Microeconomics final exam: quiz questions

How long does it take a firm to go from the short run to the long run? a. It depends on the nature of the firm. b. six months c. one year d. two years

Correcta. It depends on the nature of the firm.

An externality is an example of a. a corrective tax. b. a tradable pollution permit. c. a market failure. d. Both a and b are correct.

a market failure.

Which of the following statements about trade is false? a. With trade, one country wins and one country loses. b. Bulgaria can benefit, potentially, from trade with any other country. c. Trade increases competition. d. Trade allows people to buy a greater variety of goods and services at lower cost.

a. With trade, one country wins and one country loses.

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

a. inputs that were fixed in the short run become variable.

When a factory is operating in the short run, a. it cannot adjust the quantity of fixed inputs. b. total cost and variable cost are usually the same. c. it cannot alter variable costs. d. average fixed cost rises as output increases.

a. it cannot adjust the quantity of fixed inputs

Cartels are difficult to maintain because Answers: a. there is always tension between cooperation and self-interest in a cartel. b. antitrust laws are difficult to enforce. c. firms pay little attention to the decisions made by other firms. d. cartel agreements are conducive to monopoly outcomes.

a. there is always tension between cooperation and self-interest in a cartel.

The term market failure refers to a. a firm that is forced out of business because of losses. b. a market that fails to allocate resources efficiently. c. an unsuccessful advertising campaign which reduces demand. d. ruthless competition among firms.

b. a market that fails to allocate resources efficiently.

A demand curve reflects each of the following except the a. value each buyer in the market places on the good. b. ability of buyers to obtain the quantity they desire. c. willingness to pay of all buyers in the market. d. highest price buyers are willing to pay for each quantity.

b. ability of buyers to obtain the quantity they desire.

A consumer's willingness to pay directly measures a. the extent to which advertising and other external forces have influenced the consumer's preferences. b. how much a buyer values a good. c. the cost of a good to the buyer. d. consumer surplus.

b. how much a buyer values a good.

An increase in the size of a tax is most likely to increase tax revenue in a market with a. elastic demand and elastic supply. b. inelastic demand and inelastic supply. c. inelastic demand and elastic supply. d. elastic demand and inelastic supply.

b. inelastic demand and inelastic supply.

The Laffer curve illustrates that a. deadweight loss rises by the square of the increase in a tax. b. deadweight loss rises exponentially as a tax increases. c. tax revenue first rises, then falls as a tax increases. d. Both a) and b) are correct.

c. tax revenue first rises, then falls as a tax increases.

Human Capital is how productive an individual __________ a. is b. will be c. was d. both a. and b.

d. both a. and b.

Economies of scale occur when Answers: a. average fixed costs are falling. b. average fixed costs are constant. c. long-run average total costs rise as output increases. d. long-run average total costs fall as output increases.

d. long-run average total costs fall as output increases.

A decrease in demand is represented by a a. leftward shift of a demand curve. b. rightward shift of a demand curve. c. movement upward and to the left along a demand curve. d. movement downward and to the right along a demand curve.

leftward shift of a demand curve.

An increase in quantity demanded a. shifts the demand curve to the left. b. results in a movement upward and to the left along a demand curve. c. shifts the demand curve to the right. d. results in a movement downward and to the right along a demand curve.

results in a movement downward and to the right along a demand curve

Refer to Table 17-10. Suppose the market for this product is served by two firms who have formed a cartel and are colluding to set the price and quantity in this market. If the marginal cost to produce this product is constant at $40 per unit, then what price will the cartel set in this market? Answers: a. $50 b. $40 c. $60 d. $70

$70

Economics is the study of how society manages its a. limited wants and unlimited resources. b. unlimited wants and limited resources. c. limited wants and limited resources. d. unlimited wants and unlimited resources.

unlimited wants and limited resources.

In economics, the cost of something is a. the dollar amount of obtaining it. b. often impossible to quantify, even in principle. c. always measured in units of time given up to get it. d. what you give up to get it.

what you give up to get it.

If the price a consumer pays for a product is equal to a consumer's willingness to pay, then the consumer surplus relevant to that purchase is a. zero. b. negative, and the consumer would not purchase the product. c. positive, and the consumer would purchase the product. d. There is not enough information given to answer this question.

zero

"Other things equal, when the price of a good rises, the quantity demanded of the good falls, and when the price falls, the quantity demanded rises." This relationship between price and quantity demanded a. applies to most goods in the economy. b. is represented by a downward-sloping demand curve. c. is referred to as the law of demand. d. All of the above are correct.

