econ final 1

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Firms operating in a market situation that creates ___________________, sell their product in a market with other firms who produce identical or extremely similar products. A. a perfect monopoly B. perfect competition C. an oligopoly D. a free-market

The market demand curve for a monopolist is typically a. unit price elastic. b. downward sloping. c. horizontal. d. vertical.

The perceived demand for a monopolistic competitor A. is steep. B. is flat. C. takes competitors into account. D. disregards competitors.

Pete owns a firm that produces wheat in a purely competitive market. The firm's demand curve is a:

Horizontal line

Wages are what?

Income that results from labor input

Factors of Production

Labor, Capital, and Natural resources

What is the the image below?

Lorenz Curve

Are markets always in equilibrium?

No, but if there is no outside interference, they tend to move toward equilibrium.

Private Enterprise

The ownership of businesses by private individuals

What is the greatest incentive for creating a oligopoly?

earn higher profits

The term ________ describes a situation where the quantity of output rises, but the average cost of production falls.

economies of scale

Perfect competition features...

many small companies

If the maintenance fees for a lighthouse are paid in full each year by charging port fees, then the lighthouse is

nonrivalrous and nonexcludable

Monopoly has these characteristics:

one company with much control over price.

There is a skating rink in your city that is open to anybody to use at any time. They even provide skates for people who don't own any. This is an example of a good that is:

rivalrous and nonexcludable

sunk costs have

should have no effect on output decisions

In long run equilibrium, firms ________.

zero economic profit

This table shows the quantity demanded and supplied in the labor market for driving city buses in the town of Unionville, where all the bus drivers belong to a union. What would the equilibrium wage and quantity be in this market if no union existed?

$18 per hour, 8,000 bus drivers

Recall that in perfect competition a firm's demand curve is a horizontal line drawn at the market price level and that P=MR. With this in mind, based on the figure below, total costs are:

$264

43. Refer to the diagram above. Based on the information illustrated in this graph, which of the following is an accurate statement? A. MC is initially downward sloping in the region of increasing MR at low output levels B. As production increases, marginal revenue always increase so profits rise C. as production decreases, marginal revenue will increase so profits will rise D. a profit-seeking firm should continue to expand production as long as MR is less than MC

Explicit costs a. require an outlay of money by the firm. b. include all of the firm's opportunity costs. c. include income that is forgone by the firm's owners. d. Both b and c are correct.

When it is costly or impossible to exclude someone who hasn't paid to use a particular good from using it, then that good is classified as being

non-excludable

When a monopoly's costs are minimized because of economies of scale, we often call this type of monopoly...

a natural monopoly.

The supply curve of textbooks (which are produced using paper made from trees) will shift to the left in response to:

a sharp increase in the demand for and construction of wood-frame homes.

Refer to the graph below. Total profit is:

$-44

Refer to the graph below. Total profit is:

$144

Recall that in perfect competition a firm's demand curve is a horizontal line drawn at the market price level and that P=MR. With this in mind, based on the figure below, total costs are:

$576

69. A monopolistic competitor has the following information about cost and demand. If this industry was perfectly competitive, what price would the good sell for? A. $15 B. $19 C. $21 D. $23

A firm has market power if it can a. maximize profits. b. minimize costs. c. influence the market price of the good it sells. d. hire as many workers as it needs at the prevailing wage rate.

The graph below shows the collusion model of oligopoly. What level of output corresponds to the profit maximizing level of output for the two firms combined?

1/2 Qm, where one firm maximizes profits and splits the market (wrong)

Using the graph below, if Q = 10, Total Cost =

90 70 (correct) 30

32. Refer to the diagram above. In this instance, at the range of output represented at point b, A. total costs exceed total revenues. B. total revenues exceed total costs. C. the firm is earning profits. D. the firm should shut-down.

39. Given the data provided in the table below, what will the amount of profit be for production at quantity (Q) level 7? A. -$10.00 B. zero C. -$5.00 D. $1.00

70. A monopolistic competitor has the following information about cost and demand. What will the firm's profits equal in the short run? A. 0 B. $91 C. $102 D. $228

71. A monopolistic competitor has the following information on cost and demand. What will the firm's profits equal in the long run? A. $0 B. $91 C. $102 D. $228

75. A monopolistic competitor has the following information about cost and demand. What will this firm's profits equal in the long run? A. -$55 B. $0 C. $250 D. $280

If a graph is used to compare total revenue and total cost of a perfectly competitive firm, then the horizontal axis of the graph will represent the _______________ and the vertical axis will represent ______________________ . A. price, measured in dollars; quantity of goods produced B. total costs measured in dollars; quantity of goods produced C. quantity produced; both total revenue and total costs, measured in dollars. D. quantity produced; total revenue and total variable costs, measured in dollars.

A _________ refers to a group of firms colluding with one another to produce at the monopoly output and sell at the monopoly price. A. prisoner's dilemma B. cartel C. game theory D. duopoly

If oligopolistic firms banded together with the intention of acting like a monopoly, it would likely result in their being able to A. divide up the monopoly level of profit amongst themselves. B. hold down output in the short-run. C. charge a higher price in the short-run. D. both b and c above are correct.

In a monopolistically competitive market, the rule for maximizing profit is to set MR = MC, which means A. price is higher than marginal revenue. B. price is equal to marginal revenue. C. price is equal to marginal cost. D. price is lower than marginal revenue.

In order for a good to be classified as ______________ , when one person uses the good, others are also able to use it. A. nonrivalrous B. unrivalrous C. unexcludable D. nonexcludable

The cost of producing the typical unit of output is the firm's a. average total cost. b. opportunity cost. c. variable cost. d. marginal cost.

The term "basic research" applies specifically to research pertaining to fundamental scientific breakthroughs that may offer commercial applications in the ______________. A. distant future B. near future C. immediate future D. short run

There is a skating rink in your city that is open to anybody to use at any time. They even provide skates for people who don't own any. This is an example of a good that is A. rivalrous and nonexcludable B. nonrivalrous and excludable C. rivalrous and excludable D. nonrivalrous and nonexcludable

If a monopoly or a monopolistic competitor raises their prices, the quantity demanded ____________. A. will expand B. stays the same C. will decline D. will decline in the short run

Tom, Mary and Jill have apartments in the same building. A security system for their building costs $750. Tom is willing to pay $100 for the security system, Mary is willing to pay $300 and Jill is willing to pay $300. They have a meeting to vote on whether to pay $250 each for the security system. At least two of them must vote for the system to be installed before the vote is passed. The efficient outcome is to have the security system installed. After the meeting the security system will __________, which illustrates ___________. A. be installed, the free rider problem B. not be installed, the free rider problem C. be installed, a negative externality D. not be installed, a negative externality

If accounting profits for a firm are 20% of output, and the opportunity cost of financial capital is 8% of output, then what do the firm's economic profits equal? A. 6% of output B. 10% of output C. 12% of output D. 8% of output

When comparing short-run average total cost with long-run average total cost at a given level of output, a. short-run average total cost is typically above long-run average total cost. b. short-run average total cost is typically the same as long-run average total cost. c. short-run average total cost is typically below long-run average total cost. d. the relationship between short-run and long-run average total cost follows no clear pattern.

Which of the following items is included in U.S. GDP? a. goods produced by foreign citizens working in the United States b. the difference in the price of the sale of an existing home and its original purchase price c. known illegal activities d. None of the above is included in U.S. GDP.

Why are the underlying economic meanings of the perceived demand curves for a monopolist and monopolistic competitor different? A. a monopolist faces the market demand curve and a monopolist competitor does not B. a monopolist competitor faces the market demand curve and a monopolist does not C. because the demand curve for a monopolistic competitor is upward sloping D. because the demand curve perceived by the monopolist is flatter than that of a monopolist competitor

If one firm operating in an oligopoly raises its price and other firms do not do so, A. the sales of the firm with the higher price will decline slightly. B. the egos of all the top executives will eventually lead to cooperation at that higher price. C. the sales of the firm that increased its price will decline sharply. D. the firm with the increased price will have its higher profits sustained through cooperation.

If the price that a firm charges is higher than its ________________ cost of production for that quantity produced, then the firm will earn profits. A. marginal B. variable C. average D. fixed

Marginal cost is equal to a. TC/Q. b. ATC/Q. c. TC/Q. d. Q/TC.

Total cost is the a. amount a firm receives for the sale of its output. b. fixed cost less variable cost. c. market value of the inputs a firm uses in production. d. quantity of output minus the quantity of inputs used to make a good.

If two companies are seeking regulatory approval to merge their respective businesses, which of the following will most likely be the focus of the arguments that they will present in favor of the merger?

ALL

Which of the following circumstances would encourage I'MaPharmaCo. to increase research and development activities? A. cost of financial capital is high B. patent term expires in 20 years C. cost of financial capital is low D. a low rate of return is likely

Which of the following is not a characteristic of a competitive market? a. Buyers and sellers are price takers. b. Each firm sells a virtually identical product. c. Free entry is limited. d. Each firm chooses an output level that maximizes profits.

Which of the following is not a characteristic of a monopoly? a. barriers to entry b. one seller c. one buyer d. a product without close substitutes

Which of the following shifts short-run aggregate supply right? a. an increase in the price level b. an increase in the minimum wage c. a decrease in the price of oil d. more people migrate abroad than immigrate from abroad

Which of the following statements is correct? a. Both a competitive firm and a monopolist are price takers. b. Both a competitive firm and a monopolist are price makers. c. A competitive firm is a price taker, whereas a monopolist is a price maker. d. A competitive firm is a price maker, whereas a monopolist is a price taker.

Which of the following would most likely be recognized as a defining characteristic of a public good? A. the good is nonrivalrous item B. the good is nonexcludable item C. the good is both a and b above D. the good is a separate and identifiable item

Who is a price taker in a competitive market? a. buyers only b. sellers only c. both buyers and sellers d. neither buyers nor sellers

Why are some producers forced to sell their products at the prevailing market price? A. price takers find market analysis is too costly B. they are very small players in the overall market C. high degree of similarity to competitor's products D. they can increase output without affecting quality

Production Technologies

Alternative methods of combining inputs to produce output

33. Refer to the diagram above. In this instance, at the range of output represented at point c, A. the shutdown point has been reached. B. profits will be maximized. C. physical input levels have been reduced. D. capital input levels have been reduced.

38. Given the data provided in the table below, what will the marginal cost equal for production at quantity (Q) level 4? A. $5.00 B. $4.00 C. $1.00 D. $3.00

42. Refer to the diagram above. In this instance, point e shown on the graph indicates A. the point where profits will increase by increasing output B. the point where profits will increase by reducing output C. the profit-maximizing point where MR = MC D. the profit-maximizing point where MR is less an MC

50. Refer to the diagram above. At the point marked m, A. price is determining production at a level where P = MC. B. TR is exactly equal to TC, so profits equal zero. C. price is above average cost of production. D. the leftover rectangle is the profit earned.

66. Bob competes in a monopolistically competitive market. Suppose some new firms enter the market, causing his perceived demand curve to shift. The following tables show his demand curves, before and after the change, and his cost information. Assume that Bob can only choose from the quantities of output given in the table. By how much will his profit change after these new firms enter the market? A. his profits will not change B. decrease by $9,000 C. increase by $11,000 D. decrease by $11,000

67. YummyCandiesCo. has developed a new candy bar that contains a full recommended daily allowance of vitamins and minerals. This invention will provide considerable spillover benefits to society. The table below shows the demand for the candy bars, the supply of candy bars if the company receives only the private benefits, and the supply of candy bars if the firm also receives the full social benefits. If the new candy bar were sold based only on private benefits, the equilibrium price and quantity would be A. $4, 100,000 b. $3, 150,000 c. $2, 200,000 d. $1, 250,000

A production function describes a. how a firm maximizes profits. b. how a firm turns inputs into output. c. the minimal cost of producing a given level of output. d. the relationship between cost and output.

A relatively mild period of falling incomes and rising unemployment is called a a. depression. b. recession. c. expansion. d. business cycle.

A total-cost curve shows the relationship between the a. quantity of an input used and the total cost of production. b. quantity of output produced and the total cost of production. c. total cost of production and profit. d. total cost of production and total revenue.

Both Wisconsin and Illinois border Lake Michigan. The lake is becoming polluted and both states are deciding whether or not to clean it. If Wisconsin decides to clean the lake it will cost 1200 and generate social benefits of 1500 - however, Wisconsin will receive only 1100 of those social benefits while neighbor Illinois will receive the other 400. If Illinois cleans the lake, it will cost them 700 and generate social benefits of 900 - however, Illinois will receive only 600 of those benefits, Wisconsin will receive the remaining 300. If a state does not clean the lake, it experiences a cost of $0. If both states clean the lake, the payoffs will be A. Wisconsin gains 100, Illinois gains 200 B. Wisconsin gains 200, Illinois gains 300 C. Wisconsin gains 200, Illinois loses 100 D. Wisconsin gains 100, Illinois loses 100

The nature of a firm's cost (fixed or variable) depends on the a. firm's revenues. b. time horizon under consideration. c. price the firm charges for output. d. explicit but not implicit costs.

The typical slope of the demand curve as perceived by a monopolistic competitor will A. be steeper than the demand curve perceived by a monopolist. B. reflect that firm's ability raise its price without losing all of its customers. C. show less of a decline in demand than would a monopoly that raised its prices. D. be reflective of a perfectly competitive firm and all of the above.

When the marginal product of an input declines as the quantity of that input increases, the production function exhibits a. increasing marginal product. b. diminishing marginal product. c. diminishing total product. d. Both b and c are correct.

Constant Returns to Scale

Expanding all inputs proportionately does not change the average cost of production

Monopolistic competition is different from perfect competition in that monopolistically competitive markets:

Feature free entry and exit of firms from the industry in the long-run Feature only price competition Feature free entry and exit of firms from the industry in the short-run Feature competition based upon things other than price (correct)

If Total Cost = $100,000 when Quantity = 0, then...

Fixed Cost = $100,000.

Productive Efficiency

Goods are being produced at the lowest possible average cost

Economies of scale may arise from which of the following activities?

Having a larger retail space can expand sales more than proportionally Government economic subsidies protect firms from competition to avoid losses (incorrect) Doubling promotional expenses to expand sale more than proportionately

Interest payments are _______

Hidden costs Implicit costs Explicit costs (correct)

In perfect competition, the demand curve for the firm is:

Horizontal

The monopolistic competitor determines its profit-maximizing level of output (two scenarios)

If the firm is producing at a quantity of output where marginal revenue exceeds marginal cost, then the firm should keep expanding production, because each marginal unit is adding to profit by bringing in more revenue than its cost. In this way, the firm will produce up to the quantity where MR = MC. If the firm is producing at a quantity where marginal costs exceed marginal revenue, then each marginal unit is costing more than the revenue it brings in, and the firm will increase its profits by reducing the quantity of output until MR = MC.

