chapter 10-16 micro

In efforts to increase economic efficiency, governments should ______________ goods with external costs. A Tax B Subsidize C Do nothing for

A Tax

Rank each type of market on their industry quantities from highest to lowest. Assume that there is a bit of competition among the oligopolies. 1 A Perfect competition 2 C Monopolistic competition 3 D Oligopoly 4 B Monopoly

1 A Perfect competition 2 C Monopolistic competition 3 D Oligopoly 4 B Monopoly

Rank each type of market on their prices from highest to lowest. Assume that there is a bit of competition among the oligopolies. 1 D Monopoly 2 C Oligopoly 3 B Monopolistic competition 4 A Perfect competition

1 D Monopoly 2 C Oligopoly 3 B Monopolistic competition 4 A Perfect competition

Assume the following data for the U.S.: Wages: $ 12.00 per hour Productivity: USB cables produced per worker per hour = 8 Based on the U.S. wages and productivity figures, what is the cost to make a USB cable in the U.S.?

1.5

Assume the following data for Brazil: Wages: $6.00 per hour Productivity: USB cables produced per worker per hour = 3 Based on the wages and productivity figures for Brazil, what is the cost to make a cable in Brazil?

2

Calculate marginal revenue in the following case: price is $100 and 20 units are sold, then price drops to $99 and 21 units are sold.

79

Absolute advantage

A An individual can produce a good using fewer resources than another individual.

A monopoly will not necessarily be technically efficient because which of the following is true? A Barriers to entry will keep firms from entering B Firms will enter until the price is lowered to where price equals average cost C Monopolies have no close substitutes D Monopolies charge the highest price on the demand curve

A Barriers to entry will keep firms from entering

If a monopoly faces a demand curve that is entirely above the average cost function, in the long run they will likely do what? A Continue to operate B Increase quantity C Decrease quantity D Exit the market

A Continue to operate

A decrease in variable costs will cause the monopoly to do what? A Decrease the price B Decrease the economic profits C Lower the level of output D Increase the marginal revenue

A Decrease the price

Tony's Gas Station and Robert's Gas Station are the only two gas stations in a small town of Westville. If Tony and Robert collude to earn more profits, which of the following would be true? A Each limit the amount of gasoline available and raise prices B Each limit the amount of gasoline available and lower prices C Each increase the amount of gasoline available and raise prices D Each increase the amount of gasoline available and lower prices

A Each limit the amount of gasoline available and raise prices

A monopolist will produce on the portion of the demand curve that is _______. A Elastic B Inelastic C Perfectly elastic D Either elastic or inelastic

A Elastic

If labor is the only input and all goods can be produced with fewer hours of work in the U.S. than in Thailand, then the U.S. will ___________. A Have an absolute advantage in the production of all goods. B Not necessarily have an absolute advantage in the production of all goods. C Have a comparative advantage in the production of all goods. D Have a comparative and an absolute advantage in the production of all goods.

A Have an absolute advantage in the production of all goods.

What do you think would happen in a commercial neighborhood near your home if a restaurant in that neighborhood were making a great deal of profit (select all that apply)? A In-and-Out burger will open a new franchise. B Domino's Pizza will move to this neighborhood from a rundown area of the town. C Chipotle will open a new store next door. D The restaurant will close down.

A In-and-Out burger will open a new franchise. B Domino's Pizza will move to this neighborhood from a rundown area of the town. C Chipotle will open a new store next door.

The long-run result of that advertising will be a(n) _________________ in the price of the good. A Increase B Decrease C Increase or decrease D Not change

A Increase

Consider a good produced in a competitive market, but it has external benefits. The market price will result in too ______________ of the good for economic efficiency. The market price will be ______________ than the price that would convince producers to produce the efficient amount. A Little; lower B Little; higher C Much; lower D Much; higher

A Little; lower

Match the following policy options with the goal each policy aims to achieve in the shrimp market. Establish a tariff?

