Micro Final
T/F: As the number of members in a cartel increases, it becomes more difficult to sustain a collusive agreement True False
True
Belarus has a comparative advantage in the production of linen, but Russia has an absolute advantage in the production of linen. If these two countries decide to trade, a. Belarus should export linen to Russia b. Russia should export linen to Belarus c. trading linen would provide no net advantage to either country d. trading linen would benefit only Russia and have no effect on Belarus e. Without additional information about opportunity cost, this question cannot be answered
a. Belarus should export linen to Russia
When the rental price of DVD movies is $4, Denise rents 5 per month. When the price is $3, she rents nine per month. Denise's demand for DVD rentals is: a. elastic and the curve would be relatively flat b. elastic and the curve would be relatively steep c. inelastic and the curve would be relatively flat d. inelastic and the curve would be relatively steep e. none of the above
a. elastic and the curve would be relatively flat
The slope of the demand curve by a monopolist is _____________ the slope of the market demand curve. a. equal to b. greater than c. less than d. can be less than or equal to
a. equal to
Assume that the demand and supply curves for cars are elastic. If the government imposes a $500 tax on the buyer of each car, we can assume that: a. equilibrium price of a car would decrease by less than $500 b. equilibrium price of a car would decrease by exactly $500 c. equilibrium price of a car would decrease by more than $500 d. equilibrium price of car would not change if both curves were elastic e. none of the above
a. equilibrium price of a car would decrease by less than $500
Which of the following concepts is NOT illustrated by the production possibilities frontier? a. equity b. opportunity cost c. tradeoffs d. efficiency
a. equity
Which of the following is a characteristic of a perfectly competitive market? a. firms are price takers b. firms have difficulty entering the market c. there are few sellers in the market d. goods offered for sale are differentiated e. none of the above
a. firms are price takers
Consider the market for pens, which are considered to be normal goods. Suppose the price of pencils rises, consumers experience an increase in income, writing in ink becomes more fashionable, and the wages paid by pen manufacturers to their employees increase. What will happen as a result of these events? Equilibrium pens will: a. increase b. decrease. c. remain the same d. double in magnitude e. not enough information. Effect on equilibrium price is ambiguous
a. increase
Suppose the income elasticity of the product you sold was estimated to be 4. You would expect sales of your product to ____________ during a period of economy - wide expansion and ______________ during a recession. a. increase; decrease b. decrease; increase c. increase; increase d. decrease; decrease
a. increase; decrease
Suppose there is an early freeze in California that ruins the lemon crop. What happens to consumer surplus in th emarket for lemons? a. it decreases b. it increases c. it is not affected by this change in market forces d. it increases briefly then decreases
a. it decreases
Suppose you like to make banana cream pies with vanilla pudding. Assuming all other things are constant, you notice that the price of bananas, a key ingerdient in banana cream pie, is higher. How would your demand fro vanilla pudding, another key ingredient in banana cream pies, be affected by this? a. it would decrease b. it would increase c. it would be unaffected d. none of the above
a. it would decrease
Equilibrium price in markets characterized by oligopoly is ___________ than in monopoly markets and _______________ than in perfectly competitive markets a. lower; higher b. higher; lower c. lower; lower d. higher; higher
a. lower; higher
One difference between a perfectly competitive firm and monopoly is that a perfectly competitive firm produces where a. marginal cost equals price, whereas a monopolist produces where price exceeds marginal cost b. marginal cost equals price, whereas a monopolist produces where marginal cost exceeds price c. price exceeds marginal cost, whereas a monopolist produces where marginal cost equals price d. marginal cost exceeds price, whereas a monopolist produces where marginal cost equals price e. marginal cost equals marginal revenue, whereas a monopolist does not
a. marginal cost equals price, wheras a monopolist produces where price exceeds marginal cost
As a result of these two events, the equilibrium price of peanut butter: a. must increase b. must decrease c. must stay the same d. not enough information. Effect on equilibrium price is ambiguous
a. must increase
When a new firm enters a monopolistically competitive market, the individual demand curves faced by all existing firms in that market will a. shift to the left b. shift to the right c. shift in a direction that is unpredictable without further information d. remain unchanged. It is the supply curve that will shift to the right e. remain unchanged. It is the supply curve that will shift to the right
a. shift to the left