36. Given the data provided in the table below, the total revenue (TR) for production at quantity (Q) level 4 equals A. zero B. $1.00 C. $15.00 D. $20.00

A firm that is the sole seller of a product without close substitutes is a. perfectly competitive. b. monopolistically competitive. c. an oligopolist. d. a monopolist.

A successful advertising campaign may allow competing monopolists to A. sell a greater quantity. B. charge a higher price. C. increase its profits. D. do all of the above.

Average total cost is equal to a. output/total cost. b. total cost - total quantity of output. c. average variable cost + total fixed cost. d. total cost/output.

Which of the following effects helps to explain the downward slope of the aggregate-demand curve? a. the exchange-rate effect b. the wealth effect c. the interest-rate effect d. All of the above are correct.

The term ________ describes a situation where the quantity of output rises, but the average cost of production falls.

Economies of scale (correct) Diseconomies of scale Diminishing marginal returns Marginal cost output

What are some reasons why a certain degree of inequality of income would be expected in a market economy?

Education Age Personal preferences

Economists distinguish between the short run and the long run as follows:

In the long run, all resources are variable; in the short run, at least one resource is fixed

A firm operating as a monopoly tends to supply at a level where...

MC < P.

Average variable cost

Obtained when variable cost is divided by quantity of output

If a firm is a price taker, then the demand curve for a single firm is:

Perfectly elastic

When firms exit a perfectly competitive market, what is the impact on prices?

Prices fo up

Revnue - Expenses =

Profit

Average Profit

Profit divided by the quantity of output produced; profit margin

A successful advertising campaign may allow competing monopolists to

Sell a greater quantity (correct) Charge a higher price (correct) Increase its profits (correct)

Diseconomies of Scale

The long-run average cost of producing each individual unit increases as total output increases

As the extent of environmental protection expands, would you expect marginal costs of environmental protection to rise or fall? Why or why not?

The marginal costs exceed the marginal benefits. At this level of environmental protection, society is not allocating resources efficiently because too many resources are being given up to reduce pollution.

In perfectly competitive market, which of the following is correct?

The market demand curve is downward sloping and the firm's demand curve is flat.

Average Total Cost

Total cost divided by the quantity of output

Average total cost

Total cost divided by the quantity of output

Perfect competition displays allocative efficiency because the social benefits of additional production, as measured by the price that people are willing to pay, are in balance with the ________ to society of that production.

Total costs Marginal Costs (correct) Marginal Revenues

Economic Profit

Total revenues minus total costs (explicit plus implicit costs)

Which of the following are considered examples of monopolies?

US postal services electric utility companies

Average Variable Cost

Variable cost divided by the quantity of output

Table 15.6 shows the quantity demanded and supplied in the labor market for driving city buses in the town of Unionville, where all the bus drivers belong to a union.

What would the equilibrium wage and quantity be in this market if no union existed? The equilibrium wage would be $18 with a quantity of 8,000 QD & QS. Assume that the union has enough negotiating power to raise the wage to $4 per hour higher than it would otherwise be. Is there now excess demand or excess supply of labor? This would raise the wage to $22 with a quantity demanded of 4,000 while having a quantity of supply of 10,000. Therefore it would create a excess supply of labor or surplus of labor

Which of the following are true statements about natural resources?

The natural resources available to us are fixed and cannot be expanded Natural resources can be used by people to produce goods and services (correct) Natural resources are made by people out of natural materials

Long Run

The planning period over which a firm can consider all factors of production as variable

Production

The process of combining inputs to produce outputs, ideally of a value greater than the value of the inputs

Imagine an economy of 10 individuals. Their annual incomes are reported below. Imagine that $100 of Oprah's income is transferred to Anna. What is true?

The richest 20% of the population's income share falls from about 32.2% to about 30.5%. The poorest 20% of the population's income share grows from about 5.0% to about 6.8%.

The imposition of a price ceiling on a market often results in:

a shortage

Which of the following are characteristics of a monopoly?

all

Oligopolistic markets:

are characterized as having a small number of sellers

Which of the following would be classified as a positive externality?

converting a derelict empty lot to a public vegetable

The form of legal protection intended to prevent reproduction of original works is referred to as ________ law.

Suppose that the government implements a new policy that provides free skills training to all low-skilled workers, which makes them more productive and turns them into high-skilled workers. This will ________ the supply of low-skilled workers and ________ the supply of high-skilled workers.

decrease : increase

The labor ________ curve(s) will shift ________ if there is an increase in productivity or an increase in the demand for the final product.

demand : right

Which of the following is least likely to present a barrier to entry into a market?

deregulation

A perfect competitor's demand curve is...

horizontal.

Which of the following is most likely to be a monopoly?

local electricity distributor

Perfect competition has these characteristics:

many small companies with little or no control over price.

Natural resources and labor are two factors of what?

production

If a perfectly competitive firm is producing output at a point where marginal revenue is equal to marginal cost, then it should:

stick with that level of production in order to maximize profits.

A higher wage has an income and a substitution effect. Based on the ________, a higher wage for labor leads to a higher quantity of labor supplied.

substitution effect

In some cases oligopolies can benefit society by:

taking advantage of scale economies to produce at low average cost

As the _____________ complement for high-skill labor becomes cheaper, the demand curve for high-skill labor will shift to the right.

technology

If an industry is perfectly competitive or monopolistically competitive, then the government has relatively little reason for concern about:

the degree of monopoly power possessed by firms

Oligopoly has these characteristics:

usually 4-6 companies with some control over price.

Many states do have ____________, which impose an upper limit on the interest rate that lenders can charge.

usury laws

Which of the following would be considered mild inflation ?

2 to 3 percent

Refer to the figure below. The profit maximizing quantity is:

In long run equilibrium, firms ________.

Neither enter nor exit the industry

How has the inequality of income changed in the U.S. economy since the late 1970s?

The income inequality has grown larger since the 1970's.

Assuming that the monopolistic competitor faces the demand and costs depicted below and finds the profit maximizing level of output, what will be the corresponding price?

$12 Less than $12 $18 (correct) $15

A firm had sales revenue of $1 million last year. It spent $600,000 on labor, $150,000 on capital and $200,000 on materials. What was the firm's accounting profit?

$50,000

Implicit costs a. do not require an outlay of money by the firm. b. do not enter into the economist's measurement of a firm's profit. c. are also known as variable costs. d. are not part of an economist's measurement of opportunity cost.

When a firm makes plans for investments in physical capital, it compares the _______________ on these investments with ______________________ . A. projected rates of return; the cost of financial capital to the firm B. present inputs of physical capital; future hurdle rates C. present inputs of physical capita; future marginal revenue product D. projected rates of return; the competitive pressures for labor

Classify the following pollution-control policies as command-and-control or market incentive based:

A state emissions tax on the quantity of carbon emitted by each firm. Market incentive based b. The federal government requires domestic auto companies to improve car emissions by 2020. Command and control c. The EPA sets national standards for water quality. Command and control d. A city sells permits to firms that allow them to emit a specified quantity of pollution. Market incentive based e. The federal government pays fishermen to preserve salmon. Market incentive based

How does the cost of financial capital influence innovative research and development activities in a competitive market? A. at a high cost, firms demand a large quantity, as R&D projects return high rates. B. at a low cost, firms demand a large quantity, as R&D projects will likely return a higher rate. C. financial capital at a high cost means more projects are likely to pay a much higher return rate. D. at a low cost, the firm receives only small private benefits from investing in R&D.

Product differentiation may occur in _______________ because ____________________ created strong preferences for certain brands. A. shaping intangible preferences; predatory pricing B. the minds of buyers; past habits and advertising C. imperfect competition; the concept of differentiated products D. imperfect competition; advertising and consumer habits

Which of the following legislation was enacted in 1998 to allow copyright to be extended from 50 to 70 years after an author's death? A. Thomas Edison Patent Restoration Act B. Sonny Bono Copyright Term Extension Act C. Sonny Bono Patent Restoration Act D. Thomas Edison Copyright Term Extension Act

Which of the following would be classified as a differentiated product produced by a monopolistic competitor? A. natural gas B. Channel No. 5 C. electricity D. tap water

If a monopolistic competitor raises its price, it _________ customers than a perfectly competitive firm, but ________________ customers compared to the number that a monopoly that raised its prices would. A. will lose more; it will lose as many B. will lose more; it will lose more C. will lose fewer; it will lose more D. will lose fewer; it will lose as many

If marginal cost is rising in a competitive firm's short-run production process and its average variable cost is falling as output is increased, then A. marginal cost is above average variable cost. B. marginal cost is below average fixed cost. C. marginal cost is below average variable cost. D. average fixed cost is constant

If oligopolists compete hard against each other, A. they end up acting very much like imperfect competitors. B. costs for all are driven up. C. zero profits result for all. D. they end up acting very much like monopolistic competitors.

65. Mary competes in a monopolistically competitive market. Suddenly, 5 new firms enter the market, causing her perceived demand curve to shift. The following tables show her original and new demand curves and her cost information. Assume that Mary can only choose from the quantities of output given in the table. By how much will the quantity that she produces change after the new firms enter the market? A. increase by 5 B. decrease by 5 C. increase by 10 D. decrease by 10

During recessions a. workers are laid off. b. factories are idle. c. firms may find they are unable to sell all they produce. d. All of the above are correct.

In perfect competition, the demand curve for the firm is

Horizontal

The market demand curve in a perfectly competitive industry is:

NOT horizontal

Within a monopolistically competitive industry in the long-run, it would be expected that:

Productive efficiency is attained (partial) * Firms are not producing at the lowest possible average cost that technology (partial) Price is equal to marginal cost (partial) * Price is greater than marginal cost (partial) *

In economics, the term "shutdown point" refers to the point where the

marginal cost curve crosses the average variable cost curve.

Many cooks view butter and margarine to be substitutes. If the price of butter rises, then in the market for margarine:

the equilibrium price will rise, and the equilibrium quantity will fall.

Which of the following would most likely be recognized as a defining characteristic of a public good?

the good is both non-rivalrous and non-excludable

If a monopolist increases quantity by one unit, but sells the increased output at a slightly lower price:

the marginal revenue curve must be below the demand curve

Given the data provided in the table below, what will the amount of profit be for production at quantity (Q) level 7?

$-10

Refer to the figure below. Total costs are:

$264

Imagine an economy of 10 individuals. Their annual incomes are reported below. Approximately what percentage of this economy's income is held by the poorest 40% of the population?

18.6

Refer to the figure below. If the firm is producing the level of output that maximizes profit, its total cost of production is:

400

If a firm is producing so that the point chosen along the production possibility frontier is socially preferred, then that firm is said to have reached its A. allocative efficiency B. productive efficiency C. utility-maximizing efficiency D. minimum price efficiency

If the price that a firm charges is lower than its ____________ of production, the firm will suffer losses. A. average cost B. marginal cost C. fixed cost D. variable cost

Which of the following would cause prices to fall and output to rise in the short run? a. Short-run aggregate supply shifts right. b. Short-run aggregate supply shifts left. c. Aggregate demand shifts right. d. Aggregate demand shifts left.

________ include all of the costs of production that increase with the quantity produced.

Average costs Fixed costs (incorrect) Variable costs *

Total profit for a firm is calculated as a. marginal revenue minus average total cost. b. average revenue minus average total cost. c. marginal revenue minus marginal cost. d. (price minus average cost) times quantity of output.

Revenue

Income from selling a firm's product; defined as price times quantity sold

The profit-maximizong supply level for a competitive firm is where...

MR=MC.

Marginal Cost

The additional cost of producing one more unit

Marginal cost

The additional cost of producing one more unit of output

Which of the following is not one of the 3 key economic questions ?

When should production of goods and services take place

In which of the following situations should a manager use tactical management ?

When the group is under tight time pressure

If a country had perfect income equality what would the Lorenz curve look like?

When the line moves closer to the 45 degree line, it means that the country has a more perfect income equality.

If a perfect competitor raises its price,...

it will lose business

Incomes are received from several sources. Of the following, which is the largest?

labor

Which of the following is most likely to be a fixed cost?

mortgage payments

Which of the following are true statements about natural resources?

natural resources can be used by people to produce goods and services

When firms act in overt collusion to reduce output and keep prices high, they are considered

oligopoly (wrong) cartel

Which one of the following is the most accurate description of a monopolist?

sole producer of a product for which good substitutes are lacking in a market with high barriers to entry

When consumers and businesses have greater confidence that they will be able to repay in the future, _______________________.

the quantity demanded of financial capital at any given interest rate will shift to the right.

________ include all of the costs of production that increase with the quantity produced.

variable costs

A firm had sales revenue of $1 million last year. It spent $600,000 on labor, $150,000 on capital and $200,000 on materials. What was the firm's accounting profit?

$100,000 $50,000 (correct) $150,000

During recessions which type of spending falls? a. consumption and investment b. investment but not consumption c. consumption but not investment d. neither consumption nor investment

_________ arises when firms act together to reduce output and keep prices high. A. Collusion B. A cartel C. A monopoly D. An oligopoly

If a firm cannot cover its variable cost, it should...

shut down to minimize loss

If a firm's revenues do not cover its average variable costs, then that firm has reached its ________.

shutdown point

Assuming that the monopolistic competitor faces the demand and costs depicted below and finds the profit maximizing level of output, what will be the firm's profit?

$12 $-32 (correct) $-64 $8

Firm

An organization that combines inputs of labor, capital, land, and raw or finished component materials to produce outputs.

73. A monopolistic competitor has the following information about cost and demand. Then, in the long run equilibrium, the firm will sell this good at what price? A. $5 B. $7 C. $10 D. $14

The demand curve faced by a monopolistically competitive firm is:

Flat-perfectly elastic Downward-sloping - market demand (incorrect) Slightly downward-sloping - somewhat elastic

To minimize the cost of producing a given level of output in the long run, a firm must:

Follow the marginal decision rule and equate the ratio of marginal product to price for all factors of production.

The supply decision for a perfect competitor is where...

Price = Total Cost.

When new firms enter a perfectly competitive market, what is the impact on prices?

Prices go down

The four marketing mixed elements are ?

Product , Distribution , Promotion , Pricing

A monopolistically competitive industry does not display ________ in either the short-run, when firms are making ________, nor in the long-run, when firms are earning ________ .

Productive efficiency; economic profits or losses; negative economic profits Allocative efficiency; economic losses; positive economic profits Allocative efficiency; economic profits and losses; zero economic profits (correct)

Productivity is effected by ?