A Lowers efficiency¸ but benefits the U.S. shrimp industry

A monopoly would never produce where marginal revenue is negative because which of the following is true? A Marginal cost is always positive B Profits would automatically be negative C A firm is always trying to maximize revenue

A Marginal cost is always positive

Supply curves in competitive markets represent which of the following? A Marginal costs of production B Average costs of production C Supplier fixed costs D Marginal benefits to consumers

A Marginal costs of production

A profit-maximizing monopoly will produce where which of the following is true? A Marginal revenue is less than the price B Marginal revenue is equal to the marginal cost C Marginal revenue is positive

A Marginal revenue is less than the price B Marginal revenue is equal to the marginal cost C Marginal revenue is positive

If a monopoly increases the quantity above the profit-maximizing level which of the following will be true? A Marginal revenue will be lower than before B Marginal cost will be greater than marginal revenue C Price would decrease

A Marginal revenue will be lower than before B Marginal cost will be greater than marginal revenue C Price would decrease

If a monopoly faces a demand curve that is downward-sloping, then marginal revenue will be which of the following? A Must be less than price B Must be equal to price C Must be greater than price D Is not related to the price

A Must be less than price

In which of the following markets do sellers act as price takers? A Perfect competition B Monopoly C Cartel D Monopolistic competition

A Perfect competition

In the figure above, the firm's profit would be ______. A Positive B Negative C Zero D Cannot be determined

A Positive

Which of the following descriptions best characterizes public goods? A Public goods are those where it is hard to keep non-payers from using the good, but their use of the good does not negatively impact others' ability to use it. B Public goods are those where it is hard to keep non-payers from using the good, and their use of the good negatively impacts others' ability to use it. C Public goods are those without an external cost of production or an external benefit of production. D Public goods are those where individual consumers can be excluded from using the good, but the marginal cost is zero and so an infinite number of goods should be produced.

A Public goods are those where it is hard to keep non-payers from using the good, but their use of the good does not negatively impact others' ability to use it.

The creation of a quota on Canadian softwood lumber sold in the U.S. may affect prices and quantities of Canadian softwood lumber sold in the U.S. and the prices and quantities of U.S. softwood lumber sold in the U.S. Assuming that the quota is set at a level lower than the current level of imports, the resulting equilibrium price paid by consumers in the imported Canadian softwood lumber market will ______________. A Rise B Fall C Not change D May rise or fall

A Rise

In efforts to increase economic efficiency, governments should ______________ common resources. A Tax B Subsidize C Do nothing for

A Tax

What can you say about the equilibrium quantity of production for a market with external costs? A The equilibrium market quantity is too high and the equilibrium market price is too low, relative to the efficient point. B The equilibrium market quantity is too low and the equilibrium market price is too high, relative to the efficient point. C The equilibrium market quantity is too low and the equilibrium market price is too low, relative to the efficient point. D The equilibrium market quantity is too high and the equilibrium market price is too high, relative to the efficient point.

A The equilibrium market quantity is too high and the equilibrium market price is too low, relative to the efficient point.

Which of the following is true when comparing tariffs and quotas? A The government will likely gain more revenue with a tariff than with a quota. B A quota will be more effective in reducing imports. C A tariff will increase the price of imports more than a quota will. D Both quotas and tariffs on imports into the U.S. will eventually cause U.S. exports to rise.

A The government will likely gain more revenue with a tariff than with a quota.

A U.S. company sends a lobbyist to Washington, D.C. to argue for increased tariffs on imported goods from China that compete with the company's own products. Which of the following represents an inefficiency in government due to misplaced incentives? A The lobbyist is successful at convincing legislators to pass the legislation, and American consumers pay higher prices. B The lobbyist fails because legislators fear their constituents will be upset at the price increases. C The lobbyist is successful at convincing the legislators to put the legislation up for a vote, but it fails to get a majority of the votes. D The lobbyist fails because there are many other lobbyists in town arguing for similar tariffs, but they cannot agree on the size of the tariff to be enforced.

A The lobbyist is successful at convincing legislators to pass the legislation, and American consumers pay higher prices.

One market characterized by incomplete information for consumers is the used car market. In the used car market, consumers don't know the condition of the car being sold and therefore cannot accurately project their marginal benefit from consuming the car. Suppose that consumers distrust used car salesmen and expect the worst from the cars they sell. How will the quantity of used cars sold in the used car market compare to the efficient quantity and how will the price of used cars sold in the used car market compare to the price when the efficient quantity is sold? A The quantity in the used car market will be too low relative to the efficient quantity and the price will be too low. B The quantity in the used car market will be too high relative to the efficient quantity and the price will be too low. C The quantity in the used car market will be too low relative to the efficient quantity and the price will be too high. D The quantity in the used car market will be too high relative to the efficient quantity and the price will be too high.

