Hard Questions Econ

If the price of a firm's variable input increases, which of the following will occur?

A. The firm will decrease its level of production

A constant-cost, perfectly competitive industry is in long-run equilibrium. If the demand for the good increases, which of the following will occur in the long run?

A. The price will remain unchanged

Private supply of public goods is mostly like to result in

A. less than the efficient level of output, due to the free-rider problem

Suppose that a large number of unskilled workers enter a nation's labor market. If the labor market is competitive, the number of unskilled workers hired and the wage rate will most likely change in which of the following ways?

Number of Unskilled Workers Hired Wage Rate B. Increase Decrease

If this were a perfectly competitive industry with the same costs as shown on the graph, the equilibrium price and output would be which of the following?

Price Output C. 0T Q3

The condition for allocative efficiency is violated when

A. Firms are price makers (price searchers)

A society that wishes to achieve greater income equality is most likely to have which of the following?

A progressive income tax system and high estate and gift taxes

When marginal product exceeds average product, which of the following must be true?

A. Average product is increasing.

A merger of two firms may increase economic efficiency by

A. Decreasing average total cost through an increase in economies of scale.

Which of the following best describes the relationship between the average total cost curve and the marginal cost curve in the short run?

A. If the average total cost curve is rising, the marginal cost curve is above the average total cost curve.

collusive agreement to fix prices among firms in an oligopolistic industry is most likely to be broken under which of the following conditions?

A. It is easy for new firms to enter into the industry

Which of the following statements is true for a monopolist at the profit-maximizing output level? A. Price exceeds marginal revenue B. Marginal cost exceeds price C. Demand is price inelastic D. Price equals marginal cost, which equals average total cost. E. The demand curve intersects the supply curve.

A. Price exceeds marginal revenue

A Lorenz curve can be used by economists to do which of the following?

A. Show the distribution of personal income

Which of the following is a government policy that is intended to address a market failure?

A. Taxing the use of toxic pesticides by farmers

If the price for a product produced in a competitive market increases, which of the following is most likely to occur in the labor market for workers who produce that product? A. The demand for labor and the number of workers hired both increase. B. The supply of labor and the number of workers hired both increase. C. The demand for labor and the number of workers hired both decrease D. The supply for labor and the number of workers hired both decrease E. There is a movement along the demand for labor curve, and firms hire more workers.

A. The demand for labor and the number of workers hired both increase.

Leather and beef are jointly produced such that an increase in the production of one results in an equal increase in production of the other. An increase in the demand for leather will most likely cause

B. A decrease in the price of beef

The supply curve for automobiles will shift to the left in response to

B. An increase in wages in the automobile industry

Which of the following best explains why the short-run average total cost curve is U-shaped?

B. Spreading total fixed costs over a larger output, and eventually diminishing returns

The graph above shows the supply and demand curves for artichokes. The surgeon general announces that eating an artichoke a day dramatically reduces one's likelihood of developing cancer. Simultaneously an infestation of the artichoke weevil severely damages the crop. Which of the following will definitely occur as a result?

B. The price of artichokes will increase.

An industry will produce more than the socially efficient level of output under which of the following conditions

B. The production or consumption of a good generates a negative externality.

If the demand for good Y increases as the price of good X decreases, it can be concluded that

B. X and Y are complementary goods

Assume that total fixed costs are $46, that the average product of labor is 5 units when 10 units of output are produced, and that the wage rate is $12. If labor is the only variable input, what is the average total cost of producing 10 units of output?

C. $7

Which of the following is true in the elastic range of a firm's demand curve? A. The firm should expand output to increase economic profits B. An increase in price will also lead to an increase in total cost C. A decrease in price will likely lead to an increase in total revenue D. Marginal revenue is negative E. The firm is maximizing total revenue

C. A decrease in price will likely lead to an increase in total revenue

Assume that apple juice and grape juice are substitutes. Which of the following will cause an increase in the quantity of apple juice supplied?

C. An increase in the price of apple juice

In a perfectly competitive labor market for nurses, all of the following statements are true EXCEPT A. The imposition of an effective minimum wage will result in unemployment B. An increase in the marginal product of nurses will increase the demand for nurses and increase wages C. An increase in the supply of nurses will create unemployment and leave wages unchanged. D. An increase in the demand for health care will increase the demand for nurses and increase wages. E. Revoking work permits for foreign nurses will increase wages of domestic nurses.

C. An increase in the supply of nurses will create unemployment and leave wages unchanged.

In a perfectly competitive industry, the market price of the product is $12. A firm produces at a level of output where average total cost is $16, marginal cost is $16, and average variable cost is $8. To maximize profit, the firm should A. decrease its selling price B. increase its selling price C. decrease output but keep producing D. shut down E. Leave both price and output unchanged

C. Decrease output but keep producing

If a single farm can produce and supply an entire market at a lower unit cost than many small firms can, the long-run average total cost must be

C. Decreasing as the firm's output increases

Which of the following is true if a monopolist's marginal revenue is negative at the current level of output?

C. Demand for its product is price inelastic

In the short run in perfect competition, the industry's demand curve and a firm's demand curve have which of the following slopes? Industry's Demand Curve Firm's Demand Curve A. Horizontal Downward sloping B. Horizontal Horizontal C. Downward sloping Horizontal D. Downward sloping Downward sloping E. Vertical Horizontal

C. Downward sloping Horizontal

To correct for positive externalities, the government should

C. Pay a subsidy equal to the marginal external benefit

In microeconomics, the short run is defined as which of the following?

D. A period during which some inputs in a firm's production process cannot be changed

A firm's demand curve for labor is equal to a segment of its

D. marginal revenue product curve

Assume that a consumer spends all her income on the purchase of two goods. If the costumer's income doubles and the prices of the two goods also double, the quantity of the two goods purchased will

D. not change

A factor of production will NOT earn economic rent when its supply is A. elastic B. inelastic C. unit elastic D. perfectly elastic E. perfectly inelastic

D. perfectly elastic

Which of the following changes in the demand for and the supply of a good will necessarily result in an increase in both the equilibrium price and quantity of a good in a market?

Demand Supply B. Increase No Change

A production possibilities curve is bowed out, indicating increasing opportunity cost because of

E. Imperfect adaptability of resources to alternative uses

When a perfectly competitive firm sells additional units of output, its total revenue will A. remain constant B. increase rapidly at first, then decline C. increase at a decreasing rate D. increase at an increasing rate E. increase at a constant rate

E. Increase at a constant rate

The price of an airline ticket is typically lower if a traveler buys the ticket several weeks before the flight's departure date rather than on the day of departure. This pricing strategy is based on the assumption that

E. Travelers' demand become less elastic as the departure date approaches

Price discrimination occurs when

E. differences in a product's price do not reflect differences in costs of production

Marginal revenue product is defined as the

change in total revenue that occurs when one additional unit of an input is employed