good; w = Public Good C) x = Private Good; y = Public Good; z = Club Good; w = Common Pool Resource D) x = Public Good ; y= Common Pool Resource; z = Private Good; w = Club Good
B) x = Private Good; y = Common Pool Resource; z = Club Good; w = Public Good
Scenario: Tom, Pat, Arthur, and Julie are participating in a second-price auction for a good. Tom values the good at $150, Pat values it at $180, Arthur values it at $250, and Julie values it at $200. Refer to the scenario above. The winner of this auction will earn a surplus of ________ if he or she follows his or her dominant strategy. A) $100 B) $200 C) $50 D) $400
C) $50
The following figure shows the demand curves for pens for two consumers. Assuming that the market consists of only these two consumers, what is the market demand for pens when the price is $4? A) 15 units B) 40 units C) 65 units D) 25 units
C) 65 units (25 units + 40 units)
Scenario: Mike wants to buy an ancient painting from a curator. Mike values the original painting at $50,000, while he does not have any value for a fake one. However, he cannot differentiate between the original painting and a fake painting. Refer to the scenario above. If the curator values the painting at $45,000, which of the following problems is likely to arise? A) The tragedy of the commons B) The paradox of thrift C) Adverse selection D) The free-rider problem
C) Adverse selection
Which of the following is likely to shift the market demand curve for school textbooks to the right? A) An increase in school tuition fees B) A fall in the total income of all consumers C) An increase in the enrollment rates in high schools D) A fall in the price of school textbooks
C) An increase in the enrollment rates in high schools
Which of the following statements best describes an inferior good? A) An inferior good is a good that is rationed by the government. B) An inferior good is a good that is sold at a subsidized price. C) An inferior good is a good whose demand decreases with an increase in consumers' income. D) An inferior good is a good whose quantity supplied always exceeds its quantity demanded.
C) An inferior good is a good whose demand decreases with an increase in consumers' income.
Why would a firm decide to produce a positive quantity of a output even though it makes negative profits by doing so? A) Because the price is high enough to cover the average total cost. B) A firm would never produce when profit is negative. C) Because the price is high enough to cover the average variable cost. D) Because the price is high enough to cover the average fixed cost.
C) Because the price is high enough to cover the average variable cost.
If a nation opens up to free trade and becomes an importer of goods, which of the following is then true? A) The nation as a whole loses. B) Buyers lose. C) Buyers gain. D) Sellers gain.
C) Buyers gain.
________ is a tendency to search for information that reaffirms individualsʹ own beliefs, thus entrenching them further in their own prejudices. A) Negativity bias B) Attenuation bias C) Confirmation bias D) Attentional bias
C) Confirmation bias
Equity refers to A) Making the economic pie as large as possible B) Ensuring that all producer surplus is transferred to consumers C) Distributing resources across society (how the economic pie is divided) D) Minimizing deadweight loss
C) Distributing resources across society (how the economic pie is divided)
Which one of the following characteristics of a market would you expect to be inconsistent with price-taking behavior? A) Each firm behaves as if it faces a perfectly elastic demand curve. B) Each firm's share of total industry output is insignificant. C) Each firm's product is distinguishable from that of its competitors. D) There are a large number of firms in the industry.
C) Each firm's product is distinguishable from that of its competitors.
Which of the following statements is true? A) Firms are the suppliers in the market for labor as well as in the market for consumer goods. B) Firms are the suppliers in the market for labor, whereas they are the demanders in the market for consumer goods. C) Firms are the demanders in the market for labor, whereas they are the suppliers in the market for consumer goods. D) Firms are the demanders in the market for labor as well as in the market for consumer goods.
C) Firms are the demanders in the market for labor, whereas they are the suppliers in the market for consumer goods.
Brand multiplication in oligopoly occurs due to the desire of firms to: A) Satisfy consumersʹ changing tastes. B) Keep demand highly elastic to maintain maximum profits. C) Increase market share without lowering prices. D) Lower price and increase output and profit.