All of the above

The principle that "trade can make everyone better off" applies to interactions and trade between families. states within the United States. nations. All of the above

All of the above

A likely example of complementary goods for most people would be a. cola and lemonade. b. butter and margarine. c. chips and salsa. d. lawnmowers and automobiles.

Chips and salsa

All else equal, what happens to consumer surplus if the price of a good decreases? a. Consumer surplus decreases. b. Consumer surplus may increase, decrease, or remain unchanged. c. Consumer surplus is unchanged. d. Consumer surplus increases.

Consumer surplus increases

Which of the following statements is not correct? a. All states have state income taxes, but the percentages vary widely. b. A budget deficit occurs when government spending exceeds government receipts. c. Medicare spending has increased because the percentage of the population that is elderly and the cost of healthcare have both increased. d. Sales taxes and property taxes are important revenue sources for state and local governments.

Correcta. All states have state income taxes, but the percentages vary widely.

Which of the following is true about the percent of total income all levels of government in the U.S. take as taxes? Correcta. In 1902 the government collected about 7 percent of total income. In recent years, it collected about 30 percent of total income. b. In 1902 the government collected about 7 percent of total income. In recent years, it collected about 7 percent of total income. c. In 1902 the government collected about 30 percent of total income. In recent years, it collected about 30 percent of total income. d. In 1902 the government collected about 30 percent of total income. In recent years, it collected about 7 percent of total income.

Correcta. In 1902 the government collected about 7 percent of total income. In recent years, it collected about 30 percent of total income.

After initial success, the OPEC cartel saw the price of oil and the revenues of its members decline due, in part, to Answers: a. OPEC members failing to produce their agreed-upon production levels. b. the low elasticity of demand for oil in the short run. c. surging demand for oil in the early 1980s. d. the large number of buyers from each member nation.

Correcta. OPEC members failing to produce their agreed-upon

Refer to Figure 17-1. Suppose this market is served by a duopoly in which each firm faces the marginal cost curve shown in the diagram. The marginal revenue curve that a monopolist would face in this market is also shown. Which of the following statements is true? Answers: a. The total output in this market will likely be less than 4 units when the market is served by a duopoly. b. The price in this market will likely be $6 when the market is served by a duopoly. c. The total revenue to each firm will likely be more than $16 when the market is served by a duopoly. d. The total output in this market will likely be 2 units when the market is served by a duopoly.

Correcta. The total output in this market will likely be less than 4 units when the market is served by a duopoly.

Individual profit earned by Dave, the oligopolist, depends on which of the following? (i) The quantity of output that Dave produces (ii) The quantities of output that the other firms in the market produce (iii) The extent of collusion between Dave and the other firms in the market Answers: a. (iii) only b. (i), (ii), and (iii) c. (i) and (ii) d. (ii) and (iii)

Correctb. (i), (ii), and (iii)

The table shows the demand schedule for a particular product. Quantity Price 0 100 300 90 600 80 900 70 1,200 60 1,500 50 1,800 40 2,100 30 2,400 20 2,700 10 3,000 0 Refer to Table 17-10. If this market is perfectly competitive and the marginal cost is constant at $40 per unit, then how much output will be produced? Answers: a. 900 b. 1,500 c. 1,800 d. 1,200

Correctc. 1,800

In the short run, a firm that produces and sells house paint can adjust a. where to produce along its long-run average-total-cost curve. b. the size of its factories. c. how many workers to hire. d. All of the above are correct.

Correctc. how many workers to hire.

Firms may experience diseconomies of scale when a. there are too few employees, and managers do not have enough to do. b. they are too small to take advantage of specialization. c. large management structures are bureaucratic and inefficient. d. average fixed costs begin to rise again.

Correctc. large management structures are bureaucratic and

Which type of tax is used to finance the Social Security program in the United States? a. income tax b. consumption tax c. payroll tax d. property tax

Correctc. payroll tax

Gary Becker claimed that any activity with current cost and future increased productivity can be analyzed like a(n) _________ investment market business supply

Investment

A price ceiling is often imposed on markets in which "cutthroat competition" would prevail without a price ceiling. a legal maximum on the price at which a good can be sold. often imposed when sellers of a good are successful in their attempts to convince the government that the market outcome is unfair without a price ceiling. All of the above are correct.

a legal maximum on the price at which a good can be sold.