In monopolistically competitive markets, economic losses a. suggest that some existing firms will exit the market b. suggest that new firms will enter the market c. are minimized through government-imposed barriers to entry d. are never possible e. are eliminated when firms maximize profits
a. suggest that some existing firms will exit the market
Suppose that the Federal Reserve Bank announces that it will be making a change to a key interest rate to decrease the money supply. This is likely because a. the Federal Reserve Bank is worried about inflation b. the Federal Reserve Bank is worried about unemployment c. the Federal Reserve Bank is hoping to increase the demand for goods and services d. the Federal Reserve Bank is worried that the economy is growing too slowly
a. the Federal Reserve Bank is worried about inflation
If the quantity demanded of a certain good responds a great deal to a change in the price of the good, then a. the demand for the good is said to be elastic b. the demand for the good is said to be inelastic c. the demand for the good is said to be unitary elastic d. the demand for the good is said to be zero e. none of the above
a. the demand for the good is said to be elastic
In the early 2000s, German taxicab drivers were on strike demanding lower cab fares. What must the drivers have believed about the price elasticity of demand for taxi rides? a. the drivers believed the price elasticity of demand was elastic b. the drivers believed the price elasticity of demand was inelastic c. the drivers believed the price elasticity of demand was unitary elastic d. the drivers believed the price elasticity of demand was zero e. none of the above
a. the drivers believed the price elasticity of demand was elastic
The allocation of resources is said to be inefficient if: a. the good is not being consumed by the buyers who value it most highly b. the good is being produced by the sellers with the lowest cost c. the quantity being bought and sold in the market is the free-market equilibrium quantity d. all of the above
a. the good is not being consumed by the buyers who value it most highly
Get Smart University has decided to raise the price on parking permits to enhance revenue for parking improvements. If the demand for parking permits is elastic: a. the planned price increase would decrease total revenue b. the planned price increase would increase total revenue c. the planned price increase may increase or decrease total revenue. More information is needed to determine in which direction total revenue will change. d. the planned price increase will not change total revenue
a. the planned price increase would decrease total revenue
When there is a surplus in a free, unregulated market: a. there is downward pressure on price b. there is upward pressure on price c. the market is in equilibrium d. there is excess demand
a. there is downward pressure on price
Knowing that the demand for wheat is inelastic, if all farmers voluntarily plowed under 10% of their wheat crop, then: a. wheat farmers would increase their revenue b. wheat farmers would suffer a reduction in their revenue c. consumers of wheat would buy more wheat d. the demand for wheat would decrease
a. wheat farmers would increase their revenue
Granting a pharmaceutical company a patent for a new medicine will lead to (i) a product that is priced higher than it would be without the exclusive rights (ii) incentives for pharmaceutical companies to invest in research and development (iii) higher quantities of output than without the patent a. (i) only b. (i) and (ii) only c. (ii) and (iii) only d. (i) and (iii) only e. (i), (ii), and (iii)
b. (i) and (ii) only
Suppose than an increase in the price of carrots from $1.20 to $1.40 per pound raises the amount of carrots that carrot farmers produce 1.2 million to 1.6 million. Using the midpoint method, what would be the price elasticity of supply? a. 2.00 b. 1.86 c. 0.54 d. 0.50 e. none of the above
b. 1.86
Suppose a gardener produces both green beans and corn in her garden. If she must give up 14 bushels of corn to get 7 bushels of green beans, then her opportunity cost of 1 bushel of green beans is a. 0.5 bushel of corn b. 2 bushels of corn c. 6 bushels of corn d. 7 bushels of corn e. 14 bushels of corn
b. 2 bushels of corn
Total surplus under a monopoly market structure is _________ total surplus under a perfectly competitive market structure. a. Greater than b. Less than c. Equal to d. None of the above
b. Less than
Which of the following would cause a decrease in the demand for computer software? Assume computer software is a normal good. a. an increase in the price of computer software b. an increase in the price of computers c. a decrease in the number of computer software manufacturers d. an increase in income
b. an increase in the price of computers
You and your college roommate eat three packages of Ramen noodles each week. After graduation last month, both of you were hired at several times your college income. Yoy still enjoy Ramen noodles very much and buy even more, but your roomate plans to buy other foods she prefers more. When looking at income elasticity of demand for Ramen noodles, yours would: a. be negative and your roommate's would be postive b. be positive and your roommate's would be negative c. be zero and your roommate's would approach infinity d. approach infinity and your roommate's would be zero