C) Increase market share without lowering prices.
Which of the following is true of protectionism? A) It lowers prices for domestic consumers and also reduces social surplus. B) It increases prices for domestic consumers and also increases social surplus. C) It increases prices for domestic consumers and lowers social surplus. D) It lowers prices for domestic consumers and increases social surplus.
C) It increases prices for domestic consumers and lowers social surplus.
________ refers to actions taken by one party in a transaction that are relevant for, but not observed by, the other party. A) A negative externality B) A positive externality C) Moral hazard D) Bargaining
C) Moral hazard
Which of the following is true of a Nash equilibrium? A) A Nash equilibrium cannot occur if each player is aware of the strategies of other players. B) A Nash equilibrium occurs if each player earns a zero payoff irrespective of the strategy he chooses. C) No player can improve his payoff by changing his strategy in a Nash equilibrium. D) A game can have only one Nash equilibrium.
C) No player can improve his payoff by changing his strategy in a Nash equilibrium.
_________ is analysis that generates objective descriptions or predictions about the world that can be verified with data. A) Negative economics B) Microeconomics C) Positive economics D) Normative economics
C) Positive economics
Which of the following describes a feature of a monopolistically competitive market? A) Social surplus is maximized, and some products will be priced below the competitive level. B) Social surplus is not maximized, but the prices will be lower than the competitive level. C) Social surplus is not maximized, but product diversity may add to consumer welfare. D) Social surplus is maximized but at prices possibly above the competitive level.
C) Social surplus is not maximized, but product diversity may add to consumer welfare.
Two countries, A and B, produce Good X. Which of the following statements is true of the trading price of Good X? A) The trading price of Good X will be less than the opportunity cost of producing the good in both nations. B) The trading price of Good X will always be equal to the opportunity cost of producing the good in Country A. C) The trading price of Good X will lie between the opportunity costs of producing the good in both nations. D) The trading price of Good X will be greater than the opportunity cost of producing the good in both nations.
C) The trading price of Good X will lie between the opportunity costs of producing the good in both nations.
Marginal revenue is less than the price for a monopolist because ________. A) there are no close substitutes for the firmʹs product B) the firm sets the price C) a monopolist must lower its price to sell another unit of output D) none of the above
C) a monopolist must lower its price to sell another unit of output
If the buyers of a good are taxed for each unit sold, A) the price that the buyers need to pay falls B) a larger quantity of the good is sold C) a smaller quantity of the good is sold D) the price that the sellers receive increases
C) a smaller quantity of the good is sold
To carry out an optimization analysis, A) only direct costs incurred in a project are to be estimated B) only indirect costs incurred in a project are to be estimated C) all costs are required to be converted to the same unit of measurement D) different types of costs are measured in different units
C) all costs are required to be converted to the same unit of measurement
A compensating wage differential is a wage premium paid to ________. A) recognize a more efficient employee B) improve the goodwill of a firm hiring workers C) attract workers to otherwise undesirable occupations D) attract workers who have a family to support
C) attract workers to otherwise undesirable occupations
Stephanie wants to buy a laptop. She has chosen a particular model. However, before ordering it online, she decides to read some of the user reviews provided on the Web site. She overlooks negative feedback by some users and focuses only on positive feedback. This is an example of ________ bias. A) attentional B) distinction C) confirmation D) attenuation
C) confirmation
Collusion occurs when firms ________. A) charge a price equal to their marginal cost of production B) compete with one another by setting a price slightly lower than their rivalsʹ prices C) conspire to set the quantity they produce or the prices they charge D) compete with one another by differentiating their products
C) conspire to set the quantity they produce or the prices they charge
Other things remaining the same, a rightward shift in the supply curve will lead to a(n) A) increase in the equilibrium price and the equilibrium quantity B) decrease in the equilibrium price and the equilibrium quantity C) decrease in the equilibrium price and an increase in the equilibrium quantity D) increase in the equilibrium price and a decrease in the equilibrium quantity
C) decrease in the equilibrium price and an increase in the equilibrium quantity