A The quantity in the used car market will be too low relative to the efficient quantity and the price will be too low.

What can you say about the allocatively efficient level of output compared to the new equilibrium market quantity after the tax is imposed? A They are the same. B The equilibrium market quantity is greater. C The allocatively efficient quantity is greater. D You cannot tell from the information given.

A They are the same.

Is the marginal utility / marginal cost = marginal utility / price for the perfectly competitive firms? A Yes B No

A Yes

Comparative advantage

An individual can produce a good at a lower opportunity cost than another individual.

Which of the following individuals might be considered a "free rider" (a free rider is a person who benefits from the existence of a public good, but does not pay for it)? A A taxpayer who benefits from the garbage pickup that her tax dollars support. B An individual who lives near an airport and chooses to watch the local air show from his own yard rather than pay the admission fee next door. C An individual who lives near an amusement park but never visits the park, even when she is invited by management. D A taxpayer who frequents the local parks supported by his tax dollars.

B An individual who lives near an airport and chooses to watch the local air show from his own yard rather than pay the admission fee next door.

Monopolies will price discriminate if which of the following is true? A They dislike one group more than another and want to increase the price B At the current price, one group of consumers has an elastic demand curve while another group is not as responsive (has an inelastic demand curve) C They can increase quantity without changing revenue

B At the current price, one group of consumers has an elastic demand curve while another group is not as responsive (has an inelastic demand curve)

Which of the following descriptions best characterizes common resources? A Common resources are those where it is hard to keep non-payers from using the good, but their use of the good does not negatively impact others' ability to use it. B Common resources are those where it is hard to keep non-payers from using the good, and their use of the good negatively impacts others' ability to use it. C Common resources are those without an external cost of production or an external benefit of production. D Common resources are those where individual consumers can be excluded from using the good, but the marginal cost is zero and so an infinite number of goods should be produced.

B Common resources are those where it is hard to keep non-payers from using the good, and their use of the good negatively impacts others' ability to use it.

Common resources involve externalities. The consumption of common resources results in external ______________ and the free market quantity produced and consumed is ______________. A Costs; too low B Costs; too high C Benefits; too low D Benefits; too high

B Costs; too high

An increase in product differentiation created by advertising in a market with many firms will ______________ the elasticity of demand facing the firm: A Increase B Decrease C Increase or decrease D Not change

B Decrease

Assume a tariff has been imposed on a good imported into the U.S. What will happen to the price U.S. consumers pay and the price foreign exporters receive? Price foreign exporters receive

B Decrease

An increase in fixed costs for a monopoly will do which of the following? A Increase the price B Decrease the economic profits C Lower the level of output D Lower marginal revenue

B Decrease the economic profits

A monopoly facing a demand curve lower than the average cost curve over wide ranges of output will likely do what? A Make large economic profits B Go out of business C Produce where average costs are higher than marginal costs D Not maximize profits

B Go out of business

Your local government is contemplating adding a new fireworks show to your town's Fourth of July festivities. They have calculated that the total cost of producing the show will be $3M, and your town has 300,000 residents. The show would be financed through an increase in taxes on each of these residents. Under what conditions is the provision of the fireworks show the efficient outcome? A Only if each person in town values the fireworks show at $10 or more. B If the total benefit of the show is greater than or equal to $3M, even if some individuals value the show at less than $10. C If the total benefit of the show is greater than or equal to $3M, and every person in town has a positive (greater than $0) value for the show. (In other words, no one dislikes fireworks.) D Because the fireworks can only be provided if individuals are taxed, the provision of the fireworks show cannot be efficient.

B If the total benefit of the show is greater than or equal to $3M, even if some individuals value the show at less than $10.

A monopoly producing where marginal revenue equals marginal cost will do which of the following? A It will make positive profits B It cannot increase quantity and make a greater profit C It is producing at the highest profit possible in their market D It is producing where the additional revenue is just equal to the additional cost for each output

B It cannot increase quantity and make a greater profit C It is producing at the highest profit possible in their market D It is producing where the additional revenue is just equal to the additional cost for each output

A profit-maximizing monopolist produces where marginal cost is equal to ________. A Price B Marginal revenue C 0 D The minimum

B Marginal revenue

In which of the following markets do sellers have the highest profit level? A Perfect competition B Monopoly C Cartel D Monopolistic competition

B Monopoly

Is the marginal utility / marginal cost = marginal utility / price for the monopoly? A Yes B No

B No

Why do barriers to entry allow a monopolist to make positive economic profits? A It causes the monopoly to have lower costs. B Otherwise, firms would enter the market, resulting in a decrease in price and profits. C It allows the monopoly to be price-takers. D It does not need a barrier to entry because of the market demand.