b. be positive and your roommate's would be negative
An example of an oligopolistic market structure is the market for a. wheat b. crude oil c. restaurants d. local cabel television
b. crude oil
Suppose that the equilibrium price in a market is $5. If the government imposes a binding price floor, total surplus will: a. increase b. decrease c. stay the same d. equal 0 e. none of the above
b. decrease
Consider the following two products: insulin or nasal decongestant spray. The demand for which product is more elastic? a. demand for insulin b. demand for nasal decongestant spray c. the demand for the two products is equally elastic, i.e. no difference in price elasticity for demand d. not enough information
b. demand for nasal decongestant spray
Mike's Mushrooms is a firm producing and selling mushrooms in a competitive market. Suppose the prevailing market price for mushrooms is $8.75 per pound. Mike's Marginal Revenue from selling a little more will be: a. less than $8.75 per additional pound b. equal to $8.75 per additional pound c. more than $8.75 per additional pound d. indeterminate
b. equal to $8.75 per additional pound
A prisoners' dilemma game demonstrates how _____________ is often rational even though ____________________ a. failure to cooperate, cooperation would make everyone worse off b. failure to cooperate, cooperation would make everyone better off c. a desire to cooperate, cooperation would make everyone worse off d. all of the above
b. failure to cooperate, cooperation would make everyone better off
Equilibrium quantity in markets characterized by oligopoly is ___________ than in monopoly markets and _____________ than in perfectly competitive markets a. lower; higher b. higher; lower c. lower; lower d. higher; higher
b. higher; lower
Cornflakes and milk are complementary goods. A decrease in the price of corn would: a. increase consumer surplus in the market for cornflakes and decrease producer surplus in the market for milk. b. increase consumer surplus in the market for cornflakes and increase producer surplus in the market for milk c. decrease consumer surplus in the market for cornflakes but increase producer surplus in the market for milk d. decrease consumer surplus in the market for cornflakes and decrease producer surplus in the market for milk e. none of the above
b. increase consumer surplus in the market for cornflakes and increase producer surplus in the market for milk
An increase in market demand results in a ____________________ in equilibrium quanitty and a ______________ in equilibrium price a. increase; decrease b. increase; increase c. decrease; decrease d. decrease; increase
b. increase; increase
According to recent studies at MIT and the University of Michigan, a 5 percent increase in the price of bicycles lends to a 4 percent drop in sales to teenagers. What is the price elasticity of demand for bicycles among teenagers? a. it is elastic b. it is inelastic c. it is unitary elastic d. it is zero e. none of the above
b. it is inelastic
When a monopolist increases the number of units it sells, there are two effects on revenue, the ______________ and the ________________. a. competitive effect, monopoly effect b. output effect, price effect c. demand effect, supply effect d. competition effect, cost effect
b. output effect, price effect
The deadweight loss that is associated with a monopolistically competitive market is a result of a. price falling short of marginal cost in order to increase market share b. price exceeding marginal cost c. the firm operating in a regulated industry d. excessive advertising costs e. profit minimizing behavior
b. price exceeding marginal cost
Other things equal, when the price of a good ___________, the quantity supplied of the good ___________. This is called the law of ______________ a. rises; falls; supply b. rises; rises; supply c. falls; rises; demand d. falls; falls; demand
b. rises; rises; supply
Suppose that a decrease in the price of X results in less of good Y sold. This would mean that X and Y are: a. complementary goods b. substitute goods c. normal goods d. inferior goods
b. substitute goods
If a consumer is willing and able to pay $200 for a particular good but actually pays $140: a. the consumer surplus is $340 b. the consumer surplus is $60 c. the consumer surplus is $140 d. the consumer surplus is -$60
b. the consumer surplus is $60
In the production possibilities graph shown, the shift of the frontier from frontier A to frontier B was most likely caused by which of the following? a. improvements in animal nutrituon raise the general productivity of cows and chickens b. the cow and chicken population decrease c. cows are infected with a rare disease and milk production is reduced d. the Surgeon General announces that cholesterol in eggs is linked to heart disease
b. the cow and chicken population decrease
Canada and the United States both produce wheat and computer software. Canada is said to have the comparative advantage in producing wheat if a. Canada requires fewer resources than the United States to produce a bushel of wheat b. the opportunity cost of producing a bushel of wheat is lower for Canada than it is for the United States c. the opportunity cost of producing a bushel of wheat is lower for the United States than it is for Canada d. the United States has an absolute advantage over Canada in producing computer software e. Canada has an absolute advantage in producing wheat
