Test 3 ECO

A firm's total profit equals its marginal revenue minus its marginal cost. True False

False

A monopolist maximizes profit by producing an output level where marginal cost equals price. True False

False

If a firm is able to charge a higher price for its output, all else equal, the value of the marginal product of labor will decrease to offset the higher price. True False

False

If people with blue eyes earn more than people with brown eyes, we have proof of discrimination against people with brown eyes. a. True b. False

False

Most economists believe that a family bases its spending decisions on its transitory income. a. True b. False

False

​In competitive markets where firms are observed to be exiting the market, the firms that remain will obtain economic profits in the long run. True False

False

In the short run, a firm operating in a monopolistically competitive market can earn a. All of the above are possible. b. economic losses. c. positive economic profits. d. zero economic profits.

a. All of the above are possible.

Because of diminishing returns, a factor in relatively low supply has a a. low marginal product and a low rental price. b. low marginal product and a high rental price. c. high marginal product and a high rental price. d. high marginal product and a low rental price

c. high marginal product and a high rental price.

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

c. how a firm turns inputs into output.

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

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

A monopolistically competitive market a. is not imperfectly competitive. b. is imperfectly competitive, whereas an oligopolistic market is not imperfectly competitive. c. is imperfectly competitive, but not all imperfectly competitive markets are monopolistically competitive. d. is imperfectly competitive, and all imperfectly competitive markets are monopolistically competitive.

c. is imperfectly competitive, but not all imperfectly competitive markets are monopolistically competitive.

Relative to direct cash payments, in-kind transfers have the advantage of being a. of a higher dollar value than cash payments. b. more respectful of the poor. c. more politically popular. d. more efficient

c. more politically popular.

Jacqui decides to open her own business and earns $50,000 in accounting profit the first year. When deciding to open her own business, she withdrew $20,000 from her savings, which earned 5 percent interest. She also turned down three separate job offers with annual salaries of $30,000, $40,000, and $45,000. What is Jacqui's economic profit from running her own business? a. $-6,000 b. $4,000 c. $19,000 d. $-56,000

b. $4,000

When economists refer to a firm's capital, they are describing the a. amount of bank financing used by the firm. b. stock of equipment and buildings used in production. c. amount of financing provided by the equity markets. d. markets for final goods and services.

b. stock of equipment and buildings used in production.

When a profit-maximizing firm is earning profits, those profits can be identified by a. (P - AVC) × Q. b. (MC - AVC) × Q. c. (P - ATC) × Q. d. P × Q.

c. (P - ATC) × Q.

Discrimination may persist even in competitive markets when the source of the discrimination is a. employee prejudice. b. employer prejudice. c. wage prejudice. d. customer prejudice.

d. customer prejudice.

Refer to Figure 18-10. If the relevant labor demand curve is D2 and the current wage is W1, a. workers are failing to take into account the work-leisure tradeoff in deciding what quantity of labor to supply at alternative wages. b. there is a surplus of labor. c. the quantity of labor supplied exceeds the quantity of labor demanded. d. there is a shortage of labor.

d. there is a shortage of labor.

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

c. quantity of output produced and the total cost of production.

Suppose when a monopolist produces 50 units its average revenue is $8 per unit, its marginal revenue is $4 per unit, its marginal cost is $4 per unit, and its average total cost is $3 per unit. What can we conclude about this monopolist? a. The monopolist is currently maximizing profits, and its total profits are $250. b. The monopolist is not currently maximizing its profits; it should produce more units and charge a lower price to maximize profit. c. The monopolist is currently maximizing profits, and its total profits are $200. d. The monopolist is not currently maximizing its profits; it should produce fewer units and charger a higher price to maximize profit.