In an oligopoly with differentiated products, firms ________. A) do not face competition from their rivals B) incur losses C) earn positive economic profits D) earn zero economic profits
C) earn positive economic profits
The figure below depicts a monopolistically competitive firm in long-run equilibrium. In this equilibrium, the profit-maximizing monopolistically competitive firm ________. A) earns negative economic profits B) may earn positive or negative economic profits C) earns zero economic profit D) earns positive economic profits
C) earns zero economic profit
Which of the following is NOT a solution to the tragedy of the commons? A) levying a tax on the use of the common resource B) privatizing the common resource C) granting a subsidy of the use of the common resource D) ration the use of the common resource
C) granting a subsidy of the use of the common resource
Hedge funds often buy the same stocks and track one anotherʹs investment strategies. This is an example of ________. A) anchoring B) hedging C) herding D) sniping
C) herding
As the income of an individual increases, she can afford more leisure. This refers to the ________ of a wage increase. A) substitution effect B) opportunity cost effect C) income effect D) transformation effect
C) income effect
As the number of substitutes available for a good increases, the price elasticity of demand for the good A) initially increases and then decreases B) decreases C) increases D) initially decreases and then increases
C) increases
An environmental protection agency in Natura has launched a campaign against the use of plastic bags. This is an example of ________. A) backward induction B) anchoring C) indoctrination D) sniping
C) indoctrination
The quantity demanded for a duopolistʹs product is zero if ________. A) it can produce the product at a low cost B) it charges the same price as its rival C) it charges a higher price than its rival D) it charges a lower price than its rival
C) it charges a higher price than its rival
Two goods are said to be substitutes when a rise in the price of one good A) does not affect the demand for the other good B) leads to a fall in the price of the other good C) leads to a rightward shift in the demand for the other good D) leads to a leftward shift in the demand for the other good
C) leads to a rightward shift in the demand for the other good
The following figure shows a firm that operates in a monopolistic competition market. Refer to the figure above. If the government efficiently regulates the price for this monopolistically competitive firm, the firm will ________. A) make zero profit B) decrease its marginal cost C) make a negative profit D) make a positive profit
C) make a negative profit
A production possibilities curve shows the A) different combinations of two inputs used to produce a given quantity of output B) relationship between the price of a good and its quantity supplied C) maximum production of one good for a given level of production of another good D) quantity of output produced and the amount of inputs required for the production of the output
C) maximum production of one good for a given level of production of another good
If the market supply curve of a commodity is more elastic than its market demand curve, tax incidence is likely to fall..... A) more on producers than on consumers B) entirely on producers C) more on consumers than on producers D) entirely on consumers
C) more on consumers than on producers
Overbidding in a second-price auction is likely to result in a ________. A) zero producer surplus B) positive consumer surplus C) negative consumer surplus D) negative producer surplus
C) negative consumer surplus
The best alternative use of a resource is referred to as its A) market price B) social cost C) opportunity cost D) optimization cost
C) opportunity cost
Jane donates time and money to charity because she values helping others. This is an example of ________. A) rationalism B) liberalism C) pure altruism D) impure altruism
C) pure altruism
Other things remaining the same, if an industry introduces labor-complementary technology in production, the demand curve for labor in that industry is likely to ________. A) become vertical B) shift to the left C) shift to the right D) become horizontal
C) shift to the right
The Law of Diminishing Returns states that A) successive increases in product prices lead to a fall in revenue B) the net benefits of a perfectly competitive firm decrease as more firms enter the market C) successive increases in inputs eventually lead to less additional output when one of the inputs is fixed D) the demand for a good decreases as the price of the good increases, all other things remaining constant
C) successive increases in inputs eventually lead to less additional output when one of the inputs is fixed
If a firm pays married women less than other individuals with the same human capital (e.g., the same productivity), this is an example of ________. A) compensating wage differential B) statistical discrimination C) taste-based discrimination D) none of the above