B Otherwise, firms would enter the market, resulting in a decrease in price and profits.

How would you classify television broadcasts? A Private goods B Public goods C Ones with external benefits D Common resources

B Public goods

Common resources are used too ______________ for economic efficiency because the marginal cost of using the resource is ______________ than if the resources were private goods. A Slowly; lower B Quickly; lower C Slowly; higher D Quickly; higher

B Quickly; lower

Match the following policy options with the goal each policy aims to achieve in the shrimp market. Eliminate or lower the tariff?

B Raises efficiency¸ but hurts the shrimp companies in the U.S.

If a monopoly increased the price above the profit maximizing level __________. A Marginal revenue would decrease B Revenue would decrease C Profits would increase D Profits would be unchanged

B Revenue would decrease

Suppose that a local Italian restaurant is operating in a monopolistically competitive environment and is maximizing its profit. The price of spaghetti with meat sauce is $10 and the average total cost is $7. Based on this information, the firm is operating in the ______________ and we can expect _________________. A Short-run; firms to exit the the market B Short-run; firms to enter the market C Long-run; firms to exit the market D Long-run; firms to enter the market

B Short-run; firms to enter the market

In the figure above, if a monopoly charged the price of F and produced the monopoly quantity, then there would be a(n) ________. A Equilibrium B Shortage C Surplus D None of the above

B Shortage

If the U.S. has an absolute advantage in the production of software and the production of computers when compared to Mexico, but has a comparative advantage in the production of software, what should it produce? A Software and computers B Software and let Mexico produce computers C Computers and let Mexico produce software D One cannot tell unless we also know the opportunity costs for both countries.

B Software and let Mexico produce computers

In efforts to increase economic efficiency, governments should ______________ goods with external benefits. A Tax B Subsidize C Do nothing for

B Subsidize

In efforts to increase economic efficiency, governments should ______________ public goods. A Tax B Subsidize C Do nothing for

B Subsidize

Consider a good with external benefits. Which of the following best describes why the market does not produce an allocatively efficient amount? A The marginal private cost of production exceeds the marginal private benefit of production and the marginal social benefit of production. B The marginal private cost of production exceeds the marginal private benefit of production but not the marginal social benefit of production. C The marginal private cost of production exceeds the marginal social benefit of production but not the marginal private benefit of production. D The marginal private benefit of production exceeds both the marginal private cost of production and the marginal social benefit of production.

B The marginal private cost of production exceeds the marginal private benefit of production but not the marginal social benefit of production.

Consider a good with external costs. Which of the following best describes why the market does not produce an allocatively efficient amount? A The marginal benefit to consumers exceeds the marginal private cost of production and the marginal social cost of production. B The marginal social cost exceeds the marginal social benefit. C The marginal social benefit exceeds the marginal social cost. D The marginal private cost of production and the marginal social cost exceed the marginal benefit to consumers.

B The marginal social cost exceeds the marginal social benefit.

If the price of tomatoes in the U.S. changes, what will happen? A The price will change by more than $ .50 B The price will change by less than $ .50 C The price will change by $ .50 D The price will stay the same

B The price will change by less than $ .50

We saw that farm subsidies generally lack an economic justification. What are the unintended consequences of these subsidies? The quantity of goods produced with the subsidy is ______________ and efficiency is ______________ than the market without a subsidy. A Too low; lower B Too high; lower C Too low; higher D Too high; higher

B Too high; lower

Compare the levels of economic profits in a long-run equilibrium for a perfectly competitive firm, a monopoly, a monopolistically competitive firm, and an oligopoly. Economic profits will most likely be: A Zero in perfect competition and positive in monopoly, monopolistic competition and oligopoly B Zero in perfect competition and monopolistic competition, perhaps positive in a monopoly and perhaps positive in oligopoly C Zero in perfect competition, monopolistic competition, and oligopoly and perhaps positive in monopoly D Zero in all four market models E Positive in all four market models

B Zero in perfect competition and monopolistic competition, perhaps positive in a monopoly and perhaps positive in oligopoly

In the figure above, the quantity a monopoly produce would be ___ (C / D).