b. the opportunity cost of producing a bushel of wheat is lower for Canada than it is for the United States
Consider the market for yachts. The demand curve for yachts is elastic and the supply curve of yachts is inelastic. Suppose there is a decrease in the price of an input into the production of yachts. Which description is most accurate? a. the relative decrease in equilibrium price is greater than the increase in equilibrium quantity b. the relative decrease in equilibrium price is less than the increase in equilibrium quantity c. the relative increase in equilibrium price is greater than the decrease in equilibrium quantity d. the relative increase in equilibrium price is less than the decrease in equilibrium quantity e. none of the above
b. the relative decrease in equilibrium price is less than the increase in equilibrium quantity
Zach took $500,000 out of the bank and used it to start his new cookie business. The bank account pays 4% interest per year. During the first year of his business, Zach sold 12,000 boxed of cookies for $3 per box. Also, during the first year the cookie business incurred cost that required outlays of money amounting to $14,000. Zach's economic profit for the year was: a. -$478,000 b. -$56,000 c. $2,000 d. $22,000 e. none of the above
c. $2,000
Which of the following is an example of a barrier to entry? (i) A key resource is owned by a single firm (ii) The cost of production make a single producer less efficient than a large number of producers (iii) The government has given existing monopolist the exclusive right to produce the good a. (i) only b. (ii) only c. (i) and (iii) only d. (ii) and (iii) only e. (i), (ii), and (iii)
c. (i) and (iii) only
Muriel's income elasticity of demand for football tickets is 1.50. All else equal, the means that if her income increases by 20 percent, she will buy: a. 150 percent more football tickets b. 50 percent less football tickets c. 30 percent more football tickets d. 20 percent less football tickets e. none of the above
c. 30 percent more football tickets
If a demand curve is downward sloping, then: a. Marginal revenue is always equal to the price b. Marginal revenue is greater than the price c. Marginal revenue is generally less than the price d. Average revenue is less than the price
c. Marginal revenue is generally less than the price
Customers who purchase a book from Dave's Bookstore at regular price can purchase a second book at 50% off the regular price. This is an example of a. Predatory pricing b. First degree price discrimination c. Second degree price discrimination d. Third degree price discrimination e. None of the above
c. Second degree price discrimination
When an oligopoly market is in Nash equilibrium: a. market price will be different for each firm b. firms will not behaving as profit maximizers c. a firm will choose its best strategy, given the strategies that it observes other firms taking d. a firm will not take into account the strategies of competing firms
c. a firm will choose its best strategy, given the strategies that it observes other firms taking
Once a cartel is formed and members of the cartel successfully collude, the market is in effect served by: a. imperfect competition b. monopolistic competition c. a monopoly d. an oligopoly
c. a monopoly
Suppose we have reason to believe that the market for 2" diameter cold-rolled hexagonal steel rods is a competitive market. Suppose we also know that the price for 1 ton of 7 - foot long such steel rods is $4,350. Then we would conclude that a seller of these steel rods could sell a little more of them a. only if it lowered its price b. even if it raised its price c. at the prevailing market price d. only by undertaking an effective advertising campaign
c. at the prevailing market price
Which of the following would not be true of a perfectly elastic supply curve? a. the elasticity of supply is very large, approaching infinity b. the supply curve is horizontal c. changes in price lead to no change in quantity supplied d. the firm would likely be operating in the long run e. none of the above
c. changes in price lead to no change in quantity supplied
Other things equal, when the price of a good _______________, the quantity demanded of the good __________________. This is called the law of _____________. a. rises; falls; supply b. rises; rises; supply c. falls; rises; demand d. falls; falls; demand
c. falls; rises; demand
Competition is often listed as an important characteristic of a market economy. Competitive markets have all of the following characteristics except: a. buyers and sellers act independently of each other b. new sellers can enter the market for a product relatively easily, should they choose to do so. c. government tends to regulate most business activity fairly strictly, to insure that buyers are treated fairly. d. firms (producers) tend to be small relative to their markets (to have relatively small shares of their markets)
c. government tends to regulate most business activity fairly strictly, to insure that buyers are treated fairly.
