Econ Chapters 5-8

A firm is seeing a $500 loss in the short run. The fixed cost of operation for this firm is $200. What is the best decision for this firm in the short run? A. This firm should shut down production. B. This firm should produce more than what it is currently producing. C. This firm should not shut down production. D. There is not enough information provided to answer.

A

At the midpoint of a downward-sloping, linear demand curve for a good, the price elasticity of demand for the good is ________. A. equal to one B. between zero and one C. equal to zero D. greater than one

A

Efficiency is achieved in competitive markets because ________. A. social surplus is maximized (the economic pie is made as large as possible) B. consumer surplus is maximized C. deadweight loss is maximized D. producer surplus is maximized

A

Firms in a perfectly competitive industry earn zero profits in the long run because ________. A. the absence of barriers to entry enables free entry and exit B. the government sets prices C. demand decreases D. costs increase

A

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

A production possibilities curve shows the ________. A. relationship between the price of a good and its quantity supplied B. maximum production of one good for a given level of production of another good C. quantity of output produced and the amount of inputs required for the production of the output D. different combinations of two inputs used to produce a given quantity of output

B

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. private good; public good B. export; import C. import; export D. public good; private good

B

Marginal cost is the change in the ________. A. opportunity cost associated with producing one more unit of output B. total cost associated with producing one more unit of output C. average total cost associated with producing one more unit of output D. average variable cost associated with producing one more unit of output

B

Protectionism leads to ________. A. increased export of goods and services B. reduction in the competition faced by domestic firms C. subsidization of imports D. reduction of trade barriers

B

The exit of a firm ________. A. is a short-run decision by the firm to not produce anything B. is a long-run decision by the firm to leave a market C. refers to the temporary decision of the firm not to hire any new employees D. refers to a refusal to work organized by a group of the firm's employees

B

The long-run supply curve for a firm in a perfectly competitive industry is ________. A. negatively sloped B. horizontal C. positively sloped D. vertical

B

The percentage change in the quantity demanded of a good due to a percentage change in its price is referred to as ________. A.the cross-price elasticity of demand B. the price elasticity of demand C. consumer surplus D. the income elasticity of demand

B

Which of the following correctly identifies an argument against free trade? A. The sellers of exporting nations suffer heavy losses due to trade. B. Specialization due to trade can hamper national security. C. Trade leads to a minimization of world production. D. Trade leads to an exploitation of developed countries.

B

Scenario: Yasmin and Zeek are lawyers working at V, W, and X LLP. Yasmin works 48 hours a week, and Zeek also works 48 hours a week. They handle two types of cases, intellectual property (IP) cases and corporate fraud (CF) cases. It takes Yasmin 6 hours to handle each IP case and 4 hours to handle each CF case. Zeek can finish an IP case in 3 hours and a CF case in 6 hours. Refer to the scenario above. Who has a comparative advantage in handling CF cases and why? A. Yasmin, because her opportunity cost of handling a CF case is a third of Zeek's B. Zeek, because his opportunity cost of handling a CF case is half of Yasmin's C. Zeek, because his opportunity cost of handling a CF case is a third of Yasmin's D. Yasmin, because her opportunity cost of handling a CF case is half of Zeek's

A

Taxes levied on goods and services transported across political boundaries are referred to as ________. A. tariffs B. transport taxes C. service taxes D. value added taxes

A

The primary goal of a seller is to ________. A. maximize profits B. maximize opportunity cost C. minimize deadweight loss D. minimize consumer surplus

A

The set of all possible bundles of goods and services that can be purchased with a consumer's income is referred to as a ________. A. budget set B. demand set C. supply set D. universal set

A

Which of the following situations depicts diseconomies of scale? A. The average total cost of a firm increasing from $50 to $55 when it increases its production from 10 units to 20 units B. The average total cost of a firm decreasing from $50 to $40 when it increases its production from 10 units to 20 units C. The average total cost of a firm remaining at $50 when it increases its production from 10 units to 20 units D. The average total cost of a firm remaining at $50 when it decreases its production from 20 units to 10 units

A

Which of the following statements correctly differentiates between the slope of a demand curve and the price elasticity of demand along a linear demand curve? A. The price elasticity of demand for a good varies along the demand curve, whereas the slope of the demand curve remains the same at different points on the curve. B. The price elasticity of demand is measured in dollars, whereas the slope of a demand curve is a unit-free measure. C. The price elasticity of demand is a unit-free measure, whereas the slope of a demand curve is measured in dollars. D. The price elasticity of demand for a good is the same at different points on the demand curve, whereas the slope of the demand curve varies depending on the point where it is measured.