Technology and worker training

In perfect competition if firms produce where P=MC they ensure ________ because the social benefits of production as measured by the price that people are willing to pay, are in balance with the ________ to society of that production.

allocative efficiency : costs

Which of the following results in a rightward shift of the market demand curve for labor?

an increase in demand for the firm's product

A straightforward example of a _______________, often used for simplicity, is the interest rate.

rate of return

Which best describes an oligopoly?

firms must make decisions based on the behavior or expected behavior of their competitors

A firm's ________ consist of expenditures that must be made before production starts that typically, over the short run, ________ regardless of the level of production.

fixed costs; do not change

In the United States, price discrimination is ________.

encouraged (incorrect) maybe its permitted

Diseconomies of scale arise ________.

in the long run

For a pure monopoly to exist there is/are:

limited sellers in a particular industry. (wrong)

In the ________, the perfectly competitive firm will react to losses by ________ .

long run : reducing production or shutting down

Why is a monopoly allocatively inefficient?

price is greater than marginal cost at the profit maximizing level of output

- For a negative externality, the than the costs imposed on society as a whole.

private costs of an action are less

In a purely competitive market, a firm finds that at its MR=MC output level the Total Variable Cost (TVC) equals $550, Total Fixed Cost (TFC) equals $250, and Total Revenue equals $700. The firm should:

produce because it can still cover its total variable costs.

If large numbers of individuals choose to behave as free riders,

the public good may never be provided

A Lorenz curve graphic shows:

what perfect equality of the income distribution looks like compared to the actual income distribution.

If labor demand is downward sloping and labor supply is upward sloping, then when labor demand rises faster than labor supply, it is expected that real wages __________.

will increase

Total Cost can be expressed as:

(price x quantity) * (implicit cost + explicit cost) (average fixed cost + average variable cost) (partial) * (average cost x quantity) (Partial) *

Refer to the figure below. If the firm is producing the level of output which maximizes profit, its total variable cost of production is:

320

64. The following table shows the demand curve and cost information for a firm that is a monopoly. If they maximize their profits, what will their profits equal? A. $650 B. $1,250 C. $2,000 D. $2,250

The demand curve as perceived by a perfectly competitive firm is __________ . A. flat B. downward sloping C. upward sloping D. hump shaped

Implicit costs are ________.

A foregone opportunity to do something else with your resources (correct) The monetary value of all the inputs used for an activity A cost you consciously pay

62. The table below shows the demand curve and cost information for a firm that is a monopoly. If they maximize their profits, what price will they charge? A. $800 B. $600 C. $400 D. $200

If a firm's revenues do not cover its average variable costs, then that firm has reached its _________________ . A. price taking point B. shutdown point C. marginal point D. opportunity margin

Why did Gordon Gould have to endure a lengthy legal battle in order to receive a patent for his innovative laser idea concocted in 1957? A. by 1957, several other scientists had filed patents ahead of him, but none of their laser inventions worked B. he delayed applying to patent his idea, mistakenly believing he needed to have a working laser to apply C. by 1957, his laser was no longer the inspiration of a single person. D. by 1957, his laser technology overlapped previous laser patents.

63. The following table shows the demand curve and cost information for a firm that is a monopoly. If they maximize their profits, what will their revenue equal? A. $16,000 B. $32,000 C. $54,000 D. $56,000

When a firm operates under conditions of monopoly, its price is a. not constrained. b. constrained by marginal cost. c. constrained by demand. d. constrained only by its social agenda.

Budgeting requires an understanding of financial information and ?

Computer skills

Which of the following are assumptions of perfect competition?

Consumers have all the relevant information to make rational buying decisions. The products are identical. There are many buyers and sellers.

67. The table below sets out the amount of capital needed for certain investment projects and the rate of return for each project. What is this firm's demand for physical capital if their hurdle rate is 8%? A. $1.5 million B. $2 million C. $250,000 D. $500,000

In economics, labor demand is synonymous with A. market demand. B. average demand. C. marginal demand. D. derived demand.

Inventors of the Theory of Imperfect Competition

Edward Chamberlain: Harvard University/published The Economics of Monopolistic Competition Joan Robinson: Cambridge University/published The Economics of Imperfect Competition

Monopolistic Competition

Feature a large number of competing firms, but the products that they sell are not identical (ex. Banana Republic, J. Crew, and Nordstrom...)

Mary and Raj are the only two growers who provide organically grown corn to a local grocery store. They know that if they cooperated and produced less corn, they could raise the price of the corn. If they work independently, they will each earn $100. If they decide to work together and both lower their output, they can each earn $150. If one person lowers output and the other does not, the person who lowers output will earn $0 and the other person will capture the entire market and will earn $200. The table represents the choices available to Mary and Raj. What is the best choice for Raj if he is sure that Mary will cooperate?

If Raj is sure Mary will cooperate, he should cheat

Within a monopolistically competitive industry, it would be expected that:

In the short-run, an innovative firm's price is greater than their average cost * Firms make a positive or negative economic profit in the short-run * In the long-run, a typical firm's price is greater than their average cost * Firm's make a positive economic profit in the long-run *

What economic effects does immigration generally on immigrants themselves?

Large economical gain Wage ratio increases Countries of origin

Name two public goods and explain why they are public goods

National defense/ Fire department Relies on nonexcludable and nonrivalrous

Accounting Profit

Total revenues minus explicit costs, including depreciation

Oligopoly

When a few large firms have all or most of the sales in an industry

When a monopoly is the only supplier within 200 miles, we often call this type of monopoly...

a geographic monopoly.

When an owner uses resources they own in a business, that usage should be considered

an implicit cost

After AT&T was split up by government litigation into a number of different entities (i.e., local phone companies, a long-distance phone company and a phone equipment manufacturer), what was the impact on competition in the phone market?

an increase in competition leading to greater innovation, more services, and lower prices

In the long run, a firm can...

change all inputs

- Which of the following is the most appropriate response of public policy to a negative externality like pollution?

find ways to account for the social costs of the negative externality in economic decisions

Price discrimination occurs when a:

firm charges a different price for the same product based on demand differences

Which of the following are advantages that firms could gain by working together as if they were a monopoly?

firms can hold down industry output

An individual who wants others to pay for public goods, but plans to use those goods for their own purposes, is often referred to as a:

free rider

Except for one point, the short run average cost must always be ________ the long run average cost.

greater than

If a firm's efforts to be technologically innovative will create a positive externality, then that firm will likely:

have less incentive to innovate to the extent that the whole of society desires.

A Lorenz curve refers to a graphic illustration of the cumulative share of population on the ________ and the cumulative percentage of total income received on the ________ .

horizontal axis : vertical axis

Following the assumption that firms maximize profits, how will the price and output policy of an unregulated monopolist compare with ideal market efficiency?

output will be too small and its price too high

A public good is a good that is, and thus is difficult for market producers to sell to individual consumers

. non-excludable and non-rivalrous

- For a positive externality, than the social benefits

. private benefits of an action are less

Paddy has lots of cousins. With a family reunion in the near future, Paddy decides to collect income information for himself and all his cousins. He obtains the following data points: $52,000, $22,000, $92,000, $8,000, $118,000, $62,000, $38,000, $14,000, $132,000, $46,000, $26,000, $96,000, $54,000, $110,000, $80,000. The share of income received by the second-to-bottom quintile of this income distribution is

11.6%

Refer to the figure below. If the firm is producing the level of output that maximizes profit, its total revenue is:

480

A group of 10 golfing buddies have the following annual incomes: $32,000, $12,000, $56,000, $120,000, $10,000, $38,000, $70,000, $16,000, $20,000, $24,000. The share of income received by the bottom quintile of this income distribution is

5.5%

55. Refer to the table below. In this instance, expansion of output A. causes input prices to rise as demand for inputs increases. B. leaves input prices constant as demand for inputs increases. C. causes diseconomies of scale to occur. D. occurs because of increasing returns to scale.

59. A drug company is deciding how much to invest in Research and Development into finding a cure for the common cold. The table below shows the company's demand for financial capital for R&D of this cold drug, based on its expected rates of return from selling the cure. Every investment has an additional 4% social return: that is, an investment that pays at least a 5% return to the drug company will create at least a 9% return for society as a whole. If the opportunity cost of financial capital for the drug company is 7%, the drug company will invest ___ in R&D if it receives both the private and the social benefits of this investment. A. $308 B. $264 C. $250 D. $228

64. The SaferGlass Co. makes windshields for the automotive industry. It wants to develop a new product with shatterproof glass to increase safety. The development of the new glass requires them to change their production process significantly. The company has developed a list of possible ways of implementing the production process changes, along with estimates of how each would affect the production and sales costs. Based on these estimates, the table below shows the value of R&D projects that provide at least a certain social rate of return. Every investment in R&D would have an additional 3% social return: that is, an investment that pays at least a 4% return to the glass company will pay at least 7% return for society as a whole. If the opportunity cost of financial capital for SaferGlass Co. is 9%, the company will invest ______ in R&D if it receives both the private and social benefits of this investment. A. $400 B. $450 C. $500 D. $550

66. ToasterOvensInc. is developing technology to make a toaster oven than uses less electricity. If successful, the technology will significantly reduce the amount of energy that is wasted due to product inefficiencies. If the firm sells only in response to the market price, the quantity shown in the third column is supplied. If the firm were also to receive the broader social benefits of the new technology, the willingness to supply is shown in the fourth column. If the firm were to receive a price based on both private and social benefits, the equilibrium price and quantity would be A. $16, 740 b. $17, 770 c. $18, 800 d. $19, 830

67. Joe owns a restaurant. Many of the restaurants that he competes with recently closed, shifting his perceived demand curve. The following 2 tables show his old and new perceived demand curves. Assume that Joe can only choose from the quantities of output given in the table. By how much does the price that he charges change after the restaurants leave the market? A. increase by 3 B. decrease by 3 C. increase by 4 D. decrease by 4

68. Sam owns an antique store in Boston. Many of his competitors left the market, causing his perceived demand curve to change. The following 2 tables show his old and new perceived demand curves. Assume Sam can only choose from the quantities of output given in the table. By how much will the quantity that he sells change as a result of his competitors leaving the market? A. it will stay the same B. increase by 10 C. decrease by 10 D. increase by 5

A monopolistically competitive firm may earn abnormally high profits in the A. short term, but the process of entry will drive those profits to zero in the long run. B. long term, but the process of entry will drive those profits to zero in the short run. C. short run, but after entry occurs, the long term perceived demand curve shifts to the right. D. long run, but after entry occurs, the short term perceived demand curve shifts to the right.

An _________________ is calculated by subtracting the firm's costs from its total revenues, _______________________________ . A. accounting profit; excluding opportunity cost B. accounting profit; including opportunity cost C. economic profit; excluding opportunity cost D. opportunity cost; including economic profit

For a negative externality, the __________________________ than the costs imposed on society as a whole. A. private costs of an action are less B. social costs of an action are less C. private benefits of an action are more D. social benefits of an action are more

Government has a variety of policies that allow inventors to _____________________ , such as the granting patents and __________________ . A. receive an increased rate of return; subsidization of research and development B. protect their inventions; limited copyrights during the inventor's lifetime C. register their inventions; unlimited copyrights during the inventor's lifetime D. receive a reasonable rate of return; lifetime intellectual property rights.

I'maGoldMiner has benefited from a record rise in gold prices in the global commodities market. While the price of its output is highly influenced by market speculation, if it wants to increase production to take advantage of the current profit-maximizing opportunity, the company A. must accept market price for its physical capital inputs. B. must reduce what it pays for inputs that make up its costs of production. C. must reduce production to encourage speculators to drive gold prices higher. D. must alter the price of its labor inputs to maximize profits.

Ideally, a patent should cover a long enough period of time for the inventor to _______________, but that period should not be so long that it allows the inventor to _____________________________. A. earn a hearty return; charge a high monopoly price permanently B. contribute to the social interest; only receive a slice of the social benefits C. earn a rate of return; prevent broad public access to classic works D. contribute to the social interest; prevent broad public access to inventions

If a competitive firm experiences a shift in costs of production that decreases marginal costs at all levels of output, A. expanding output levels at any given price will be profitable. B. producing less at any market price will off-set marginal cost . C. the firm's marginal cost curve will shift to the left. D. the firm's demand curve will also shift to the left.

If a competitive firm is currently producing a level of output at which marginal revenue exceeds marginal cost, then a. a one-unit increase in output will increase the firm's profit. b. a one-unit decrease in output will increase the firm's profit. c. total revenue exceeds total cost. d. total cost exceeds total revenue.

If a perfectly competitive firm is a price taker, then A. pressure from competing firms will force acceptance of the prevailing market price. B. it must be a relatively small player compared to its competitors in the overall market. C. it can increase or decrease its output without affecting overall quantity supplied in the market. D. quality differences will be very perceptible and will play a major role in purchasers' decisions.

If a small electric automobile manufacturer is able to gain the social return generated by its electric motor, its demand for financial capital would A. shift to the left. B. shift to the right. C. decrease substantially. D. increase slightly.

If an alternative policy could encourage both _____________________, instead of ________________________, consumers would benefit. A. invention and competition; invention and monopoly B. invention and monopoly; invention and public funding C. invention and monopoly; invention and competition D. invention and competition; invention and public funding

If some of the products developed by I'mASoftwareCo. must face market competition that can very quickly produce either an identical product or a close substitute for it, then A. it may decide against R&D projects of this sort. B. it will have to figure out innovative ways to prevent adaptation and copying of its products. C. the other firms will all save on their R&D costs. D. it must charge more for its products to quickly compensate for the research and development costs.

If the government determines that the private sector does not have sufficient incentive to carry out research and development, which of the following is likely to be a reasonable response? A. government can use public funds to pay for the R&D activities directly. B. setting up government-run laboratories to ensure public benefits arise from public funding. C. direct all public R&D funding to colleges and universities to ensure public benefits arise from public funding. D. ensure that firms are not entering cooperative ventures to lessen competition, as well as b and c above.

If the quality differences of similar products are mostly imperceptible to the average consumer's eyes, which of the following will most likely play a major role in influencing the decisions of purchasers? A. price of competing products B. size of competing products C. purchaser's opportunity cost D. geographic origin of products

In Sam's greenhouse operation, labor is the only short term variable input. After completing a cost analysis, if the marginal product of labor is the same for each unit of labor, this will imply that A. the average product of labor is always equal to the marginal product of labor. B. the average product of labor is always greater that the marginal product of labor. C. the average product of labor is always less than the marginal product of labor. D. as more labor inputs are used, the average product of labor inputs will fall.

In a free market economy, firms operating in a perfectly competitive industry are said to have only one major choice to make. Which of the following correctly sets out that choice? A. what quantity to produce B. what price to charge C. what quantity of labor is needed D. what quality to produce

In the competitive market for figure skate blades, manufacturers offer an array of products that are A. distinctly different in a particular way. B. distinctly similar in a particular way. C. virtually identical on the competition spectrum. D. at opposite ends of the competition spectrum.