Not d

Of the theories listed below, which do the best job of explaining why educated people are paid more than uneducated people? a. human-capital and price-fixing b. wage-differential and signaling c. wage-differential and compensating-differentials d. human-capital and signaling

Not- a

In the long run, monopolistically competitive firms produce where demand equals average total cost. a. True b. False

True

The Flying Elvis Copter Rides Quantity Total Cost Fixed Cost Variable Cost Marginal Cost Average Fixed Cost Average Variable Cost Average Total Cost 0 $50 $50 $0 -- -- -- -- 1 $150 A B C D E F 2 G H I $120 J K L 3 M N O P Q $120 R Refer to Table 13-7. What is the value of K? a. $110 b. $220 c. $25 d. $50

a. $110

Table 17-10 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. 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 and there is no fixed cost, then what will the combined profit of the cartel be? a. $27,000 b. $63,000 c. $15,000 d. $24,000

a. $27,000

Refer to Table 17-4. If there are exactly two sellers of gasoline in Mauston and if they collude, then which of the following outcomes is most likely? a. Each seller will sell 125 gallons and charge a price of $5. b. Each seller will sell 125 gallons and charge a price of $2.5. c. Each seller will sell 250 gallons and charge a price of $5. d. Each seller will sell 175 gallons and charge a price of $3.

a. Each seller will sell 125 gallons and charge a price of $5.

Which of the following statements is not correct? a. Government regulation that prohibits discrimination is economically necessary because market forces support discrimination. b. Competitive markets will eliminate discrimination in wages over time unless customer preferences also reflect discrimination and/or government intervention promotes discrimination. c. If the government passes regulations that prevent shorter workers from working in higher paying jobs, taller workers may continue to earn higher wages than shorter workers. d. If a firm discriminates by paying short workers less than tall workers, the firm may be able to compete in the market if the firm's customers also prefer taller workers to shorter workers.

a. Government regulation that prohibits discrimination is economically necessary because market forces support discrimination.

Which of the following is not correct? a. Measurements of income inequality use lifetime incomes rather than annual incomes. b. Poverty is long-term problem for relatively few families. c. Measurements of income inequality would be more meaningful if they reflected permanent rather than current income. d. Measurements of income inequality usually do not include in-kind transfers.

a. Measurements of income inequality use lifetime incomes rather than annual incomes.

A monopolist produces where P > MC = MR. a. True b. False

a. True

Cartels with a small number of firms have a greater probability of reaching the monopoly outcome than do cartels with a larger number of firms. a. True b. False

a. True

The story of the prisoners' dilemma contains a general lesson that applies to any group trying to maintain cooperation among its members. a. True b. False

a. True

The human-capital theory explanation for why people invest in education has been challenged by a theory that suggests a. schooling acts only as a signal of ability. b. humans cannot be considered "capital." c. productivity is not linked to wages. d. ability, effort, and chance matter more.

a. schooling acts only as a signal of ability

Refer to Figure 15-22. Based upon the information shown, what is total revenue for Bearclaws, given that it maximizes profits? a. ​$980. b. ​$900. c. ​$1080. d. ​$490.

a. ​$980.

status with Farland U.S. trade value = $65 b Farland trade value = $75 b U.S. trade value = $140 b Farland trade value = $5 b Renew MFN status with Farland U.S. trade value = $35 b Farland trade value = $285 b U.S. trade value = $130 b Farland trade value = $275 b Refer to Table 17-27. If both countries follow a dominant strategy, the value of trade flow benefits for the United States will be a. $35 b. b. $65 b. c. $140 b.

b. $65 b.

A firm's marginal cost has a minimum value of $80, its average variable cost has a minimum value of $90, and its average total cost has a minimum value of $100. Then the firm will shut down in the short run once the price of its product falls below a. $80. b. $90. c. $100. d. $40.

b. $90.

A movie theater can increase its profits through price discrimination by charging a higher price to adults and a lower price to children if it a. has some degree of monopoly pricing power. b. All of the above are correct. c. can easily distinguish between the two groups of customers. d. can prevent children from buying the lower-priced tickets and selling them to adults.

b. All of the above are correct.