Which would likely have the most elastic supply? a. commercial property in Chicago next year b. commercial property in Chicago next month c. hot dogs sold by street vendors in Chicago next year d. all goods have the same elasticity of supply
c. hot dogs sold by street vendors in Chicago next year
In the circular-flow diagram a. firms are sellers in the factors of production market and the market for goods and services b. firms are buyers in the market for goods and services c. households are sellers in the factors of production market d. spending on goods and services flow from firms to households
c. households are sellers in the factors of production market
suppose a wheat farmer is currently producing 60,000 bushels of wheat per year, with the following costs: AVC = $3.75 per bushel ATF = $5.85 per bushel MC = $6.15 per bushel The prevailing market price of wheat is $6.37 per bushel and is expected to remain at $6.37 per bushel. If this farmer wants to maximize profits, the farmer can be expected to: a. leave output unchanged b. decrease output until MC is $1.00 less than price. c. increase output until MC is equal to the market price (which is also the farm's MR) d. shut down immediately and get out of the wheat farming business in the long run, because wheat farming is clearly not profitable
c. increase output until MC is equal to the market price (which is also the farm's MR)
Which of the following markets would most likely be classified as a monopoly? a. market for automobiles b. market for soft drinks c. local market for electricity d. market for fast food.
c. local market for electricity
which of the following statements is not correct? a. monopolistic competition is similar to monopoly because in each market structure the firm can charge a price above marginal costs b. monopolistic competition is similar to perfect competition because both market structures are characterized by free entry c. monopolistic competition is similar to monopoly because both market structures are characterized by barriers to entry d. monopolistic competition is similar to perfect competition because both market structures are characterized by many sellers e. monopolistic competition is similar to perfect competition because both market structures are characterized by profit-maximizing behavior.
c. monopolistic competiton is similar to monopoly because both market structures are characterized by barriers to entry
Suppose that a tax is placed on DVDs. If the seller ends up paying the majority of the tax we know that the: a. demand curve is more inelastic than the supply curve b. government has placed the tax on the buyer c. supply curve is more inelastic than the demand curve d. government has placed the tax on the seller
c. supply curve is more inelastic than the demand curve
One characteristic of an oligopolistic market structure is: a. firms in the industry are typically characterized by very diverse product lines b. products typically sell at a price below marginal cost c. the actions of one seller can have a large impact on the profitability of other sellers d. since markets are typically large, the actions of one seller largely go unnoticed by its competitiors
c. the actions of one seller can have a large impact on the profitability of other sellers
Russell spends an hour studying instead of playing tennis. The opportunity cost to him of studying is: a. the improvement in his grades from studying minus the enjoyment of playing tennis b. the enjoyment of playing tennis minus the improvement in his grades from studying c. the enjoyment and exercise he would have received had he played tennis d. zero. Since Russell chose to study rather than to play tennis, the value of studying must have been greater than the value of playing tennis
c. the enjoyment and exercise he would have received had he played tennis
Why does an individual firm in a competitive market have no control over price? a. the government sets the prices of products sold in competitive markets b. competitive markets are dominated by a large firm which is able to force smaller firms to charge the price it picks c. the existence of a large number of small firms means that buyers have alternatives, and will buy from the lowest-priced seller; this forces all firms to charge the same, lowest price. d. small firms have incomplete information about market demand and supply, so they do not have enough information to make pricing decisions on their own, and rely on industry associations to do it for them.
c. the existence of a large number of small firms means that buyers have alternatives, and will buy from the lowest-priced seller; this forces all firms to charge the same, lowest price.