In the framework of an oligopoly, what strategy can work like a silent form of cooperation? A. always match other cartel firms' price cuts, but don't match price increases B. always match other cartel firms' price increases, but don't match price cuts C. immediately match price increases D. legally enforceable agreements

In the short-run, a firm's supply curve is equal to the a. marginal cost curve above its average variable cost curve. b. marginal cost curve above its average total cost curve. c. average variable cost curve above its marginal cost curve. d. average total cost curve above its marginal cost curve.

Many residents of a particular town enjoy taking their dogs with them when they go to their local park for recreation and picnics. Everybody enjoys the park more when each group cleans up after themselves and their pets, but nobody enjoys the act of cleaning up after themselves or their dogs. We can expect the park to be _______, due to a _________ . A. dirty, prisoner's dilemma B. clean, prisoner's dilemma C. dirty, positive externality D. clean, positive externality

Market competition may sometimes encourage a firm to innovate out of fear because of the perception that A. they will inevitably fall behind other competitors seeking out innovations. B. the firm will only have a very temporary edge over its competitors. C. the ability to earn above-normal profits is also available to its competition. D. higher profits can only be earned by finding less expensive ways to produce.

Monopolistic competitors can make a _____________ in the short-run, but in the long run, ______________ will drive these firms toward _______________________ . A. profit or loss; entry and exit; a zero-profit outcome B. loss; exit; losses on their earnings C. profit or loss; exit; economic profits D. profit; entry; a price that lies at the very bottom of the AC curve

Most economists use the aggregate demand and aggregate supply model primarily to analyze a. short-run fluctuations in the economy. b. the effects of macroeconomic policy on the prices of individual goods. c. the long-run effects of international trade policies. d. productivity and economic growth.

Oligopoly firms acting individually may seek to gain profits ___________________________ . A. by expanding levels of output and cutting prices B. by selling products that are distinctive in some way C. by having a mini-monopoly on a particular brand name D. by having a mini-monopoly or through tough competition

One difference between a perfectly competitive firm and a monopoly is that a perfectly competitive firm produces where a. marginal cost equals price, while a monopolist produces where price exceeds marginal cost. b. marginal cost equals price, while a monopolist produces where marginal cost exceeds price. c. price exceeds marginal cost, while a monopolist produces where marginal cost equals price. d. marginal cost exceeds price, while a monopolist produces where marginal cost equals price.

Perfect competition and monopoly stand at _____________ of the spectrum of competition. A. opposite ends B. the high end C. the low end D. the mid-way point

The model of short-run economic fluctuations focuses on the price level and a. real GDP. b. economic growth. c. the neutrality of money. d. None of the above is correct.

The shape of the perceived demand curve for a perfectly competitive firm reflects that firm's ability to A. sell any quantity it wishes at the prevailing market price. B. raise its price without losing all of its customers. C. choose any combination of price and quantity. D. lose fewer customers than a monopoly that raised its prices.

When a firm invests in new technology, the ________________ that the firm receives are _____________________________ . A. private benefits; only a portion of the overall social benefits B. social benefits; only a portion of the overall private benefits C. private benefits; about three-quarters of the economic benefits D. social benefits; about one-third of the overall private benefits

When exit occurs in a monopolistically competitive industry the A. perceived demand and marginal revenue curves will shift to the right. B. perceived demand and marginal revenue curves will shift to the left. C. perceived demand curve will shift to the left. D. marginal revenue curve will shift to the left.

Which of the following represents one of the methods that the government uses to promote technology? A. protection of intellectual property B. provision of a greater number of public goods C. maintenance of stable regulated financial markets D. creation of public colleges and universities

Which of the following statements about GDP is correct? a. Nominal GDP values production at current prices, whereas real GDP values production at constant prices. b. Nominal GDP values production at constant prices, whereas real GDP values production at current prices. c. Nominal GDP values production at market prices, whereas real GDP values production at the cost of the resources used in the production process. d. Nominal GDP consistently underestimates the value of production, whereas real GDP consistently overestimates the value of production.

Which of the following would most likely create the setting for an oligopoly? A. government grants Alex, Trent, and Alyse each a patent for their respective molybdenum based electric car batteries B. market demand is two or more times less than quantity needed to produce at the minimum of the AC curve C. market demand is two or more times more than quantity needed to produce at the minimum of the MC curve D. insurmountable technological difficulty associated with producing similar products acts as an effective barrier to entry

______________________ refers to the additional revenue gained from selling one more unit. A. Marginal revenue B. Total revenue C. Economic profit D. Accounting profit

The term "constant returns to scale" describes a situation where

A larger scale firm can produce at a lower cost than a smaller-scale firm Expanding all inputs changes the average cost of production The quantity of output rises and the average cost of production falls Expanding all inputs does not change the average cost of production (correct)

Sunk costs have ________.

A moderate effect on output decisions Significant effect on output decisions Should have no effect on output decisions (correct)

Why are the underlying economic meanings of the perceived demand curves for a monopolist and monopolistic competitor different?

A monopolist faces the market demand curve and a monopolist competitor does not

Short Run

A planning period over which the managers of a firm must consider one or more of their factors of production as fixed in quantity

A group of 10 people have the following annual incomes: $24,000, $18,000, $50,000, $100,000, $12,000, $36,000, $80,000, $10,000, $24,000, $16,000. Calculate the share of total income received by each quintile of this income distribution. Do the top and bottom quintiles in this distribution have a greater or larger share of total income than the top and bottom quintiles of the U.S. income distribution?

A useful first step is to rank the households by income, from lowest to highest. Then, since there are 10 households total, the bottom quintile will be the bottom two households, the second quintile will be the third and fourth households, and so on up to the top quintile. Dividing the population by 2 and put it into quintiles. Add the two lowest incomes together and divide by the next quintile. Take the income for the quintile divided by the total times 100.

Long-run equilibrium in perfectly competitive markets meets what two important conditions?

Allocative efficiency Productive efficiency

Which of the following will NOT result in a leftward shift of the market demand curve for labor?

An increase in immigration An increase in the wage rate

Economies of scale

As the quantity of output goes up, the cost per unit goes down

In monopolistic competition, the end result of entry and exit is that firms end up with a price that lies

At the very bottom of the AC curve At the very top of the AC curve On the upward-sloping portion of the average cost curve On the downward-sloping portion of the average cost curve (correct)

61. Neil's Bakery is famous for its giant cinnamon buns. The bakery has fixed costs of $100. Neil must pay each worker a wage of $10.00 per hour and each works an 8 hour shift. He earns $2 for each cinnamon bun that is sold. The following table shows how many cinnamon buns he can sell, depending on the number of workers he hires. Refer to the table below. To maximize his profits in this competitive market, how many workers should he hire?A. 2 workers B. 3 workers C. 4 workers D. 5 workers

62. CleanAir Motors Inc. wants to build electric cars with no emissions. However, electric motors require innovative battery technology for adequate energy storage to meet basic daily commuting needs. The company has several possibilities for alternative battery technology, along with estimates of how these approaches would affect their costs of producing the cars and their sales of the cars. Based on these estimates, the table below shows the value of R&D projects that provide at least a certain private rate of return. Every investment would have an additional 2% social return: that is, an investment that pays at least a 6% return to the car company will pay at least an 8% return for society as a whole. If the opportunity cost of financial capital for CleanAir Motors Inc. is 10%, CleanAir Motors Inc. will invest ___ in R&D if it receives both the private and social benefits of this investment. A. $2000 B. $1500 C. $1000 D. $500

63. The SaferGlass Co. makes windshields for the automotive industry. It wants to develop a new product with shatterproof glass to increase safety. The development of the new glass requires them to change their production process significantly. The company has developed a list of possible ways of implementing the production process changes, along with estimates of how each would affect the production and sales costs. Based on these estimates, the table below shows the value of R&D projects that provide at least a certain social rate of return. Every investment in R&D would have an additional 3% social return: that is, an investment that pays at least a 4% return to the glass company will pay at least 7% return for society as a whole. If the opportunity cost of financial capital for SaferGlass Co. is 9%, the company will invest ______ in R&D if it receives only the private benefits of this investment. A. $400 B. $450 C. $500 D. $550

74. A monopolistic competitor has the following information about cost and demand. What will this firm's profits equal in the short run? A. -$55 B. $0 C. $250 D. $280

A public good is a good that is ____________________ , and thus is difficult for market producers to sell to individual consumers. A. excludable or rivalrous B. nonexcludable and nonrivalrous C. excludable and rivalrous D. unexcludable or unrivaled

Accounting profit is equal to a. marginal revenue minus marginal cost. b. total revenue minus the explicit cost of producing goods and services. c. total revenue minus the opportunity cost of producing goods and services. d. average revenue minus the average cost of producing the last unit of a good or service.

As the name monopolistic competition implies, a firm's decisions in this setting will in certain ways resemble ______________ and in other ways resemble________________ . A. monopoly; imperfect competition B. monopoly; perfect competition C. imperfect competition; perfect competition D. imperfect competition; oligopoly

Cathy can take either of two separate roads to drive to work. The first is a lightly used new toll road that is rarely congested. The second road is a local road with no tolls, but it is often congested and has many potholes. In this instance, the toll road is A. nonrivalrous and excludable B. rivalrous and nonexcludable C. nonrivalrous and nonexcludable D. rivalrous and excludable

Economic profit can be derived from calculating total revenues minus all of the firm's costs, A. excluding its opportunity costs. B. including its opportunity costs. C. including its marginal revenue. D. excluding its marginal revenue.

Even when competitive firms are unable to calculate marginal revenue product directly, _________________________________________ will push wage rates toward the marginal revenue product of labor. A. planned future investment in physical capital B. the pressures of competition in the labor market C. the marginal workers ongoing skills training D. wages that exceed workers' net revenue product

For a perfectly competitive firm, the marginal cost curve is identical to the firm's ________________ . A. demand curve B. supply curve C. average total cost curve D. average variable cost curve

Gross domestic product measures two things at once: a. the total spending of everyone in the economy and the total saving of everyone in the economy. b. the total income of everyone in the economy and the total expenditure on the economy's output of goods and services. c. the value of the economy's output of goods and services for domestic citizens and the value of the economy's output of goods and services for the rest of the world. d. the total income of households in the economy and the total profit of firms in the economy.

I'maSolarPanelCo. manufactures and distributes solar panels in the US market. Two years ago, it had 5 US competitors, but government stimulus in the industry has encouraged 7 new US competitors to enter the market. In these circumstances, I'maSolarPanelCo.'s price for its output A. can be tailored to exceed the price of its inputs. B. is dictated by the forces of demand and supply. C. can be tailored to meet the price of its inputs. D. can be set by management to maximize profits.

Idaho farmers can sell as large a quantity of their potato crop as they wish, A. if they set their own price in the short run, but in the long run, the market sets the price. B. provided each is willing to accept the prevailing market price. C. if they set their own price in the long run, but in the short run, the market sets the price. D. provided quality is perceptible and determines the market price.

If I'MSmartCo's research and development project succeeds, then A. market competition will ultimately discourage commercialization of the new technology. B. competitors may find a way to adapt and copy the underlying idea without incurring R&D costs. C. their success will be temporary because they will inevitably fall behind other innovative competitors. D. they will need to find a less expensive way to add even more desirable characteristics.

If a monopoly or a monopolistic competitor raises their prices, then A. decline in quantity demanded will be larger for the monopoly. B. decline in quantity demanded will be larger for the monopolistic competitor. C. the quantity demanded for the monopoly product falls to zero. D. the quantity demanded for the monopolistic competitor will fall to zero.

If a perfectly competitive firm raises its price, the quantity demanded of its product _____________. A. diminishes temporarily in the short run B. falls to zero C. stays the same D. falls below marginal cost

If a perfectly competitive market involves many firms selling identical products, then, in the face of such competition, A. each of these firms must act as a price-maker. B. each of these firms must act as a price-taker. C. collusion amongst them will most often result. D. demand curves can become kinked in appearance.

If each of two competing monopolists undertakes equal advertising efforts to attract consumers away from the other, the total result is A. they will both increase market share. B. they will simply neutralize one another's efforts. C. they will both lose market share. D. they will both improve their industrial position.

If large numbers of individuals choose to behave as free riders, A. more of the public good will be available for paying riders. B. the public good may never be provided. C. public goods will quickly be privatized. D. public domain technologies become more difficult to obtain.

If marginal cost is equal to average total cost, then a. marginal cost is minimized. b. average total cost is minimized. c. average variable cost is minimized. d. marginal cost is zero.

If the firm is producing at a quantity of output where marginal revenue exceeds marginal cost, then, A. the firm's perceived demand will shift to the left. B. the firm should keep expanding production. C. each marginal unit adds profit by bringing in less revenue than its cost. D. the firm is now earning zero for profit.

In a perfectly competitive market, each firm produces at a quantity where price is set A. equal to marginal cost, in the short run. B. equal to marginal cost, both in the short run and in the long run. C. equal to average cost, in the long run. D. equal to average cost, both in the short run and in the long run.

In economic terms, a practical approach to maximizing profits requires an examination of how changes in production affect ________________ and ________________ . A. total revenue; total cost B. marginal revenue; marginal cost C. total revenue; marginal cost D. marginal revenue; total cost

In order to include many different goods and services in an aggregate measure, GDP is computed using, primarily, a. values of goods and services based on surveys of consumers. b. market prices. c. consumer and producer surpluses. d. costs of producing goods and services.

In order to produce 100 oatmeal cookies, GoodieCookieCo incurs an average total cost of $0.25 per cookie. The company's marginal cost is constant at $0.10 for all oatmeal cookies produced. The total cost to produce 50 oatmeal cookies is A. $25 B. $20 C. $50 D. $60

In the ________, the perfectly competitive firm will react to losses by __________________________ . A. short run; reducing production or shutting down B. long run; reducing production or shutting down C. short run; increasing physical inputs D. long run; increasing capital inputs

In the long run, a. inputs that were fixed in the short run remain fixed. b. inputs that were fixed in the short run become variable. c. inputs that were variable in the short run become fixed. d. variable inputs are rarely used.

Kate's 24-Hour Breakfast Diner menu offers one item, a $5.00 breakfast special. Kate's costs for servers, cooks, electricity, food, etc. average out to $3.95 per meal. Her costs for rent, insurance cleaning supplies and business license average out to $1.25 per meal. Since the market is highly competitive, Kate should A. raise her prices above the perfectly competitive level set by the market. B. keep the business open in the short-run, but plan to go out of business in the long-run. C. keep the business open in the short-run, and plan to expand the business in the long-run. D. lay-off her staff, break her lease, and close the business down immediately.

Market competition can provide _______________ for _________________ , A. unsustained profits; firms with marketable patents B. the needed incentive; discovering new technologies C. time; competitors to catch up with other's inventions D. an opportunity; competitors seeking out innovations

One difficulty with direct government support of R&D is that it inevitably involves government decisions about ___________________. A. whether it can agree on the amount of social benefit conferred to private firms B. which of the vast number of proposed projects are worthwhile C. the location of the congressional district receiving the research funding. D. quantifying the social benefit conferred on a private firm by an R&D tax reduction.