The poverty line is based on the percentage of people who cannot afford an adequate diet. a. True b. False

b. False

Chuckie's Pizza Palace produces gourmet pizzas that sell for $20 each. Assume that labor is the only input that varies for the firm. If Chuckie hires 10 workers, he can produce and sell 600 pizzas per week. If he hires 11 workers, he can produce and sell 650 pizzas per week. Chuckie pays each of his workers $400 per week. Which of the following is correct? a. If the firm is employing 11 workers, then its profit would increase if it cut back to 10 workers. b. For the 11th worker, the marginal revenue product is $1,000. c. The firm is maximizing its profit. d. For the 11th worker, the marginal profit is $1,000.

b. For the 11th worker, the marginal revenue product is $1,000.

In theory, perfect price discrimination a. decreases the monopolist's profits. b. decreases consumer surplus. c. reduces the number of consumers who purchase the monopoly's product. d. increases deadweight loss.

b. decreases consumer surplus.

Refer to Figure 14-5. In the short run, if the market price is higher than P1 but less than P4, individual firms in a competitive industry will earn a. zero profits. b. losses but will remain in business. c. positive profits. d. losses and will shut down.

b. losses but will remain in business.

Which of the following is an example of a firm's derived demand? a. Workers with higher levels of education earn more, on average, than workers with lower levels of education. b. Factors that decrease the demand for labor will decrease the equilibrium wage. c. A tractor manufacturer's demand for assembly-line workers is inseparably linked to the supply of tractors. d. All of the above are correct.

c. A tractor manufacturer's demand for assembly-line workers is inseparably linked to the supply of tractors.

A competitive firm would benefit from charging a price below the market price because the firm would achieve (i) higher average revenue. (ii) higher profits. (iii) lower total costs. a. (i), (ii), and (iii) b. (i) only c. None of the above is correct. d. (ii) and (iii) only

c. None of the above is correct.

A firm that has little ability to influence market prices operates in a a. power market. b. strategic market. c. competitive market. d. thin market.

c. competitive market.

A college degree makes a person more productive according to a. neither the human-capital nor the signaling theory of education. b. both the human-capital and the signaling theories of education. c. the human-capital but not the signaling theory of education. d. the signaling but not the human-capital theory of education

c. the human-capital but not the signaling theory of education.

Which of the following would be most likely to contribute to the breakdown of a cartel in a natural resource (e.g., bauxite) market? a. high prices b. low price elasticity of demand c. unequal member ownership of the natural resource d. high compatibility of member interests

c. unequal member ownership of the natural resource

Refer to Figure 16-2. Suppose that average total cost is $36 when Q=24. What is the profit-maximizing price and resulting profit? a. P=$36, profit=$144 b. P=$24, profit=$0 c. P=$36, profit=$48 d. P=$36, profit=$0

d. P=$36, profit=$0

Which of the following statements regarding a competitive market is not correct? a. There are many buyers and many sellers in the market. b. Price equals average revenue. c. Firms can freely enter or exit the market. d. Price exceeds marginal revenue.

d. Price exceeds marginal revenue.

One way in which monopolistic competition differs from oligopoly is that a. strategic interactions between firms are rare in oligopolies. b. all firms in an oligopoly eventually earn zero economic profits. c. there are no barriers to entry in oligopolies. d. in oligopoly markets there are only a few sellers.

d. in oligopoly markets there are only a few sellers.

Since the early 1970s, average incomes have a. decreased, while the poverty rate has remained unchanged. b. remained unchanged, while the poverty rate has decreased. c. increased, which has reduced the poverty rate. d. increased, while the poverty rate increased slightly.

d. increased, while the poverty rate increased slightly.

Refer to Figure 16-5. Which of the panels depicts a firm in a monopolistically competitive market earning positive economic profits? a. panel b b. panel d c. panel a d. panel c

d. panel c

Refer to Figure 13-5. Which of the curves is most likely to represent average fixed cost? a. D b. C c. B d. A

d.A