If a binding price ceiling is imposed in a market: a. there will be a surplus in the market b. the price will be legally forced toward equilibrium price c. there will be a shortage in the market d. the price will be legally forced above equilibrium price
c. there will be a shortage in the market
We can say that the allocation of resources is efficient if: a. producer surplus is maximized b. consumer surplus is maximized c. total surplus is maximized d. none of the above
c. total surplus is maximized
Monopolistic competition is characterized by (i) efficient level of output (ii) markup pricing over marginal cost (iii) deadweight loss (iv) excess capacity a. (i) and (ii) only b. (ii) and (iv) only c. (i), (ii), and (iii) d. (ii), (iii), and (iv) only e. (I), (ii), (iii), and (iv) only
d. (ii), (iii), and (iv) only
Suppose the U.S. Justice Department is deciding whether to poopose a merger between a producer of waxed paper and a producer of plastic wrap. The firms' attorneys argue that their products are very different and hence the merger would no reduce competition. The government hires you to calculate the cross-price elasticity of demand and gives you evidence that when the price of waxed paper rises by 20%, the demand for plastic wrap increases by 30%. What is the cross-price elasticity and what type of goods are waxed paper and plastic wrap? a. 0.67 complements b. 0.67 substitutes c. 1.5 complements d. 1.5 complements e. none of the above
d. 1.5 complements
Sue drinks three sodas during a particular day. The marginal benefit she enjoys from drinking the third soda a. can be thought of as the total benefit Sue enjoys by drinking three sodas minus the total benefit she would have enjoyed by drinking just two sodas b. determines Sue's willingness to pay for the third soda c. is likely to continue to fall as Sue drinks mor and more soda d. a, b, and c are all correct
d. a, b, and c are all correct
If a price floor is a binding constraint on the market: a. actual price will be below the price floor b. actual price will be above the price floor c. equilibrium price will equal the price floor d. actual price will equal the price floor e. none of the above
d. actual price will equal the price floor
A demand curve reflects: a. the willingness to pay of all buyers in the market b. the value each buyer in the market places on a good c. the highest price buyers are willing to pay for each quantity d. all of the above
d. all of the above
We can assume that markets are efficient only if: a. markets are sufficiently competitive b. there are no externalitites c. there is no market power by one firm or a small group of firms d. all of the above
d. all of the above
A decrease in market supply results in a ______________ in equilibrium quantity and a _________________ in equilibrium price. a. increase; decrease b. increase; increase c. decrease; decrease d. decrease; increase
d. decrease; increase
Assume Pepsi and Coke are substitutes. The price of Pepsi falls sharply. As a result, the equilibrium market price of Coke ________________, the equilibrium market quantity of Coke sold ______________________, and producer surplus in the Coke market ______________. a. increases; increases; increases b. increases; increases; decreases c. increases; decreases; decreases d. decreases; decreases; decreases
d. decreases; decreases; decreases
As you move from perfect competition to monopoly along the market continuum, price competition ____________ and profit potential __________________ a. increases; decreases b. increases; increases c. decreases; decreases d. decreases; increases
d. decreases; increases
If marijuana were legalized, it is likely that there would be a increase in the supply of marijuana. Advocates of marijuana legalization argue that this would significantly decrease the amount of revenue going to the criminal organizations that currently supply marijuana. These advocates believe that the: a. supply of marijuana is price elastic b. demand for marijuana is price elastic c. supply for marijuana is price inelastic d. demand for marijuana is price inelastic
d. demand for marijuana is price inelastic
The demand curve facing a firm in a competitive market is: a. downward-sloping b. upward-sloping c. vertical at the profit-maximizing output d. horizontal at the prevailing market price
d. horizontal at the prevailing market price
When the playe of a game chooses a dominant strategy: a. it is the best strategy, only if other players are cooperative b. it always leads to a Nash equilibrium that makes all players equally well off c. the game can never reach a Nash equilibrium d. it is the best strategy for that player, regardless of choices made by other players
d. it is the best strategy for that player, regardless of choices made by other players
In the circular-flow diagram, which of the following is not a factor of production a. land b. labor c. machines d. money e. building
d. money
As a result of these two events, the equilibrium quantity of peanut butter: a. must increase b. must decrease c. must stay the same d. not enough information. Effect on equilibrium quantity is ambiguous
d. not enough information. Effect on equilibrium quantity is ambiguous
There are thousands of wheat farmers who produce and sell wheat and there are millions of consumers who use wheat and wheat products. Wheat produced by different farmers is typically considered to be identical. The market for wheat would be classiffied as: a. monopoly b. oligopoly c. monopolistic competition d. pure/perfect competition
d. pure/perfect competition