Celine buys a new MP3 player for $90. She receives consumer surplus of $15 on her purchase if her willingness to pay is a. $105. b. $90. c. $15. d. $75.

a. $105.

Over the past 100 years, as the U.S. economy's income has grown, a. tax rates have increased, while tax revenues have decreased. b. tax rates have decreased, while tax revenues have increased. c. both tax rates and tax revenues have increased. d. both tax rates and tax revenues have decreased.

both tax rates and tax revenues have increased

As a group, oligopolists would always earn the highest profit if they would produce the perfectly competitive quantity of output. produce more than the perfectly competitive quantity of output. charge the same price that a monopolist would charge if the market were a monopoly. operate according to their own individual self-interests.

charge the same price that a monopolist would charge if the market were a monopoly.

Which of the following is correct? When oligopolies collude Answers: a. they make higher profits and consumers of the product are better off. b. they make lower profits and consumers of the product are worse off. c. they make lower profits and consumers of the product are better off. d. they make higher profits but consumers of the product are worse off.

d. they make higher profits but consumers of the product are worse off.

Holding all other things constant, a higher price for ski lift tickets would a. decrease the demand for other winter recreational activities. b. increase the price of skis. c. increase the number of skiers. d. decrease the number of skis sold.

decrease the number of skis sold.

Two goods are substitutes when a decrease in the price of one good a. decreases the demand for the other good. b. increases the demand for the other good. c. decreases the quantity demanded of the other good. d. increases the quantity demanded of the other good.

decreases the demand for the other good.

People who provide you with goods and services a. have chosen not to become interdependent. b. do so because they get something in return. c. are acting out of generosity. d. are required to do so by the government.

do so because they get something in return.

An economic outcome is said to be efficient if the economy is a. able to produce more than what is currently being produced without additional resources. b. using all of the scarce resources it has available. c. conserving on resources, rather than using all available resources. d. getting all it can get from the scarce resources it has available.

getting all it can get from the scarce resources it has available.

Central planning refers to a. government guiding economic activity. Today many countries that did not have this system have implemented it. b. government guiding economic activity. Today many countries that had this system have abandoned it. c. markets guiding economic activity. Today many countries that did not have this system have implemented it. d. markets guiding economic activity. Today many countries that had this system have abandoned it.

government guiding economic activity. Today many countries that had this system have abandoned it.

In a market economy, a. households decide which firms to work for and what to buy with their incomes. b. firms decide whom to hire and what to make. c. a central planner makes decisions about production and consumption. d. Both a and b are correct.

households decide which firms to work for and what to buy with their incomes firms decide whom to hire and what to make

If Kindle e-readers and Nook e-readers are substitutes, a higher price for Nooks would result in a(n) a. decrease in the demand for Kindles. b. decrease in the demand for Nooks. c. increase in the demand for Kindles. d. increase in the demand for Nooks.

increase in the demand for Kindles

A decrease in the price of a good would a. increase the supply of the good. b. increase the quantity demanded of the good. c. shift the supply curve for the good to the left. d. give producers an incentive to produce more to keep profits from falling.

increase the quantity demanded of the good.

Two goods are complements when a decrease in the price of one good a. decreases the quantity demanded of the other good. b. increases the demand for the other good. c. decreases the demand for the other good. d. increases the quantity demanded of the other good.

increases the demand for the other good.

Consumer Surplus a. is closely related to the supply curve for a product. b. does not reflect economic well-being in most markets. c. is represented by a rectangle on a supply-demand graph when the demand curve is a straight, downward-sloping line. d. is measured using the demand curve for a product.

is measured using the demand curve for a product.

A decrease in demand is represented by a a. movement upward and to the left along a demand curve. b. leftward shift of a demand curve. c. rightward shift of a demand curve. d. movement downward and to the right along a demand curve.

leftward shift of a demand curve.

Benefits from trade would not include a. less competition. b. the ability of people and nations to specialize. c. lower prices. d. a greater variety of goods and services becoming available

less competition.