C

At the Fisherman's Wharf in San Francisco, there are a lot of seafood vendors. Suppose that there are twenty vendors selling steamed crab. If Tommy's crab shack sells 100 steamed crabs per day for $20 each, how much economic profit will Tommy earn in the long run? (Assume that the seafood vendors are operating in a monopolistically competitive market.) A 2000 B 1000 C 0 D There is not enough information

C 0

OPEC is an example of _____________. A Perfect competition B A monopoly C A cartel D Monopolistic competition

C A cartel

Which situation would be labeled a "natural monopoly"? A A firm owns exclusive rights to a natural resource. B A firm applies for a patent to exclude others from entering. C A firm has large economies of scale, and is thus able to sell the good for a lower price than it would be possible if there were many firms.

C A firm has large economies of scale, and is thus able to sell the good for a lower price than it would be possible if there were many firms.

In the long run, a monopolistically competitive firm will produce where price _________. A Equals marginal cost and is greater than average cost B Equals marginal and average cost C Equals average cost and is greater than the marginal cost D Is greater than marginal and average cost

C Equals average cost and is greater than the marginal cost

In the aftermath of the financial crisis of 2008, several banking practices came into sharp focus for contributing to the crisis. One of those practices was the issuance of "subprime" mortgages - mortgages made to borrowers who were unlikely to be able to repay in the case of a recession or a decline in housing values. Banks defended their choice by arguing that if the mortgage holders defaulted on the payments, the banks themselves would be the ones taking a loss in profits. In the end, however, the default rate on these loans was so high that the country's entire financial system was at risk of collapse, and taxpayer dollars were used to keep banks solvent. This information indicates that subprime mortgages are: A Public goods B Common resources C Goods with additional social costs D Goods with additional social benefits

C Goods with additional social costs

Copyrights on movies, books, and music act as a barrier to entry in order to give people what? A Guaranteed profits B Starter money for to pay for research and development C Incentives to create D Unfair advantages

C Incentives to create

Assume a tariff has been imposed on a good imported into the U.S. What will happen to the price U.S. consumers pay and the price foreign exporters receive? Price U.S. consumers pay?

C Increase

An oligopolistic industry with the same costs as a monopoly will have prices: A Equal to a monopoly price. B Greater than a monopoly price. C Less than or equal to a monopoly price. D Less than a monopoly price. E Greater than or equal to a monopoly price.

C Less than or equal to a monopoly price.

A monopolistically competitive firm in the long run will produce an amount that is _____________ the quantity where average cost is at a minimum and charge a price that is _________________ marginal cost. A Equal to; greater than B Equal to; equal to C Less than; greater than D Less than; equal to

C Less than; greater than

Which of the following is true for a profit-maximizing monopolistic competitor? A Marginal cost = price B Marginal cost> marginal revenue C Marginal cost = marginal revenue D Marginal cost < marginal revenue

C Marginal cost = marginal revenue

Monopolistically competitive firms __________________ earn economic profits in the _________________. A May; short and long runs B May; long run only C May; short run only D Will not; either the short or long run

C May; short run only

Consider a good produced in a competitive market that has external costs. Too ______________ of the good will be produced for economic efficiency and the price will be ______________ than the price that will convince consumers to purchase the efficient amount. A Little; lower B Little; higher C Much; lower D Much; higher

C Much; lower

A quasi-public good shares all characteristics of a public good except that access to the good can be limited, at least somewhat, so that there are no free riders. Which of the following products best fits the definition of a quasi-public good? A Clean air B Streetlights C Museum D Public radio broadcast

C Museum

The Pepsi Company is the only producer of Pepsi. Is it considered a monopoly? A Yes, it is the only firm with the recipe for a real Pepsi. B Yes, because Pepsi has no close substitutes. C No, because Pepsi has many close substitutes.

C No, because Pepsi has many close substitutes.