New oak tables are normal goods. What would happen to the equilibrium price and quantity in the market for oak tables if the price of maple tables rises, the price of oak wood falls, more buyers enter the market for oak tables, and the price of wood saws falls? a. price will fall and the effect on quantity is ambiguous b. price will rise and the effect on quantity is ambiguous c. quantity will fall and the effect on price is ambiguous d. quantity will rise and the effect on price is ambiguous e. none of the above
d. quantity will rise and the effect on price is ambiguous
A natural monopoly occurs when: a. the monopolist's product is sold in its natural state (such as water or diamonds) b. firms are characterized by constant marginal cost curves c. a monopoly firm requires the use of free natural resources (such as water or air) to produce its product d. there are economies of scale in production
d. there are economies of scale in production
Haagen-Dazs strawberry ice cream would tend to have very elastic demand because a. it must be eaten quickly b. the good is broadly defined c. it represents a substantial percentage of the typical consumer's income d. there are many other brands and flavors of ice cream available e. none of the above
d. there are many other brands and flavors of ice cream available
The price of golf clubs falls. A retailer notices an increase in sales of golf balls, as well as golf clubs. We can say that: a. demand for golf clubs and golf balls has increased b. there has been an increase in quantity demanded of golf balls and an increase in the demand for golf clubs c. golf clubs and golf balls are substitutes d. there has been an increase in the quantity demanded of golf clubs and an increase in the demand for golf balls e. none of the above
d. there has been an increase in the quantity demanded of golf clubs and an increase in the demand for golf balls
Economists make assumptions a. to diminish the chance of wrong answers b. because all scientists make assumptions c. to make certain all possible variables are included d. to make the world easier to understand
d. to make the world easier to understand
In words, what does it mean when an economic consultant states; Stanley's price elasticity of beer equals 2 a. if the price of beer increases by 1 percent, then Stanley will increase his quality demanded of beer by 2 percent b. if Stanley's quantity demanded of beer increases by 2 percent, then the price of beer will drop by 1 percent c. if the price of beer decreases by 2 percent, then Stanley will increase his quantity d. if Stanley's quantity demanded of beer decreases by 1 percent, then the price that he is willing to pay for beer will decrease by 2 percent e. none of the above
e. none of the above
Price ceilings and price floors a. are desirable because they make markets more efficient as well as more equitable b. cause surpluses and shortages to persist since price can adjust to the market equilibrium price c. are usually enacted to restore a market to equilibrium d. are imposed because they can make the poor in an economy better off without causing adverse effect e. none of the above
e. none of the above
Which of the following will lead to an increase in the quantity supplied of dishwashers? a. decrease in income (assuming dishwashers are normal good) b. increase in the number of dishwasher manufacturers c. decrease in the price of dishwashers d. increase in automation at dishwasher manufacturing facilities, such that productivity of facility increases e. none of the above
e. none of the above
Consider the market for pens, which are considered to be normal goods. Suppose the price of pencils rises, consumers experience an increase in income, writing in ink becomes more fashionable, and the wages paid by pen manufacturers to their employees increase. What will happen as a result of these events? equilibrium quantity of pens will: a. increase b. decrease c. remain the same d. double in magnitude e. not enough information. Effect on equilibrium price is ambiguous
e. not enough information. Effect on equilibrium price is ambiguous
Which of the following would cause a decrease in the quantity demanded for eyeglasses? Assume eyeglasses and contact lenses are substitute goods, and eyeglasses are a normal good. a. an increase in the price of eyeglasses b. an increase in the price of contact lenses c. a decrease in the cost of producing eyeglasses d. a decrease in income
a. an increase in the price of eyeglasses
Which of the following is NOT a characteristic of a monopoly a. easy for firms to enter the market b. single seller c. no close substitute products d. firm is a price searcher
a. easy for firms to enter the market
If a good is a luxury, demand for the good would tend to be: a. elastic b. inelastic c. unitary elastic d. complementary e. none of the above
a. elastic
in a market economy, economic activity is guided by: a. the government b. prices c. central planners d. corporations
b. prices
If a decrease in income increases the demand for a good, then a. the good is a substitute good b. the good is a complement good c. the good is a normal good d. the good is an inferior good
d. the good is an inferior good
Defenders of advertising and brand names argue that firms use them to: a. inform consumers b. compete more vigorously on price c. compete more vigorously on product quality d. a and c only e. a, b, and c
e. a, b, and c
There are very few, if any, good substitutes for motor oil. Therefore a. the supply of motor oil would tend to be price inelastic b. the demand for motor oil would tend to be price elastic c. the income elasticity of motor oil would tend to be inelastic d. the supply of motor oil would tend to be price elastic e. none of the above
e. none of the above
Which of the following statements is false? a. in the long run, there are no fixed costs b. marginal cost is independent of fixed costs c. economies of scale is a long-run concept d. diminishing marginal product explains increasing marginal cost e. none of the above
e. none of the above