One reason some economists doubt that patent protection encourages innovation is that economic studies show that inventors receive only __________________ of the total economic value of their inventions in countries that ______________ . A. one-half to two-thirds; previously had few patents B. one-third to one-half; already had patents C. one-third to one-half; previously had no patents D. one-half to two-thirds; had existing patents

Patent and copyright laws are major sources of a. natural monopolies. b. government-created monopolies. c. resource monopolies. d. antitrust regulation.

Raven Farms raises a substantial number of bees and uses the honey to produce its own skin healing cream. Raven Farms is situated next to the Oakcreek Apple Orchard. The bees from Raven Farms pollinate Oakcreek's apple trees. In this instance, Raven Farms A. derives more private benefits and provides less social benefit. B. provides more social benefits than it derives in private benefits. C. provides a marginal social benefit and derives a complete private benefit. D. provides a complete social benefit and derives a marginal private benefit.

The amount by which total cost rises when the firm produces one additional unit of output is called a. average cost. b. marginal cost. c. fixed cost. d. variable cost.

The first step to be undertaken by a profit-maximizing monopolistic competitor wanting to decide what price to charge is to A. determine total revenue, total cost, and profit B. select the profit maximizing quantity to produce C. determine what price to charge for the product D. determine average costs, total revenue, and profit

The single most common form of competition in the U.S. is A. perfect competition among firms with differentiated products. B. monopolistic competition among firms with differentiated products. C. oligopolistic competition in a certain market with similar products. D. perfect competition because it displays product and allocative efficiencies.

Those things that must be forgone to acquire a good are called a. implicit costs. b. opportunity costs. c. explicit costs. d. accounting costs.

Under perfect competition, any profit-maximizing producer faces a market price equal to its A. average costs B. marginal costs C. total costs D. variable costs

What role can advertising play with respect to differentiated products? A. allows a firm to sell any quantity it wishes B. shapes consumers intangible preferences C. shapes perceived demand for a price taker D. allows a firm to raise the prevailing market price

When a business adopts a strategy of reducing and/or discontinuing production in response to a sustained pattern of losses, it is A. considering opportunity costs. B. preparing to exit operations. C. preparing to reach its shutdown point. D. considering capital investments.

When a firm uses retained profits to invest in more energy efficient equipment, an economist would calculate the _________________ of investing in physical capital. A. typical hurdle rate B. opportunity cost C. degree of risk D. hurdle rate premium

When entry occurs in a monopolistically competitive industry, A. the perceived demand and marginal revenue curves for each firm will shift to the right. B. the perceived demand and marginal revenue curves for each firm will shift to the left. C. the perceived demand curve for each firm will shift to the right. D. the marginal revenue curves for each firm will shift to the right.

When technology is advancing so quickly, even a patent from, say, two years ago may be ___________________, because __________________________ . A. somewhat outdated; few firms are relying on the technology B. completely outdated; no firm is relying on that technology any longer C. irrelevant; inventors are only receiving a slice of the social value. D. irrelevant; not every idea can remain under patent protection forever.

Which of the following is a characteristic of a natural monopoly? a. Marginal cost declines over large regions of output. b. Average total cost declines over large regions of output. c. The product sold is a natural resource such as diamonds or water. d. All of the above are correct.

Which of the following is a question economists have struggled to address with only partial success? A. Whether monopolistic competition provides optimal productive or allocative efficiency? B. Whether a market-oriented economy produces the optimal amount of variety? C. Does a market-orientated economy provide productive or allocative efficiency? D. Does a monopolistically competitive industry displays allocative efficiency in the short run?

Which of the following is most commonly used to monitor short-run changes in economic activity? a. the inflation rate b. real GDP c. aggregate demand d. aggregate supply

Which of the following is the most appropriate response of public policy to a negative externality like pollution? A. modernize, update, and restore homes in run down neighborhoods to decrease littering B. find ways to account for the social costs of the negative externality in economic decisions C. encourage high standards of public education to increase innovation capability of youth D. assist the private party creating the negative externality to receive more social benefits

Which is NOT a reason that oligopolies are inefficient?

Barriers to entry can allow them to earn sustained profits over long periods of time

The upward sloping portion of a long-run cost curve illustrates:

Both of the above Diseconomies to scale (correct) Diminishing marginal returns

On April 1, 2009, in the middle of a recession, the government of the province of Ontario, Canada increased the provincial minimum wage from $8.75 to $9.50. What will the likely effect of this policy be?

Both the leftward shift in the labor demand curve and the higher minimum wage will lead to an increase in the unemployment rate.

What economic effects might immigration have on the countries of immigrant origin?

Brain drain is the emigration of highly trained or intelligent people from a particular country. Remittances are a portion of wages back to country of origin

34. Refer to the diagram above. In this instance, the range of production possibilities at point d, A. is a steeper slope reflecting increasing profits due to diminishing costs. B. is a steeper slope reflecting a lower price. C. is a steeper slope reflecting a return to losses due to diminishing returns. D. is a steeper slope reflecting higher total revenue.

37. Given the data provided in the table below, what will the marginal revenue equal for production at quantity (Q) level 4? A. $20.00 B. $15.00 C. $5.00 D. $1.00

58. A drug company is deciding how much to invest in Research and Development into finding a cure for diabetes. The table below shows the company's demand for financial capital for R&D based on its expected rates of return from selling the cure. Every investment provides an additional 4% social return: that is, an investment that pays at least a 5% return to the drug company will create at least a 9% return for society as a whole. If the opportunity cost of financial capital for the drug company is 7%, the drug company will invest ___ in R&D if it receives only the private benefits of this investment. A. $308 B. $264 C. $250 D. $228

61. CleanAir Motors Inc. wants to build electric cars with no emissions. However, electric motors require innovative battery technology for adequate energy storage to meet basic daily commuting needs. The company has several possibilities for alternative battery technology, along with estimates of how these approaches would affect their costs of producing the cars and their sales of the cars. These estimates are set out in the table below. Every investment has an additional 2% social return: that is, an investment that pays at least a 6% return to the drug company will pay at least an 8% return for society as a whole. If the opportunity cost of financial capital for Cleaner Motors Inc. is 10%, Cleaner Motors Inc. will invest ___ in R&D if it receives only the private benefits of this investment. A. $2000 B. $1500 C. $1000 D. $ 500

61. The following table shows the demand curve and cost information for a firm that is a monopoly. What quantity should they produce to maximize their profits? A. 200 units B. 400 units C. 600 units D. 800 units

65. ToasterOvensInc. is developing technology to make a toaster oven than uses less electricity. If successful, the technology will significantly reduce the amount of energy that is wasted due to product inefficiencies. If the firm sells only in response to the market price, the quantity shown in the third column of the table below is supplied. If the firm were also to receive the broader social benefits of the new technology, the willingness to supply is shown in the fourth column. If the firm were to receive a price based only on private benefits, the equilibrium price and quantity would be A. $16, 740 B. $17, 680 C. $18, 620 D. $19, 660

66. The table below sets out the amount of capital needed for certain investment projects and the rate of return for each project. What is this firm's demand for physical capital if their hurdle rate is 5%? A. $11 million B. $12 million C. $23 million D. $33 million

72. A monopolistic competitor has the following information about cost and demand. If this industry was perfectly competitive, what price would the good sell for? A. $8 B. $9 C. $10 D. $11

A complementary approach to supporting R&D that does not involve the government's close scrutiny of particular R&D projects is to give firms A. a permanent monopoly over all their inventions that never expires. B. the option to fund all R&D projects through colleges or universities. C. a reduction in corporate taxes based on amount of R&D performed. D. assurance that antitrust authorities challenge cooperative R&D efforts.

A manufacturer would likely make an ___________ in a market following the long-run process of beginning and expanding production in response to ________________ . A. accounting profit; a strategy to grow profits B. accounting profit; an incentive for profit C. entry; a sustained pattern of profits D. entry; an incentive to add to profits

A monopolistically competitive industry does not display ____________________ in either the short-run, when firms are making _______________, nor in the long-run, when firms are earning ________________ . A. allocative efficiency; profits and losses; negative profits B. productive efficiency; profits and losses; zero profits C. productive and allocative efficiency; profits and losses; zero profits D. productive and allocative efficiency; profits and losses; negative profits

A monopoly a. can set the price it charges for its output and earn unlimited profits. b. takes the market price as given and earns small but positive profits. c. can set the price it charges for its output but faces a downward-sloping demand curve so it cannot earn unlimited profits. d. can set the price it charges for its output but faces a horizontal demand curve so it can earn unlimited profits.

A perfectly competitive industry is a A. realistic extreme. B. hypothetical assumption. C. hypothetical extreme. D. realistic assumption

An individual who wants others to pay for public goods, but plans to use those goods for their own purposes, is often referred to as a ______________ . A. tax evader B. excludable C. free rider D. nonexcludable

Because of the legal protection for intellectual property, such as patents, a firm has a better chance of recouping the costs of research if it pursues A. basic technological research B. technologically innovative research C. applied technological research D. technologically positive research

Both Wisconsin and Illinois border Lake Michigan. The lake is becoming polluted and both states are deciding whether or not to clean it. If Wisconsin decides to clean the lake it will cost 1200 and generate social benefits of 1500 - however, Wisconsin will receive only 1100 of those social benefits while neighbor Illinois will receive the other 400. If Illinois cleans the lake, it will cost them 700 and generate social benefits of 900 - however, Illinois will receive only 600 of those benefits, Wisconsin will receive the remaining 300. If a state does not clean the lake, it experiences a cost of $0. If Wisconsin does not clean the lake and Michigan does then the payoffs will be A. Wisconsin gains 200, Illinois gains 100 B. Wisconsin gains 200, Illinois loses 100 C. Wisconsin gains 300, Illinois loses 100 D. Wisconsin gains 300, Illinois gains 100

Both Wisconsin and Illinois border Lake Michigan. The lake is becoming polluted and both states are deciding whether or not to clean it. If Wisconsin decides to clean the lake it will cost 1200 and generate social benefits of 1500 - however, Wisconsin will receive only 1100 of those social benefits while neighbor Illinois will receive the other 400. If Illinois cleans the lake, it will cost them 700 and generate social benefits of 900 - however, Illinois will receive only 600 of those benefits, Wisconsin will receive the remaining 300. If a state does not clean the lake, it experiences a cost of $0. In the absence of any agreement, the outcome of this game will be A. neither state cleaning the lake B. Wisconsin cleaning the lake, Illinois not cleaning the lake C. Wisconsin not cleaning the lake, Illinois cleaning the lake D. both states cleaning the lake

Economists assume that the typical person who starts her own business does so with the intention of a. donating the profits from her business to charity. b. capturing the highest number of sales in her industry. c. maximizing profits. d. minimizing costs.

For a positive externality, _________________________than the social benefits. A. private benefits of an action are more B. social benefits of an action are more C. private benefits of an action are less D. social costs of an action are less

GDP is defined as a. the market value of all goods and services produced within a country in a given period of time. b. the market value of all goods and services produced by the citizens of a country, regardless of where they are living, in a given period of time. c. the market value of all final goods and services produced within a country in a given period of time. d. the market value of all final goods and services produced by the citizens of a country, regardless of where they are living, in a given period of time.

How can parties who find themselves in a prisoner's dilemma situation avoid the undesired outcome and cooperate with each other? A. one oligopoly can physically beat up another oligopoly B. by seeking alternatives to create pressure for members to keep output up and prices up C. find effective ways to penalize firms who do not cooperate D. sign legally enforceable contracts setting out their mutual agreement to act like a monopoly

I'mAComputerCo. would likely be more willing to undertake an innovative research project to reduce the amount of electricity required to run its computers if there were some form of guarantee that if it succeeded, A. it will enjoy a small temporary advantage over the competition. B. it would be able to set price to compensate for development costs. C. it could sell the new computers as a monopoly for at least a few years. D. it would receive a government bailout if losses could drive it out of business.

If a firm's efforts to be technologically innovative will create a positive externality, then that firm will likely A. have more incentive to innovate to the extent that the whole of society desires. B. invest significantly more in its research and development activities. C. have less incentive to innovate to the extent that the whole of society desires. D. demand more financial capital investment to expand its R&D activities.

If the average product for six workers is fifteen and the marginal product of the seventh worker is eighteen, then A. marginal product is rising. B. marginal product is falling. C. average product is rising. D. average product is falling.

If the government altered its invention patent policy from a monopolistic policy to a competitive policy, then consumers A. would face higher prices and less quantity in the long-run. B. would face lower prices and less quantity in the short-run C. would benefit from the lower price and greater quantity sold. D. would benefit from lower prices due to increased public investments

In monopolistic competition, the end result of entry and exist is that firms end up with a price that lies A. on the upward-sloping portion of the average cost curve. B. at the very bottom of the AC curve. C. on the downward-sloping portion of the average cost curve. D. at the very top of the AC curve.

In the _________, if profits are not possible, the perfectly competitive firm will seek out the quantity of output where _____________________ . A. long run; increasing production B. short run; fixed costs can be reduced C. short run; losses are smallest D. long run; fixed costs can be eliminated

In the _________, the perfectly competitive firm will seek out ________________________ . A. long run; the quantity of output where profits are highest B. short run; profits by ignoring the concept of total cost analysis C. short run; the quantity of output where profits are highest D. long run; methods to reduce production and shut down

In the case of technology, it can sometimes be quite difficult for ______________ to earn a ____________ rate of return from their inventions. A. individuals; high B. public investors; low C. private investors; reasonable D. the whole of society; high

It is said that in a perfectly competitive market, raising the price of a firm's product from the prevailing market price of $179.00 to $199.00, ____________________. A. will likely cause the firm to reach its shutdown point immediately B. will cause the firm to recover some of its opportunity costs C. could likely result in a notable loss of sales to competitors D. is a sure sign the firm is raising the given price in the market

Macroeconomists study a. the decisions of households and firms. b. the interaction between households and firms. c. economy-wide phenomena. d. regulations on firms and unions.

Monopolies use their market power to a. charge prices that equal minimum average total cost. b. increase the quantity sold as they increase price. c. charge a price that is higher than marginal cost. d. dump excess supplies of their product on the market.

Monopolistic competitors in the food industry will often include a recyclable symbol on packaging used for their product as a means to A. be socially responsible. B. be environmentally responsible. C. differentiate their product. D. be perceived more favorably.