C) taste-based discrimination
The quantity demanded of a good is A) the amount of the good that sellers are willing to supply at a given market price B) determined independently of the market price of the good C) the amount of the good that buyers are willing to purchase at a given market price D) always determined by government intervention
C) the amount of the good that buyers are willing to purchase at a given market price
Producer surplus for a perfectly competitive firm is A) always zero B) the area under firm's total cost curve and above marginal cost C) the area under the market price and above the firm's marginal cost curve D) the same as profit
C) the area under the market price and above the firm's marginal cost curve
In an English auction, ________. A) the auctioneer begins the bidding process with a high starting bid B) the bidders begin the bidding process with a high starting bid C) the auctioneer begins the bidding process with a low starting bid D) the bidders decide the starting bid
C) the auctioneer begins the bidding process with a low starting bid
Government failures refer to A) the absence of government interventions B) the incapacity to form a government C) the inefficiencies caused by a government's interventions D) policies implemented without the consent of citizens
C) the inefficiencies caused by a government's interventions
The Law of Demand states that A) the demand for a commodity always equals the supply of the commodity B) the demand for a commodity is directly related to consumers' income, all other things remaining constant C) the quantity demanded of a commodity varies inversely with the price of the commodity, all other things remaining constant D) the quantity demanded of a commodity is the same for all consumers in a perfectly competitive market
C) the quantity demanded of a commodity varies inversely with the price of the commodity, all other things remaining constant
A network externality occurs when ________. A) the government interferes to prevent the concentration of market power in the hands of a few firms B) a firm that has control over key resources auctions the resources off to other firms C) the value of a product increases as more consumers start to use it D) firms collude to sell products at a price higher than the equilibrium market price
C) the value of a product increases as more consumers start to use it
The concept of diminishing marginal benefit states that A) lower levels of consumption give lower level of utility B) the demand for a commodity is more dependent on income than on price C) the willingness to pay for an additional unit declines as more of a good is consumed D) the demand for a commodity declines as its price increases
C) the willingness to pay for an additional unit declines as more of a good is consumed
Scenario: An ancient painting is being auctioned off in an English auction. The following table shows the maximum willingness to pay of each bidder. Bidder Value ($) Rachel 500 James 450 David 400 Joe 350 Emily 300 Bob 250 Refer to the scenario above. The optimal strategy for Rachel is to bid a price ________. A) equal to 5/6 times her willingness to pay B) equal to half the amount she is willing to pay C) up to her willingness to pay D) above her willingness to pay
C) up to her willingness to pay
For an individual, consumer surplus measures A) the price paid for the good B) willingness to pay C) willingness to pay less the price paid for the good D) willingness to pay plus the price paid for the good
C) willingness to pay less the price paid for the good
According to the ________, as long as property rights are clearly defined, two agents can always bargain to reach the efficient outcome. A) Ricardian theory on rent B) revenue equivalence theorem C) envelope theorem D) Coase theorem
D) Coase theorem
Which of the following statements identifies a difference between correlation and causation? A) Correlation occurs when one thing directly affects another, whereas causation implies a mutual relationship between two things. B) Causation cannot arise when correlation is present, and correlation cannot arise when causation is present. C) A causal relationship exists between two variables when they are correlated, but correlation does not necessarily exist if there's a causal relationship between two variables. D) Correlation implies a mutual relationship between two things, whereas causation occurs when one thing directly affects another.
D) Correlation implies a mutual relationship between two things, whereas causation occurs when one thing directly affects another.
Which of the following statements is true? A) Perfect competition is characterized by high entry barriers. B) Firms in a market with no entry barriers are likely to have more market power than firms in a market with entry barriers. C) A monopoly is characterized by no entry barriers. D) Firms in a market with entry barriers are likely to have more market power than firms in a market with no entry barriers.