You have been charged with deciding on optimal fishing policies in order to both encourage growth in the salmon population in the Atlantic and allow fishermen to earn a living. You will need to allow some fishing, but not so much fishing that population counts are depleted for next year. Three proposals are on the table for you to choose from. Option 1: Institute a fishing "window" of 3 weeks wherein fishermen may fish as much as they wish, but after three weeks they must stop. Option 2: Institute a fishing "quota" that will limit the number of fish that any individual fisherman may harvest from the waters. Option 3: Sell a fixed number of licenses to harvest a certain number of fish. Which of these choices is most likely to produce the outcome you are interested in? A Option 1 B Option 2 C Option 3 D Do nothing

C Option 3

What can you say about the equilibrium quantity of production and the equilibrium price for a market with external benefits? A The equilibrium market quantity is too high and the equilibrium market price is too low, relative to the efficient level of production. B The equilibrium market quantity is too low and the equilibrium market price is too high, relative to the efficient level of production. C The equilibrium market quantity is too low and the equilibrium market price is too low, relative to the efficient level of production. D The equilibrium market quantity is too high and the equilibrium market price is too high, relative to the efficient level of production.

C The equilibrium market quantity is too low and the equilibrium market price is too low, relative to the efficient level of production.

The market demand in a monopoly market differs (or not) from the demand the monopoly itself faces by _________. A The amount of marginal revenue B The fixed revenue C The monopoly is the only firm in the market, so it does not differ. D The monopoly is the only firm in the market, so the demand curve is steeper.

C The monopoly is the only firm in the market, so it does not differ.

Imagine two firms with identical cost structures that do not exhibit economies of scale at high levels of production. One is competing in a perfectly competitive market and one is a monopoly. In the long run which of the following is true? A The monopoly and the perfectly competitive firm will produce the same quantity B The monopoly and the perfectly competitive firm will charge the same price C The monopoly will charge a higher price than the perfectly competitive firm D The monopoly will sell a higher quantity than the perfectly competitive firm

C The monopoly will charge a higher price than the perfectly competitive firm

Assume that instead of establishing a tariff, we set a quota on French computers exactly equal to the number of French computers that would be sold under a specific tariff. The resulting price of the French computers in the U.S. would be ______________ the price under the tariff, ______________. A Lower than, because no tax is involved. B Higher than, because the French manufacturers will get the increased revenue from the quota. C The same as, because demand has not changed. D Cannot tell, because it depends upon what happens in the U.S. manufactured computer market.

C The same as, because demand has not changed.

A monopolist will engage in price discrimination, if it can, in order to increase profits by doing which of the following? A By selling more of its goods B By reducing costs for some of its products C While continuing to produce the same amount D While increasing prices for all consumers and producing less

C While continuing to produce the same amount

In the long run, the monopolist ______________ (will/will not) produce a quantity where average cost is at a minimum, whereas the perfectly competitive firm ______________ (will/will not) produce that quantity. A Will; will B Will; will not C Will not; will D Will not; will not

C Will not; will

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

C by finding effective ways to penalize firms who do not cooperate

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.

C the sales of the firm that increased its price will decline sharply.

The supply curve in a perfectly competitive market is the sum of all of the individual firm's marginal cost curves. What is the supply curve for a monopoly? A The marginal revenue curve B The marginal cost curve C The demand curve D A monopoly does not have a supply curve

D A monopoly does not have a supply curve

Suppose the government chooses to provide a public good at a zero price, and the increased consumption makes it so that one person's use begins to interfere with others' use. Think of a crowded road or a crowded park. What should the government do now to keep this market efficient? A Stop providing the good. B Close the goods to users at peak demand times. C Pay consumers to use the good. D Add prices that reflect the costs of an individual's use of the good

D Add prices that reflect the costs of an individual's use of the good.

If a monopoly is not producing at the profit-maximizing quantity, then it must be the case that which of the following is true? A Marginal cost is greater than marginal revenue B Marginal revenue is greater than marginal cost C Marginal revenue is negative D All of the above are possible

D All of the above are possible

What is a reason that monopolies exist? A A firm owns a resource that no one else has B A firm is given legal protection that prevents another firm from entering C A firm naturally drives out competitors through lower prices. D All of the above are reasons

D All of the above are reasons

If a firm faces increasing returns to scale, average costs will do which of the following? A Be below marginal cost B Increase as output increases C Not change as output increases; average product increases D Be above marginal costs