On average, it can cost _____________ and take ___________ to discover a new drug, perform the necessary safety tests, and bring the drug to market. A. $500 million; five years B. $100 million; a year C. $800 million; more than a decade D. $300 million; less than a decade

Once it's patent application has been accepted, a firm is able to earn ________ on its product, which ___________________________________ . A. an increased rate of return for investors; raises doubts further R&D activities B. more profit; will allow it to recover the biggest slice of the social value created C. monopoly profits; offers an incentive for research and development to take place D. competitive profits; creates incentive for continuing innovative R&D projects

Perfect competition displays _____________________ because the social benefits of additional production, as measured by the price that people are willing to pay, are in balance with the ____________ to society of that production. A. allocative efficiency; total costs B. economic efficiency; total revenues C. allocative efficiency; marginal costs D. economic efficiency; marginal revenues

Shopping malls typically lease retail space to a large number of clothing stores. When this group of retailers competes to sell similar but not identical products, they engage in what economists call ________________________. A. a cartel B. collusion C. monopolistic competition D. perfect competition

Some costs do not vary with the quantity of output produced. Those costs are called a. marginal costs. b. average costs. c. fixed costs. d. incurred costs.

Some studies done by economists have found that the original inventor receives _________________________________________________ from innovations, while other businesses and new product users receive the rest of the benefit. A. one-quarter to one-half of the social and economic benefits B. one-quarter to one-third of social and economic benefits C. one-third to one-half of the total economic benefits D. one-quarter to one-third of the total economic benefits

Temperatures have persisted below freezing levels in Florida throughout the months of December and January. As a result, demand for electricity sharply increased and the price of electricity rose sharply. The price of coal also rose. In these circumstances, any resulting shifts in the supply curves for coal miners and electricity producers A. will determine what price to produce at given the market demand. B. at all levels of output shifts marginal costs to the right. C. can also be interpreted as shifts of their respective marginal cost curves. D. shifts marginal costs to the right enabling both to produce more at any given market price.

The branch of mathematics that analyzes situations in which players must make decisions and then receive payoffs most often used by economists is A. oligopoly collusion. B. prisoner's dilemma. C. game theory. D. collusion theory

The demand curve as perceived by a monopolistic competitor is ______________ . A. upward-sloping B. U shaped C. downward-sloping D. flat

The efficient scale of the firm is the quantity of output that a. maximizes marginal product. b. maximizes profit. c. minimizes average total cost. d. minimizes average variable cost.

The federal government funds __________ of the nation's basic research, much of which ____________________________. A. more than half; carried out by private firms B. less than half; conducted in the labs of private firms C. about half; conducted at colleges and universities D. more than half; conducted a government run facilities

The perceived demand curve for a group of competing oligopoly firms will appear kinked as a result of their commitment to A. match price increases, but not price cuts. B. stand at opposite ends of the competition spectrum. C. match price cuts, but not price increases. D. stand at the high point of the competition spectrum.

The term "applied research" refers to research that is focused on a particular product that promises A. to offer commercial applications in the short-term. B. to offer commercial applications in the long-term. C. an economic payoff in the short or medium-term. D. an economic payoff in the medium or long-term.

The term _________________ refers to a firm operating in a perfectly competitive market that must take the prevailing market price for its product. A. price setter B. business entity C. price taker D. trend setter

Through the process of exit, monopolistically competitive firms remaining in the market A. are no longer earning zero economic profits. B. will each have ongoing negative earnings. C. are no longer earning losses. D. have positive earnings.

We would expect a macroeconomist, as opposed to a microeconomist, to be particularly interested in a. explaining how economic changes affect prices of particular goods. b. devising policies to deal with market failures such as externalities and market power. c. devising policies to promote low inflation. d. identifying those markets that are competitive and those that are not competitive.

When P > MC in a monopolistically competitive market, that industry will most likely produce ______________________ than would be found in a perfectly competitive industry benefits to society of providing additional quantity as measured by the price that people are willing to pay exceeds the marginal costs to society of producing those units. A. a higher quantity of a good and charge a lower price B. the price that people are willing to pay is lower C. a lower quantity of a good and charge a higher price D. the price people are willing to pay is not more

When calculating a firm's profit, an economist will subtract only a. explicit costs from total revenue since these are the only costs that can be measured explicitly. b. implicit costs from total revenue since these include both the costs that can be directly measured as well as the costs that can be indirectly measured. c. the opportunity costs from total revenue since these include both the implicit and explicit costs of the firm. d. the marginal cost since the cost of the next unit is the only relevant cost.

Which of the following can be thought of as an adjustment for the risks involved with respect to the cost of a firm acquiring financial capital? A. higher retained earnings from past profits B. cost of financial capital paid by a firm C. imposition of hurdle rates of interest D. tax credits for physical capital investments

Which of the following statements about GDP is correct? a. GDP measures two things at once: the total income of everyone in the economy and the unemployment rate of the economy's labor force. b. Money continuously flows from households to government and then back to households, and GDP measures this flow of money. c. GDP is to a nation's economy as household income is to a household. d. All of the above are correct.

Which of the following statistic is usually regarded as the best single measure of a society's economic well-being? a. the unemployment rate b. the inflation rate c. gross domestic product d. the trade deficit

_____________ occurs when circumstances have allowed several large firms to have all or most of the sales in an industry. A. Collusion B. A monopoly C. An oligopoly D. A cartel

When wages and work conditions are agreed upon by business owners and workers, the process is called?

Collective bargaining

Suppose you own a profitable tailoring company that hires two workers. The combined production of the two workers is ten shirts per day. You decide to double the amount of capital and labor and see that the total number of shirts produced each day has increased to 22. This implies that your company is exhibiting ________.

Constant returns to scale Economies of scale Decreasing returns to scale Diminishing marginal product (incorrect)

Which of the following is not a characteristic of a pure public good?

Consumption by one consumer (group) reduces the availability of the good to another consumer (group)

Variable Cost

Cost of production that increases with the quantity produced

Short term financing includes ?

Current operating activities ?

31. Refer to the diagram above. Which of the following explains the slope of the total revenue curve illustrated in this graph? A. total revenue shown as a straight line sloping up indicates a perfectly competitive firm B. the slope of the total revenue curve is determined by the price of the goods produced C. at higher levels of output, diminishing returns will cause total cost to slope downward steeply D. the slope of the total revenue curve is explained by both a and b above.

40. Given the data provided in the table below, what will the fixed costs equal for production at quantity (Q) level 4? A. $35.00 B. $4.00 C. $36.00 D. $9.00

41. Refer to the diagram above. In this instance, the marginal revenue curve A. reflects a perfectly competitive firm B. is equal to the price of the good C. is a horizontal straight line D. reflects each of the above

44. Refer to the diagram above. Based on the information illustrated in this graph, which of the following is an accurate statement? A. production should keep expanding because MR is always less than MC B. because this is a perfectly competitive firm, the profit maximizing rule is not P = MC C. because this is a perfectly competitive firm, the profit maximizing rule is not P = MR D. profits will be reduced by production in the zone where MC exceeds MR

54. Refer to the table below. In this instance, confirmation that this firm is operating in a perfectly competitive market can readily be ascertained by the fact that its A. marginal cost is increasing. B. total cost is increasing. C. economic profits are zero. D. marginal revenue is constant.

60. A drug company is deciding how much to invest in Research and Development into finding a cure stomach cancer. The table below shows the company's demand for financial capital for R&D of this drug, based on its expected rates of return from selling the drug. Every investment has an additional 4% social return: that is, an investment that pays at least a 5% return to the drug company will create at least a 9% return for society as a whole. If the opportunity cost of financial capital for the drug company falls from 7% to 5%, the drug company will invest ___ more in R&D if it receives only the private benefits of this investment. A. $14 B. $16 C. $24 D. $30

68. YummyCandiesCo. has developed a new candy bar that contains a full recommended daily allowance of vitamins and minerals. This invention will provide considerable spillover benefits to society. The table below shows the demand for the candy bars, the supply of candy bars if the company receives only the private benefits, and the supply of candy bars if the firm also receives the full social benefits. If the firm's candy bars were sold on the basis of both private and social benefits, the equilibrium price and quantity would be A. $4, 100,000 B. $3, 150,000 C. $2, 200,000 D. $1, 250,000

A highly innovative firm operating in a competitive market will usually have A. a permanent edge over its competitors. B. a lack of ability to earn reasonable profits. C. vast numbers of competitors catching up to its innovations. D. some time before competitors catch up to its innovations.

A monopoly is an inefficient way to produce a product because a. it can earn both short-run and long-run profits. b. it faces a downward-sloping demand curve. c. the cost to the monopolist of producing one more unit exceeds the value of that unit to potential buyers. d. it produces a smaller level of output than would be produced in a competitive market.

Competitive markets are characterized by a. a small number of buyers and sellers. b. unique products. c. the interdependence of firms. d. free entry and exit by firms.

For a competitive firm, a. total revenue equals average revenue. b. total revenue equals marginal revenue. c. total cost equals marginal revenue. d. average revenue equals marginal revenue.

Generally, market competition and technology can A. support each other. B. oppose each other. C. compliment each other. D. sometimes a or b.

If marginal cost is greater than average total cost, then a. profits are increasing. b. economies of scale are becoming greater. c. average total cost remains constant. d. average total cost is increasing.

If monopolistic competitors must expect a process of entry and exit like perfectly competitive firms, A. they will be unable to earn higher-than-normal profits in the short run. B. they will wish to cooperate to make decisions about what price to charge. C. they will wish to cooperate to make decisions about what quantity to produce. D. they will be unable to earn higher-than-normal profits in the long run.

If the CEO of I'MaBigBank is playing prisoner's dilemma then, from his perspective, the gains to be had from cooperation are A. larger than the payoffs that will be received. B. smaller than the payoffs that will be perceived. C. smaller than the rewards from pursuing self-interest. D. larger than the rewards from pursuing self-interest.

If the maintenance fees for a lighthouse are paid in full each year by charging port fees, then the lighthouse is A. rivalrous and excludable B. nonrivalrous and excludable C. rivalrous and nonexcludable D. nonrivalrous and nonexcludable

If the research and development efforts of a firm have ended in failure, then A. the firm could be driven out of business. B. the firm will suffer losses. C. R & D projects rarely end in total failure. D. the firm could experience a and/or b.

In a monopolistic competitive industry, firms can try to differentiate their products by A. creating optimal perceptions of the product. B. choosing optimal locations from which the product is sold. C. enhancing the intangible aspects of the product. D. enhancing product's physical aspects and all of the above.

In a perfectly competitive market setting, which of the following would be a true statement? A. Market price automatically sets itself exactly at equilibrium. B. Market price rarely trends toward the equilibrium value. C. Wage rates mirror marginal revenue product levels exactly. D. Wage rates trend toward marginal revenue product levels.

In a simple circular-flow diagram, total income and total expenditure are a. never equal because total income always exceeds total expenditure. b. seldom equal because of the ongoing changes in an economy's unemployment rate. c. equal only when one dollar is spent on goods for every dollar that is spent on services. d. always equal because every transaction has a buyer and a seller.

In economic terms, when I'mASoftwareCo. invests in new technology innovations, A. competitive externalities arise. B. potential externalities arise. C. negative externalities arise. D. positive externalities arise.

In economics, the term "shutdown point" refers to the point where the A. marginal cost curve crosses the total revenue curve. B. average variable cost curve crosses the total revenue curve. C. average variable cost curve crosses the marginal cost curve. D. marginal cost curve crosses the average variable cost curve.

In order to produce 100 pairs of oven gloves, Marcia incurs an average total cost of $2.50 per pair. Marcia's marginal cost is constant at $10.00 for every pair of oven gloves produced. The total cost to produce 50 pairs of oven gloves is A. $250.00 B. $500.00 C. $300.00 D. $200.00

In the ________, the perfectly competitive firm will react to profits by __________________________ . A. short run; increasing quality of products B. long run; tailoring their quality controls C. short run; reducing its labor inputs D. long run; increasing its production

In the actual economy, goods and services are purchased by a. households, but not firms or the government. b. households and firms, but not the government. c. households and the government, but not firms. d. households, firms, and the government.

In the framework of monopolistic competition, advertising works because it causes A. the steeper perceived demand curve to become flatter. B. perceived demand curve to shift to the left. C. perceived demand curve to shift to the right. D. a steeper perceived demand curve, as well as c above.

In the framework of monopolistic competition, the way advertising works can be perceived as A. causing a firm's perceived demand curve to become more elastic. B. causing a firm's perceived demand curve to become more inelastic. C. causing demand for the firm's product to increase. D. causing both b and c to occur.

In the highly competitive setting in which oligopoly firms operate, which of the following are considered to be typical temptations each may face? A. to cooperate to generate and then divide up monopoly-like profits B. to cooperate to mutually decide what price to charge C. to cooperate to make decisions about what quantity to produce D. to cooperate to act as a single monopoly and all of the above

In the short run, a firm incurs fixed costs a. only if it incurs variable costs. b. only if it produces no output. c. only if it produces a positive quantity of output. d. whether it produces output or not.

It is commonly understood that every invention A. has its own story of discovery and development. B. often involved a parade of characters and firms. C. has a unique story that develops over years or decades. D. often results in new technology and all of the above.

Many economists would view market competition as supporting the invention of new technology because it A. provides an competitive edge over competitors for the long-term. B. encourages methods of producing existing products at less cost. C. encourages creation of products with desirable characteristics. D. provides short-term above-normal profits, and b and c as well.

Most markets are not monopolies in the real world because a. firms usually face downward-sloping demand curves. b. supply curves slope upward. c. price is usually set equal to marginal cost by firms. d. there are reasonable substitutes for most goods.

Paddy and Mick are the only two inhabitants of a small island off the coast of Ireland. They burn coal to keep their houses warm at night. However, this coal burning is harming the air quality on their island. Both Paddy and Mick could install air filters on their chimneys. These filters cost 50 each. Each filter provides a social benefit of 80, but those benefits are divided equally among Paddy and Mick. If both Paddy and Mick install the filters A. both will gain 10 B. both will gain 0 C. both will lose 30 D. both will gain 30

Profit maximizing firms in competitive industries with free entry and exit face a price equal to the lowest possible a. marginal cost of production. b. fixed cost of production. c. total cost of production. d. average total cost of production.

Suppose a firm operates in the short run at a price above its average total cost of production. In the long run the firm should expect a. new firms to enter the market. b. the market price to fall. c. its profits to fall. d. All of the above are correct.

The aggregate supply curve is upward sloping in a. the short and long run. b. neither the short nor long run. c. the long run, but not the short run. d. the short run, but not the long run.

The basic tools of supply and demand are a. useful only in the analysis of economic behavior in individual markets. b. useful in analyzing the overall economy, but not in analyzing individual markets. c. central to microeconomic analysis, but seldom used in macroeconomic analysis. d. central to macroeconomic analysis as well as to microeconomic analysis.