The discontinuous worker re-enters the workforce at _______ wage rate compared to what he or she was earning prior to leaving the workforce. higher lower the Theory of Human Capital does not address this issue the same

lower

The word "economy" comes from the Greek word oikonomos, which means a. "one who makes decisions." b. "production." c. "environment." d. "one who manages a household."

one who manages a household."

A likely example of substitute goods for most people would be a. pencils and pens. b. televisions and subscriptions to cable television services. c. tennis balls and tennis rackets. d. peanut butter and jelly.

pencils and pens.

The term price takers refers to buyers and sellers in perfectly competitive markets. monopolistic markets. markets that are regulated by the government. markets in which buyers cannot buy all they want and/or sellers cannot sell all they want.

perfectly competitive markets.

If a market is a duopoly and additional firms enter and do not cooperate, then price and quantity fall. price and quantity rise. price falls and quantity rises. price rises and quantity falls.

price falls and quantity rises.

A market demand curve shows how the total quantity demanded of a good varies as a. income varies. b. supply varies. c. price of the nearest substitute good varies. d. price varies.

price varies.

When an economist points out that you and millions of other people are interdependent, he or she is referring to the fact that we all a. have similar tastes and abilities. b. rely upon one another for the goods and services we consume. c. are concerned about one another's well-being. d. rely upon the government to provide us with the basic necessities of life.

rely upon one another for the goods and services we consume.

A decrease in quantity demanded a. shifts the demand curve to the right. b. shifts the demand curve to the left. c. results in a movement upward and to the left along a demand curve. d. results in a movement downward and to the right along a demand curve.

results in a movement upward and to the left along a demand curve.

An increase in demand is represented by a a. rightward shift of a demand curve. b. leftward shift of a demand curve. c. movement downward and to the right along a demand curve. d. movement upward and to the left along a demand curve.

rightward shift of a demand curve.

For a college student who wishes to calculate the true costs of going to college, the costs of room and board should be counted in full, regardless of the costs of eating and sleeping elsewhere. should be counted only to the extent that they are more expensive at college than elsewhere. usually exceed the opportunity cost of going to college. plus the cost of tuition, equals the opportunity cost of going to college.

should be counted only to the extent that they are more expensive at college than elsewhere.

In a game, a dominant strategy is the best strategy for a player to follow only if other players are cooperative. the best strategy for a player to follow, regardless of the strategies followed by other players. a strategy that must appear in every game. a strategy that leads to one player's interests dominating the interests of the other players.

the best strategy for a player to follow, regardless of the strategies followed by other players.

In most societies, resources are allocated by a. a small number of central planners. b. the combined actions of millions of households and firms. c. those firms that use resources to provide goods and services. d. a single central planner.

the combined actions of millions of households and firms.

A production possibilities frontier shifts outward when a. opportunity costs are lessened. b. at least one of the basic principles of economics is violated. c. the economy experiences economic growth. d. the desires of the economy's citizens change.

the economy experiences economic growth.

As a result of a successful attempt by government to cut the economic pie into more equal slices, a. those who earn more income pay less in taxes. b. the pie gets larger, and there will be more pie overall. c. it increases the reward for working hard, resulting in people producing more goods and services. d. the pie gets smaller, and there will be less pie overall.

the pie gets smaller, and there will be less pie overall.

A production possibilities frontier is bowed outward when a. the rate of tradeoff between the two goods being produced is constant. b. the rate of tradeoff between the two goods being produced depends on how much of each good is being produced. c. the more resources the economy uses to produce one good, the fewer resources it has available to produce the other good. d. an economy is self-sufficient instead of interdependent and engaged in trade.

the rate of tradeoff between the two goods being produced depends on how much of each good is being produced.

A production possibilities frontier is a straight line when a. the rate of tradeoff between the two goods being produced is constant. b. the rate of tradeoff between the two goods being produced depends on how much of each good is being produced. c. the more resources the economy uses to produce one good, the fewer resources it has available to produce the other good. d. an economy is interdependent and engaged in trade instead of self-sufficient.

the rate of tradeoff between the two goods being produced is constant.

Because each oligopolist cares about its own profit rather than the collective profit of all the oligopolists together, they are unable to maintain the same degree of monopoly power enjoyed by a monopolist. each firm's profit always ends up being zero. society is worse off as a result. Both a and c are correct.

they are unable to maintain the same degree of monopoly power enjoyed by a monopolist.