D Be above marginal costs

Your local government is considering building a new highway bypass to circumvent your city. The bypass will traverse private property as it makes its way around the city and may even require some individuals to move residences. Which of the following is NOT a justifiable concern regarding the decision-making process or the construction of the bypass? A Because there is no competition within local government, the project might be completed in an inefficient manner, costing taxpayers more than necessary. B It is difficult to estimate how much a new highway bypass is worth to citizens, and the government may have incorrectly estimated the benefits of this project. C Because the bypass will need to traverse private properties and disrupt some people's property and lives, they may lobby against the project even it if it has a positive net benefit to all of the city's citizens. D Because private contractors are often licensed and bonded, but the government is not, if the government builds the new bypass themselves, there is likely to be a greater number of safety violations.

D Because private contractors are often licensed and bonded, but the government is not, if the government builds the new bypass themselves, there is likely to be a greater number of safety violations.

Once again assuming that the quota is set at a level lower than the current level of imports, the resulting equilibrium price received by the producer in the imported Canadian softwood lumber market will ______________. A Rise B Fall C Not change D Cannot be determined

D Cannot be determined

Which of these is an economically efficient manner of producing basic medical research? A Subsidize production of basic medical research by private producers B Government production of basic medical research C Tax the production of basic medical research by private producers D Either (a) or (b) will work E Either (b) or (c) will work

D Either (a) or (b) will work

If wages are lower in Mexico than in the U.S., we would expect that U.S. imports from Mexico would be _________. A High, because the costs of producing in Mexico are lower than in the U.S. B High, if productivity is lower in Mexico than in the U.S. C Low, if productivity is higher in Mexico than in the U.S. D Higher, if productivity is higher in Mexico than in the U.S.

D Higher, if productivity is higher in Mexico than in the U.S.

The earth's environment is an example of a common resource because: A The actions of any single individual are too inconsequential to meaningfully affect the quality of the environment. B It has a cost of use in the form of pollution, but the benefits of using it far outweigh the costs. C It is provided for all to use without a cost, and each person can use it without affecting other's use of it. D It is provided for all to use without a cost, but one person's use (or abuse) of it affects the ability of others to use it.

D It is provided for all to use without a cost, but one person's use (or abuse) of it affects the ability of others to use it.

A single oligopolistic firm charging a price where industry marginal revenue is equal to marginal cost will be tempted to ________________ prices, because it faces a more _____________ demand if it alone changes its price. A Raise; inelastic B Raise; elastic C Lower; inelastic D Lower; elastic

D Lower; elastic

Once a government has introduced a proper (that is, economically efficient) policy to address the market failure, the price of a good that has external benefits will be ______________ than its free market price and the price of a good that has external costs will be ______________than its free market price. A Higher; lower B Higher; higher C Lower; lower D Lower; higher

D Lower; higher

Demand curves in competitive markets represent which of the following? A Marginal costs of production B Average costs of production C Supplier fixed costs D Marginal benefit to consumers

D Marginal benefit to consumers

All firms that are profit-maximizing, regardless of whether the demand curve is horizontal or downward-sloping, will produce where which of the following is true? A Marginal revenue is greater than price B Demand is elastic along the whole curve C Marginal cost is equal to price D Marginal cost is equal to marginal revenue

D Marginal cost is equal to marginal revenue

A large number of firms in Biergarten sell flavored beer. However, each firm faces a downward-sloping demand curve. The market for flavored beer is _________________. A Perfectly competitive B A monopoly C A cartel D Monopolistically competitive

D Monopolistically competitive

Suppose that the Peached Tortilla is one of ten food trucks in the town of Happyville, and every food truck is earning substantial economic profits. What is likely to happen in the long run? A Some food trucks will exit the markets. B Some food trucks will lay off their employees because their profits are not high enough. C New food trucks will enter the market and continue to earn economic profits D New food trucks will enter the market and gradually all food trucks will earn zero economic profits. E There is not enough information

D New food trucks will enter the market and gradually all food trucks will earn zero economic profits.

Assume that average costs are the same for all firm sizes and types of market structure. Assume that oligopolies compete a bit with one another. Which of the following represents the likely ranking of prices, from low to high, in the long run? A Perfect competition, monopolistic competition, monopoly, oligopoly. B Perfect competition, oligopoly, monopolistic competition, monopoly. C Monopolistic competition, perfect competition, oligopoly, monopoly. D Perfect competition, monopolistic competition, oligopoly, monopoly.