A

Which of the following statements is true of the gains to trade? A. The gains to trade shrink as trading partners become more alike. B. The trading nations can enjoy gains to trade even when none of the nations have a comparative advantage in the production of any good. C. The gains to trade expand as trading partners become more alike. D. The gains to trade are equal for all trading partners.

A

Willingness to pay ________. A. is the highest price that a buyer is willing and able to pay for a unit of good B. is equal to the price of the lowest-priced good in a consumption bundle C. is equal to the price of the highest-priced good in a consumption bundle D. is the lowest price that a buyer is willing and able to pay for a unit of good

A

Which of the following statements is true? A. If the domestic price of a good in a country is higher than the world price, the country will become an exporter of the good. B. If the domestic price of a good in a country is higher than the world price, the country will become an importer of the good. C. Whether a country becomes an importer or an exporter of a good depends only on the domestic price of the good and is independent of the world price of the good. D. Whether a country becomes an importer or an exporter of a good depends only on the world price of the good and is independent of the domestic price of the good.

B

Equity refers to ________. A. Minimizing deadweight loss B. Ensuring that all producer surplus is transferred to consumers C. Distributing resources across society (how the economic pie is divided) D. Making the economic pie as large as possible

C

In equilibrium, ________. A. the ratio of total benefits to income should be identical across all goods B. the ratio of marginal benefits to income should be identical across all goods C. the ratio of marginal benefits to price should be identical across all goods D. the ratio of total benefits to price should be identical across all goods

C

In the long run, a firm should exit from a market when ________. A. price is equal to average total cost B. price is equal to marginal cost C. price is less than average total cost D. price is more than marginal cost

C

The U.S. coal industry has endured several years of economic losses as natural gas has replaced coal in electricity generation and other uses. At the same time, the solar panel industry in the United States has recorded large positive economic profits. If these markets are perfectly competitive, we would expect ________. A. exit from the U.S. coal industry but no entry into the solar panel industry B. neither entry nor exit from the U.S. coal industry but entry into the solar panel industry C. exit from the U.S. coal industry and entry into the solar panel industry D. entry into both the U.S. coal industry and the solar panel industry

C

The invisible hand is mostly guided by ________. A. the costs of production B. government intervention C. market prices D. the quantity of goods and services sold

C

The reservation value of a buyer reflects her ________. A. total utility from a good or service B. total income C. willingness to pay for a good or service D. trade-off between buying various goods and services

C

The slope of a consumer's budget constraint equals ________. A. the ratio of the price of the good measured along the vertical axis to the price of the good measured along the horizontal axis B. the ratio of the income of the consumer to the price of the good measured along the horizontal axis C. the ratio of the price of the good measured along the horizontal axis to the price of the good measured along the vertical axis D. the ratio of the income of the consumer to the price of the good measured along the vertical axis

C

The underlying motivation for trade, relies on one simple principle. What is it? A. Trade allows total production to be maximized. B. Trade creates employment. C. Trade will increase the profit for firms. D. Trade maximizes the opportunity costs.

C

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. Sellers gain. C. Buyers lose. D. Buyers gain.

D

If prices are held below the equilibrium price, ________. A. social surplus will be maximized B. there will be a surplus in the market C. all firms will earn positive economic profits D. there will be a shortage in the market

D

In a perfectly competitive market, sellers ________. A. are told the price to charge by the government B. coordinate to set the market price C. each have the power to set the price D. are price takers

D

Is the producer surplus same as the profit? A. Yes, they are the same, because the profit is the revenue minus the sum of marginal costs of each unit sold. B. Yes, they are the same, because the producer surplus is the sum of profits from each unit sold. C. No, they are different, because the profit is always at least the producer surplus. D. No, they are different, because the producer surplus does not take into account the fixed cost

D

The firm's long-run supply curve is ________. A. the upward-sloping portion of the firm's average total cost curve B. the firm's average total cost curve C. the firm's marginal cost curve D. the firm's marginal cost curve above the minimum of average total cost

D