D) Firms in a market with entry barriers are likely to have more market power than firms in a market with no entry barriers.
________ occurs when individuals conform to the decisions of others. A) Signaling B) Sniping C) Anchoring D) Herding
D) Herding
Which of the following is true of a progressive tax system? A) All households pay the same amount of taxes irrespective of their income. B) Low-income households pay a higher percentage of their income in taxes. C) All households pay the same percentage of their income in taxes. D) High-income households pay a higher percentage of their income in taxes.
D) High-income households pay a higher percentage of their income in taxes.
________ refers to an action that an individual with private information takes to convince others about her information. A) Sniping B) Hedging C) Speculating D) Signaling
D) Signaling
Which of the following statements best describes absolute advantage? A) The party who has the lower opportunity cost of producing the good B) The party who can produce less of the good C) The party who has the higher opportunity cost of producing the good D) The party who can produce more of the good
D) The party who can produce more of the good
The congestion charge is an example of __________ to the negative externality associated with common pool resources. A) a social norm solution B) a private bargaining solution C) a command-and—control government solution D) a market-based government solution
D) a market-based government solution
If the marginal cost of a monopolist exceeds its marginal revenue, ________. A) additional production enhances profits B) the difference between the marginal revenue curve and demand curve is at its lowest C) the difference between the marginal revenue curve and demand curve is at its highest D) additional production reduces profits
D) additional production reduces profits
The gasoline market in the United States is often said to be highly competitive. It is not perfectly competitive, but it has features and results that are similar to those of a perfectly competitive market, such as A) an individual gas station cannot influence the market price by itself B) an individual buyer cannot influence the market price of gasoline by himself C) gas stations located near each other tend to charge the same or very similar prices D) all of the above
D) all of the above
As more people in a country started hoarding grain in fear of a shortage, a shortage actually occurred. This is an example of ________. A) moral hazard B) adverse selection C) a positive externality D) an information cascade
D) an information cascade
Scenario: Two rival firms charge equal prices for their products, which are perfect substitutes. Firm 1 is considering offering a 10 percent discount on the market price to increase sales. The game tree below shows the respective payoffs to each firm, depending on the decisions each makes. Refer to the scenario above. In equilibrium, ________. A) neither firm will offer a discount B) Firm 1 will continue charging the original price, while Firm 2 will offer a discount C) Firm 1 will offer a discount, while Firm 2 will not offer a discount D) both firms will offer a discount
D) both firms will offer a discount
The ability of an individual, firm, or country to produce a certain good at a lower opportunity cost than other producers is referred to as A) absolute advantage B) marginal advantage C) cardinal advantage D) comparative advantage
D) comparative advantage
The decrease in social surplus from a market distortion is referred to as.... A) Pareto loss B) revenue loss C) market loss D) deadweight loss
D) deadweight loss
For a firm with market power, the price effect is the ________. A) increase in revenue from selling one more unit of output B) decrease in revenue from selling one more unit of output C) increase in revenue arising from the reduction in price necessary to sell another unit of output D) decrease in revenue arising from the reduction in price necessary to sell another unit of output
D) decrease in revenue arising from the reduction in price necessary to sell another unit of output
A supply schedule is a table that reports the A) expected excess supply in the market at different prices B) different quantities of a good that producers are willing to sell at different income levels C) profits earned by producers at different levels of production D) different quantities of a good that producers are willing to sell at different prices
D) different quantities of a good that producers are willing to sell at different prices
For social surplus to be maximized, the__________ buyers are actually making a purchase and the __________ sellers are selling the products. A) lowest-value; lowest—value B) highest-value; highest-cost C) lowest-value; highest—cost D) highest-value; lowest-cost
D) highest-value; lowest-cost