The desire of businesses to __________________________, so that they can raise the prices that they charge and earn higher profits, has been well-understood by economists for a long time. A. compete with each other B. engage in free market activities C. maximize profits for social benefit D. avoid competing with each other

The difference between playing a board game and a playing a video game is the A. elimination of free riders B. involvement of fewer rivals C. involvement of free riders D. technology of the video game

The fact that a consumer is not required to buy the goods that a given firm produces, as well as the fact that the consumer might want the goods a firm produces, but may choose to buy from other firms instead A. will reduce the revenue a firm receives and it should shut down. B. means the firm has reached it shutdown point and should exit. C. is part of the process to a sustained pattern of profits. D. are two stark realities any business firm must recognize.

The intersection of a firm's marginal revenue and marginal cost curves determines the level of output at which a. total revenue is equal to variable cost. b. total revenue is equal to fixed cost. c. total revenue is equal to total cost. d. profit is maximized.

The long-term result of entry and exit in a perfectly competitive market is that all firms end up selling at the price level determined by the lowest point on the A. total cost curve. B. average variable cost curve. C. total marginal cost curve D. average cost curve.

The marginal product of an input in the production process is the increase in a. total revenue obtained from an additional unit of that input. b. profit obtained from an additional unit of that input. c. total revenue obtained from an additional unit of that input. d. quantity of output obtained from an additional unit of that input.

The marginal product of labor is equal to the a. incremental cost associated with a one unit increase in labor. b. incremental profit associated with a one unit increase in labor. c. increase in labor necessary to generate a one unit increase in output. d. increase in output obtained from a one unit increase in labor.

The model of aggregate demand and aggregate supply explains the relationship between a. the price and quantity of a particular good. b. unemployment and output. c. wages and employment. d. real GDP and the price level.

The production decisions of perfectly competitive firms follow one of the Ten Principles of Economics, which states that rational people a. consider sunk costs. b. equate prices to the average costs of production. c. will eventually leave markets that experience zero profit. d. think at the margin.

The simplest way for a monopoly to arise is for a single firm to a. decrease its price below its competitors' prices. b. decrease production to increase demand for its product. c. make pricing decisions jointly with other firms. d. own a key resource.

Under current U.S. copyright legislation, works produced on a for-hire basis and owned by firms enjoy monopoly protection for A. 50 years after date of publication. B. 70 years after date of publication. C. 75 years from the date of publication. D. 95 years from the date of publication.

What happens in a perfectly competitive industry when economic profit is greater than zero? A. existing firms may expand their operations B. firms may move along their LRAC curves to new outputs C. there may be pressure on the market price to fall D. new firms may enter the industry and all of the above

When I'MaGoldMiner chooses what quantity of gold each of it/s mines will produce over the next 12 months, this quantity, along with the prices prevailing in the market for output and inputs, will A. determine the company's annual revenue, variable costs and its profits. B. no longer be dictated by the forces of demand and supply. C. have no effect on the market forces of demand and supply. D. determine the company's total revenue, total costs, and its profits

When entry occurs in a monopolistically competitive industry, A. marginal costs to society exceed the price people are willing to pay. B. price is equal to marginal revenue gained by society. C. the marginal revenue curve will shift to the left. D. a smaller quantity will be demanded at any given price.

When it is costly or impossible to exclude someone who hasn't paid to use a particular good from using it, then that good is classified as being A. unexcludable B. free rider C. public good D. nonexcludable

Which of the following best identifies what the concept of differentiated products is closely related to? A. unique style. B. the degree of monopolistic competition that exists. C. optimal location. D. the degree of product variety that is available.

Which of the following explains why production rises in most years? a. increases in the labor force b. increases in the capital stock c. advances in technological knowledge d. All of the above are correct.

Which of the following is included in the aggregate demand for goods and services? a. consumption demand b. investment demand c. net exports d. All of the above are correct.

Which of the following items is included in U.S. GDP? a. final goods and services that are purchased by the U.S. federal government b. intermediate goods that are produced in the U.S. but that are unsold at the end of the GDP accounting period c. goods and services produced by foreign citizens working in the U.S. d. All of the above are included in U.S. GDP.

Which of the following mechanisms will increase the rate of return that can be earned by inventors of new technology? A. intellectual property rights B. government research and development grants C. cooperative research ventures between companies D. patents, copyrights, and each of the above

Which of the following represents a difference in the process by which a monopolistic competitor and a monopolist make their respective decisions about quantity and price? A. only the monopolist competitor faces a downward-sloping demand curve B. the monopolist's perceived demand curve is market demand C. the monopolist competitor's perceived demand curve is market demand D. a monopolist need not fear entry and also selection b above

Which of the following statements is correct? a. For all firms, marginal revenue equals the price of the good. b. Only for competitive firms does average revenue equal the price of the good. c. Marginal revenue can be calculated as total revenue divided by the quantity sold. d. Only for competitive firms does average revenue equal marginal revenue.

Which of the following statements is correct? a. If marginal cost is rising, then average total cost is rising. b. If marginal cost is rising, then average variable cost is rising. c. If average variable cost is rising, then marginal cost is minimized. d. If average total cost is rising, then marginal cost is greater than average total cost.

Which of the following would be classified as a positive externality? A. a surcharge for ambulance service is shifted to property taxes B. reselling outdated textbooks to under-funded public schools C. removing government education subsidies for public schools D. converting a derelict empty lot to a public vegetable garden

Which of the following would most likely be identified as being the ultimate goal of public policies that pertain to technology? A. to help inventors earn higher rates of return B. to help inventors earn reasonable returns C. to encourage a stream of inventions that monetarily benefit the inventor. D. to encourage a stream of invention that benefits the whole of society.

Which of the following would some economists be likely to perceive as the most appropriate public policy response to a positive externality created by the development of a highly innovative new technology? A. not taking into account the negative externality associated with social benefit B. not taking into account the positive externality associated with social benefit C. have reasonable rates of return not based on a notion of unearned social benefits D. develop ways to provide a greater share of the social benefits to the innovator

While the majority of economists acknowledge that intellectual property rights do provide a method for increasing the rate of return for inventors, some have suggested there are number of reasons to doubt whether patents provide A. sufficient benefits for society as a whole. B. completely appropriate benefits for the whole of society. C. completely appropriate incentives for innovation. D. sufficient incentives for innovation, as well as c.

Why did Thomas Edison vow that he would work only on ideas for things that people would buy? A. only things that people will buy produce a social benefit. B. only ideas that people will pay a high price for are protected by patents. C. he wanted to hold the record for registering the most patents. D. no government would buy his first patented invention.

Why would a profit-seeking firm need to tailor its decisions about the quantity of labor inputs that it purchases? A. to produce the highest profitable quantity of output at the lowest possible marginal cost B. deciding what quantity to produce is one of the major choices a profit-seeking firm makes C. the quantity of labor is the only variable cost choice a profit-seeking firm can make D. to produce the profit-maximizing quantity of output at the lowest possible average cost

Would raising the price for a product create a larger decline in quantity demanded for a monopolistic competitor's than it would for a monopoly? A. no; a monopolistic competitor perceives demand as a price maker B. no; conditions of imperfect competition means demand is constant C. yes; but temporarily because price increases only create a short-run decline D. yes; consumers will buy from competitors offering lower priced substitutes

2 When the Total Product curve reaches its maximum point, the value of the Marginal Product at that point is ________.

Decreasing Increasing Zero (correct)

2 The marginal product of labor is known to be greater than the average product of labor at a given level of employment. The Average Product at this point would be ________.

Decreasing Increasing (correct) Constant

Monopolistic competitors in the food industry, acting in their own self-interest, will often include a recyclable symbol on packaging used for their product as a means to:

Differentiate their product (correct) Be socially responsible Be environmentally responsible Be perceived more favorably in the marketplace (correct)

When the Long Run Average Cost (LRAC) curve is horizontal, it implies there are ________.

Diseconomies of scale Constant returns to scale (correct) Increasing returns to scale Decreasing returns to scale

In the competitive market for figure skate blades, manufacturers offer an array of products that are

Distinctively different in a particular way

The image below shows what?

Distribution of income among groups of people.

The marginal product curve is

Downward sloping Upward sloping, and then downward sloping (correct) Downward sloping, and then upward sloping

When a long-run average cost curve illustrates economies to scale it will be:

Downward sloping then constant Upward sloping Downward sloping (correct)

Fixed Cost

Expenditure that must be made before production starts and that does not change regardless of the level of production

Fixed Costs

Expenditures that do not change regardless of the level of production, at least not in the short term

Suppose there is a perfectly competitive market for grapefruit. If the price for grapefruit is lower than the marginal cost of producing grapefruit, what will happen in the long run, in order for the market to achieve productive and allocative efficiency?

Fewer grapefruit will be produced

Which of the following are considered barriers to entry?

Heavy spend on advertising by established companies

Why are some producers forced to sell their products at the prevailing market price?

High degree of similarity to competitor's products

All of the following are characteristics of Perfect Competition except:

Incomplete information about prices.

Suppose a computer manufacturer is producing in the short run when capital is fixed and the only variable factor of production is labor. The change in the quantity of production with the increase in labor is shown in the table below. What does the production function given represent?

Increasing marginal returns to capital Increasing marginal returns to labor Decreasing diminishing marginal returns to labor (correct) Decreasing diminishing marginal returns to capital

What can government do to encourage the development of new technology?

Intellectual property rights Funding of research and development Tax breaks for research and development

Monopolistic competition is different from perfect competition in that monopolistically competitive markets:

Involves competition that is all about efficiency minimizing average cost (incorrect) Allows for positive economic profits in the short-run Allows for positive economic profits in the long-run Involves non-price competition in the form of variety

Effective advertising has what effect on product differentiation?

It decreases product differentiation It has no effect on product differentiation It increases product differentiation (correct)

Does a gap between the average earnings of men and women, or between whites and blacks, prove that employers are discriminating in the labor market? Explain briefly.

It does not prove it because it depends on a variety of discrimination.

Have levels of immigration to the United States been relatively high or low in recent years? Explain.

It has increased in recent years

What is the shape of a marginal revenue curve for a perfectly competitive firm?

It is flat

In what way(s) is a monopolistically competitive firm inefficient?

It produces where marginal revenue is equal to marginal cost It charges a price higher than marginal cost (correct) It does not produce at the minimum of its average cost curve (correct)

Would you expect the presence of labor unions to lead to higher or lower pay for worker-members? Would you expect a higher or lower quantity of workers hired by those employers? Explain briefly

It would let union workers to have higher wages because they are a part of the labor union. The employer would hire less employees due to the higher wage.

Which of the following statement(s) accurately describe(s) a monopolistically competitive firm?

Its market it dominated by a small number of firms It will try to differentiate it product to create a mini-monopoly (correct) It competes against a large number of firms selling slightly different products (correct)

If a perfectly competitive market moved toward monopolistic competition, we might expect:

Less advertising A greater range of product differentiation, but higher price (correct) A greater range of product innovation and a lower price A smaller range of product differentiation, but a lower price

Even if it is making economic losses, a perfectly competitive firm should keep operating in the short run so long as the price is not:

Lower than the average variable cost

Firms operating in highly competitive markets tend to supply at a level where...

MC = P.

Which of the graphs below is drawn incorrectly?

Marginal Product (partial correct) Average Product *(partial correct) Total Product (partial correct) *(partial correct)

The term ________ is used to describe the additional cost of producing one more unit.

Marginal cost (incorrect) Fixed cost Variable cost Average cost

Economies to scale refers to the ________ where all inputs are being allowed to increase together.

Marginal cost curve (incorrect) Short-run average cost curve (incorrect) Long-run average cost curve Average total cost curve

________ refers to the additional revenue gained from selling one more unit.

Marginal revenue

If a monopolist increases quantity by one unit, but sells the increased output at a slightly lower price:

Marginal revenue is affected by adding one additional unit sold at the new price

Refer to the table below. In this instance, you can tell this firm is operating in a perfectly competitive market by the fact that its:

Marginal revenue is constant

The business that adds value to products is ?

Marketing

Product Differentiation

May occur in the minds of buyers. It is closely related to the degree of variety that is available. For example, many people could not tell the difference in taste between common varieties of beer or cigarettes if they were blindfolded but, because of past habits and advertising, they have strong preferences for certain brands. Advertising can play a role in shaping these intangible preferences

Capital is a factor of production that has been produced for use in the production of other goods and services. Which of the following are examples of capital?

Money Computer Software (correct) Airports (correct)

Which of the following is most likely to be a fixed cost?

Mortgages payments (correct) Wages paid to an unskilled labor Expenditure for raw material Shipping charges

Given the data provided in the table below, what will be the marginal revenue for production at quantity (Q) level 4?

NOT $15, 20

Given the data provided in the table below, what will the fixed costs equal for production at quantity (Q) level 4?

NOT $4

Recall that in perfect competition a firm's demand curve is a horizontal line drawn at the market price level and that P=MR. With this in mind, based on the figure below, total revenues are:

NOT $432

NOT 7.5%, 9.5%

What condition is being met when goods are being produced and sold at the lowest possible average cost?

NOT allocative efficiency

Refer to the graph below. In the long run:

NOT price will decrease until economic profit is zero

If a firm is producing so that the point chosen along the production possibility frontier is socially preferred, then that firm is said to have achieved:

NOT productive efficiency

The point where the marginal cost curve crosses the average cost curve is called the:

NOT profit-maximizing point.

The profit-maximizing choice for a perfectly competitive firm will occur where marginal revenue is equal to ________.

NOT variable revenue

Which of the following statements about natural resources is true ?

Natural resources need people to turn to goods

What happens in a perfectly competitive industry when economic profit is greater than zero?

New firms have an incentive to enter the industry There may be pressure on the market price to fall Existing firms may expand their operations

Firms in a perfectly competitive market are said to be "price takers"—that is, once the market determines an equilibrium price for the product, firms must accept this price. If you sell a product in a perfectly competitive market, but you are not happy with its price, would you raise the price, even by a cent?

No you would not raise the price

Are positive externalities reflected in market demand curves? Why or why not?

No. A market demand curve reflects only the private benefits of those who are consuming the product. Positive externalities are benefits that spill over to third parties, so they create social benefits and are not captured by a market or private benefit demand curve. They are reflected in the social demand curve and shift it right for greater production

Assume that the production of good X (for example, electricity) results in a negative externality (pollution), then (assuming the law of demand and the law of supply hold) which of the following statements is incorrect?

None of the above

Which of the following are examples of long-run fixed costs:

None of the above (correct) Mortgage payments Hourly wage costs Payments for production inputs

Implicit Costs

Opportunity cost of resources already owned by the firm and used in business, for example, expanding a factory onto land already owned

Explicit Costs

Out-of-pocket costs for a firm, for example, payments for wages and salaries, rent, or materials

When we assume firms want to maximize profits, how will the price and output policy of an unregulated monopolist compare with ideal market efficiency?

Output will be too small and its price too high.

When individuals or company's make new products they may seek to obtain ?

Patent

What is the difference between poverty and income inequality?