D Perfect competition, monopolistic competition, oligopoly, monopoly.

A monopolistic competitive firm will incur loss if which of the following is true? A Price is higher than average total cost B Price is equal to marginal cost C Price is lower than marginal cost D Price is lower than average total cost

D Price is lower than average total cost

The Green River runs through Wyoming and is used free of charge by farmers for irrigation. When there is plenty of rain, the river is a ______________. But in low-rain years, the downstream farmers can experience water levels too low for irrigation and the river is a ______________. A Good with external benefits/Common resource B Common resource/Good with external benefits C Common resource/Public good D Public good/Common resource

D Public good/Common resource

Consider a good with external costs. Which of the following descriptions characterizes quantities of goods between the market equilibrium quantity and the allocatively efficient quantity? A These quantities will not be produced by the private market, but the government can add these quantities to production using a subsidy, resulting in higher economic efficiency. B These quantities will not be produced by the private market, but the government can add these quantities to production using a tax, resulting in higher economic efficiency. C These quantities will be produced by the private market, but the government can eliminate these quantities from production using a subsidy, resulting in higher economic efficiency. D These quantities will be produced by the private market, but the government can eliminate these quantities from production using a tax, resulting in higher economic efficiency.

D These quantities will be produced by the private market, but the government can eliminate these quantities from production using a tax, resulting in higher economic efficiency.

Assume that tomatoes are currently imported from abroad at a market price of $ .50 per tomato. Assume that a tariff of $ .25 is placed on imported tomatoes. Also assume that the supply and demand for tomatoes are normal supply and demand relationships. What will be the effect of the tariff on the price of tomatoes in the U.S. and to the price received by foreign exporters of tomatoes? Price received by foreign exporters?

Decrease

In the figure above, the price the monopoly would charge would be ___ (E / F / G).

E

What will happen in a competitive market if consumers are unable to accurately estimate the marginal utilities of goods? A There will be no change relative to a market where consumers know marginal utilities. B Consumers may over-estimate benefits and consume too much of a good. C Consumers may under-estimate benefits and consume too little of a good. D Both b and c are possible. E All three outcomes (a, b, and c) are possible.

E All three outcomes (a, b, and c) are possible.

A rural county in the U.S. has no broadband internet providers. A broadband provider from a neighboring county makes a proposal to the county government about building the infrastructure needed to bring broadband to individual businesses and households. The city asks for donations from its residents to cover the costs of the infrastructure (users would still be charged a monthly rate for access) and comes up short of the total amount needed. Which of the following is true if the county is interested in achieving the efficient outcome? A The county should not pursue the broadband connection any further. Their residents clearly do not value it enough to cover the infrastructure costs. B The county should undertake a study of potential benefits from broadband access. If the benefits exceed the costs, the county should tax all its citizens to pay for the infrastructure. C The county should undertake a study of potential benefits from broadband access. If the benefits exceed the costs, the county should tax only the eventual users of the broadband service, not all its citizens. D Either a or b can help the county reach the efficient outcome. E Either b) or c) can help the county reach the efficient outcome. F Either a) or c) can help the county reach the efficient outcome.

E Either b) or c) can help the county reach the efficient outcome.

A monopoly produces a level of output where demand is (elastic, inelastic, or unit elastic) ______________.

Elastic

A movie theater price discriminates by charging children and seniors lower prices than adults because their demand is ______________(elastic / inelastic).

Elastic

If a monopoly is producing where price is greater than average cost (and thus making a profit), more firms will enter the market (True / False).

False

Assume that tomatoes are currently imported from abroad at a market price of $ .50 per tomato. Assume that a tariff of $ .25 is placed on imported tomatoes. Also assume that the supply and demand for tomatoes are normal supply and demand relationships. What will be the effect of the tariff on the price of tomatoes in the U.S. and to the price received by foreign exporters of tomatoes? Price in the U.S?

Increase

Given your answers to the previous question, the marginal revenue is ______________ (less than / greater than / equal to) the price at each quantity demanded?

Less than

When comparing a monopoly and a perfectly competitive market where the costs are the same, the monopoly will produce a ______________ (greater / lower / same) quantity.

Lower

A monopoly will always charge a price that is ______________ (greater than / less than / equal to) marginal cost.

greater than