A natural experiment is an empirical study.... A) in which the researcher assigns subjects to the control and treatment groups to verify a cause-effect relationship B) that can only be used to understand natural phenomena and is widely used in subjects such as physics and biology C) in which the predictions of the model are not required to be tested with data D) in which some process, outside the control of the experimenter, has assigned subjects to the control and treatment groups in a random or nearly random way
D) in which some process, outside the control of the experimenter, has assigned subjects to the control and treatment groups in a random or nearly random way
If government decides to provide generous unemployment benefits, it is likely to ________. A) increase the motivation to look for a job B) decrease the rate of unemployment in an economy C) decrease consumption expenditure in the current period D) increase the duration of unemployment
D) increase the duration of unemployment
An economic agent when he accounts for the full costs and benefits of his actions... A) maximizes his profit B) is called a rent seeker C) is called a free rider D) internalizes an externality
D) internalizes an externality
The free-rider problem exists for goods that are A) excludable B) free C) rival D) non-excludable
D) non-excludable
A good is non-rival in consumption if A) the government can regulate its production B) people cannot be prevented from using it C) the demand for the good increases with an increase in the consumer's income D) one person's use of the good does not preclude consumption by others
D) one person's use of the good does not preclude consumption by others
Gary has to decide between attending a 2—day art workshop and a 4—day art workshop. If he evaluates only the change in net benefit when he switches between the two options, he is using the technique of A) optimization using total value B) mean analysis C) before and after comparisons D) optimization using marginal analysis
D) optimization using marginal analysis
If there is a decrease in the price of the final good that an industry produces, the labor demand curve for the industry is likely to ________. A) shift to the right B) become vertical C) become horizontal D) shift to the left
D) shift to the left
The adoption of new technologies and the use of sophisticated equipment in the provision of medical care has greatly increased the demand for highly skilled workers relative to less-skilled workers. This development is an example of ________. A) statistical discrimination B) firm-specific training C) taste-based discrimination D) skill-biased technological change
D) skill-biased technological change
Empiricism refers to the process of A) making choices using values and beliefs B) measuring variables C) collecting and organizing data D) testing ideas using data
D) testing ideas using data
For a perfectly competitive firm, profit maximization requires producing A) at the level of output where marginal revenue is zero B) at a level of output where marginal revenue is greater than marginal cost C) at a level of output where marginal revenue is greater than price D) the level of output where marginal revenue equals marginal cost
D) the level of output where marginal revenue equals marginal cost
Elasticity is A) the sum of the percentage changes in two variables B) the difference between the percentage changes in two variables C) the product of the percentage changes in two variables D) the ratio of the percentage changes in two variables
D) the ratio of the percentage changes in two variables
Scenario: Two colleagues-Mathew and Peter-have successfully completed a project, and their employer has decided to reward them in a unique way. Each of them is taken to a separate room and asked to choose whether the other colleague is a good teammate or a bad teammate. They are told that if both of them choose ʺbad,ʺ they will not get any reward. If both of them choose ʺgood,ʺ they will get $5,000 each. If one chooses ʺgoodʺ while the other chooses ʺbad,ʺ the one who chooses ʺbadʺ will get $10,000 and the one who chooses ʺgoodʺ will not get anything. Refer to the scenario above. If the players have to pay a fairness penalty of $7,000, ________. A) they will both choose ʺbadʺ B) Mathew will choose ʺbad,ʺ and Peter will choose ʺgoodʺ C) Mathew will choose ʺgoodʺ and Peter will choose ʺbadʺ D) they will both choose ʺgoodʺ
D) they will both choose ʺgoodʺ
Marginal cost is the change in the A) average total cost associated with producing one more unit of output B) opportunity cost associated with producing one more unit of output C) average variable cost associated with producing one more unit of output D) total cost associated with producing one more unit of output
D) total cost associated with producing one more unit of output
A factor of production refers to any good or service that is ________. A) produced in a competitive market B) produced using scarce economic resources C) produced by the government D) used to produce other goods and services
D) used to produce other goods and services
When one firm merges with one of its suppliers, this is referred to as a: A) horizontal merger B) output merger C) diversified merger D) vertical merger
D) vertical merger