Poverty is the falling below a certain level of income. Income inequality is when one group receives a disproportionate share of total income or wealth than others.

Which of the following is not 1 of the 5 activities of business managers ?

Purchasing

The data below relate to a monopolist and the product it produces. What is the profit-maximizing output and price for this monopolist?

Q=2 : P=$18 (wrong)

The graph below shows the collusion model of oligopoly. What level of output corresponds to allocative efficiency in the market?

Qc where P=MC for the market as a whole

A monopolistically competitive firm may earn abnormally high profits in the

Short term, but the process of entry will drive those profits to zero in the long run

Long-run average cost (LRAC) curve

Shows the lowest possible average cost of production, allowing all the inputs to production to vary so that the firm is choosing its production technology

Which of the following is not true about safety in a workplace ?

Smoking in workplace is not a business issue

What is the difference between private costs and social costs?

Social costs are costs that include both the private costs incurred by firms and also additional costs incurred by third parties outside the production process, like costs of pollution. Private costs are costs that includes internal costs incurred for inputs, labor, rent, and depreciation

What should a company do in the short run if it sells 5,000 items at $60 each, has a total cost of $140,000 when production is 0, and has a total cost of $400,000 when it produces those 5,000 items?

Stay open to minimize loss since its revenue of $300,000 covers its variable cost of $260,000.

Which of the following is true about Silver , Nickel , Tin , and Chromium ?

The U.S. must import tons of these metals

Short-run average cost (SRAC) curve

The average total cost curve in the short term; shows the total of the average fixed costs and the average variable costs

Monopolistic competition is different from perfect competition in that, in the long-run:

The characteristics of items sold will be more dynamic within monopolistic competition (correct) Economic profit is positive for the monopolistic competitors, but not for perfectly competitive firms Economic profit is zero for monopolistic competitors, but not for perfectly competitive firms Society's resources will be under-allocated to production within a perfectly competitive industry

The two parts to the study of work requirements in preparation to hire new employees ?

The current work of the business and new activity planned for the business

A successful advertising campaign results in ________.

The firm's perceived demand curve to become more elastic, leading to more variability in pricing The firm's charging a lower price for its product but selling more units The firm's perceived demand curve to become more inelastic, so demand increases (correct)

If the firm is producing at a quantity of output where marginal revenue exceeds marginal cost, then ________.

The firm's perceived demand will shift to the left The excess profit would attract additional competition (correct) Each marginal unit adds profit by bringing in less revenue than its cost The firm should keep expanding production *

Which of the following best describes the line of perfect income inequality in a Lorenz curve?

The line of perfect income inequality is at 0 degrees, because one person has all the wealth.

The supply and demand conditions for a manufacturing firm are given in Table 12.5. The third column represents a supply curve without taking the social cost of pollution into account. The fourth column represents the supply curve when the firm is required to take the social cost of pollution into account. Identify the equilibrium before the social cost of production is included and after the social cost of production is included:

The original equilibrium (before the external social cost of pollution is taken into account) is where the private supply curve crosses the demand curve. This original equilibrium is at a price of $15 and a quantity of 440. After taking into account the additional external cost of pollution, the production becomes more costly, and the supply curve shifts up. The new equilibrium will be at a price of $30 and a quantity of 410. The supply curve would be shifted to the left because the price increases.

Imagine an economy of 10 individuals. Their annual incomes are reported below. Imagine that $100 of Oprah's income is transferred to Anna. What is true?

The poorest 20% of the population's income share grows from about 5.0% to about 6.8%. The richest 20% of the population's income share falls from about 32.2% to about 30.5%.

How does the poverty trap discourage people from working?

The poverty trap discourages people from working because they will be guaranteed an amount every month that they are able to use, whereas they would have to work to earn a little more.

Except for one point, the short run average cost must always be ________ the long run average cost.

The same as Greater than (correct) Less than

Total Cost

The sum of fixed and variable costs of production

If average total cost is increasing, ________.

The total cost must be declining The marginal cost must be greater than average total cost (correct) The average fixed cost must lie above the average variable cost The marginal cost must be less than average total cost

Economists distinguish between the short run and the long run as follows:

There are increasing returns in the long run, but diminishing returns in the short run In the long run, all resources are variable; in the short run, at least one resource is fixed In the short run, all resources are fixed; in the long run, all resources are variable (incorrect) Cost of resources is higher in the short run than it is in the long run

Imperfectly Competitive

They have more influence over the price they charge than perfectly competitive firms, but not as much as a monopoly would or firms and organizations that fall between the extremes of monopoly and perfect competition

If each of two competing monopolists undertakes equally successful advertising efforts to attract consumers away from the other, the total result is ________.

They will simply neutralize one another's efforts (correct) They will both improve their industrial position They will both increase market share

If monopolistic competitors must expect a process of entry and exit like perfectly competitive firms,

They will wish to cooperate to make decisions about what price to charge They will be unable to earn higher-than-normal profits in the long run (correct) They will wish to cooperate to make decisions about what quantity to produce They will be unable to earn higher-than-normal profits in the short run

Which of the following are examples of a company's fixed costs:

Wages for hourly workers Raw materials for production Monthly rent for factory or retail space (correct)

Explain two categories of economic effects that immigration to the U.S. can have on the U.S. economy.

Wages/competition Wages decrease, Immigration increases Draw on System Not paying as much into the system as paying out *** Taxes increases more than government benefits

An example of a horizontal merger would be..

Wilson Tennis Balls merging with Penn Tennis Balls.

Both Wisconsin and Illinois border Lake Michigan. The lake is becoming polluted and both states are deciding whether or not to clean it. If Wisconsin decides to clean the lake it will cost 1200 and generate social benefits of 1500 - however, Wisconsin will receive only 1100 of those social benefits while neighbor Illinois will receive the other 400. If Illinois cleans the lake, it will cost them 700 and generate social benefits of 900 - however, Illinois will receive only 600 of those benefits, Wisconsin will receive the remaining 300. If a state does not clean the lake, it experiences a cost of $0. In the absence of any agreement, the outcome of this game will be:

Wisconsin not cleaning the lake, Illinois cleaning the lake

In long run equilibrium, all firms earn ________.

Zero economic profit

From an economic perspective, is it sound policy to pursue a goal of zero pollution? Why or why not?

Zero pollution is not a reasonable goal. At the socially optimal quantity, the amount of pollution will be positive. The social optimum involves the correct balance between the social marginal benefits and social marginal costs, taking all of the relevant costs into consideration. But since most industrial processes involve at least some pollution, it will usually not be possible to push pollution to zero

A firm specific demand curve is:

a curve showing the relationship between the price charged by a specific firm and the quantity the firm can sell.

Describe how each of these changes is likely to affect poverty and inequality:

a. Incomes rise for low-income and high-income workers, but rise more for the high-income earners. Poverty falls, inequality rises b. Incomes fall for low-income and high-income workers, but fall more for high-income earners. Poverty rises, inequality falls.

Identify the following situations as an example of a negative or a positive externality:

a. You are a birder (bird watcher), and your neighbor has put up several birdhouses in the yard as well as planting trees and flowers that attract birds Positive externality b. Your neighbor paints his house a hideous color. Negative externality c. Investments in private education raise your country's standard of living. Positive externality d. Trash dumped upstream flows downstream right past your home. Negative externality e. Your roommate is a smoker, but you are a nonsmoker Negative externality

In order to try to convince consumers that their product is better than the competition's product, a monopolistic comeptitor would likely...

advertise about product differentiation.

________ give government the power to block certain mergers, and in some cases, to break up large firms into smaller ones.

antitrust laws

- Paddy and Mick are the only two inhabitants of a small island off the coast of Ireland. They burn coal to keep their houses warm at night. However, this coal burning is harming the air quality on their island. Both Paddy and Mick could install air filters on their chimneys. These filters cost 50 each. Each filter provides a social benefit of 80, but those benefits are divided equally among Paddy and Mick. If both Paddy and Mick install the filters

both will gain 30

Given that labor and capital are the only two factors of production for a given firm. If the price of labor rises, the firm will shift to a factor mix that uses more ________ ; as a result, we say that the firm is becoming more________.

capital : capital intensive

In 2007, five or six major pharmaceutical companies formed a group in order to control the price of vitamins and adjust their production. Such an arrangement is called a ________.

cartel

If a company with 10% market share merges with a company with 5% market share, the HHI will...

change by 100 points.

In the short run, a firm can...

change only variable inputs.

Negotiations between unions and a firm or firms is called ________ .

collective bargaining

The Department of Justice and the US Federal Trade Commission justify their records of approval of most mergers by claiming that, even though competition is diminished by consolidating two firms into one, mergers usually benefit:

competition and consumers by allowing firms to operate more efficiently.

Firms in an oligopoly typically act more like ________.

competitors

In a prisoner's dilemma, assuming the individuals can't communicate, what type of behavior provides the most benefit for each of them?

confess

Regulations that permit a regulated firm to cover its costs and to make a normal level of profit are commonly referred to as:

cost plus regulation

Oligopolies cause market inefficiency by

creating more deadweight loss in society

________ occur when the marginal gain in output diminishes as each additional unit of input is added.

diminishing marginal returns

The upward sloping portion of a long-run cost curve illustrates:

diseconomies to scale

Let's pretend there is a perfectly competitive market with many firms selling identical products, then, in this type of competition,

each of these firms must act as a price-taker.

Which of the following is most unlikely to present a barrier to entry into a market?

economies of scale

If the North American newspaper market has barriers to entry, then

entry will be blocked even if firms are earning high profits.

City Gas is a natural monopoly that supplies natural gas to a particular city. Its cost and demand information are given below. If the government decides to regulate this natural monopoly by forcing them to produce at the point where the demand curve intersects average cost, then compared to the unregulated natural monopoly, the price will ________ and the quantity will ________.

fall, rise

Sometimes oligopolies in the same industry are very different in size. Suppose we have a duopoly where one firm (Firm A) is large and the other firm (Firm B) is small, as shown in the prisoner's dilemma box: What is Firm B's dominant strategy? Should it collude or cheat? Firm B colludes with Firm A Firm B cheats by selling more output Firm A colludes with Firm B A gets $1,000, B gets $100 A gets $800, B gets $200 Firm A cheats by selling more output A gets $1,050, B gets $50 A gets $500, B gets $200

firm b should cheat

A Lorenz curve shows:

how a population's total income is distributed among its members.

Which of the following will not result in a leftward shift of the market demand curve for labor?

increase in wage rate

Improvements in the productivity of labor will tend to:

increase wages

If the demand for software engineers __________ slower than does supply, then wages of software engineers will __________.

increases; fall

2 The marginal product of labor is known to be greater than the average product of labor at a given level of employment. The Average Product at this point would be ________.

increasing

A situation of ________ arises when one group receives a higher share of total income or wealth than others.

inequality

If Congress reduced the period of patent protection from 20 years to 10 years, what would likely happen to the amount of private research and development?

it would make innovation less lucrative, so the amount of research and development would likely decline.

A ________ is an organization of workers that negotiates with employers as a group over wages and working conditions.

labor union

Other things being equal, a ________ supply of workers tends to put ________ pressure on real wages.

larger : downward

Other things being equal, a __________ supply of workers tends to __________ real wages.

larger; decrease

Suppose that new high-technology farming equipment is developed. These new machines are substitutes for low-income workers such as farm laborers, but they are complements for high-income workers such as farm technicians and farm owners. This new technology will shift the demand curve for low-income workers to the ________ while shifting the demand curve for high-income workers to the ________.

left : right

left ; right

Economies to scale refers to the ________ where all inputs are being allowed to increase together.

long-run average cost curve

A perfectly competitive firm should shut down immediately in order to incur only fixed costs whenever the price is:

lower than the average variable cost

Monopolistic competition has these characteristics:

many varying sized companies with some control over price.

If marginal cost is rising in a competitive firm's short-run production process and its average variable cost is falling as output is increased, then:

marginal cost is below average variable cost.

If a company makes 9 items and sells all of them for $10 each, and then the company makes a 10th item and sells it for $10, we know for sure that its...

marginal revenue for the 10th item is $10.

Following the Shutdown Rule enables a company to...

maximize profit or minimize loss.

The largest cattle rancher in a given region will be unable to have a ________ when sufficient numbers of smaller cattle ranchers provide sources of competition.

monopoly

A market in which there is only one buyer of a good, service, or factor of production is called a

monopsony

- Which of the following is a good example of a pure public good?

national defense

A ________ exists when the quantity demanded in the market is less than the quantity at the bottom of the long-run average cost curve.

natural monopoly

- In order for a good to be classified as, when one person uses the good, others are also able to use it.

non-rivalrous

Farmers producing and then selling field corn at an agricultural elevator could be used as a legitimate example of...

perfect competition

The four main market structures are...

perfect competition, monopolistic competition, oligopoly, and monopoly.

Incomes rise for low-income and high-income workers, but rise more for the high-income earners. How will this change affect income inequality?

poverty falls, inequality rises

When reference is made to the ________, it means the specific amount of income needed for a basic standard of living.

poverty line

The "law of supply" functions in labor markets; that is, a higher __________ for labor leads to a higher quantity of labor supplied.

price

provides more social benefits than it derives in private benefits.

Major arguments against monopolies are that they tend to ________________ supply and _________________ price.

reduce; increase

Monopolies tend to worry consumers because of...

restricted supply and higher prices.

- Cathy can take either of two separate roads to drive to work. The first is a lightly used new toll road that is rarely congested. The second road is a local road with no tolls, but it is often congested and has many potholes. In this instance, the toll road is:

rivalrous and nonexcludable

In the ________, if profits are not possible, the perfectly competitive firm will seek out the quantity of output where ________.

short run: losses are smallest

If the HHI changes by 400 as the result of a horizontal merger,...

the Department of Justice is unlikely to approve the merger.

Which of the following are forms of labor?

the natural ability of a worker the skills a worker has acquired

Whenever there is a shortage at a particular price, the quantity sold at that price will equal:

the quantity demanded at that price.

If incomes rise for both low-income and high-income workers, but rise less for the high-income workers,

then poverty will fall and inequality will fall.

If a rise in incomes is the same proportion for both low-income and high-income workers,

then poverty will fall and inequality will remainunchanged

If a rise in incomes for both low-income and high-income workers is higher for the high-income workers,

then poverty will fall and inequality will rise

________ include all spending on labor, machinery, tools, and supplies purchased from other firms.

total costs

2 The marginal product of labor is known to be greater than the average product of labor at a given level of employment. The Average Product at this point would be ________.

upward sloping and then downward sloping

The marginal cost curve is generally ________, because diminishing marginal returns implies that additional units are ________.

upward-sloping; more costly to produce

The Shutdown Rule states that a company should stay open in the short run as long as it can cover its...

variable cost.

In which of the following pairs of terms are both items incomes earned for factors of production?

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